Will we finally see Cannabis Federal Legalization? The past couple of weeks have been brutal for all stocks across the board. The economy is heading down a path of no return. Inflation is at 40-year highs and remains persistent. This is forcing the Federal Reserve to move interest rates higher a the fastest clip in decades. And, the Federal Reserve is also simultaneously removing policy liquidity in the form of reducing its balance sheet. Because of this, the broader stock market has sold off significantly. And, this has drug cannabis stocks downward along with it erasing early gains in August. In summary, September was brutal across the board.
It will get worse, far worse, for the economy and then stocks.
Will Cannabis Stocks Move Higher
But, cannabis federal legalization may actually get some kind of play during all of this turmoil. The Senate tried to push through legislation that was far too liberal for even liberals to support. Almost immediately, the Senate backed off and swept their attempt under the rug. Senators sent verbal support to other cannabis federal legalization attempts being dubbed SAFE+ – the idea that the SAFE banking agenda needs to be passed over anything else, and while they are doing that, might as well tack on a few other provisions in line with some liberal agenda.
Rumors are widespread. And, the thinking is that there is a better than 60% chance of SAFE+ happening in the lame-duck session of congress immediately following the mid-term elections on November 7th, but before the start of the new Congress on January 1st.
If that happens, there will be fireworks, for sure.
Why SAFE+ Is Important
One thing that the Feds hate with a vengeance is the idea of the $15B – $20B cannabis industry being an all-cash business. The Feds love knowing where every single penny moves. This is how they keep track of individuals. So, having an all-cash cannabis business is outside of their comfort level. Significantly.
For me, if SAFE+ happens in the lame-duck session or not is not a material difference to me. My belief is that no matter what it will occur eventually. And, I am not one to hope for any kind of moves in the market driven by outlying events to take profits in stocks. I am a long term investor and once I buy a stock, I plan on owning it for some time.
However, I also see an additional opportunity outside of norm and this is likely to drive me to make decisions to capitalize on moves with cannabis stocks. I’ll explain that later.
Up-listing & 280E
But, SAFE+ would allow for two things that are crucial for the industry. First, with SAFE+ cannabis companies would effectively be legal. This would allow for the up-listing to Nasdaq or the NYSE. This would allow for far bigger players to step in and support these stocks.
But, before the up-listing, the bigger thing is the 280E hurdle that would be removed. Cannabis companies cannot write off significant portions of their business expenses because it is disallowed by law. The effective rate of cannabis stocks is some 15% of revenue. However, normal stock pay an effective rate of approximately 3.5% – 4.5% or revenue, depending upon the respective company.
Immediately, profit margins would jump significantly.
Kyle as a Cannabis Stocks Investor
The moves in Congress have the immediate capability of drawing in a multitude of investors from around the world. Most are merely going to be chasing something, anything, that resembles the potential profit opportunity to erase any losses that these investors have seen in the past several months.
Kyle, Karen’s boyfriend, will undoubtedly want to recoup losses and rush in to any cannabis stocks he can. He’ll more than likely be rushing in to the Nasdaq-traded cannabis stocks simply because this is the only real stocks he can trade on his Robinhood account.
But, by the time Kyle hits the buy button, the short sellers who have crushed cannabis stocks to near pulverized dust will have been the ones to hit the buy button the fastest. However, even before that, offers will evaporate to near zero. This means any buy orders will be entire clips higher than the rock-bottom prices cannabis stocks are currently trading at.
But first, the economy
Regardless of any moves in cannabis stocks, the very first thing to keep in mind is that cannabis companies are playing inside an economy. And, it is not just the US economy – or, Canadian economy. All companies, regardless of being global or not, are global. There are moves and ebbs that are occurring within the financial world. There are strains inside the financial world and the feeling from professionals is that things are broken… we’ve just not heard the crack and snap of it yet.
Still, there have been significant moves in the world economies. The US dollar shot up recently to all-time highs versus some of the world’s most revered and trusted currencies. This is being driven by money that is looking to chase yield and get a better return in the US versus the rest of the world.
The Federal Reserve is removing policy accommodation and shrinking its balance sheet – the liquid nitro that is fueling demand here in the US which is pushing inflation to remain high. As the money from around the world shows up chasing higher yield, it is undoing what the Fed is doing. This is unnatural. It is like a tsunami of liquidity showing up on our shores. And, when the Fed has finally broken the back of US consumers, they will eventually have to lower interest rates. So, all of that money will then leave. This will choke the economy when it is already down on the ground.
An Economy About to Sputter To Zero
Because of this, interest rates will eventually choke out the economy in such a way that expenditures by consumers will drop significantly. Cannabis companies will see their share of declines in the coming year. This means any gains we see in any surge from investors will eventually evaporate. The reason is two-fold. First, the process of getting listed on Nasdaq or the NYSE is time-consuming and, only the biggest will do so any time soon. The second reason is that the reality of the economy will eventually unleash itself on the broader stock market and, cannabis stocks are going to contract again.
I look for continued losses in the broader market. And, I look at continued losses in cannabis stock along with these broader market sell-offs despite some of the cannabis stocks being at significantly reduced price levels.
How I Plan on Playing Cannabis Federal Legalization
Mostly, my intention is to sell out my entire cannabis stocks holdings if there is a surge. This is not because I no longer believe in cannabis stocks. It is fully because I believe that just as the short sellers are hitting the offers all day at warp speed to get out of their immediately losing positions, eventually they will get right back in and go short again.
Cannabis stocks need to go through the process of up-listing and continually building their foundations to gain scalability and profitability. It is a process, not an event. Despite the potential of this one event being a game-changer, it is but just one event. The full process needs to play out in large part over the course of the next five – ten years.
The economy is going to deteriorate significantly over the course of the next year. My expectations are that the stock market will sell off significantly even further than where we are to date. Cannabis stocks will follow suit simply because of the contraction in expenditures from consumers.
I expect I may be able to buy back my cannabis stocks holdings at a 50% reduction of price after the surge. Then, I’ll be able to own 2x the shares.
This is a process. If we get cannabis federal legalization during the lame-duck session from congress, this is a big event within the much bigger process. I fully plan on taking advantage of this.
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I’m hoping they can get it done by 4/20/2022.
@cannabis-investing they’re just waiting to get closer to the midterms.
@cannabis-investing @awesame I think the process of pushing through legislation is a process and we will see it play out. Remember, POTUS was a Senator for many years and he knows everyone there. They will do what they need to do to get it pushed through.
I think all of the “attempts” may have been nothing more than to drop hints to the people of the United States that this is going to happen. If enough of these hints are dropped the attitude could turn to “It’s about time”.
This is the year and getting closer and closer to mid-terms is the move to expect. Keep your powder kegs dry because this will be big.
What I don’t understand about is WHY is POTUS he sooooo against Federal legalization and it is unbelievable that the Safe Act hasn’t passed it seems to be just the Pawn in the chess game if it passed everything else would follow
I truly hope that it at least passes so business can be business’s and Institutions and stock market can come to life.
Potus finally some action
President Biden
@POTUS
United States government official
As I’ve said before, no one should be in jail just for using or possessing marijuana. Today, I’m taking steps to end our failed approach. Allow me to lay them out.
2:00 PM · Oct 6, 2022·The White House
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President Biden
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First: I’m pardoning all prior federal offenses of simple marijuana possession. There are thousands of people who were previously convicted of simple possession who may be denied employment, housing, or educational opportunities as a result. My pardon will remove this burden.
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President Biden
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Second: I’m calling on governors to pardon simple state marijuana possession offenses. Just as no one should be in a federal prison solely for possessing marijuana, no one should be in a local jail or state prison for that reason, either.
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President Biden
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Third: We classify marijuana at the same level as heroin – and more serious than fentanyl. It makes no sense. I’m asking
@SecBecerra
and the Attorney General to initiate the process of reviewing how marijuana is scheduled under federal law.
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I’d also like to note that as federal and state regulations change, we still need important limitations on trafficking, marketing, and underage sales of marijuana.
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President Biden
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Sending people to jail for possessing marijuana has upended too many lives – for conduct that is legal in many states. That’s before you address the clear racial disparities around prosecution and conviction. Today, we begin to right these wrongs.
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Johnathan
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Every single American stands with you.
Kaboom…. Cannabis stocks just leaped. This is the beginning of the beginning. POTUS lays out the foundation. Congress follows up. Get ready for the rocket ride.
@dhtaylor Damm interesting technical timing…we achieved the anticipated further-down 30% area since July/August amongst other technical sweet spots a few days ago …as usual there is nothing done by the politicos by accident. Still, for most of these, its today only popping up into resistance….but that said its also a good spot for the timid to justify doing nothing…maybe rightly, but this sector isn’t for the timid.
This is all being coordinated. Biden does things and makes announcements. Congress will follow suit all at voting time!
@dhtaylor What kind of rocket ride are you expecting? Do you think fairly soon?
@jpaecoutlook-com buckle up and strap in. This is going to be fun. But, no matter what you do, have a plan. Period. People who’ve never even heard of cannabis stocks are likely to flood into this sphere with the hopes of striking gold. They will be the last to hit the buy button.
We could very well see surges upward well past what we saw in February 2021. So, look at the charts and look at activity from back then. This is the first real target price for these stocks. If we clear these levels, the rest is pure gravy.
If you are merely looking at my intrinsic valuations, they will get utterly blown apart as the surge from the short seller being driven out and the news from that pulling in new buyers.
But, this is also going to take some time. Tomorrow could be really interesting. First, we have non-farm payrolls. If that is really solid, that would be disastrous for stocks in general. I expect we will see something solid from non-farm payrolls. This may drag cannabis stocks right back down. If cannabis stocks ignore this, then that is an excellent sign of things to come.
Let’s get through tomorrow first.
Then, we should continually hear from Congress talking about passing some kind of legislation. This will be what continually pops cannabis stocks upward. That will continually draw in new investors. It will be a feedback mechanism. More pops higher bring in more investors. Ultimately, I expect Congress to pass something in mid-December.
This could very well be an amazing holiday season.
https://www.marijuanamoment.net/schumer-plans-to-file-marijuana-legalization-bill-in-april-as-top-house-lawmaker-details-his-own-reform-plan/
Senate Majority Leader Chuck Schumer (D-NY) announced at a press conference on Friday that he is aiming to formally file his much-anticipated bill to federally legalize marijuana in April. House Judiciary Committee Chairman Jerrold Nadler (D-NY), who also spoke, discussed progress on his separate legalization bill.
Both top lawmakers detailed their efforts to end prohibition at an event in New York City, which also involved House Small Business Committee Chairwoman Nydia Velazquez (D-NY), New York lawmakers and advocates with the Drug Policy Alliance and other organizations.
Friday proved to be an especially eventful day for federal cannabis policy, as the House earlier passed a large-scale bill that contains the bipartisan Secure and Fair Enforcement (SAFE) Banking Act. It’s the sixth time that reform has cleared the chamber in some form.
“In the coming weeks, we’re ramping up our outreach—and we expect to introduce final legislation. Our goal is to do it in April,” Schumer said at the New York event. “Then we begin the nationwide push, spearheaded by New York, to get the federal law done. As majority leader, I can set priorities. This is a priority for me.”
Advocates were encouraged when Schumer first disclosed details about his Cannabis Administration & Opportunity Act (CAOA), which he unveiled in draft form for public comment in July, but they’ve grown impatient with his repeated comments in the months since that a formal introduction was coming “soon.” Now he’s set a target timeline, and the leader also separately said in a meeting with activists that he expects committee hearings on the proposal shortly after it’s finally filed.
“Right now, we’re taking those comments [on the draft version] and reaching out to Democratic and Republican senators,” Schumer said, adding that “we have some Republican support.” It’s not clear if he’s indicating that there will be GOP cosponsors on the bill itself or if he’s referencing general support from voters and some lawmakers across party lines for ending prohibition.
“If any senators have other ideas that they want to add to the bill, as long as it keeps social and economic justice as the spearhead, we’re happy and willing to listen,” he said.
Even if committee hearings start quickly following an April introduction, it seems highly unlikely that it will pass and make it to the president’s desk by the unofficial cannabis holiday 4/20, as Schumer said he wanted to see happen in a Senate floor speech delivered last April 20.
Schumer, Nadler, several New York lawmakers also made the case at Friday’s event that while New York’s legalization law, which is actively being implemented, should serve as a model for the country, comprehensive equity will only be achievable once federal prohibition is lifted.
“We want to renew the case for comprehensive marijuana reform that repairs the harm of the war on drugs at the federal level, using the great work that has been done here in New York as an example and way to lead,” Schumer said, adding that “just because we have a state law, the federal law still creates problems, and that’s why one of the many reasons we need to change it.”
The majority leader’s office has been involved in negotiations with advocates and stakeholders, both on his legalization measure as well as the SAFE Banking Act, which he was blamed for blocking as part of a separate defense bill late last year.
The leader and colleagues have insisted on passing comprehensive legalization first before banking—but the sponsor of the banking bill, Rep. Ed Perlmutter (D-CO), told Marijuana Moment on Friday that, after initiating conversations with the leader’s office, there may be a path forward to advance his legislation through both chambers with equity-focused amendments that Schumer wants to see.
With respect to Schumer’s legalization bill, the Senate leader emphasized late last year that he wants to keep the “big boys” out of the marijuana industry in favor of creating opportunities for smaller operators when cannabis is federally legalized, and he said that his upcoming bill would accomplish that.
“We don’t want the big boys to come in,” he said at the time. “After all the pain that’s been occurring in communities like the one you represent in Brooklyn, where I’m from—to have the big boys come in and make all the money makes no sense.”
He’s made similar remarks in the past, stressing that his reform bill will take specific steps to restrict the ability of large alcohol and tobacco companies to overtake the industry.
Nadler, meanwhile, discussed on Friday his Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, which would also end federal prohibition and promote social equity in the industry like CAOA. That bill passed the House in a historic first last session, and it cleared Nadler’s Judiciary Committee again in September.
“The war on drugs—and particularly the criminalization of marijuana—has been a failure that has unleashed untold suffering on millions of Americans, especially within minority communities,” Nadler said. “I am proud to stand here with Senator Schumer, and with the many other legislators and advocates with us today, who are leading the way in reforming our laws and bringing justice to those who have been harmed by these unfair and destructive policies.”
Also at the event, Velazquez talked about the importance of ending prohibition, as well as opening up Small Business Administration (SBA) resources for marijuana businesses.
“Change will not happen, change will not come, unless we demand it,” the congresswoman said. “And because we have been demanding it, public opinion has changed dramatically. So it is time for government to act, particularly the federal government.”