By Nick Giambruno, chief analyst, Crisis Investing
On October 17, Canada made history when it became the first large, industrialized, Western nation to legalize recreational marijuana.
This puts Canada at the forefront of the global marijuana industry. Canada could be to cannabis what France is to wine. But it has implications for the U.S. industry, too…
Legalizing cannabis fits right in with Trump’s trademark expression.
“America First” is more than a political slogan. Trump and his supporters sincerely believe in this. This mindset will be a critical factor for Trump to legalize cannabis.
Hundreds of billions of dollars are at stake. I doubt Trump will want U.S. businesses to sit on the sidelines while foreigners eat their lunch… to the tune of hundreds of billions of dollars.
But right now, that’s exactly what’s happening. Canada is getting an important head start in the global cannabis industry.
I’ll explain why in a moment. But first, let me show you why the U.S. could follow in Canada’s footsteps in the near future…
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Putting “America First”
If Trump is serious about putting “America First” – and I think he is – he’ll legalize cannabis.
Trump won’t be able to legalize cannabis overnight. The Deep State swamp creatures that make a living off the War on (Some) Drugs are legion.
Even though they are fighting a losing battle, it will take time to overcome the interests they have entrenched themselves in over generations. But I expect Trump will be able to overcome this.
There’s already been more progress in that direction during his time in office than all the previous post-prohibition U.S. presidents before him combined.
For example, the Food and Drug Administration (FDA) just approved a prescription cannabis medicine for the first time. That drug is called Epidiolex, which is used to treat epilepsy.
Prior to this, the feds’ official stance was that cannabis had “no accepted medical use.” The approval of Epidiolex cracked the door wide open for further cannabis research and cannabis-based drugs.
Then there’s the Drug Enforcement Agency (DEA). For the first time ever, it changed its position on a cannabis derivative by classifying Epidiolex as a Schedule V drug, its least severe classification. Previously, the DEA treated all cannabis derivatives the same as cannabis – as Schedule I substances, its most severe classification.
In other words, up until this year, the DEA considered cannabis and all cannabis derivatives to be in the same category as heroin and LSD, and more dangerous than cocaine and meth.
The Epidiolex classification has changed the DEA’s absurd view on cannabis. I expect this decision to open the door to further favorable changes.
And finally, the Securities and Exchange Commission (SEC) approved the first cannabis producer to be listed on a major U.S. stock exchange, the Nasdaq. The New York Stock Exchange also approved its first cannabis producer.
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The World’s Export Powerhouse
Despite these achievements, full legalization in the U.S. isn’t going to happen overnight.
We can’t sit on our hands waiting for this inevitability when there are some outstanding opportunities just north of the border.
In the meantime, Canada will be the premier place to profit from this explosive new industry.
Aside from the Canadian market itself, Canada is already the legal cannabis export powerhouse. It’s about the only country that currently exports cannabis on an industrial scale.
Numerous countries allow for medicinal cannabis, but are constrained in producing it. Leading Canadian companies have already set up partnerships and joint ventures in Brazil, Germany, Australia, and other countries.
A Canadian company even secured approval from the DEA to supply cannabis extracts to researchers in the US, which are federally prohibited from receiving it from domestic sources.
You also have to consider cannabis oils. The Canadian government started issuing export permits in early 2016. By 2017, exports of Canadian cannabis oil had roughly quadrupled, as you can see in the chart below.
This first-mover advantage in global markets has given Canadian companies a tremendous head start on their competitors.
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Bigger Than Alcohol
When you consider the immense medical, recreational, industrial, therapeutic, and accessory markets for cannabis, the implications are clear.
Legal cannabis will create countless new categories of products. These combined markets will easily be worth hundreds of billions of dollars in the years ahead.
It’s hard to wrap your mind around the impact legal cannabis will have on the world. It’s an unprecedented situation.
I’ve covered the parallels between cannabis prohibition now and U.S. alcohol Prohibition in the 1920s and 1930s in detail.
But as cannabis legalization spreads, it will be orders of magnitude more profound than the repeal of Prohibition in 1933.
Alcohol use was largely just a recreational market. With cannabis there is much, much more than that.
Legal cannabis is going to disrupt the alcohol, tobacco, pharmaceutical, and soft drink industries, among others.
Add in the illicit recreational market – worth $200 billion globally – that will become a new legal market, and we’re talking about a megatrend that could disrupt over $500 billion in global markets, according to the CEO of one of our top recommended marijuana companies.
Considering where we are today, it seems to me that the legal cannabis megatrend is closer to its beginning than its end. It will make investors in the right companies rich in the process, too.
Of course, it will be years before the various cannabis sub-industries – including recreational, medical, industrial, therapeutic, and accessory – are fully developed.
But that just means that, today, we have the chance to buy the future Coca-Cola and Philip Morris of cannabis before they emerge as industry dominators.
Now is the perfect time to bet on Canadian marijuana producers.
Remember, it won’t be a straight shot upwards. There will be downturns. As always, it’s a good idea to keep your position sizes small and take some profits along the way.
This way, you can capture the gains on the way up without exposing yourself to huge losses.