The recent shift in Canada’s political leadership – introducing a Liberal government with a stated commitment to the legalization of marijuana for adult recreational use – has inflamed cannabis investment fever.
The legality of Canadian medical marijuana has led to a handful of publicly traded start-ups that have attracted U.S. investment attention. And continuing confusion between the various levels of government in the U.S. about what is or is not legal for business, banking and investment has only made the Canadian market more attractive.
Nonetheless, institutional cannabis investor Anthony Wile has warned investors – both institutional and individual – to exercise patience when it comes to cannabis investing. In an editorial entitled “Investors should take a deep breath before they try cannabis” carried at Canada’s largest national newspaper, The Globe & Mail, Anthony Wile said: “Slow down. Take a deep breath. You don’t need to be in such a hurry – because if you are, you may get it wrong. It will take a while for this industry to mature to the point where it will be predictable and increasingly transparent. Rome wasn’t built in a day, and your portfolio of cannabis investments won’t be either.”
As chief investment strategist of High Alert Investment Management, Anthony Wile has been researching the cannabis market for years and believes it will go through fundamental changes as it evolves. These changes will affect maturing markets like Canada’s as well as just-emerging ones.
Wile maintains, “Regardless of which side of the border one is on, changes are coming. As I’ve said before, any business opportunity with as much potential as cannabis will undergo a series of significant regulatory and fiscal reconfigurations that can dramatically affect the dynamics of regional marketplaces.”
For Anthony Wile, the underlying mechanics of the business are simple enough. Regulation rather than criminalization is the emergent paradigm, as officials in many countries consider how to position a legal cannabis market. In Colombia, for instance, President Santos recently signed a decree legalizing the cultivation, processing and exportation of cannabis for medical and scientific purposes, and Uruguay legalized adult cannabis cultivation and use in 2013. Other South American countries will no doubt follow Colombia’s lead.
Certainly legalized cannabis holds out the potential of a cash bonanza, not only for investors but for governments as well. Reports publicized during the recent Canadian election showed that Canada’s cannabis industry could be worth as much as $10 billion a year.
That may be a low estimate given the experience to date in Colorado. The industry in the United States has seen dramatic increases already, with estimates that it grew 74 percent in 2014 to $2.7 billion, up from $1.5 billion in 2013.
Even staunch supporters of legalization are quick to point out that a change of this significance will take time to properly structure and regulate. And with government being what it is, that’s not likely to happen with the speed that investors (or advocates) might prefer.
When considering all these factors, Anthony Wile has concluded that it is absurd to think that tomorrow’s cannabis industry will look anything like today’s.
“It’s simply not realistic to think a $10 billion annual industry will be left to mom-and-pop operators,” he cautioned. “As the industry matures, corporate and institutional pressure will certainly build, which will shape a lot of what is to come. Larger corporate interests with proven maturity in distributing ‘sensitive’ and highly regulated products will surely try to dominate the sector, so current market projections will probably need to be severely adjusted.”
There are far larger forces obviously at work, Wile points out. These forces will center on the forthcoming United Nations General Assembly Special Session on Drugs to be held in New York City in April 2016.
At UNGASS 2016, all 193 UN member states will seek to ratify a new approach to the global war on drugs that is expected to include decriminalization and a public health approach rather than incarceration. Preparatory sessions have been underway in regions around the globe to draft the policies that will be presented to the full general assembly.
In a separate effort with significant global influence, former UN Secretary-General Kofi Anan, past presidents and prime ministers of numerous countries and business leaders such as Richard Branson and Wall Street maven Paul Volcker have been leading the Global Commission on Drug Policy pressing for legalization, regulation and a sensible, public health approach.
Results from UNGASS 2016 will have an indisputable impact on every member country’s cannabis industry – including Canada’s. Simply put, UNGASS 2016 is a watershed moment in defining the future structure of the global cannabis marketplace.
“At this point in time, I strongly encourage investors to watch and wait to see what happens at UNGASS 2016 before investing significantly in any regionally-focused cannabis opportunity,” Wile advised. “Don’t rush in.“