I’m just going to go ahead and say it: Everything we’ve seen yet regarding legalized and medical marijuana pales in comparison to what is coming next year.
I could easily be referring to Canada in the headline for this article. With Justin Trudeau taking the Prime Minister’s office two months ago, the will and way is there to legalize marijuana nation-wide.
That alone is expected to become a $5 billion industry, calculated by Dundee Capital Markets.
However, I’m going to focus on a potential $8 billion market, with much broader support, and a much faster path to implementation.
California is, without any doubt in my mind, going to legalize recreational marijuana use in November 2016, and it is going to be a watershed moment for the pace of legalization in the U.S.A., and for investors who identify the potential.
A Little History
If anything, I find it shocking that it has taken this long for legalized recreational use to come to the Golden State.
After all, California was the first state to adopt medical marijuana back in 1996, a full 20 years ago.
2010 saw a close referendum effort, but Prop 19 — as it was called —was poorly run, and funded. It became a wedge issue for the state-level two-party system.
11 largely urban counties supported it, the other 47 relatively “conservative” counties did not, and the referendum failed by 7%.
Californians broke the ice though, paving the way for 22 other states to adopt medical marijuana. Undeniably, the legalization successes in Colorado, Oregon, Washington, Alaska, and Washington, D.C. owe something to the first state to question federal authority on the matter.
And, in spite of the setback, support never wavered. In 2016, the propositions that will go up for a popular vote will have a lot more going for them. Note the plural there, right now there are 18 versions being proposed as ballot measures.
Ten have already received the green light from the California Attorney General to begin collecting signatures. Whichever version gets a majority, plus the most votes, will take the prize.
The Times They Are A Changin’
Of course, this raises the question of what, if anything, has changed.
Sure, 23 states allow medical use, with four and Washington, D.C. having recreational use laws on the books. Plus there are the other states that will, or will likely, have their own proposals on the ballot; Arizona, Maine, Massachusetts, and Nevada.
However, supporters had to step up and find a viable way to advance the agenda. It has taken several extra election cycles, but the political infrastructure is now in place.
Conservative polls now show that 55% of Californians support legalization. The most liberal surveys have put the figure as high as 65%.
As for financial backing, the most high-profile of the proposed initiatives — the Adult Use of Marijuana Act — is being backed by several billionaires and high-profile Silicon Valley investors. Most notably Sean Parker, founder of Napster and an early investor in Facebook
Lt. Governor Gavin Newsom even voiced support for it after chairing the California Blue Ribbon Commission on Marijuana Policy, a mix of academic and law enforcement experts. The full panel endorsed the Adult Use of Marijuana Act back in July.
Also of note is the election itself. 2010 was a mid-term election marked by exceptionally low turnout, whereas 2016 will be a very contentious presidential election.
Higher turnouts disproportionately add young, liberal-leaning voters, who — as you might imagine — overwhelmingly support legalization. Public support will be heavily represented in the ballot boxes.
Massive Expansion, High Profile Investors
Recreational marijuana in California would represent a vast expansion of the market.
Measured on its own, the state would be the eighth largest world economy. By population, California far outweighs states with existing laws as well.
Alaska, Colorado, Oregon, Washington, and Washington, D.C. have a combined population of 17.85 million. California is home to 38.8 million.
Legalization in the state would expand the number of people living under the new laws by a whopping 217%.
There is plenty of expansion potential too, considering adding California would bring the total population of states that allow recreational marijuana to just 17.7% of the total U.S. population.
This represents massive market growth for existing companies, along with the scales of economy advantages, revenue expansion, and earnings potential.
It is a completely unique market, with preexisting demand just waiting to be fulfilled. As investors, we’ve never seen anything like it in our lifetimes.
That is exactly why Peter Thiel has staked $75 million on marijuana holdings. George Soros is in on it too.
Same with Elon Musk, who has already pocketed $133 million from the industry, so far.
Even America’s favorite old-timer, Warren Buffett, is in on it.
The Outsider Club’s Jimmy Mengel has been a strong advocate for getting in early too, leading to gains of 17.5%, 73.21%, and 87% from closed positions for his readers this year.
With the expansion to come next year, he has found three more great picks for investors. Given his track record so far and the industry’s unprecedented potential, it is worth your time to check out his research.
