Trumping the Rescheduling Delay
Trump's Comments Eliminate the Big Risk to Rescheduling
Last week started with disappointing news that the DEA essentially delayed rescheduling by setting up a December 2nd hearing that pushes any rescheduling into 2025.
But all of that was overshadowed by comments made on Saturday by Donald Trump that he was in support of decriminalizing cannabis:
“someone should not be a criminal (for consuming cannabis) in Florida, when this is legal in so many other States.”
Trump added that current policy ruins lives, wastes taxpayer dollars and puts people at risk of dying from cannabis tainted with fentanyl. (Trump’s full comments can be found by clicking this link.)
Florida Sen. Joe Gruters (R), a former state Republican Party chairman, cheered Trump’s support for legalization.
“I am incredibly proud to have President Trump stand alongside us in our effort to end needless arrests and incarcerations of adults for simple possession of marijuana and to give Floridians the same individual freedom to choose safe, tested products that more than half the country already enjoys,” he said.
A big concern for cannabis investors has been the unknown of what will happen if Trump wins. Could his win derail the ongoing rescheduling process or any future cannabis reform? With a Trump win is all reform off the table? With these new Trump comments, the risk of derailing rescheduling or cracking down on cannabis should fall dramatically, and for investors, the risk of owning cannabis stocks falls as well. And more importantly, we now have two candidates who are pro-cannabis reform for the first time in US history.
There are some other benefits as well. Trump’s comments probably also improve the odds that the Florida adult legalization initiative passes in November, which will be a boon for the sector. Trump’s comments also are a potentially powerful signal to any prohibitionist forces in the DEA and other parts of government who are fighting cannabis that a delay in reform won’t change much if Trump becomes President. Further, career bureaucrats in government probably gave a sigh of relief that moving forward on rescheduling will not cost anyone their jobs if Trump becomes President.
Does this mean that we know how and when Federal reform of cannabis will happen?
No.
Does this mean you should rush out to buy all cannabis stocks?
No.
This is the reality of most publicly traded cannabis companies:
There are many cannabis companies that talk a great game, but actually are struggling with their operations and are praying for higher stock prices, so they can issue shares and save their distressed balance sheets. If the past three years have taught us anything, it is: Buyers beware.
The biggest mistake I see others making is that they keep trying to time the “Big Trade” as they see it, to cash in on when these stocks start trading on US exchanges and excessive taxation goes away.
Our whole system of government is set up to make change really, really hard to accomplish. This is why trying to time when and how reform will happen has been a fool’s trade and one I stopped trying to play a long time ago.
This is why I’m so focused on companies that are demonstrating operational excellence. This is why I’m so focused on fundamental research and analysis. I want to own the companies that should succeed regardless. This is why I have been so focused on companies like Glass House (OTC: GLASF) and Grown Rogue (OTC: GRUSF) who are competing in the most difficult of environments and winning.
But the other reason I focus on the long-term is that I am a true believer in the future of cannabis. I think we are at the very beginning of a twenty or thirty year run of cannabis adoption. Federal reform will only mark the beginning.
This why TOKE, the cannabis ETF I’m a research consultant to, was buying into last week’s decline. Cambria (who runs the ETF) and I are big believers in the future of cannabis. And federal reform is only a matter of when at this point.
P.S. Want to hear from a real operator, who is succeeding despite the challenging backdrop of cannabis? Be sure to check out the interview I posted last week with Obie Strickler, the CEO of Grown Rogue.