OT Eyes Wide Open - Chapter 1 (it's expensive)
From following this market for sometime and browsing social media sites and numerous articles, nobody really fully understands this market. You get opinions skewed to one side or the other, way too bullish and hype or way to bearish and negative. There is all kinds of mis information on both sides and numerous spin stories.
I have a passion to analyze markets, especially new ones and current trends, a side benefit is it helps make you some $$. Because this market is new and so huge and controversial and lucrative, I have decided to do a several part series and try to explain everything I know and learned. I will do several of these, one a week or few days and in the end will be a short story and analysis on the market. I am going to name these chapters as seen above
I am simply calling this POT because it does not deserve anything complicated. We no longer call corn 'Zea mays indenata' or a potato 'Solanum tuberosum'
Growing Pot is not rocket science, it is a plant and we have become dam good at growing plants and crops. Everyone talks about POT as something special but that is simply to justify the very high price.
There is this strain and that strain, more THC here and more this Cannabinoid type there.
You know how many strains or varieties of corn there are? At one time there was about 300 but thousands of hybrids today. They fall into about 6 main types. Popcorn comes from one variety that is higher in moisture, corn flakes from another type and feed for cattle another. Sweet corn that we mostly eat has about a 10% sugar content compared to other varieties around 5%.
Even still there are about 150 varieties sweet corn and each of us has our favorites. To name a few I have tried and like are:, Silver King, Peaches and Cream, Kandy Korn and Passion. I probably had many others but don't know or remember the names. More and more POT strains are grown and they get their names too.
We no longer see corn as a big deal, sure there is probably some fanatics around that can tell you a lot more about corn.
Corn has been grown for thousands of years and so has POT.
There is one thing very special about POT and that is the price.
Corn sells for about $3.75 per bushel, wheat around $4.50 and Soybeans around $9.50.
POT sells for about $7 per gram. There is around 35,000 grams in a bushel, so POT is selling for 35,000 times higher price than these other common plants.
There is only one thing we commonly consume that is more expensive. Sure there are other drugs that are more expensive, but if we group POT in with common consumables like alcohol, cigarettes and foods etc. An alcoholic beverage is pretty expensive but at the liquor store we are only talking $1 or $2 per ounce.
The Tequila plant must be expensive? Tequila is derived from the Blue Agave plant and they take 5 years to mature before they are used for Tequila. The growth of the plant is regulated by the Mexican government and is grown in one of 181 Mexican municipalities, most of which are in the state of Jalisco. Current prices are around $0.50 per kilogram, so very cheap.
Probably the only common thing we have or use that is more expensive is Gold that is about $40 per gram, most of us have some, coins or jewelry. Platinum and Palladium would be up there, but is not that common for us to own or use, unless you count the ounce or less in your SUV exhaust system.
POT is very expensive because until recently it could only be obtained in the black market. It is estimated the Canadian Pot market could be worth between $10 to $20 billion per year, depending on whose estimate. The U.S. market is probably 10 to 20 times this size.
We do know that the Colorado market was worth $1.3 billion in 2016.
This is a multi- billion market and there is a huge war going on to control it and benefit from it.
Remember marijuana has been illegal for a long time and has been sold on a black market and a lot of people have made a lot of money dealing it.
If you think this black market is not going to go down without a fight, you are foolish, naive, ignorant or all of the above.
Cannabis consultant Paul Rosen from Ottawa Citizen article “ It may take several years to stamp out the black market in marijuana, but we are going to win. The white market is going to overtake the black market. It just won’t be on July 1, 2018.”
With a multi billion market at stake the black market will be kicking and screaming all the way. We are more civilized these days, well that might be questionable, but we will see the battle fought in many different ways other than guns and knifes.
Government regulation initiatives have been slowed to either a snail or turtle pace, so the black market has gained some there. The first license was issued in Canada to Tweed in early 2014 after a year or two of preparation. That was very fast, about 4 years later and we only have about 40 licenses granted now.
I estimate this will grow to between 200 and 500 as we climb the 'S curve' but that is another chapter. Legal POT has probably captured between 5% to 10% of the Canadian market now, so it is in the early adoption phase.
I would not be surprised if the black market has now taken their fight to the financial side. If they can slow down the money be raised to expand grow operations they can milk the black market longer.
This might be why we are seeing a surge in short interest in POT stocks and defamation attacks on these companies.
These new public and legal producers are taking away the black market's lunch and in time it will be a lot more than just lunch.
We have seen the fossil fuel industry spend billions fighting green energy, this will be little different other than the black market won't be as obvious showing their face.
Cannabis Wheaton would be seen as a big threat because their business plan could help fuel the growth engine in the legal market. Shorts will argue it is a scam, but with 20% of the stock shorted, never before have so many been right about predicting a scam.
BreX never had that big a short position and it goes down as one of the biggest scams of all time.
POT is more about greed and money than anything else. High prices have that effect on human nature. To compare with the only other expensive thing Gold. Mark Twain described a Gold mine 'as a hole in the ground with a liar on top'.
If he were around today he would probably describe a POT Grow-op ' as a fenced field with an armed criminal at the gate'
stay tuned for Chapter 2, probably market size and growth
