Yesterday, the Dow rose 91 points. But markets are generally sluggish. It is vacation time. People have better things to do than watch Bloomberg terminals and bet on stocks.
So, let us also turn our attention to other things. Specifically…
How to get your share of the pot!
‘Would you like to make a billion dollars?’ begins an email from an old friend. He was completely serious.
‘I don’t know if you’ve been following the development of the medical marijuana business in Colorado, California, Washington and elsewhere. But this much is clear — it is fantastically lucrative.’
Don’t Bogart that joint…
Recently, at a party, a friend took a joint out of his pocket, lit up, and passed it around. Imagine our surprise! We had not seen marijuana in use since 1969.
We looked forward to taking a deep toke…filling our lungs…and reliving those happy times. (Would someone put Sympathy for the Devil on the record player, please…) But the joint never made it to us. It went up in smoke, ‘Bogarted’ by our friends.
The resurfacing of marijuana in middle-class settings, and our own juvenile reaction to it, made us wonder: Are baby boomers getting younger? If so, maybe investing in the medical marijuana business is a good idea.
Our friend thinks so. And he’s not the only one. Only a few months ago, another friend offered us the opportunity to invest in a similar marijuana venture in Canada. We declined. (Alas, we may never make it to true billionaire status!)
Marijuana, the story goes, will soon be made widely available for people who need it. And to those who don’t. Especially the baby boomers. They are the target audience. They have no fear of the weed…and they have plenty of aches, pains and anxieties that it may help.
There is some research suggesting that smoking too much pot when you are young may stunt your intellectual or emotional growth. It may also harm your career or your family life.
But for the baby boomers these things pose no threat. They already stunted their intellectual and emotional growth in the 1960s. And they made a mess of their careers and families in the 1970s, 1980s and 1990s. Now, they have to live among the debris…with few responsibilities and lots of time on their hands. Many think pot helps.
A Marijuana Monopoly?
Could pot help their finances get high too?
At first, we dismissed the possibility. Marijuana is too easy to grow. It will be cheap and readily available to everyone. Profit margins will be narrow, with no moat to keep out new competitors.
But the cronies are not so dumb.
If marijuana were simply legalised, prices would probably be low…supplies abundant…and profits few.
That may be the real reason it is has not been made legal already: There was no profit in it. The dealers…the police…the prisons…all colluded to keep it illegal.
But what if, instead of legalising it, you could turn it into a state-sponsored monopoly, like state lotteries?
Licenses could be issued to cronies who contribute to political campaigns. Only a few carefully monitored growers would be permitted…distribution would be tightly controlled…and competition would be prohibited. Then there would be fat profit margins to divvy up.
Our friend comments:
‘We have a friend working in the state legislature. He just happens to be intimately involved in the governor’s initiative to legalize medical marijuana. We have made substantial investments in political contacts in [the state capitol].’
The fruit of these investments, he goes on to say, will be an explicit licensing system, giving a few well-connected players what amounts to monopoly franchises in the pot space.
Even in the weed space…the fix is in.
For The Daily Reckoning Australia