Should You Invest in Marijuana

I've fielded numerous calls from folks about investing in the burgeoning "pot" industry.  If there is a speculative craze out there at the moment then it's in this sphere.  It seems simple.  Marijuana is legal in several states already and is likely to become legal in more in the next few years.  Indeed it's hard to argue that legalized weed hasn't made somebody, somewhere some money.  Colorado last year took in nearly $200 million in tax revenue on $1.3 billion in revenue.  Legal sales across the US grew nearly 30%.  The problem though is that while somebody is likely making money, it's probably not going to be you or me.   

The real money if it's investing in these businesses is doing so privately.  These are deals amongst accredited investors who can put big dollars into very speculative investments in the hopes of generating what is hoped to be outsized investment returns.  Folks that see these sort of deals are thought to be able to understand the nature of investing in such risky adventures and hopefully are rich enough to absorb any potential losses. Unless you are one of these sorts of persons, you're not likely to be approached with this kind of deal.  If you get to see one of these then ask to see some numbers behind the investment.  Be leery of anything offered to you that is short of information and long on hope.

Most everything out there trading on public markets trades as small over-the-counter {OTC} "penny" stocks.  Yes you can maybe scoop up shares of companies on the OTC bulletin boards trading in the pennies per share and have visions of riches before your eyes.  But there is a reason they trade here and at these levels.  Most of these are likely not real companies, or companies without meaningful sales and no prospects to ever have such.  Perhaps there are one or two hidden gems hiding in these weeds but you're going to have to be very fortunate to ferret them out.  Companies trading here have let professional investors in some form take a look at them and they've passed.  

Now I'm not saying you can't find that one diamond in the rough, but I'm telling you I don't know where to look and I'm not getting paid to do the looking for you.  Don't ask me for advice because I have none to give other than there is a very high probability of you losing money if you try to invest in this space.  Yes, there will be a few that hit the jackpot but the majority of investments by regular folks in the marijuana industry has a high probability of ending in losses and tears.  If you choose to go that route good luck to you, you're on your own and consider yourself warned!

Here are a few things I've found on the web you might want to read before you think about this space.  Most of  these articles appear in either Canadian or Australian online services.

The Sydney Morning Journal, "Medical Cannabis Stocks are all the Rage, But it's a Bubble".

The Calgary Sun, "Investors Dive into Marijuana Stocks Raising Concerns About-Green Bubble."

Nanalyze.com, "Warning Don't Buy Cannabis Stocks."  {The article refers to buying OTC cannabis companies.}

BNN.CA, "Marijuana Stock Euphoria: Should You Join the Wild Ride?"

I haven't posted the opposite side where everybody is overly optimistic and tells of money just to be scooped up.  You can find page after page of that stuff on the web with little or no effort.  Finding the opposite of the optimists takes some doing.  Another reason for caution in my book.

Back Monday.