Published on April 30 2018

US Pot Prohibition—A “Gift to Canada”

Justin’s note: As regular Dispatch readers know, marijuana legalization is starting to sweep the globe. And it’s providing everyday investors with the opportunity to make life-changing gains.

Today, in a brand-new essay from Crisis Investing editor Nick Giambruno, you’ll see just how big this opportunity is… and the best way to capitalize…


By Nick Giambruno, editor, Crisis Investing

“Welcome to Saskatchewan,” said Samuel Bronfman, “home of the best whiskey this side of the St. Lawrence.”

Bronfman, a Canadian whiskey maker, was uneasy. But to his relief, the man he was meeting—the infamous mobster Al Capone—greeted him warmly.

Next, Sam led Capone through his largest whiskey warehouse. It was filled with hundreds of barrels of whiskey. The stash was worth a small fortune back in the states, where Prohibition had gone into effect in 1920, just a few years earlier.

Capone agreed to buy 14 barrels on the spot. He also requested 14 more barrels every week going forward.

Eventually, the whiskey would make its way to Chicago and flow into Capone’s distribution network.

The deal was hugely profitable for Bronfman. It cost him about $24 to make each barrel, which he’d sell to Capone for $140 per barrel. And for Bronfman, it was all completely legal.

Of course, Capone took on a lot more risk. So, he made even larger profits.

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This meeting was the start of a partnership that lasted over 10 years. It was also the foundation of a multibillion-dollar business empire that thrives to this day…

In 1928, Bronfman acquired one of the largest whiskey distilleries in Canada. By the time Prohibition in the US was repealed in 1933, he had already established a crucial first-mover advantage in the US market.

By the 1940s, Bronfman’s company was the largest liquor producer in the US and Canada. Ultimately, it made him a billionaire.

You’ve certainly heard of Bronfman’s company: Seagram’s. You can find his products in any corner liquor store. You may even have a bottle of Seagram’s in your house right now.

It’s Legal in Canada

US prohibition propelled Sam Bronfman’s business to new heights. But as I mentioned, his business was 100% legal.

Sure, it was illegal for Canadians to export whiskey to the US… But that’s not what he did. He simply sold whiskey to an American on Canadian soil.

The Canadian government didn’t mind Bronfman’s setup at all. He wasn’t breaking any Canadian laws. Plus, he paid Canadian taxes on every barrel of whiskey he sold to Al Capone.

Bronfman’s business was 100% above-ground in Canada. That’s how he built the foundation of an empire… and legally positioned it for explosive growth.

When the US markets opened up in 1933, Bronfman’s company was primed to quickly expand into the US.

Today, this same dynamic is playing out in the cannabis market.

In June, Canada is set to make cannabis 100% legal—nationwide. The country’s cannabis producers already have a 17-year head start, thanks to its longstanding medical marijuana laws.

Yet the US is still legalizing marijuana state-by-state…

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Capitol Hill Is Finally Catching On

To date, 29 US states (plus Washington, DC) have already legalized medical marijuana. And nine states (plus DC) have approved recreational use. More states are bound to do the same in the near future.

New Jersey is aiming to legalize recreational marijuana by the end of the year. And New York governor Andrew Cuomo came out in favor of legalizing marijuana in his state just a few weeks ago.

Meanwhile, a handful of other states are also quickly moving to soften their cannabis laws.

Soon, I think the US federal government will, too. In fact, I think pot politics have reached a tipping point within the past month. In April alone…

  • President Trump promised not to interfere with states’ legal cannabis industries.

  • Former US House Speaker John Boehner joined the advisory board of a marijuana-focused investment firm, and …

  • Chuck Schumer, the Senate Minority Leader, announced he would introduce a bill to decriminalize marijuana at the federal level.

This is monumental. Schumer is a political heavyweight. He could actually push this kind of bill through.

For the time being though, cannabis is still illegal in the eyes of the federal government. And that gives Canadian cannabis producers the upper hand.

Canada Has the Upper Hand… Again

Ninety years ago, Canadian companies established a critical first-mover advantage in the US alcohol market. Seagram’s is just the most prominent example.

In other words, the US government tied the hands of US businesses while turning Canadians into billionaires.

The exact same dynamic is playing out again today… only this time with cannabis. And shortsighted laws are still crippling US businesses.

One Canadian cannabis executive even called US prohibition “a gift to Canada.” He’s exactly right.

The Cannabis Act

In 2001, Canada legalized medical marijuana nationwide. Since then, it’s been inching toward complete legalization.

Last April, Canadian Prime Minister Justin Trudeau introduced the Cannabis Act. This started the process to make it official. The last hurdle is in the Canadian Senate, which is expected to approve it by early June at the latest.

The Cannabis Act will allow adults in Canada to legally purchase and possess recreational marijuana from licensed providers. The goal is to have it implemented this summer.

At that point, Canada will be the second country (after Uruguay) to fully legalize recreational cannabis. More importantly, it will be the first large, industrialized, Western nation to legalize marijuana outright.

Canadians overwhelmingly support the change. A full 68% support legalization, according to a Dalhousie University poll.

This all has huge implications for Canada’s current $400 million marijuana industry. Accounting firm Deloitte estimates that Canada’s marijuana market could become a $4–9 billion market once recreational use is legalized.

That means Canada’s legal marijuana economy is about to grow at least tenfold in size, almost overnight. And that’s probably low-balling it.

One investment bank thinks that Canada’s marijuana market could soon be worth as much as $10 billion. Others think the industry could blossom into a $23 billion-plus market within a few years. That would make it more than twice as large as Canada’s $9 billion beer industry.

In short, Canada’s marijuana economy is about to explode. But you don’t have to live in Canada or open a Canadian brokerage account to profit.

Canadian cannabis producers are one of the best ways to invest in the legal marijuana market. However, many of these stocks trade in the US, and are easily accessible through an ordinary brokerage account.

Bottom line… Widespread marijuana legalization is unleashing a $150 billion global market. Those profits are up for grabs.

In the coming months, I think investors around the world will make life-changing fortunes as the marijuana market takes its natural place next to the liquor market.

Regards,

Nick Giambruno
Editor, Crisis Investing

P.S. Canadian cannabis companies have raised more than $1 billion over the past year. I think many billions more will pour in after legalization. I suggest positioning yourself right now… before that surge.

The chances are high that cannabis stocks could reward you with 5-baggers, 10-baggers, or even higher returns… if you select the best companies. I shared critical details on my top cannabis plays during the Pot Stock Millionaire Summit last week.

Our live presentation is no longer online. But we created a brand-new video where you can catch up on all the details. This special presentation is only available until tomorrow night, so check it out here while you still can.


Reader Mailbag

Have you started investing in marijuana stocks after last week’s Pot Stock Millionaire Summit? Are you bearish or bullish on cannabis? Let us know here.

And again, while the live presentation is no longer available, you can still access this special video to catch up on all the details… and to see why now is the perfect time to invest in marijuana stocks.