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Marijuana Stock Report: Let’s Face It, It’s Time To Panic

The North American Marijuana Index fell again on Friday, as pot stocks ended a newsworthy but rather tranquil week on another down note. Despite Washington's seeming about-face on weed, including Attorney General Jeff Sessions’ recent admission that "there may well be some benefits from medical marijuana," cannabis stocks continue to plummet. Down 4.8 percent last week alone, The Index has lost nearly six percent for the year, including an unprecedented 24 percent drop in February, leading analysts and experts alike to continually question whether a recovery is near.

Image/The Marijuana Index www.marijuanaindex.com

While pundits tease marijuana's big moment and lament the fall of other vice investments like alcohol in the wake of the public about-face on weed, average investors quietly begin to foment anger and frustration over promised gains that have yet to appear. “Having a sobering saturday [sic] sitting here contemplating my portfolio. I'm down a ridiculous amount of money and it just seems insurmountable to break even,” writes one poster on the popular subreddit r/weedstocks.

“Don't think I could have possibly played it worse buying everything in January. My plan is to hold until the fall then liquidate everything regardless of prices. I regret every investment decision I have made and will remember this period of my life forever,” the poster continued. The post, titled “Anybody else lost huge playing marijuana?” currently has 198 comments, far more than any other recent post on the sub. Although some comments are hopeful of a market turnaround, most admit their portfolios are down this year.

The Index fell 0.17 points, or 0.07 percent, to close out the week at 243.88, with the United States Marijuana Index gaining .85 percent and The Canadian Marijuana Index losing 1.07 percent.

Meanwhile, Earth’s Mightiest Heroes brought in more money last week than peace negotiations on the Korean peninsula, as Avengers: Infinity War broke box office records but attempts at “complete denuclearization” between North and South Korea failed to move the stock market. Wall Street ended Friday mixed on news that weak consumer spending slowed the economy, though experts agree that wage surges and lower tax rates could offset those negatives.

“The GDP came in much stronger [than expected] but the employment cost index was also stronger and that is what caused some of the negative reaction because that just brings up the whole wage pressure and inflationary argument again, and what the Fed is going to do,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in an interview with Reuters.

The Dow Jones Industrial Average dropped 11.15 points, or 0.05 percent, to end the week at 24,311.19, while the S&P 500 rose 2.97 points, an increase of 0.11 percent, to close out Friday at 2,669.91. Finally, the Nasdaq Composite jumped 1.12 points, or 0.02 percent, ending the week at 7,119.80.

Across the border a partial outage at Canada’s major stock exchanges caused trading to shut down nearly an hour early, leading to some questions about the credibility of the TMX Group, who operates the exchanges.

Photo By Open Grid Scheduler / Grid Engine

"It is not a good thing for the exchange or the investors. It is lost business for TMX and lost credibility. It makes investors look elsewhere," said David Cockfield, portfolio manager at Northland Wealth Management in an interview with Reuters. Trading is expected to resume Monday.

The Horizons Marijuana Life Sciences ETF (HMMJ.TO) fell CAD$0.13 per share, or 0.80 percent, to close the day at CAD$16.04, while Evolve’s Marijuana ETF (SEED.TO) dipped CAD$0.11 per share to CAD$16.54.

Overproduction Leads To Layoffs, Price Cuts In Oregon

Oregon’s cannabis market is learning a hard lesson in economics, with Merry Jane reporting this week that overproduction has led to deep price cuts and layoffs for local dispensaries. Loose regulations which led to a lower barrier of entry into the marketplace saw the state produce over 1.1 million pounds of cannabis in 2017, even though, as Merry Jane reports, Oregonians consume less than 340,000 pounds per year. Of course, federal law prohibits cultivators from selling marijuana over state lines.

A gram of flower sells for around $4, while a pound at wholesale averages $700. According to the report that is more than 40 percent cheaper than the previous year.

"Whenever you have these emerging markets, there's going to be a lot of people entering the market looking for profit,” remarked Beau Whitney, a senior economist for the cannabis research firm New Frontier Data, who spoke to the Willamette Weekly. "Once it becomes saturated, it becomes more competitive. This is not a phenomenon that is unique to cannabis. There used to be a lot of computer companies, but there's not so many anymore."

With so much bud leftover, experts worry that desperate cultivators and dispensary owners may turn to the black market to try and make back some of their investment. "If somebody has got thousands of pounds that they can't sell, they are desperate," stated Myron Chadowitz, a cannabis farmer in Eugene, who also spoke to the Willamette Weekly. "Desperate people do desperate things."

According to Merry Jane, U.S. Attorney Billy Williams has warned the state’s cannabis players that the federal government could step in if the overproduction problem is not rectified. To date, the issue continues to go about unsolved.

Quick Hits

Maricann Group (CSX:MARI) (OTCMKTS:MRRCF) announced fiscal year 2017 financial results last Friday… Friday Night Inc. (CSE:TGIF) (OTCQB:TGIFF) held a special shareholders meeting… MedReleaf Corp. (TSX:LEAF) partnered with Niagara College.

California Vs. Canada

Although Canada expects to legalize the use of recreational marijuana across the entire country later this year, it is noteworthy to point out that California is still the larger market for cannabis consumption, despite the fact that it is only one state. According to New Frontier Data, the market is worth $1.35 billion in California and $370 million in Canada, with growth expected to rise to $2.51 billion and $1.68 billion, respectively in 2019.  Explore the complete data set in this week’s “Cannabit” below:

Photo Courtesy New Frontier Data www.newfrontierdata.com
 
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