What’s Happening With Pot and Marijuana Stocks in 2018


– Hey guys, I wanna revisit
the video I made the other day about the buy the rumor
sell the fact event which I saw playing out in the
Canadian cannabis companies and how it could also extend
to the American companies next. So I wanna give you the
anatomy of what happened there and show you how you can also spot buy the rumor sell the fact events before they come out or before they happen in other situations not
just with marijuana. (upbeat music) And don’t mind that the sign
behind me has been ripped down. I literally tore it off the wall today. So that’ll give you an idea
how my day is going so far. But it was sagging, the
one corner came loose, and I don’t have time to
try and figure this out, so I gotta get the guys back in here and put it in a little bit better. So the anatomy for a set-up for a buy the rumor sell the fact event means that there’s three
things that have to happen. Number one, it needs to be a widely known pretty positive event. Everybody knows the good
thing that’s gonna happen, and it’s exciting them all and
they’re all talking about it. It helps if it’s in a hot industry such as cannabis or 3D printing or electric vehicles or
some new biotech company. It helps if it’s something
that gets investors motivated. And number three is that there
has to be an almost set date. I say almost because it
doesn’t have to be exact, but if everybody is saying
that in late November, or but more importantly what happened with cannabis
is in October 17th, cannabis who’s gonna become
legalized all across Canada, and I was talking about
how that’s gonna affect the Canadian and the American
companies at the same time. And I say that it’ll be a buy the rumor, everyone’s buying the rumor
that it’s gonna be legalized, so therefore if cannabis is legalized, a company that sells cannabis must therefore do better from that point, so therefore it’s a good investment. That’s the way people think. That’s why a buy the rumor sell
the fact event gets set up. When you got those three
factors all coming together, the widely known positive event in a hot industry with
a set upcoming date, it’s a very subjective investing. People think that’s how you invest well and how you can get rich
from trading stocks. It doesn’t work that way. The problem is it becomes a crowded trade. Everybody and their grandma thinks that they’re the only ones who know this, but everybody and their grandma is all buying into the same thing, they’re waiting for, in this case or in this situation, they’re waiting for the legalization date. And when that happens,
a driving factor that has been pushing the
stock up for that long suddenly disappears, and there’s no more impetus to hurry up and buy it by a certain date, so there’s all those people, those other people who’ve bought because they thought that they would benefit from the legalization in the shares that they’ve bought. So they bought the shares and they see that nothing’s happening after the legalization date which was what they were waiting for, and so therefore they’re much more likely to become sellers at the same time. And this is how it played out. And you can look in the charts here, you can see that on the Japanese
candlestick chart rate here is where marijuana was
legalized in Canada, so this is a Canadian marijuana company, WEED is the ticker symbol. And there’s another one just to give you another
example of what happened. But this is the date of legalization, and from that point that
everybody was so excited about, they all started selling, the
stocks started coming down. And I know that the markets had a couple bad days during this time but I don’t think that that
was much to do with it, as much to do with it as
people probably realized. That’s why I was talking
about this well before we knew how the market was gonna
be doing at that time, I said that it was setting up as a perfect buy the
rumor sell the fact event. So what’s next for pot stocks now that the event has played out? Are they just gonna keep on tumbling down? Potentially more likely they’ll probably trade
sideways for a while while they’re trying to find a new more appropriate valuation
or appropriate range. These are all short-term stuff anyways. In the long term there’s gonna be a very few select big
winners from this industry. The vast majority are gonna get wiped out. It’s gonna be competitive evolution when new competitors don’t spring up to take a piece of the market. What’s happening is that there’s already big established corporations that will evolve themselves to take over this market as soon as it’s socially acceptable. And I’m talking about in the
States here, not in Canada. Canada was an example to show you that buy the rumor sell the fact of it. But what’s gonna happen, a lot of these smaller marijuana companies will be absolutely wiped out as soon as someone like, say for example, Pepsi Cola gets into this business and says, “Okay we’ll take over now,” or and the big pharmaceutical companies. A lot of these huge corporations with deep pockets and
extensive legal teams, huge intellectual property divisions, they’re going to absolutely destroy any pure play marijuana company. But very long term, besides
a couple of the big players, the big multinational
corporations who take a part of this industry or this market, the industry itself has a lot of problems. The first one that stands out to me is that the barriers
to entry for marijuana are absolutely nonexistent. Anybody can come along
and become a competitor, and I don’t necessarily
mean a direct competitor. And there’s a lot of problems though longer term with the actual industry. There’s absolutely nonexistent barriers to entry to selling pot. A lot of people can rise up. If the prices increase at all, they can instantly step in and take over some of that supply. And at the same time there’s an ease of increasing the supply. For example if you’re a
big corporation who sells 10% of the marijuana that
gets sold in any given year, you can easily say we
wanna make more money, we wanna take over more of the market, let’s double how much we produce. And then they’ve got this massive supply, and what that does is it might put pressure on prices of the supply because there’s so much of it., but it’s gonna put way more pressure on the smaller companies that are playing in the industry. It’s not gonna put a lot of pressure on the bigger companies. And any time there’s more regulation, if they force or they
fight to make sure that if you wanna sell marijuana, you have to jump through certain hoops and pass certain metrics and fill out certain forms, the more of that there is, the more it helps the bigger companies. The smaller companies
have a lot of hard time meeting all the demands and jumping through all that
hoops that they have to. The bigger companies love that because it adds barriers to entry. If you wanna sell marijuana, then you must get this
kind of permit for example, and if they can get the
permit ’cause they have, like I said, a big legal team, they know exactly what they’re doing, they have the money and deep pockets, then it actually becomes a benefit to them because it keeps other
players out of the industry because it’s so hard to get
that marijuana selling permit that you want or that you need. And as good as the marijuana
industry is going to become, it’s gonna grow a lot, it’s gonna be huge, it’s gonna be big, it is actually cannibalizing some of the others cent investments such as alcohol and cigarettes. Some people have a certain amount of money that they’re gonna spend on cent products such as cannabis and alcohol, and they’re not going to then say, okay, marijuana is legal so I’m gonna buy that plus keep buying the same
amount of how much of wine and vodka and alcohol
they’ve bought already. People aren’t going to just drink more and get stoned all the time. What’s gonna happen is people
are gonna pick their moments, they’re gonna have a certain
cannibalization of dollars going into these types of
industries which will be reverted or redirected to buying marijuana. And it’s gonna add a lot of cost too. For anybody who smokes marijuana, then you’re gonna need to be buying a lot more from your
budget for snack foods, chips, cookies, all that kind of stuff. But most of all you’re
gonna see that some money is being redirected to this industry as opposed to being created and added to the money being spent on
these types of products. It’s gonna be taken from somewhere else. It’s kinda like Cherry Coke. It didn’t take Pepsi drinkers and convert them over to Coke. Cherry Coke cannibalized some of the other drinkers of Coke that they already had who drank normal Coke or Vanilla Coke. They all went to Cherry
Coke to try it out, but it didn’t really get
a lot of new customers who used to drink Pepsi and say, okay, well now I’m gonna go drink Cherry Coke. It was other Coke investors. And I’ll tell you a secret how you can know when there’s another buy the rumor sell the
fact event setting up, because they’re all over the place, they happen all the time, and then you’ll know not to
chase those stock prices up and you may know also how to benefit as the prices come back down. Pay attention when someone comes to you with a stock that they’ve
either invested in or that think that you
should invest in it, and they have a reason for why they think it’s such a good investment, and it comes along with a set date. So if somebody says to you you
should buy marijuana stocks because on October 17th it’s
becoming legalized in Canada, that is a red flag, that should put up all sorts
of warning signs for you. If somebody comes to you with
something that they think is a subjective good investment, it’s subjective, not objective, that should set off a
ton of red flags for you, a bunch of warning signs. If somebody comes to
you and their reasoning for why somebody should buy the stock, on the reasons that it’s
going to increase in value such as in our example, well, marijuana will be legalized in Canada on October 17th dot, then that means that it’s very likely that the stock price is getting pushed up and pushed up and pushed
up until that point. And when that happens, the stock will become so overvalued that once the event happens, there’s nothing for that stock to do except return down to lower valuations. The ways that people look at that company also change in that moment. It goes from speculation of this big date is coming up, it’s gonna change everything and then we’re all gonna
make so much money, it goes from that to people take a breath and they step back and they go, okay well, let’s look at the actual company, what’s going on here now, because the legalization has passed, the stock price hasn’t
gone through the roof like they expected. And there’s a shift then at that point where more sellers come
out of the woodwork and fewer buyers. The buyers lighten up, there’s a lot less of them, and also there’s a lot
more sellers who have waited until the date
that they’ve invested for. Now the date’s passed
and they are going to, some of them are gonna
dump some of their shares, and that puts a lot of pressure on a stock that has no price drivers pushing it up. That’s how buy the rumor
sell the fact plays out, and that’s why these stocks
have started falling, and they may go a lot lower, I don’t think that they
will but they could. They will probably be trying to find a range for a little while. And there’s another video on the screen right now that please click on it, it’s gonna keep our conversation going. Thank you.

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