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I lobbed a couple of metaphorical grenades in our Reddit sub yesterday regarding multi-state operators (MSOs). I offered up a couple of unorthodox takes on a few of the emerging (and viewed as ‘dominant’) companies in the legal cannabis sector. A sector which is an absolute darling to many right now.
Being provocative was part of it. But the reactions and vitriol that came back is a great example of how irrational the human animal can become. I’ve had some pretty nasty things land in my inbox, just because I put forward a couple of views that aren’t currently in vogue.
Some people right now regard the future profitability of legal cannabis as canon – that inevitably….as sure as night becomes day – that current stock valuation will be multiples of what they currently are. That one will make millions by holding and buying more of these companies. That it’s so much of a certainty…it might as well be put onto stone tablets on a mountain top, and delivered to the people by a guy bringing them down while stepping over burning bushes.
I’ve seen this behaviour before.
I saw it in the dot-com boom of the early 2000’s. I’ve seen it In the mining sector of a decade ago. And I’ve seen it most often in sports books.
I’m a fan of Las Vegas. Living where I was, it was a 3 hour flight to get there. And some hobbies I competed in at the national level took me there several times a year over 2 decades. I like gambling too: I’m a student of blackjack, and enjoy playing roulette. Once in awhile, I’ll bet on sports. Not hard – nor much, but it can be fun to wager on a home team or preferred player. In the mid-90’s, sports books in Las Vegas were relatively new to hockey, and their odds-making was somewhat unrefined. The group I was with – a bunch of Canadians in their early 30’s – knew their divisions and teams and players well. Odds given were sometimes at odds with our views, and we had a couple of good years during playoffs. Nothing crazy, but it was relative to the times, and most of all, it was fun.
The fervour and intensity of many buying/selling legal cannabis equities right now is high. It’s as high – or moreso – than it was a couple of years ago in Canadian stocks. There’s a determinism and certainty….almost a religious fervour towards the inevitability of the millions upon millions of dollars that are going to be reaped and returned to those who join in and attend services by putting their money forward.
And yep, there already has been. I know folks who have made bags of money off of the recent run on both the Canadian and US side of the border. And I also know folks who have dumped a ton of money chasing the same hopes and dreams.
The point of this is that the future is not known. And anyone claiming to know so is full of hot air.
I mentioned gambling above, because I see the same emotional investment by many in stocks as those watching a playoff game or a horse race in a casino. While it might be fun and entertainment in those places, placing your investing dollars – whether in gambling or in stocks – carries risk. Gambling isn’t trading. But both carry risk of loss. And those risks can be ignored when emotion gets involved. And there is a ton of emotion out there right now.
<A professional equity trader left the following as a comment on that link. It’s become one of my favorite analogies about trading: “It’s tough to keep your chin tucked and eye in the scope for precision shots when its raining prime rib. Even if occasionally people are getting food poisoning.” >
I just want to stress: if you’re not doing it for a living, I encourage you to keep your investments or trading amounts relative, and keep in mind that things can turn as quick as an interception or a fluke breakaway can in a sports game.
I’m not bearish on legal cannabis, but I take exception to treating investments more than what they are. Emotion clouds judgement, and as the human animal, we are all emotional by nature. Stepping hard into positions and overextending oneself financially beyond a risk/reward scenario has led many to ruin. I’ve given up lots of money by being cautious…because I’ve seen far too many suffer negative, life-altering outcomes that were completely avoidable.
In legal cannabis right now, I see very few voices saying this. And it desperately needs to be said.
The preceding is the opinion of the author, and is in no way intended to be a recommendation to buy or sell any security or derivative.