Marijuana and the old law
When
considering new regulations to govern the marijuana market, little heed has
been paid to the fact that the existing enforcement effort doesn’t have the
slightest impact on the broad pot smoking public and never has. During the fifty years that I have been a
daily marijuana smoker inflation adjusted prices are down by half, quality has
improved dramatically, and any high school student in the country can score a
joint at lunch. The law’s only effect has been to create criminals, pad
police budgets, enrich lawyers, and senselessly ruin tens of thousands of lives.
On the upside, given the abject failure of the
existing law to have even the most trivial impact on pot smokers, there is no
reason to assume that the new law will increase the number of people driving
while high. Neither of the people who
want to smoke pot but don’t because of the law are the sort to drive
irresponsibly. The concern about stoned
driving comes from the same people who deemed OxyContin or tackle football in
junior high coached by priests safe.
Marijuana and the new law
The
government cannot fix price or control the production of marijuana because it
cannot restrict new entrants. A 100
plant grow-op producing three twenty-five kilo harvests of top quality weed annually
can be set up in a big suburban basement in less than a month for $25,000. The cost of entry to the market is so low
that marijuana can’t be a regulated oligopoly.
Statscan
discovered that the current street price for good pot is $7.65/g compared to
the $10 the finance ministers agreed on.
The price of pot is like a soufflé.
It is kept high by the heat of police risk. That price impact is the
only actual consequence of the current marijuana law. Premium BC greenhouse weed costs $1/g to
grow. The existing industry produces 700
tons a year according to the Globe (not counting the substantial export market). Why should they quit unless there is a
massive increase in enforcement budgets to protect investors? Without such an increase, competition means pot
price will fall like a cold soufflé.
Existing
unlicensed growers can cut prices well below what licensed producers (LPs) can
match and use the established, unregulated distribution system to serve the
largest part of the market, the young, who have no reason to start obeying a
law teens have been ignoring for decades.
The LPs’ only hope to play a role in the market is to be competitive on
the basis of price, quality, and convenience.
This will savage their margins. The
wonder of free markets.
Price
is the least of the LP’s worries. The
weed offered by the licensed producers is dreadful crud. Unregulated marijuana is not only cheaper, it
is much, much better.
The
only way straight investors can make a buck in this market is a hedge fund
shorting marijuana stocks.
Marijuana is not a new industry
The
law is not creating a new industry. It
is attempting a hostile take-over of an existing industry that may be as big as
softwood lumber (according to a 2004 Fraser Institute report (https://www.fraserinstitute.org/sites/default/files/MarijuanaGrowthinBC.pdf). BC marijuana dwarfs the economic impact of BC
fruit. The government is offering no
compensation to investors in the existing production and distribution
infrastructure and does not appear to grasp the massive cost, quality, and
goodwill advantages of the incumbent industry.
During
the 1980s Cannabis indicus seeds transformed
the Canadian marijuana market. Cannabis sativa is a tropical plant that
flourishes best in Jamaica or Columbia. Cannabis indicus is Old World pot from
Afghanistan and Nepal where the climate is more Canadian and less
Caribbean. After marijuana crossed
$1,000 / lb. for Canadian home grown (Cannabis
indicus based, not the crud from old Mexican sativa seeds), a lot of investment and talent was attracted to the
business.
Nobody
imports pot anymore. Fifty years later,
the “commercial Mexican” of my youth ($25 / oz. in 1968) is no longer available
in Canada. Grow-op knowledge and
technology has improved so much that there is no longer a market for even high
end domestic outdoor pot. These days,
the best marijuana is the world is indoor pot grown in Canada. Canada is a major exporter of pot to the U.S.
market (although the gravy days are over as legalization in many states erodes the
extravagant prices Canadian quality marijuana once commanded).
The
licensed producers are selling the cannabis equivalent of Niagara box wine for
ice wine prices. The unregulated market
is offering premium pot at 75% of the cost of the crud the LPs sell. The Canadian pot market has been dominated
for decades by the cannabis equivalent of good French wine. Why would already satisfied consumers pay
elite prices for lousy weed?
It is clear from reading the marijuana news in the
Report on Business that the analysts, report writers, and investors don't smoke
much pot. Peak silly was achieved in a November ROB story suggesting
Canopy Growth Corporation intends to export to Jamaica (I laughed uncontrollably
for nearly a minute – best high ever from Tweed). There was a great picture of a worker tending
to pot plants in a haz-mat suit. They are
approaching investors with the premise that a Canadian in a plastic burka can
sell Tweed weed to Rastafarians accustomed to premium ganja. The Canopy product might be accepted in the
Caribbean as compost but trying to sell it for recreation on the streets of
Kingston will get you shot.
The new LPs will not be able to compete with the
established industry which has no reason to surrender market share in a
massive, lucrative business even if margins shrink a bit. Investors in
the “new” marijuana business may understand spread sheets, but they don’t
understand the product, the customer, or the market. They are going to get skinned and it couldn’t
happen to a more deserving gang of parasites.
The future of medical marijuana
Medical
marijuana started as a ruse to evade a senseless law. Over time the
anecdotal folk medicine stories – appetite stimulation, nausea relief, epilepsy
control, sleep aid – accumulated. The hope of medical cannabis investors
is not folk medicine but rather the potential to compete with Big Pharma for
the anxiety market. Skip the Prozac, Valium, or Xanax – smoke a joint.
The
medical market (meaning access to health insurance plans) will take years of
testing to be viable. The recreational market is a fait accomplis. The war on marijuana is over. The hippies won. Deal with it.
Marijuana - Waiting for the law
A
Globe editorial said the recreational smoker just “has to wait” (March
13). Why should we kneel to an absurd
and ineffective law while those that gave us OxyContin whine about safety and
conspire to take the money? Dream
on. How will the overburdened criminal
justice system cope as a flood of new demands for a jury trial swamp the
courts?
In
a just world, they would simply admit that the marijuana laws were an idiotic
mistake in the first place. The problem
demonstrated by the residential schools financial settlement, is that when
government admits that people were grievously harmed by its own nitwit
policies, the thousands who suffered from that daft mistake will demand
compensation. Now the gay community is
following the aboriginals into court for redress of gross injustice.
The
law ruined tens of thousands of lives and did much more damage than the
drugs. Compensation for that damage is
required.
