Pot Peripherals – Getting In On The Side Gig.

Peripheral vision it's what allows you to see objects all around you without turning your head or moving your eyes. What does this have to do with investing in cannabis stocks? Peripherals are other industries that can be indirectly impacted by the growth of the industry in focus. For example, when crypto-currency was all the rage, volatility reigned supreme. Many believed that crypto-currency was the wave of the future, and it very well might be, but speculation produced extremely high volatility and since then, the market for crypto has weakened immensely.

Smart investors saw an opportunity without the risk, as I did, and instead of getting emotionally caught up in the direct investment, decided to invest in the peripheral investment. What were those peripheral investments? CME Group (NASDAQ: CME), otherwise known as the Chicago Mercantile Exchange and CBOE Global Markets (NYSEMKT: CBOE). Both exchanges announced that they would begin trading futures in crypto-currency and this opened up an opportunity for an investor to participate in the mania without participating in the risk.

I bought shares in both companies and realized a 12.96% return from CME and a 7.00% return from CBOE before exiting my positions and the collapse of crypto-currency. On December 17, 2017 Bitcoin hit $19,379 and has sense retreated to $6,395.00 as of this writing. There are still opportunities in this space, if you want the risk and volatility, but for me, I have decided to move on.

The cannabis industry has the same opportunity in peripherals as did Bitcoin. However, CME and CBOE have yet to announce future contracts on cannabis crops. Not that I do not think that CME and CBOE will begin to see cannabis as a commodity, but for now, the peripherals I am talking about are found in infused drinks, edibles and oils.

Partnership with companies in other industries is a real possibility. Constellation Brands (NYSE:STZ) has been the first one to enter the market. Constellation, along with its subsidiaries, produces, imports, and markets beer, wine, and spirits in the United States, Canada, Mexico, New Zealand, and Italy. Constellation is in the beverages – wineries and distilleries industry. Although they are the first mover, many others in the beverage industry are looking to produce Cannabis infused beverages. Coca-Cola has been rumored to be in talks with Aurora Cannabis Inc. (NYSE: ACB).

New Age Beverages Corp (NASDAQ: NBEV) and Craft Brew Alliance Inc. (NASDAQ: BREW) are also in the hunt for cannabis infused drinks. It could be that they are positioning themselves for acquisition rather than a strategic partnership. I say that because the difference between Constellation Brands and New Age Beverage Corp. in terms of capitalization is enormous.

If an investor wants of participate in the potential profits of the industry without investing in a pure stock play, then finding a company that is looking to capitalize on the market and investing in it might be the best way to participate.

Most of the companies offering cannabis infused edibles are traded over the counter (pink sheets) and are considered penny stocks. Due to that, I will forego listing any of the stocks because I cannot, with good conscious, name any of these stocks. However, an investor can look at reputable companies such as The Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF) or the private company MC Brands, LLC. Rocky Mountain has not expressed any interest in entering the cannabis infused space and MC Brands is nothing but cannabis infused edibles.

Watching private companies, which are currently involved in the market go public or, watching public companies that currently do not have interest in the industry navigate the uncharted waters, could be profitable. However, playing the peripherals can be like shooting BBs into the ocean hoping to hit a lobster. In other words, picking a winner that might not exist yet is a very long shot. The peripheral play is a difficult call, but as the industry becomes more accepted and profitable, traditional companies will find it hard to stay out.

If you like the traditional company that you think might have a place in the cannabis industry, you could add it to your portfolio after conducting your due diligence. However, don’t add a position in a traditional company based solely on your belief that it may one day enter the industry. When adding any company to your portfolio, it is always wise to complete your due diligence and then wait for a buy opportunity on a market dip. So much more so when adding a pure stock play in cannabis or any potential partnerships and peripherals.

Will Cannabis Stocks Go Up In Smoke?

These are exciting times for investors who enjoy first mover opportunities. With the budding new industry being created by the legalization of medical cannabis across North America and the world and, consumer cannabis in Canada, investors who are willing to tolerate high volatility have the opportunity of a lifetime. To get into a developing industry on the ground floor gives the investor an incredible opportunity, but not one without it fair share of volatility. With the number of public and private companies looking to capitalize on consumer demand for cannabis, navigating the terrain and picking winners is a daunting task.

There are several ways to play the cannabis industry including pure stock plays, peripherals, and partnerships. In this article, I want to focus on pure stock plays and then address peripherals and partnerships in future blogs. I do not want to focus on individual companies per se’ because, a simple google search will give you more information that the average person can digest. What I would like to discuss is the S.W.O.T. of investing in cannabis as a pure stock play.

The first caution of cannabis investing is to employ the following three strategic concepts:

§  know thyself

§  know the market

and

§  know the company

First, Know Thyself: Temperament can limit one’s ability to overcome the emotionality of volatility. If you are more prone to intellectual efficiencies, your ability to make decisions based on logical data will serve you well. However, if you are more apt to react emotionally to volatility, you will have to work extremely hard to invest in the cannabis market. It is often said that intellectuals can think themselves into anything and emotional people can feel themselves out of everything. If volatility causes you to freak out, then stay out of cannabis.

But volatility is one aspect of the market that can cause insecurity when trading in cannabis stocks. An investor must temper his or her greed as well. It is easy to convince one’s self that buying a large number of shares at a low price is a sound investment. After all, if the company excels, you make more money. However, the best advice I could offer is this.

If you, as an investor, decide that the cannabis industry has a place in your portfolio, then diversify across multiple companies. By having a small number of shares in many companies, you position yourself to capture arbitrage from M&As and well as partnerships which may form with more traditional companies such as tobacco, beverage and even confectionary companies.

Second, Know the Market: Since the cannabis industry is still developing, knowing the market is not as easy as it sounds. Knowing the market happens at the macro-level. It is big picture and following legislative decisions will help you navigate the industry. If the current U.S. administration bends its ear to the purveyors of cannabis, you can bet the early investors will benefit the most. Once institutional investors are given the green light, you can sit back and watch the money roll in and the stock prices go up.

In addition to the above, there is likely to be a lot of M&A action as companies vie for market share and one-ups-man-ship. Several companies have already participated in acquiring smaller niche companies. This happens in every industry, but will accelerate in the cannabis industry as the real players emerge. Knowing the M&A market as it pertains to cannabis will be highly important concerning the third caution of cannabis investing.

Third, Know the Company: Learning how a company wants to position itself within the industry will provide the investor key information as to the viability of the company in this space. Knowing the company happens at the micro-level. An investor at this level, needs to know the profiles of the companies, which are literally creating a new industry. This is key to determining what direction you want to go as an investor in cannabis. Here are a few of the top companies in this space and their profiles.

• Aphria is positioning itself as a low-cost pot producer
• Aurora Cannabis investments may be more valuable than its pot
• Meet Cronos, the Heinz Ketchup of weed
• Canopy Growth is the cannabis business’s $4 billion gorilla
• GW Pharma is a drugmaker that grows its own cannabis plants
• Vancouver Island–based Tilray has global ambitions

Information derived from Yahoo Finance.

Knowing that Aphria is looking to capture the low-cost market lets an investor understand the market, but it also gives valuable information about potential M&A activity and potential partnerships. With Aurora having investment more valuable that its cannabis products could make it an attractive acquisition target. Each profile gives an investor information about the direction of the company. Tilray, having global aspirations, puts them in the driver’s seat for acquisitions.

So, what might some of the Strengths, Weaknesses, Opportunities, and Threats faced by the investor concerning the cannabis industry be? One of the top strengths of the industry for investors is the newness and acceptance of cannabis. The world is quickly changing (whether for better or worse) and acceptance of cannabis by the general public is gaining momentum. However, this new acceptance is fraught with regulations. This weakness could make the growth of the market limited and susceptible to legal actions, as we have seen with tobacco.

In addition to that, there is the enticement of making large returns via capital gains. Opportunities to buy in at times of negative volatility (when stock prices fall violently) and selling during positive volatility (when stock prices rise rapidly) can result in decent gains in one’s portfolio. Timing is everything in this market and those with the best sense of timing will do well.

Finally, the greatest threat for the investor, I believe, is the government. Since the government thrives on taxing additive substances (consider tobacco and alcohol) there is no doubt they will use cannabis as another revenue source. In order to legally grow and distribute cannabis, a company must operate within the confines of the law, but this does not necessarily mean the black market will dry-up. Since it will be legal to possess and consume cannabis, once purchased, there is no way for the law enforcement community to know where someone purchased the product.

Illegal purchases will not only reduce the tax base, but it will also take money out of the pockets of the companies’ investors are looking to invest in. The industry has great early market mover opportunity, but will experience strong volatility until the dust settles and the leading players begin to solidify their position.

As a pure stock play, the investor should expect significant volatility along with some great opportunities until the market settles into its new reality. The best companies will rise to the top and the less significant companies will likely be acquired by the bigger players. Which company offers the best opportunity is based on the investor’s perception and own direction. Remember, know thyself, know the market, and know the companies. These three analytical concepts will help any investor make better decisions and improve his or her ability to navigate the cannabis industry.

Financial Black Belt™ Financial Self-Defense Training

Recently, I have been asked what it takes to achieve the rank of 1st Degree Financial Black Belt™. So, I have put together the structure of the training I offer under my Financial Self-Defense Training. 

Let me begin by saying that this is the most intense financial training an individual can experience, because you don't just learn the requirements, you execute them. I say "can" experience because not everyone has the special je ne sais quoi, that little something that eludes description, to become a Financial Black Belt™. Membership in the Financial Black Belt™ ranks is exclusive because achieving the rank of 1^st Degree Black Belt requires a life-long commitment to do the extraordinary with ordinary resources.

Achieving the rank of 5th Dan Financial Black Belt™ (Master), is a life-long journey and often isn’t achieved until one is retired. It takes, on average, 3 years for a person studying martial arts to become a Black Belt. That is, of course, so long as there are no interruptions along the way and he or she attends class at least twice a week. Becoming a Financial Black Belt™ will take longer. However, the same discipline required to earn a Black Belt in martial arts is required to become a Financial Black Belt™. You have to fight past the pain, the setbacks, and the times when you feel like giving up. Of course, just as with martial arts training, you do not begin as a Black Belt. You have to work your way through the ranks. Everyone, regardless of his or her current financial situation, must start as a No Belt. Also, just like martial arts, everyone will progress at his or her own pace, from No Belt to 1^st Degree. The time frame is determined by how determined you are. Everyone starts as a No-Belt, but where an individual finishes, is dependent upon that individual.

Financial Self-Defense training is available for individuals, groups, and employees. To learn how to start training today, send your email request to financialblackbelt@gmail.com.

The Ranks and Requirements for each:

No Belt: Upon starting the Financial Black Belt™ Financial Self-Defense Training, an individual will be given the information he or she will need to know and practice in order to advance to the next belt level. Each belt level achieved will result in the individual receiving additional information and action items he or she will need to practice before being tested for the next belt. Yes, there is a test for each belt level.

White Belt: In order to attain the rank of White Belt, an individual must understand and be able to explain the basic concepts of personal finance and investing.

Yellow Belt: Must demonstrate that he or she has established a monthly budget using the O.N.C.E. priority process and has set up allotments with employer as described in the strategy.

Orange Belt: Must demonstrate that he or she has established a Tier 1 Emergency Fund containing 3 to 6 months of living expenses

Green Belt: Must demonstrate that he or she has reached a Tier 2 Emergency Fund containing 1 year’s net salary

Blue Belt: Must demonstrate that he or she has reached a Tier 3 Emergency Fund containing 1 year’s gross salary

Purple Belt: Must demonstrate that he or she has paid off all unsecured / consumer debt and maintains a zero balance on all credit accounts by paying any incurred unsecured / consumer debt balance off monthly

Brown Belt: Must demonstrate that he or she has established a taxable investment account with a reputable brokerage firm equal to 1 year’s gross salary

Brown Senior Belt: Must demonstrate that he or she is maximizing Roth IRA Contributions (for self and spouse) (<50 = $6,000 / >50 = $7,000) Totals based on 2019 IRS limitations. Contribution limitations are subject to change due to IRS rules.

Red Belt: Must demonstrate that he or she is maximizing HSA Contributions (Self = $3,500 / Family = $7,000 or <55 = $4,500 / >50 = $8,000) Totals based on 2019 IRS limitations. Contribution limitations are subject to change due to IRS rules.

Red Senior Belt: Must demonstrate that he or she is maximizing 401k Contributions (<50 = $19,000 / >50 = $25,000) Totals based on 2019 IRS limitations. Contribution limitations are subject to change due to IRS rules.

Red / Black Belt: Must demonstrate that he or she has paid off all secured debt and establish the Champaign Waterfall Strategy for income distribution

1^st Dan Black Belt: Tier 1 Millionaire - Net worth millionaire where total assets minus liabilities equals more than $1M

2^nd Dan Black Belt: Tier 2 Millionaire - Financial assets millionaire where total financial assets equals more than $1M

3^rd Dan Black Belt: Tier 3 Millionaire - Retirement assets millionaire where all tax-favored assets equals more than $1M

4^th Dan Black Belt (Master Instructor): Tier 4 Millionaire - Liquid assets millionaire where all taxable accounts equal more than $1M

5^th Dan Black Belt (Master): Tier 5 Millionaire - Lifetime earnings millionaire where financial assets equal more than lifetime earnings (as recorded by the Social Security Administration)

Personal finance has 3 main goals: Maximize Profit, Enhance Sustainability, and Promote Growth.

Maximize Profit: a.k.a. Financial Offense: The goal is to advance towards the target and dictate positive outcomes.

Enhance Sustainability: a.k.a. Financial Defense: The goal is to protect against possible and probable threats.

Promote Growth: a.k.a. Financial Momentum: The goal is to use life’s momentum to find new opportunities.