Daddy sent me to college to gain a little knowledge, and while I was there I discovered Willie Nelson. His rebellious ways fit mine, and I liked country music. I never was meant for glitter rock and roll. Willie tells a story about quitting cigarettes, cold turkey, with marijuana — it could be poetic license, but an amusing account regardless. Occasionally clients ask about marijuana stocks, but I remind them of the scores of technology companies, despite the information age, that went bust. Tobacco giant Altria saw their $1.8 billion position in Cronos Group, a pot cultivation and marketing company, drop by 10% this year compared with a double-digit return on the overall stock market.
Levi Strauss, a Jewish immigrant from what is now Germany, moved to San Francisco. Instead of mining for gold, he made a fortune and along the way became an American institution by selling dry goods to miners. Neither of the two men who discovered gold in California got rich. The California Gold Rush’s first millionaire was Sam Brannen, an entrepreneur who owned a merchandise shop and a newspaper. According to legend, Brannen bought up all of the picks and shovels in San Francisco and then announced the gold discovery in his paper. He leveraged his profits into land speculation, and in less than a decade, Brannen’s empire included one-fifth of San Francisco’s real estate.
Brannen died penniless, but his “picks and shovels” strategy endures. Instead of the final output, gold, for instance, focus on the technology or services the industry requires. We may be seeing similar results with the marijuana industry. Scotts Miracle-Gro has been selling fertilizer to domestic gardeners for over 150 years. According to a report in The Wall Street Journal, over 15% of Scott’s revenue now comes from cannabis clients. The company supplies companies in legalized markets with equipment and fertilizer.
Since marijuana is still illegal at the federal level, conventional mortgage financing is close to impossible. Innovative Industrial Properties (IIP) is a real estate investment trust specializing in growing facilities. IIP specializes in sales and leaseback with growers. While IIP has stellar returns this year, changes in federal laws could hinder future results.
In less than a decade and a half, Social Security’s Trust Fund will only be able to pay 80% of projected benefits and Americans need to pay attention to its funding crisis. We ought to consider legalizing marijuana and taxing it like tobacco and alcohol with the funds earmarked specifically for the Social Security Trust Fund. For those who oppose legalization, remember the only way to solve Social Security’s funding shortfall is to raise taxes or cut benefits. They should be happy none of their taxes will increase nor any benefit reduced. If someone has a better solution I want to hear it.
You can’t always get what you want but Buz Livingston, CFP can help you get what you need. For specific recommendations visit us online at livingstonfinancial.net or come by our office in Redfish Village, 2050 Scenic 30A, M-1 Suite 230.