When Napoleon ruled France in the early 1800s, California was a wild frontier region – home to just a handful of pioneers.
But last year, California overtook once-mighty France in the rankings of the world’s largest economies, coming in at sixth place.
The International Monetary Fund says California’s GDP is worth roughly $2.5 trillion, buoyed by agriculture, tourism, aerospace, and, of course, Silicon Valley and high tech.
The vast scale of economic opportunity in the Golden State is incredibly important for another big reason. That huge GDP will help serve as a key “trigger” – or catalyst – in the breakout Frontier Investing world of legal cannabis.
Starting Jan. 2, California is all set to make recreational use of marijuana for adults fully legal. Simply stated, we’ve never seen anything this big happen in the legal cannabis industry.
That’s why I’m headed south to Anaheim this week to attend the California Cannabis Business Conference later this week, where some 350 firms will be represented.
To give you the inside edge, I’ve spoken with the group’s leaders.
Today I’ll be share their insights with you.
They foresee a more than $20 billion impact in just the next four years alone.
Bringing Their “A” Game
“All eyes are on California, and for good reason,” Josh Drayton, communications and outreach director for California Cannabis Industry Association (CCIA), tells me. “We’ve never seen a rollout this large.”
Drayton’s comments come as a wide range of analysts predict California will have a dramatic impact on the national industry’s sales volume starting in just a few months.
“We’re now seeing insurance providers coming into this space, tech companies, commercial real estate… folks who never anticipated they would be touching the cannabis industry,” he says to me. “But I really do believe, throughout every step that we’re dealing with, there is room for growth the whole way through. Now is the time where every part of this industry needs to bring its ‘A’ game.”
A report by the University of California Agricultural Issues Center suggests that medical cannabis already adds $5 billion a year to the state’s economy.
That figure could swell much higher as the state becomes a legal and regulated recreational market. Analysts note that right now many growers and a millions of buyers in California are working outside the law, depriving the state and its cities of badly needed tax revenue.
As by far the nation’s largest consumer market, with nearly 40 million residents, recreational use is bound to help make legal cannabis even more popular that it has become in the last few years.
A poll conducted by CBS News found that 61% of Americans think the time has come for legal recreational pot. That’s up five percentage points from a year ago. And it’s more than double the 27% approval rate in 1979.
Here’s how that’s translating into dollars and cents…
A $100 Billion Market by 2029
Legal pot sales rose a stunning 34% in 2016 to $6.7 billion across North America, according to Arcview Market Research. That figure should surpass $8 billion by 2018, and reach $22.6 billion by 2021. That works out to a 27.5% yearly growth rate.
The impact on “jobs, tax money, and wealth creation made possible by California ending marijuana prohibition cannot be overstated,” says Arcview CEO Troy Dayton, with whom I recently met.
Dayton says a compound growth rate of more than 20% a year will continue “for many years past 2021 as more states and countries legalize cannabis.”
For its part, Ackrell Capital is even more bullish on California’s recreational pot market. By 2029, the firm says, the sector will be worth a stunning $100 billion.
But analysts may actually be understating California’s full impact, says Kristi Knoblich Palmer. She is a cofounder of cannabis edibles firm Kiva Confections and serves on CCIA’s board of directors.
Here’s what she has to say…
Knoblich Palmer notes that the state remains a global leader in tourism with popular destinations like Napa Valley, Hollywood, and San Francisco, not to mention the skis slopes that ring Lake Tahoe.
“Our cannabis products will be able to access a whole new world market, she notes. “We’ll get global awareness. It will just be an amazing accelerator for cannabis as an industry and as something for people to incorporate into a healthy lifestyle.”
She’s making a great point about California’s ripple effect. The tourism group Visit California pegs the value of the state’s 2016 travel market at $126 billion.
The group doesn’t count the number of persons who visited, instead relying on the number of trips to California. Last year, there were 261 million visits to the state, all but 49 million of which were for leisure.
In other words, millions of folks from around the world where cannabis is still illegal will be able to buy and consume those products in California after Jan. 2.
Ahead of that growth, money is flowing into the sector. The research firm New Frontier notes a 287% jump in investments last year in businesses that grow and sell pot.
And cannabis-focused biotech firms have become a huge magnet for funding. New Frontier won’t disclose dollar amounts, but pegs the 2016 increase in VC funding at a stunning 482%.
The payoff from that spending is now being seen in dozens of new clinical trials, and the stage is set for effective new cannabis-based drugs to come to market over the next few years.
Meantime, the momentum is clearly in favor of legal cannabis use.
Canada, for example, is gearing up to launch legal recreational pot nationwide next year, as are a number of other U.S. states.
On June 19, Mexico’s president signed into law a bill legalizing cannabis use for medical purposes. That means, beginning next year, some form of cannabis use will be legal from the very north of Canada all along the West Coast of the United States to the very south of Mexico.
In other words, this is a field that is still in the early stages and that offers investors enormous opportunities.
Your Single Best Move
Though I plan to touch base after I get back, I won’t be sending you regular updates from the California Cannabis Business Conference in Anaheim. Those I reserve for the paid-up members of my Nova-X Report premium service.
For those folks, I’ve put together an authoritative guide to cannabis investing – consider it the “bible of weed investing.” Titled The Roadmap to Marijuana Millions, this in-depth report is the most comprehensive of its kind – by far. In it, I cover more than 25 stocks.
This is the kind of “model portfolio” with which you can build a nest egg – the sort of treasure chest you need for retirement… or just to treat yourself.
To get your copy, simply click here.
I’ll see you back here with a technology investment that comes out of Silicon Valley – and much further afield.
And then I’ll be back next week with some news from Anaheim.
I’ll see you then.
Have a great week.