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Texas Could be Leader in Legalization of Marijuana
(Credit: PAUL BUCK/AFP/Getty Images)
“Texas could be a marijuana leader, in the next few years, actually.”
That’s the prediction of Alan Brochstein, founder of 420 Investors, and one of the participants at this week’s inaugural Marijuana Investment Conference in Houston. It’s a bold prognostication from a guy who less than two years ago, hardly comprehended the breadth and depth of the industry.
“About a year and ten-months ago, I didn’t know what ‘420’ was,” he confides in an anteroom at the Conferece. “I do now–‘420′ means ‘marijuana-friendly,’ and I stumbled upon the whole notion of publicly-traded marijuana stock,” he says. “I didn’t know they existed.”
Alan Brochstein, 420 Investments Photo Credit: Alan Brochstein
Brochstein is no newbie in this arena. “I’ve been in investments since I graduated from college, since 1986, and I had been in stocks professionally, since 2000,” he says. In early 2013 his first exposure to marijuana stocks revealed a shocking scenario. “I learned in early 2013 that these companies even existed. “I was horrified. I said, ‘wow! people are crazy–they’re paying high prices for terrible companies,’ and I was probably one of the first people to ever take a very serious look at the companies in the space,” he recalls.
Throughout 2013, he became fascinated by the whole subject. And yes, personal politics did enter the equation. “I’m a lifelong Libertarian, so to me, it was like, ‘Legalize it.'” he says. “I don’t know why not. Period. End of story.”
What he learned in 2013 was all of the medicinal aspects, which really resonated with Brochstein. “I was learning about all these different conditions that Marijuana may be able to treat, and at the same time, because of the scheduling–which is just crazy to me, that our government, for whatever reason, thinks cocaine is safer than Marijuana,” he says. “I don’t understand that.” However, studies to prove or disprove the stance are virtually nonexistant.
Brockstein’s growing passion for the medicinal marijuana industry actually spawned a life of its own as the year progressed. An already prolific contributor to Seeking Alpha, he found more and more people relying on his research and recommendations. He began to build a loyal audience, “people who really cared about the theme of investing in Marijuana, and trying to find the good companies,” he says. “And there weren’t that many.”
In late 2013, he says,”the market kind of took off” as two big things happened. First was the about-face by CNN Chief Medical Correspondent, Sanjay Gupta. “He did his famous 180, and he embraced medical marijuana–that was a huge change,” notes Brochstein. Equally significant, the legislative landscape was shifting, particularly in the Washington State and Colorado. “Everybody knew that Colorado and Washington had approved legal cannabis, but they didn’t know what the Federal Government was going to say,” he says.
United States Department of Justice/KROI
The Federal Government was strangely quiet on the subject. Then, in late August, Eric Holder, at the Department of Justice, issued the Cole Memo. “Eight-points, basically–the bottom line was, ‘we will let the experiment proceed,'” he says.
Colorado and Washington were a go.
That’s when lights and bells started going off in his head.
“Right before the Cole Memo and right after Sanjay Gupta, I said, ‘you know what–I am going to start a website aimed at the public, trying to help them navigate this new wild, wild west sector.” 420 Investors launched September 15th last year, and ended with about 160-subscribers (At $49/month = $96,000/year!)–which was pretty impressive. “It was’t a full time job for me,” he says, however.
As Colorado went legal in January, world wide media attention exploded. “The stocks exploded, and people poured into the sector,” Brochstein says. “The number of companies that were trading publicly ballooned!” he says. Brochstein estimates there are probably about 250. “I don’t know them all intimately, but I track them,” he says.
By March of this year, he was into the sector full time. “This is all I do now,” he says. “I basically had to fire all my clients, which, they were okay, they understand this is a once in a lifetime opportunity.” It’s very rare that you have an industry with established demand, already in place, where the supply chain is going change dramatically the way it is now. We’re basically moving from a system where you have a black market, into the light of day. And this creates all sorts of opportunities, and the industry’s gonna change in many ways.
Brochstein believes Texas could be one of the leaders in accepting, embracing and regulating the legalization of cannabis. “I call it a triple-win,” he says. “It’s going to be good for entrepreneurs–we’re seeing some of them [at the conference].” Brochstein also predicts the changes will ultimately be good for consumers. “They’re going to get more standardized product–higher quality product–and possibly better prices,” he says, ever the capitalist.
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But there’s another social aspect that is equally important, and could have fundamental implications. “It’s good for the society,” he says, noting the government will get tax revenue. But on an individual basis, he says, “we’ll also see people not inappropriately jailed, which is not only expensive, but it destroys lives.”
Brochstein is amazed at what he sees on an ever-changing landscape. “I think people are starting to learn about this, and it’s very real.” He says even his assessment has changed in the past few months. “I just heard that the Students of a Sensible Drug Policy, which is an organization across college campuses, are now reporting that Texas is their most-active [state], in terms of the number of members, in the whole country.” Florida is second, with a lot of activity pushing for legalization there, as well.
The Marijuana Policy Project is also very focused on doing three things in Texas in the next few years. “First–decriminalization,” he says. “They call it civil penalties. Second would be to create a medical marijuana program in Texas–and I think that’s very feasible,” he says. Brochstein predicts more resources will be needed because much education has to take place.
“As citizens in Texas, we have no say–it’s our legislators that have a say,” he notes. “First of all, we have to convince the people that this is a good thing,” he says. “Then we have to show the people how to convince their legislators. It’s a tough, tough process,” says Brochstein.
Still, he sees the end game in a favorable light. “Society wins, the businessman or woman wins, and the consumer wins. So, that’s where we are today,” he says.