The pot market got too high on itself
Shrouded in all the cryptocurrency madness late last year, there was an equally-epic bubble in marijuana stocks in Canada.
The country is slated to legalize pot on July 1 and that led to a rush into companies to supply the drugs.
There are many charts that look like Newstrike Resources.
The problem is that supply is about to far outstrip demand. Statistics Canada estimates that illegal demand for weed in Canada last year was 730,000 kg.
«In total, 91 growing licenses have been issued by Health Canada, and
this quick snapshot of a few of the players above accounts for only
about 20% of those licenses. Combined, just this small snippet of growers are
capable of 1,500,000 kilograms of capacity by 2020, give or take perhaps
100,000 kilograms. That’s more than double the consensus guess for
demand in Canada, and it doesn’t even take into account around five
dozen additional licensed growers not mentioned here.»
The lesson here isn’t to necessarily short the stocks. It’s that in a globalized world where capital is in excess and easily flows across borders, that any time there is a new, game-changing idea the prices and speculation will get way out of hand.