2019年10月29日星期二

The Truth Behind the “Vaping Crisis”

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CASEY DAILY DISPATCH - Casey Research

Chris’ note: One of the best ways to beat the market is by finding opportunities in the sectors most investors ignore… especially ones that are in the middle of a crisis.

And today, there’s no better “crisis investing” opportunity than cannabis stocks.

If you haven’t been following the news, the cannabis industry has taken a beating recently, thanks to a new health scare that’s cropped up around vaping. Vaping is a method of ingesting certain substances (including marijuana), but some recent incidents have led people to believe it’s dangerous.

This just isn’t true… but the drama is giving us an opening to book even larger gains as the cannabis trend takes off.

That’s the word from my friend and go-to cannabis investing expert, Nick Giambruno, who runs our Crisis Investing newsletter. There are few people who know more about this sector than Nick… and he’s convinced that this is a perfect time for speculators to buy in.

I called him to get the full story. Below, Nick explains what’s really going on with the “vaping crisis”… and why you shouldn’t let it scare you away from huge profits…


The Truth Behind the “Vaping Crisis”

Chris Reilly, managing editor, Casey Daily Dispatch: Nick, the “vaping crisis” is dominating the news. Can you break down what’s really going on?

Nick Giambruno, chief analyst, Crisis Investing: I'm sure most people know what vaping and e-cigarettes are. You've probably seen a person vape on the street or in a restaurant or in some other public place. Basically, it's a new way to ingest nicotine and other substances. Vaping has been around for years now, but in the past nine or so months, there's been a lot of strange health problems linked with it.

So far, there have been 24 deaths and over 1,000 injuries as the vaping crisis has sparked a health scare.

But it's important to understand that this isn’t a problem regarding the process of vaping itself. It's a problem because people are getting sick and dying from counterfeit and black-market cannabis products that are bought off the street instead of from reputable sources and stores.

Specifically, people are getting sick from the black-market and counterfeit marijuana vape cartridges. These are mixed with all sorts of chemicals, heavy metals, and pesticides. In a lot of cases, these vapes don't even have the cannabis ingredients in them. So, people don't even know what they're ingesting into their lungs.

It's analogous to if somebody made some moonshine in their basement and then put it in Smirnoff bottles. And then people started getting sick and dying from that. Well, that's not a problem with the vodka or the alcohol industry. It's the problem of counterfeit products with poor quality. So that's what the issue is here.

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Chris: Is this the main reason for the sell-off in cannabis stocks?

Nick Giambruno: It’s certainly the big reason right now. The perceived link between the vaping crisis and cannabis has helped to pummel cannabis stocks in recent months.

People are confused. They see all the scary headlines in the mainstream media and think a major source of revenue for cannabis companies is going to disappear. The fact is there are reputable cannabis companies in places where cannabis is legal that make legitimate and safe vape products.

The market seems to be conflating the black-market and counterfeit vape products with the legitimate ones. That’s a big reason why we’re seeing a sell-off in cannabis shares.

I should mention vaping is a very big and growing part of the legal cannabis market. In legal markets, it makes up at least 50% of the derivatives market, with derivatives making up about half of the overall market. So it's a very big and growing chunk of legal cannabis sales.

The bottom line is that this crisis is overhyped and misunderstood.

Chris: Do you think vaping will become illegal? It seems like the government could step in and just ban it outright…

Nick Giambruno: First, it’s prudent to consider the numbers when talking about banning an industry…

Cigarettes kill over 480,000 people each year in the US. That’s about 1.4% of the total users, as over 34 million people in the US smoke cigarettes.

And vaping – illegal, black-market vaping – has caused only 24 deaths out of 11 million vape users. That’s about 0.00022% of the total vape users.

I’m not trying to diminish the suffering… only keep in perspective that this is a tiny minority of users.

And despite the high death toll and attempts to stamp out the cigarette market, it’s still very legal.

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In regard to vaping, you’ve heard politicians, from state governments and the federal government, talk about banning certain vape products. Now they're not talking about banning all vaping products. They're talking about banning specifically flavored vape products, like bubblegum and grape and the kind of flavors that appeal to minors.

This is actually a counterproductive knee-jerk response. They’re going to ban the products that the kids like the most. So what are the kids going to do? If they can’t be obtained legally, they're going to buy them off the black market, which is where all of the problems from the crisis are coming from in the first place.

It will just make the problem worse. So if they want to solve the vape crisis, they should find ways to stamp out these underground, counterfeit products. What they’re proposing is just completely wrongheaded and misguided. But like anything the government does, that's to be expected.

The one politician who doesn’t get it completely wrong is President Trump, who said this recently:

tweet

Chris: You’ve mentioned that this is the perfect crisis investing opportunity. Can you explain?

Nick Giambruno: Sure. For people who are looking to invest in cannabis stocks, it's actually an opportunity because this crisis is only a temporary problem. I think people will soon come to their senses and realize that this is a problem of counterfeit and underground products and not of vaping itself.

Some cannabis stocks are down well over 50% this year. The vaping crisis is a big reason why. So really, it's created an opportunity to pick up the quality cannabis stocks. And I must say, most cannabis stocks are junk. They are absolute garbage with no prayer of turning a profit. But there are a handful of good ones that will dominate this new global industry worth hundreds of billions of dollars. And this vaping crisis is giving us a chance to pick up those good ones at bargain prices.

Cannabis vape products aren’t going to disappear. On the contrary, they represent one of the fastest-growing segments of the legal cannabis industry. The companies that get it right – by creating quality vape products and building strong reputations – are going to thrive in the long term.

It’s precisely the kind of contrarian setup I look for in Crisis Investing – extreme negative sentiment, beaten-up shares, and clear upside catalysts.

Chris: That definitely paints a clearer picture for me. And I think our readers will appreciate the truth behind what’s really going on.

Thanks, Nick.

Nick Giambruno: My pleasure, Chris.


Chris’ note: There’s another reason to get involved in the legal cannabis sector today. In short, Trump’s found a backdoor way to legalize marijuana at the federal level. One that bypasses Congress… and legalizes weed federally by executive order – with one stroke of his pen.

It’s a bold move. One that will pump $194 billion into an already booming economy… and create 1 million jobs in the near future – giving Trump a smooth path to a second term.

And our research shows Trump could sign the executive order any day now. Go here to see why.


Reader Mailbag

Today in the mailbag, a reader raises concerns about electric cars… in response to Doug Casey’s two-part interview on the rise of this new technology (which you can read here and here):

I have been a Doug Casey fan for decades.

There are a few things that I wonder about concerning electric cars and the grid. Electric cars are coming because of central planning, based on the false pretense of climate change.

The only constant in the whole universe is change. Of course climate changes, but so does everything else.

There is very little demand for electric cars. Without billions in subsidies, they are not economic. Maybe at $300 a barrel of oil they would make sense.

Natural and manmade catastrophes are inevitable. Shut down the grid, and the whole world comes to a halt. If there is to be any change concerning these matters (which is doubtful), people first have to become aware.

Best wishes, Doug.

– Rossco

Would you buy an electric car? Do you think they will become more popular, or do they face too many obstacles? Share your thoughts with us at feedback@caseyresearch.com.


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