Last week, Attorney General Jeff Sessions hinted at a shift in marijuana enforcement just weeks after signalling he would continue Obama era policy regarding cannabis law. This series of flip flopping left cannabis industry activists and investors alike dazed and confused. Considering the market is a psychological beast, speculation seemed to favor a substantial move lower in cannabis stocks for both US and Canadian stocks in the days following Session’s comments .
However, something interesting happened. US cannabis stocks remained strong over the course of the following two trading days even ticking higher on Friday after holding up well Thursday (chart below). Canada did continue down, but after last week’s House of Commons vote and a substantial exponential move into the news, a buy the rumor sell the news event was expected and may continue to bring about weakness in the coming weeks (after months of exponential gains, consolidation often takes several weeks to complete). Although the US index is down from when the news initially broke last Wednesday, it’s only by a couple points and several cannabis stocks closed Friday at the day high well above the day’s trading range.
The fact Session’s comments were completely ignored by investors adds significant weight to the theory his threats are hollow and downright unfeasible. To allow State’s rights for cannabis over the last four years then pull the rug out would turn currently law abiding business into criminal enterprise, cut billions in tax revenue for States, and cost the Federal Government billions in enforcement costs. Neither States nor the Fed could easily afford such action. California, for example has already spent millions getting their State set up and ready for their recreational cannabis law coming online next month. More importantly than cost, however, States would surely not stand for the authoritarian crack-down on moral grounds alone.
If history is any guide, States don’t take too kindly to the Feds telling them what to do. The blow-back from attempting to stifle the will of 29 States is unfathomable and, according to some sources, could even push the Federal Government to favorable action regarding State’s rights on the issue.
According to an article by James McClure of “Civilized”, “Republican National Committee Chairman Michael Steele welcomes the crackdown because he thinks it will backfire almost immediately.” “In one sense, I’m like, ‘Go ahead, Jeff. Do your thing, baby. Bring it. Because you’ll have 18 states lining up to bring an immediate lawsuit pushing back on your crackdown,'” Steele told Civilized. “And that really blows up the conversation at the federal level.”
It seems that speculation is leaning toward “bring it on!” rather than cowering to Session’s threats. This week will be important to watch as the Spending Bill is expected to be finalized by this Friday, the 8th. It’s time to put up or shut up. If Sessions fails at his attempt to thwart the will of the people and State’s rights, it would be a major psychological and fundamental victory and will indeed signal Game On for the US cannabis stocks into the historic implementation date of January 1st 2018 for California, the world’s 6th largest economy.