The “Window of Wealth” won’t stay open for long…
On March 27, 1995, the S&P 500 first crossed the 500 mark.
I remember it well. I was sitting at the trading desk, on the 92nd floor of the Sears Tower (that’s what it was called then), trading high-fives with the rest of the traders on the desk.
I guess that “The 500 at 500” had an eponymous ring to it. And the convergence between name and value was at least worth a little acknowledgement.
The celebration lasted all of 10 seconds. Then it was back to work. Which, for me, was index arbitrage.
Now, arbitrage is a big, complicated word. I’ll break it down for you in a moment, but it basically means that there’s a window temporarily open somewhere in capital markets to make a lot of money with little risk. And to profit from it usually requires that you get a lot of very technical things right.
Well, today there’s a massive “Wealth Window” wide open in cannabis markets. It’s the biggest wealth window I’ve seen in a generation. And profiting from it does not take complex financial engineering. Anyone can take advantage of it – including you.
But before I tell you about it, let’s talk about what makes a trade and arbitrage trade in the first place…
Understanding the Importance of Arbitrage
Arbitrage is used all the time, and it means different things to different people.
But for me way back in 1995, it specifically meant that S&P 500 futures contracts were trading at a price far out of whack of the prices of the actual stocks in the index. And the mispriced futures contract temporarily opened a window to make money.
Specifically, when futures were trading too high compared to stocks, you could borrow money which you would use to buy the stocks of the S&P 500 and simultaneously sell the futures, thereby locking in a higher rate of interest.
That may not sound terribly exciting but a little more interest on hundreds of millions of dollars can make a big difference to a bank.
And the complexity of capital markets opens lots of arbitrage Wealth Windows. Traders manning the trading desks at hedge funds and investment banks cobble together transactions to take advantage of mispricing in corporate mergers, mortgages, convertible bonds, currencies, oil markets, etc.
Now, there are a lot of reasons these Wealth Window’s open. And the Wealth Window open in cannabis today is the direct result of the United States Congress.
Why the Wealth Window Is Open
Here’s why it’s open.
On the one hand, 43 states have legalized cannabis sales one way or another. And multi-state operators (MSOs) like Jushi Holdings Inc. (OTC: JUSHF), Curaleaf Holdings Inc. (OTC: CURLF), and Green Thumb Industries (OTC: GTBIF) are generating hundreds of millions of dollars of revenue by selling cannabis into the legal markets. And that revenue is leaping higher, quarter after quarter, at an incredibly high rate. For example, in 2020, cannabis sales surged 66% percent higher from the prior year.
On the other hand, cannabis is still illegal at the federal level. And this illegality has prevented many Big Money investors from investing in cannabis stocks.
This means that a lot of capital has been locked out of the cannabis markets, keeping cannabis stock prices much lower than they should be given their revenue growth rates.
And it’s this mispricing that creates the single-biggest wealth window I’ve seen in my career.
Now, there are three catalysts at work in the cannabis industry that will close that wealth window.
Two of them are already at work. Those are the continued surge in sales, and the acquisition spree currently underway across cannabis companies.
The third, the trading liquidity provided by listing U.S. cannabis stocks on major exchanges, is coming soon.
But for now, that wealth window still reflects that fact that cannabis is federally illegal.
It’s an “Everyman’s Arbitrage.” And individual investors that get in on the right cannabis stocks can see gains of 20 to 30 times over the next year or so.
But you have to move quickly. There’s a lot of pressure on Congress to legalize cannabis. And it could happen sooner than anyone expects.
So, become a NICI Member today to take full advantage of this rare Window to Wealth.
Executive Director, National Institute for Cannabis Investors
13 responses to “The Biggest “Wealth Window” Is Open for You. But You Have to Act Now”
December 31 2020