 Breaking Information on Stock Exchange Bylaw "Section 703"
Thanks in part to a little-known stock exchange rule, some pre-retirees and retirees are now collecting 6 to 21 times more income, over time, than the average investor. It's called Regulation "Section 703," and we estimate not 1 in 1,000 Americans have heard of it. But you can get all the details on this little-known, portfolio-juicing plan right here. |
Thursday, January 30, 2014 | Issue #2218
The Real Reason States Are Legalizing Pot
Sean Brodrick, Resource Strategist, The Oxford Club
|  America hasn't legalized an outlawed industry since the end of Prohibition, but that may be changing. Nearly 60% of Americans believe that marijuana should be legalized for recreational use, and two states have done just that.
The strongest economic argument in favor is that pot sales will boost tax revenue.
And while that's likely true, a close look finds it may not be an endless fountain of new tax money. Let's look at what's really going on.
Pot is now legal for recreational sales in Colorado. And Washington will make it so in June. Maine, California and Vermont might follow suit. Twenty states plus the District of Columbia already allow pot for medical purposes.
Colorado logged $5 million worth of recreational marijuana sales in its first week, netting the government around $1.45 million. With a 25% excise tax on pot, the state hopes to collect as much as $23 million a year.
This is exactly why Prohibition was repealed in 1933. Before Prohibition, about 14% of government tax revenues were derived from alcohol commerce. Repeal did provide the government with much-needed tax revenue and created jobs during the Depression.
It worked then. Will it work now?
The Jobs Are There
There are jobs in the marijuana business. Many of them are entrepreneurial. There are at least five marijuana trade schools in Colorado. (I can only imagine what the class reunions will be like.)
On the other hand, legal growers and dealers are faced with huge startup costs running into the hundreds of thousands of dollars. The state charges an application fee of $5,000 and license fees as high as $14,000. That just makes you legal.
Also, recreational pot in Colorado is priced at twice the cost of medical marijuana. Any student of history will tell you: The more cost-prohibitive you make something legally, the more tempting it is to do it illegally.
Growers face their own red tape. Colorado rolled out its $1.2 million Marijuana Inventory Tracking Solution. Here's how that works... - Every plant a commercial grower sticks in the dirt gets a radio-frequency tag.
- The tag moves with the plant through its lifecycle. Once the marijuana is harvested, everything is weighed. Then it's weighed again after drying out and at other points during processing.
- Packages shipped to the stores can't weigh more than a pound and they get their own RFID tags.
- At the shop, store owners are required to weigh their inventory every day.
What a hassle!
No wonder only 136 of the 517 medical-marijuana dispensaries operating in Colorado applied for a recreational sales license when it was first offered last fall.
And forget getting a bank loan. The banks are afraid of the feds, though the Obama administration will soon allow banks to accept deposits from state-legalized marijuana businesses.
It's About the Money
The state of Washington's taxes will be even more onerous than Colorado's - perhaps as high as 44%. (Street dealers cheered!) The state estimates it may collect as much as $2 billion in new taxes over five years.
So, just like alcohol prohibition, marijuana is being legalized to fill government coffers.
What would happen if marijuana were legalized nationally? Some 25.8 million Americans acknowledged using marijuana in the past year, according to the National Survey on Drug Use and Health. And 15.2 million said they smoked pot in the past month. They spend at least $10 per gram to buy pot illegally, according to a separate study in California.
If it were sold at that price legally, pot could raise $40 billion to $100 billion in new tax revenue.
But that's only if all illegal sales were diverted to legal sales at high tax rates.
The Marijuana Policy Project also estimates that the government would save $7.7 billion on anti-marijuana enforcement, out of $51 billon spent annually fighting drugs.
And marijuana accounts for 10% of those incarcerated for nonviolent drug crimes - about 20,000 people nationwide. It costs about $47,000 to incarcerate one inmate for a year in California.
Those against legalized weed say the fact that marijuana is illegal cuts down use quite a bit. Once it is legal, a lot more people will use it, and there are social costs to that.
Can You Play It?
Are there ways for you to profit? While there are a handful of penny stocks - Medbox (OTCBB: MDBX), Medical Marijuana (OTC: MJNA) and GreenGro Technologies (OTCBB: GRNH), to name three - deep in the weeds of this business, I can't recommend them. The legal landscape is still very cloudy.
The biggest area of tension is between federal and state law. Not only is growing, selling and possessing marijuana still illegal federally, section 280E of the Internal Revenue Code requires that those violating the Controlled Substances Act - whether they're street dealers or big, regulated marijuana businesses - pay taxes on the proceeds of all transactions.
However, marijuana growers and dealers cannot deduct normal business expenses. The only break marijuana businesses get under 280E is that they can deduct their cost of obtaining their illegal goods. So, this little-known tax-law wrinkle creates enormous incentives for marijuana companies to sink as much revenue as possible back into their businesses.
In other words, the IRS is giving marijuana dealers and growers every incentive to grow their businesses faster.
As usual, Uncle Sam's rules make perfect sense.
Good investing,
Sean
| P.S. I really want to hear from you on this issue, so please click the link below to tell me what you think of the pot-legalization movement. | | | Recent Articles:
Investment U | Take Advantage of the Slaughter in Biotech: The slide in emerging markets set off a panic in speculative assets in the U.S. But large cap biotech names are a great opportunity.
How to Buy on the Dips: No investor wants to cut his hands trying to "catch a falling dagger," but everyone wants to buy a bargain. Here's a very simple strategy that will help ensure you're buying "on the dips," and not just being foolish.
| Recent Articles:
Wealthy Retirement | Despite Problems... Dividends Don't Get Much Better Than This: These days, outside REITs or MLPs, it's tough to find stocks with stable dividends above 4%. But this oil & gas giant has enough cash flow to sustain the dividend, despite some weakening fundamentals.
Dividend of the Year? After 2013 ended with a roar, 2014 has started with a whimper. With pullbacks like this, there are some great companies - especially long-term dividend payers - that have been severely nicked to start the year.
"This could change the future of computers and other devices forever"
MIT experts now predict five billion people will use tablets or comparable devices within a decade. And a new technology breakthrough stands to make all of these gadgets faster, lighter, and cheaper than imaginable. The BBC reports this innovation "could change the future of computers and other devices forever." Most shocking is that one small company holds the key patents on this discovery. Its earnings could soon mushroom from millions, to billions. And of course, its underpriced $9 shares would explode too. Full details here. | | | | 
Gold Sentiment: Black as Night | A Gold-Rush Style Boom
"The place went from desolate to booming. There are quite a few millionaires now."
"It's been the opportunity of a lifetime."
"It's unexpected. A blessing."
That's just a few of the things being said about a gold-rush-style boom generating "overnight millionaires" across the country.
Even Warren Buffett is benefiting from it. He generated a "record high stock price" thanks to this boom. To find out how you can get in on it and bring in profits as high as $127K per year, go here. | | |
Click here to post a comment on InvestmentU.com |
   
– SHARE INVESTMENT U –
If you enjoy reading Investment U, why not share it with your family and friends?
Simply send them this link, so they can sign up (for free, of course).
– QUESTIONS –
Republish Investment U on your website or blog for free. Learn how.
Have a question for our editorial team? Contact us. | |
You are receiving this email because you subscribed to Investment U.
To unsubscribe from Investment U or to manage your account, click here
To cancel by mail or for any other subscription issues, write us at:
Investment U Attn: Member Services 105 West Monument Street Baltimore, MD 21201
Keep the emails you value from falling into your spam folder. Whitelist Investment U.
Email: CustomerService@InvestmentUInfo.com
Website: www.investmentu.com | North America: 855 402 3939; International: +1 443 353 4057
The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis, investment markets have inherent risks and our past performance does not assure the same future results. The stated returns may also include option trades.
Protected by copyright laws of the United States and international treaties. This newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of The Oxford Club 105 W. Monument Street, Baltimore MD 21201. | | |
It's on the verge of becoming the most precious resource on the planet. And when it does, it will send one undervalued mining company soaring.
No comments:
Post a Comment
Keep a civil tongue.