Everyone is on the lookout for black swans but what about the grey rhinos?!
“Grey rhino” is a term coined by Michele Wucker that refers to a highly likely yet ignored threat. This is contrary to the more popularly talked about “Black Swan” events which refer to highly unlikely events with potentially severe consequences.
Most sophisticated investors concur that the euphoria for cannabis stocks is going to end badly as did technology stocks in the year 2000. We recall the euphoria for internet and technology stocks in the late 1990’s when companies added “.com” to there business name. This was often sufficient reason to double the market cap. Today junior companies are being created at a rapid pace to participate in the emerging supply of cannabis products. Many of these companies make unsubstantiated claims of great health benefits while downplaying the risks. We have documented 140 such medical conditions that cannabis companies proclaim to benefit.
How many growers do we really need? There are currently 115 and counting. The number of Canadian junior cannabis companies on our watch list has ballooned to 120 public companies plus over 60 private companies from only a handful two years ago. In recent weeks there has been at least one new cannabis deal per day.
In our view, there is no question that the cannabis industry will wipeout significant investor capital. The timing of this is the only unknown.