10 Ways To Make Money From The Coming Legalization Of Pot

Opponents of legalized marijuana say it will make the nation lazy and worthless.

But for many companies, the legalization of weed would be a massive business opportunity. Other companies would be decimated.

Legalization could also be a tax windfall.

NORML, a pro-marijuana legalization group, estimates that the industry could yield $1.2 billion per year for just one state’s, California’s, taxpayers through a proposed 50% tax on the drug.

Harvard’s Jeffrey Miron estimated that a legalized marijuana industry comparable to the alcohol industry would generate up to $14 billion in tax revenue nationally each year.

Short Smith and Wesson

Rationale: Drug trafficking-fuelled violence across the Mexico border should decrease when marijuana is legalized.

Play: Short an arms maker like Smith & Wesson (SWHC).

Short Solvay Pharmaceuticals

Rationale: Marinol, the prescription pill-version of the appetite stimulant found in THC, which also reduces nausea and vomiting, will be redundant.

Play: Short Solvay Pharmaceuticals (SOL), the company that sells Marinol.

Long Phillip Morris

Rationale: Cigarette companies may commercialize filtered 'joints,' marijuana cigarettes, or 'spliffs,' mixed marijuana-tobacco cigarettes. 'Marb greens,' anyone?

Play: Long Philip Morris (PM).

Short alcohol

Rationale: Some people will drink less if they are given the option of legal marijuana.

Play: Short alcohol companies, like the Anheuser-Busch Companies (BUD)

(And here's some proof that the alcohol companies know the legalization means decreased profits for them - they're trying to kill the competition. Last week California Beer and Beverage Distributors made a $10,000 contribution Sept. 7 to Public Safety First, the main coalition opposing Prop. 19.)

Long Nintendo

Rationale: 'Stoners' like to play video games. (As an aside, they also like to watch TV, so you might also go long Time Warner Cable)

Play: Game-makers and video game software-makers like Nintendo (NTO, of the Wii), EA (ERTS), and GameStop (GME).

Short Eli Lilly

Rationale: Medical marijuana, legal in some states (like California) is prescribed to treat depression. If marijuana is legalized, patients who take prescription pill versions of anti-depressants, like Prozac, may opt to supplement or replace their treatment with marijuana.

Play: Short Eli Lilly (LLY), the company that makes Prozac.

Long RJ Reynolds

Rationale: Cigarette companies own a lot of farmland in North and South Carolina. Land which marijuana-growers might look to acquire will increase in value.

Play: Go long RJ Reynolds (RJR), a cigarette company (the maker of Camel) that owns land in North and South Carolina.

Invest in real estate in northern California, North and South Carolina

Rationale: Farmland will probably be bought in order to grow marijuana. Real estate near these areas should increase in value as marijuana-growing communities emerge and prosper.

Play: Invest in real estate near fertile farmland, like northern California (Mendocino county, for example), North and South Carolina.

Gold

Rationale: Paranoia, a side effect of smoking, could spark greater interest in 'safe havens,' where investors who think the world might end look.

Play: Gold (SPDR), farmland

Long KFC

Rationale: Smokers will be hungry for 'munchies.'

Play: Pepsi (PEP) and KFC (YUM), and McDonald's (MCD), for example, are good bets for popular providers of munchies.

Maybe this could even save California. Don't miss...

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