When it comes to new markets, it’s best not to get too excited because we have seen many can’t-miss markets that just failed to deliver despite great promise. Remember single-stock futures? They are still chugging along, though so far have failed to be the transformational market many said they would become.
In this issue we take an in-depth and sober look at the legal marijuana industry. Admittedly, it is a little premature for us because we tend to talk about derivatives for established markets, and the underlying cannabis sector is just on the precipice of gaining legitimacy. David Friedman, an early and persistent investor in the space, lays out an honest assessment of the opportunities and risks involved (see “Cannabis: The modern day gold rush,”).
In addition to giving the lay of the land, Michael Robinson (see “Stocks to watch in burgeoning cannabis sector,”) and Alan Brochstein (see “Sunshine on the budding marijuana sector,”) provide an outlook on the companies likely to survive emerging market growing pains and become leaders in the space.
Every market sector needs a benchmark, and proof that the legal marijuana industry is not going away is the fact that there is an index measuring the performance of the many emerging companies in the space (see “Indexing marijuana’s monster growth,”). Throughout this issue we include examples of the breadth of this market that appears almost ready for prime time.
However, our focus has historically been on trading markets and in “Seed CX: Planting hemp seeds” we introduce a registered and regulated swaps execution facility that hopes to provide risk transfer services to the burgeoning industrial hemp market as well as other emerging agricultural markets. While related genetically to marijuana, hemp is a serious agricultural commodity with many varied and expanding uses, which makes it a desirable crop for farmers.
Ironically, the industrial hemp market has had its own legal hassles and has only relatively recently been free to grow and market its products in the United States. As demand grows and more growers and processors become involved, they will need a market to offset their risk. Seed CX is hoping to provide it.
While, given its tenuous legal standing, we don’t anticipate a marijuana futures market any time soon, hemp has the potential of becoming an agriculture futures staple.
In this issue we also provide a post mortem on this year’s unprecedented election. Our job has always been to serve market participants and looking back on our election preview issue, I think it is fair to say we did our job. Modern Trader source Lawrence McDonald actually called the election, but more importantly, he and several others laid out a pretty accurate picture of how markets would react to the possibility of a Trump victory. Many markets and market sectors moved as they forecasted. While the overall opinion of analysts figured the broad equity market would react negatively to the uncertainty of a Trump election, they also said it would be positive in the long run. An interesting twist is just how quickly the markets digested all those views. In “Analysis compression and the election” we examine this phenomena and discuss its implications going forward. We also try and square the two conflicting election results as it involves our market theme. The legal cannabis industry won a huge victory as 8 of 9 ballot initiatives creating greater access for medicinal and adult use of marijuana passed, including California approving recreational use. Yet, Republicans — no friend to legalization — won the Presidency and both Houses in Congress. It will be interesting to see how this conflict plays out.
And finally, since before this publication first launched in 1972, Larry Williams has been a historic figure in the world of technical analysis and trading. With Williams celebrating 50 years in markets, Murray Ruggiero, long-time Futures/Modern Trader contributor and a friend and protégé of Williams, highlights Larry’s contributions to the industry in “Larry Williams: One with the market,”.
Murray interviews Larry and examines a truly extraordinary legacy; one which brought many additional people into the industry, which is as powerful a tribute as one could hope for.