Lessons for Pot Stock Investors From Recent Infrastructure Bill
It doesn’t matter if you have a disdain for politics (and, frankly, these days, it’s almost hard not to), it’s undeniable that the marijuana industry is heavily tied to legislative machinations.
When it comes to U.S. marijuana legalization, which is sure to generate the most momentum in the pot market due to America’s size and consumer spending potential, we’ve just encountered what could be a huge boon for marijuana stocks.
Surprisingly, the good news comes from a bit of politicking that has nothing directly to do with pot stocks.
Allow me to explain.
Recently, the House and Senate passed a bipartisan infrastructure bill that, among other things, seeks to improve roads, bridges, the Internet, and railways.
The important takeaway for marijuana investors isn’t so much what the bill contains (though it does include elements that bode well for marijuana stocks), but instead how the bill was passed.
This bipartisan infrastructure bill was exactly that, bipartisan. That’s very rare to see out of Washington these days. The bill had the support of 69 out of 100 senators. On divisive legislation like infrastructure spending bills, which has a price tag of more than $1.0 trillion, this is rare indeed. (Source: “Senate Passes $1 Trillion Infrastructure Bill After Months of Intense Bipartisan talks,” CNN, August 10, 2021.)
And it proves that bipartisanship isn’t completely dead.
For years, it was looking like the U.S. had entered some ossified state of democracy in which no politician was willing to compromise on even common-sense spending.
The political deadlock ensured that only when in control of slim majorities could Congress actually do its job and pass legislation.
And that has been the exact problem we’ve encountered with marijuana legalization at the federal level. With only a one-seat majority in the Senate, any marijuana legalization bill would have to get votes from every Democrat or, if the bill lost support from some of the more conservative Democratic senators, at least a few Republicans.
That has seemed downright unfathomable—until now.
The bipartisan infrastructure bill shows that there can indeed be compromises between the two ruling parties, even if it’s rare. Considering that the infrastructure bill largely represents voluntary spending (that point could be disputed when you see bridges crumbling, roads in disarray, and people stranded in Internet wastelands, but I digress), it’s even better news for pot stocks.
What this is telling us is that there’s potentially room for a bipartisan federal U.S. marijuana legalization bill.
What would it take?
A lot of compromise, to be sure, and there certainly would be some sticking points.
Democrats, for instance, often want to include full expungement of non-violent marijuana-related charges and the release of the people locked up for said crimes. Many conservatives on both sides of the political divide would likely have a problem with that.
There’s also the question of taxation, regulation, licensing, packaging, marketing, etc.
In other words, there’s a lot to consider.
The good news is that we’ve had dozens of successful pot legalization pilot programs in states across the Union, from which the feds can pick their favorite aspects.
That would make creating a marijuana legalization bill a lot faster. It could also help eliminate some of the sticking points that the two parties might face when passing this hypothetical legislation.
But, overall, the bipartisanship is really good news. Considering that there are many pro-business Republicans that would love to see marijuana legalized, there now exists an opportunity for some real bipartisan action on pot legalization.
That doesn’t mean federal legalization is going to happen overnight, of course, but it does mean we won’t necessarily have to wait for a supermajority of one party.
The other good news is that infrastructure bills are almost always solid investments. Think of the highways and how much economic activity they’ve generated over the decades; we’re talking billions of dollars.
The recent infrastructure bill, while unlikely to reshape America in the same way the railroads and highways of yesteryear did, will help drive commerce and modernize shipping channels.
Investments in transportation infrastructure are almost always a boon to businesses, and marijuana stocks will be no exception.
If pot companies can cut down on shipping times as a result of road improvements and other aspects of the infrastructure bill, we’ll see that reflected in their quarterly reports.
And considering that pot stock investors are mainly focused on growth right now (as they should be—marijuana is an emergent industry, after all), any opportunity to show revenue increases is a great way to stimulate share-price gains.
All this to say that the federal infrastructure bill, while not necessarily monumental for marijuana stocks, certainly has more than a few features that should have investors excited about the future.
What’s more, it has shown that bipartisan action is possible in the U.S. (and keep in mind, marijuana legalization is something that has bipartisan support).
I’ve written for years that politicians can only deny the will of the people who elected them for so long. Eventually, they’ll have to make a move on marijuana legalization.
With the example of the two parties cooperating to pass the recent infrastructure bill, we could see a move toward federal pot legalization much earlier than previously expected.