My colleague Jim Pearce this week suggested that he interview me about the booming marijuana and psychedelics industries. Jim is the chief investment strategist of our flagship publication Personal Finance. Jim and his readers have a keen interest in the profit potential of marijuana, especially as we stand on the cusp of a new year.

I write about marijuana and ancillary psychotropic substances for the twice-weekly e-letter you’re reading right now, Marijuana Investing Daily. I’m also chief investment strategist of the premium trading service, Marijuana Profit Alert.

I can always count on Jim Pearce for incisive thinking. His questions to me are in bold.

Cannabis remains illegal on the federal level. Will the feds lift the ban in 2023?

In January 2023, the GOP will take control of the House and the Democrats will retail control of the Senate. The result will be a bitterly divided Congress and legislative gridlock.

The federal ban on marijuana probably won’t get lifted in 2023. Federal legalization looked promising for a while and even imminent, but the political winds in Washington have suddenly shifted. Culture warriors who are ardently anti-marijuana will dominate the House.

However, the legalization of marijuana on the federal level is only a matter of when, not if. I’m absolutely convinced that it’s inevitable. But investors should be proactive and gain exposure to the right marijuana stocks ahead of the news, because when the feds finally make their move, pot stocks will spike higher and become far less affordable.

As for potential federal legalization, the most likely vehicle is called the Marijuana Opportunity Reinvestment and Expungement (MORE) Act. This bill would federally deschedule cannabis and expunge the records of those with previous marijuana convictions. MORE would impose a 5% tax on cannabis sales, the revenue from which would be reinvested in communities most harmed by the War on Drugs.

MORE also would expedite resentencing for people imprisoned for marijuana offenses, protect immigrants from being denied citizenship because of cannabis, and prevent federal agencies from blocking public benefits or security clearances due to its use.

Marijuana stocks have been in a slump. Will they bounce back in 2023?

Pot stocks have been under pressure in 2022, largely because of the overall bear equity market. But as macro headwinds dissipate in 2023, I think the prices of many undervalued marijuana stocks will appreciate in tandem with their improving growth prospects.

In 2023, we’re likely to see marijuana companies reap the fruits of their 2022 labors. Over the past several months, many canna-businesses streamlined, introduced new branded products, shed debt, improved cash flow, and forged strategic alliances. This hard work will pay off in the new year ahead.

Has state-level legalization been accelerating?

Most definitely. Notably, the results of the midterm elections were favorable for marijuana legal normalization.

In the November 8 midterms, Maryland and Missouri voters approved ballot measures to legalize recreational marijuana. Texas voters in five cities approved marijuana decriminalization ballot measures.

As you and I speak, marijuana is legal for adults in 21 states and Washington, DC. Medical marijuana is legal in 38 states and DC. I expect more states and localities to join the fold in 2023.

What’s one of the most promising segments of the marijuana industry for investment?

I especially like the “picks-and-shovels” plays on the marijuana boom. These companies aren’t necessarily about growing marijuana nor are they developing cannabis-derived drugs. They’re infrastructure stocks that can be extremely profitable.

Marijuana investing can be risky, but you can seek greater safety (and profits) by focusing on the ancillary firms that provide infrastructure services for pot companies in either the recreational or medicinal segments.

Picks-and-shovels plays can be reliable money-makers, because they provide essential value-added services. What’s more, they usually enjoy a diversified roster of clients in several different industries, which buffers them from the inherent volatility of the marijuana business. As the marijuana industry further matures in 2023, I expect picks-and-shovels plays to gain prominence, especially in the IT sector.

Talk briefly about psychedelics. These substances are an emerging investment theme too, correct?

Jim, you and I are both Baby Boomers. When you were in college, did you ever think that you’d be having a serious investment discussion one day about LSD and magic mushrooms?

[Laughing] Certainly not! Life has its ironies.

Yes, indeed it does. It won’t be long before publicly traded marijuana companies start adding branded products predicated on psilocybin (the active ingredient in magic mushrooms), LSD, and other mind-bending drugs, for recreational as well as medicinal purposes.

Psychedelics remain illegal on the federal level but more and more jurisdictions in the country are legalizing them.

An increasing body of research shows that these drugs have medicinal benefits. They can help alleviate depression, post-traumatic stress disorder, and other psychological ailments.

The potential for investors to profit from the increasing respectability of psilocybin and LSD is enormous. Pharmaceutical companies are engaged in a race to develop psychedelics-based treatments. Marijuana companies are making plans to branch out into psychedelics, for medical as well as recreational purposes. A new industry is in the throes of being born. Early investors stand to make fortunes.

Counter-culture guru and psychedelics advocate Dr. Timothy Leary coined the famous phrase: “Turn on, tune in, drop out.” The operable phrase now should be: Turn on, tune in…make money.

In 2023, I expect Big Pharma to ramp up its efforts to get involved in the development of psychedelics-based medicines.

Before choosing a pot stock as an investment, what do you look for?

I suggest that readers consult one of my recent primers, 12 Criteria for Picking The Right Pot Stock.

The legalization of cannabis is one of the greatest investment opportunities in a generation. However, when the news is out about an industry’s good fortunes, the rest of the investment herd piles in. Risky and even fraudulent stocks proliferate. Some investors make a fortune; others lose their shirts. They key is doing your homework, and conducting due diligence.

Editor’s Note: Every portfolio should have exposure to the marijuana industry. That’s why I’ve just launched a new service detailing how you can financially benefit from the consumer mainstreaming of cannabis and psychedelics.

Called Marijuana Profit Alert, my publication is your guide to reaping profits from these megatrends. In this service, I provide specific, actionable investment guidance for investors in the booming marijuana and psychedelics industries.

As 2023 unfolds, an increasing number of U.S. states (and countries around the world) will legalize cannabis and psychedelics, which in turn will create new markets, new sales, and big profits for the investors who act now.

Want to cash in on the psychotropic revolution? Consider the advice in Marijuana Profit Alert. Click here to learn more.

John Persinos is the editorial director of Investing Daily.

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