As I have mentioned in previous editions: the first goal of investing is not making money.That’s the second goal. The first goal of investing is not losing money or stated more formally: capital preservation.

Certainly, the cannabis industry is here to stay. On October 17th, Canada will legalize recreational use of weed. Two things are clear: the Canadian government sees huge potential revenues, and some cannabis companies will evolve into massive operations.

However, what is equally clear is that current valuations of pot stocks do not make sense from an investment perspective, explains Jay Nash, Senior Vice-President, Portfolio Manager and Investment Advisor, at the London branch of National Bank of Canada. Nash likens the current market for cannabis stocks to the 1999 tech bubble, meaning that only a few stocks will really survive over time, with the possibility that there are more ways to lose than to win here. The current enthusiasm also recalls the fervor in the 1840’s and 1850’s that drove valuations of British rail stocks to levels that, in hindsight, were completely unsustainable by future earnings.

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