I’m an early morning person. The start of the day is when I indulge in my favorite addiction. No, not marijuana. I’m talking about coffee.

Full disclosure: I’m hooked on caffeine. For editors, it’s an occupational hazard. This morning, as I drink my favorite coffee (Jamaican Blue Mountain, freshly ground) and write this column, I’ve decided to address reader letters.

Whether in my personal or professional life, I find it invaluable to occasionally take a step back from the daily noise and reflect on the long view. The questions and comments that I receive via email help me in this regard.

No matter how smart you may think you are, there’s always an opportunity to learn more. Philosophers call it “the open mind,” a willingness to consider different ideas or opinions.

Let’s dive into the marijuana mailbag and see what’s on your minds.

Mastercard just says “no”…

“I recently read that Mastercard is blocking the use of debit cards at marijuana dispensaries. What gives? As marijuana becomes increasingly legal and popular, Mastercard’s move seems short-sighted to me.” —Stan L.

Mastercard (NYSE: MA) last week instructed U.S. financial institutions to cease allowing purchases of cannabis on its debit cards, eliminating a convenient way for customers to buy pot without cash.

Despite the acceleration of state-level legalization, federal law still prohibits the sale, possession and use of marijuana. Accordingly, Mastercard asserted that purchases were not allowed on its systems, even when customers use bank cards and PINs to access their own cash to purchase marijuana in states where the substance is legal for recreational and/or medical reasons.

And you’re right, Stan: Mastercard’s decision is indeed short-sighted. Cannabis industry leaders decried the move, saying it would increase the risk of robbery at cannabis companies that are compelled to operate by cash only. It’s yet another example of how certain sectors of the economy, particularly financial services, refuse to recognize cannabis as a legitimate industry.

Mastercard’s move also underscores the need for banking reform for marijuana companies. The prime example of current reform efforts is the Secure and Fair Enforcement (SAFE) Banking Act, which seeks to allow state-legal marijuana businesses greater access to financial services. SAFE is currently pending in both chambers of Congress; Mastercard’s anti-marijuana stance is likely to give the bill greater impetus.

Benign substance or gateway drug?

“In the past, President Joe Biden has referred to marijuana as a ‘gateway’ drug. I want to invest in pot stocks, but I’m concerned that new medical research will come along to torpedo the industry, the way revelations about second-hand smoke dealt a blow to Big Tobacco.” — Jerry R.

First, let’s get one thing clear. I’m not necessarily a rah-rah booster of Mary Jane and its normalization. As an investor, you should remain coolly dispassionate and leverage investment opportunities as they are, not as you wish them to be.

For example, no sane person is in favor of war. The Russia-Ukraine crisis is a reminder of the bloody misery of military conflict.

However, from time to time, for my other newsletters I’ve recommended aerospace/defense stocks. If you think cannabis is a dangerous gateway drug (and that’s your right), tell your member of Congress or local editorial board. But if you want to make money from “canna-business,” read on.

Despite the fast pace of marijuana legalization, certain falsehoods persist about pot. Many of these myths derive from the War on Drugs that started under President Nixon.

It’s true, Joe Biden spouted some anti-pot rhetoric during the early days of the 2020 presidential campaign at a political town hall. He stated that he wants to see more data about the safety of marijuana use before embracing efforts to legalize it on the federal level.

Now that he’s actually in the White House, Biden has since walked back those remarks. In fact, he has pulled a 180-degree turn.

In October 2022, Biden announced a pardon for thousands of Americans convicted of “simple possession” of marijuana under federal law. The move addressed policing practices that disproportionately hurt minorities and renewed momentum for decriminalizing weed on the national level.

Normalization proponents, Democrats, liberals, social equity activists, and marijuana investors cheered the pardon. Many Republicans and libertarians also applauded Biden’s move. Marijuana equities soared on the news.

Read This Story: Is The GOP Going to Pot?

Since he issued his historic pardon, Biden has signaled that if a marijuana legalization bill reaches his desk, he would sign it.

Biden’s pardon represents a genuine change of heart, but it’s also a shrewd political calculation. According to a recent Pew Research Center survey, a huge majority of U.S. adults (88%) say either that marijuana should be legal for medical and recreational use by adults (59%) or it should be legal for medical use only (30%). A small minority (10%) say marijuana use should not be legal.

That said, the notion that marijuana is a gateway drug remains an article of faith among the anti-pot contingent.

Sure, people who have tried or experimented with marijuana may eventually try harder drugs. But I’m reminded of a George Carlin joke: “We all know that beer eventually leads to hard drugs.”

Joking aside, the empirical science proves overwhelmingly that for most people, marijuana is not a gateway drug and it’s actually less addictive than the coffee I drink (see chart).

Most marijuana users do not end up using cocaine, heroin, or other illicit and much stronger substances, a fact that lessens the chances of a political backlash that could hurt marijuana investments.

Meanwhile, when it comes to more socially acceptable and prevalent substances, such as tobacco or alcohol, cannabis has proven to cause fewer dependency issues. The likelihood of developing an addiction to marijuana is nowhere near as likely as other federally controlled substances.

The National Institute on Drug Abuse states: “The majority of people who use marijuana do not go on to use other, ‘harder’ substances.” That’s Uncle Sam talking, not a local pot dealer.

In fact, marijuana is what’s known as an “exit drug” that helps fight the opioid crisis by offering an alternative, safer method of pain relief.

I’m not necessarily advocating for marijuana use. That’s not the purpose of this newsletter. I’m merely stating the facts. I don’t anticipate any “bombshell” medical evidence that could derail marijuana legalization and by extension clobber pot stocks.

In my view, the complete lifting of marijuana prohibition on the federal level in the U.S. is only a matter of time. When that happens, cannabis stocks will get their next big catalyst for an upward surge.

Read This Story: Pot Prohibition’s Days Are Numbered

Indeed, the industry recently got a boost on the federal level, when the U.S. Food and Drug Administration (FDA) published an overview of the research and approval process for cannabis and the compounds derived from it (known as cannabinoids). This is a significant step that should pave a clearer regulatory path for medicinal marijuana companies.

The risks of penny stocks…

“Should I be wary of penny pot stocks?” — Ellen D.

The dilemma with marijuana plays is trying to determine which ones become lasting businesses. Many will simply vanish into the black hole of penny stock failures. Penny stocks are intrinsically risky.

Some penny pot stocks succeed, of course, but you must stick to quality. Marijuana remains an exciting investment opportunity, but the weakest companies are getting weeded out (pun intended).

Make sure the marijuana stock is traded on an official exchange. Not all over-the-counter stocks are toxic, per se. There are plenty of solid OTC-traded stocks.

However, keep in mind, OTC equities are less regulated than their brethren on the NYSE and NASDAQ or the credible foreign exchanges such as Toronto’s TSX.

OTC stocks aren’t mandated to disclose crucial information to the public, making it difficult to perform a deep dive into the stock’s fundamentals.

In covering the marijuana industry since its infancy, one dynamic I’ve noticed is that a lot of cannabis start-ups are run by young pot enthusiasts with little or no corporate experience. As the firm grows, they tend to spin through the C-Suite revolving door. That’s a red flag.

Avoiding investment mistakes…

“I’ve been reading a lot of stories about marijuana investing. So much of this coverage seems like hype and exaggeration! Is the cannabis industry really such a hot area for investors? I trust your judgment. I want to make money but I’m close to retirement and I can’t afford to make any mistakes.” — Matt S.

New money-making opportunities are increasingly emerging in the realm of marijuana. But how can you separate the solid bets from the crap shoots? You need guidance.

That’s why I urge you to read my new book: The Wide World of Weed and Psychedelics. My book is your definitive guide for making money in the thriving cannabis and psychedelics industries. Get your free copy of my book.

John Persinos is the editorial director of Investing Daily.

Subscribe to John’s video channel: