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Briefing highlights

  • Legal cannabis: Demographics and products
  • Global markets mixed ahead of Fed decision
  • Markets at a glance
  • What to expect from the Fed
  • Roots posts wider quarterly loss

Mom, Dad!

Remember, kids, it was your parents’ generation that got the whole sex-drugs-and-rock-and-roll thing going.

So don’t act so surprised if mom and dad want to join in when Canada legalizes marijuana.

This possibility follows several studies on what to expect in a legal, multibillion-dollar cannabis market, first for the marijuana you smoke and later the stuff you eat.

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In this Sept. 26, 2014, file photo, smaller-dose pot-infused brownies are divided and packaged at The Growing Kitchen in Boulder, Colo.

Brennan Linsley/The Canadian Press

We refer specifically to two recent reports, one that looked at demographics and the other at ways to partake.

The first study, from Deloitte, found older consumers are taking a new interest in the marijuana industry now that legalization is on the horizon. This got us wondering if, well, the kids will be all right with this where their parents are concerned.

Hoping to find out how young people might react, we did a fast, informal poll of folks in their early 20s. (To the older set among us: Remember being in your early 20s?)

Nearly everyone said, yes, they’d be surprised if they learned their parents were smoking marijuana, or eating it, while a small minority said, “Heck, no!”

(One went so far as to say she’d not only be surprised, but also “horrified.”)

Deloitte recently surveyed “current and likely recreational cannabis consumers” across Canada to see what’s in store. Here’s what the company found:

THE ‘RISK TAKER’: TODAY’S ALREADY ACTIVE CONSUMER

These are the younger folks, between the ages of 18 and 34, who are more likely to partake “multiple” times a week, more likely to have a “maximum education” of high school or college, are “more likely to deviate from the letter of the law,” and more likely to “take health and safety risks to enjoy life and have a fuller experience.”

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THE ‘CONSERVATIVE EXPERIMENTER’: THE POST-LEGALIZATION CONSUMER

These take in the 35-54 age group, who are more likely to join in less than once a month, probably have a maximum education of university or grad school, and are “less likely to prioritize personal interests ahead of family interest.”

(Makes you wonder if there could be family interest in imbibing.)

Here’s another interesting tidbit from the Deloitte study: “Two-thirds of cannabis consumers say free shipping is essential. They’d like speedy delivery, too: 63 per cent expect their purchases to arrive within two days, and 34 per cent say they’d be willing to pay a higher price for expedited delivery. Currently consumers are more willing (41 per cent) to pay for faster delivery than likely consumers (27 per cent); respondents aged 54 and younger are twice as likely to pay more for expedited delivery (38 per cent) than those aged 55 and older.”

(One of these two writers — the older one — wonders why there’d be any problem walking to the store after your afternoon nap.)

Interesting, too, is the expected breakdown among products.

Citing a recent study, AltaCorp Capital believes that, in time, the pace of growth in edibles will eclipse that of plant and oil.

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(A warning here for the conservative types: Edibles are stronger than what you smoke, so maybe they’re not for the faint of heart.)

“It should be noted that edibles are expected to be legalized sometime in 2019, and, therefore, will begin from a lower base than dried flower and oils,” AltaCorp said.

“Although the forecasts only include up to 2021, we believe this trend will continue for several years post-edibles legalization, driven principally by further product development, particularly in the beverage segment, as well as continued development of distribution channels, and positioning of the consumable products as wellness supplements — also referred to as microdosing — which does not carry the same stigma as smoking.”

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Markets at a glance

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What to expect from the Fed

Markets expect the U.S. central bank’s Federal Open Market Committee, the policy-setting group, to raise the federal funds rate’s target range to 1.75 to 2 per cent.

“A rate rise this week isn’t really in doubt, however the narrative for the remainder of this year is what markets are more likely to be more fixated on,” said CMC Markets chief analyst Michael Hewson.

“How does the Fed see the U.S. economy, and what concerns do they have about recent trade tensions, and the impact on investment decisions, as well as expectations around the run rate for inflation, alongside their tolerance levels for a minor overshoot?”

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A rate hike would also mark something of a milestone in the recovery from the financial crisis, with the target range eclipsing a measure of inflation that strips out volatile items such as energy and food prices, noted Bank of Montreal deputy chief economist Michael Gregory.

A quarter-point jump would put the midpoint of the target range at 1.875 per cent, he said.

That would top what’s known as core personal consumption expenditures inflation, which now stands at an annual rate of 1.8 per cent, though it would remain below the pace of all prices.

“Although real policy rates will still be slightly negative relative to headline PCE inflation (2 per cent), this is an important milestone on the road to policy normalization (a trip that began 2 1/5 years or 175 basis points ago),” Mr. Gregory said.

With an interest-rate increase expected, markets will focus on the Fed’s updated economic forecasts and the so-called “dot plot,” which spells out the rate-hike timeline expected among individual policy makers.

“With second quarter GDP growth tracking at between 3.5 and 4 per cent, annualized, and signs that underlying price pressures are picking up, the accompanying statement and economic projections may well hint that a further two rate hikes are coming in the second half of this year,” said Michael Pearce, senior U.S. economist at Capital Economics.

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