Investing in altered states

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By Josh Heller

With fortunes made and lost in the Bre-X debacle and news of bulls running wild on Bay Street, you may want to put the money you worked for all summer to work for you now. Low inflation and feeble interest rates suggest the sky is the limit on the stock market. However, there’s a market more lucrative than stocks for those who want a quick return and don’t mind risk. Try the booming drug market. Not prescription or over-the-counter drugs — illicit drugs.

Jeff(who doesn’t want his last name used) knows how profitable investing in illegal drugs can be. He’s a clean cut, freckle-faced 21-year-old high school graduate who designs web pages for a living—during the day. In the evening and weekends Jeff cashes in on his investments. He is a broker, a drug broker. Dealer if you prefer. He’s been dealing drugs for about a year-and-a-half. Jeff picks up a quarter-pound of marijuana for $800 sells it in three-and-a-half gram (half-quarter) bags for $40. Ten days later, if Jeff’s salesmanship works, he has a $480 profit. If Jeff picks up five ounces for $1,000 and sells it all as $40 half-quarters every two weeks, he’ll have made a $14,400 profit—tax free— in a year.

Marijuana is not the only commodity Jeff invests in. His portfolio also includes hallucinogenic “magic mushrooms.”

For $1,000, Jeff buys a pound of mushrooms. After about three months of selling half-quarter bags at $30 apiece, Jeff made a healthy tax-free profit of $2,840.These mushrooms certainly work magic on his bank account, until he gets busted.

In one-and-a-half years of dealing, Jeff’s never been caught. He doesn’t fear jail. “If it happens then it happens. It’ll give me some time to relax, maybe make some new connections.” When asked if selling drugs was wrong, Jeff just shrugged. “If people want the stuff, they’ll find a way to get it. If it’s not me selling it to them it’ll be some guy on the next block. My shit is primo. I’m not ripping people off. I give them their money’s worth. What’s wrong with that?”

Tim (who also wants only his first name used) brokers heavier drugs like cocaine and acid. Unlike Jeff, Tim has no day job or permanent address. With shoulder-length dirty blond hair and usually wearing torn jeans and a lumberjack shirt, he moves around Toronto living at a friend’s house one week, a motel the next.

Sometimes he can be found staying at youth shelters. Tim picks up three ounces of cocaine for $5,000 and sells single grams for a “bill” each ($100). In about a month he’s sold his supply — a $3,400 profit. A year of buying and selling at this rate will land him a $40,800 profit. Tim was quick to point out that this number wasn’t exact. Some months are “drier” than others — when there isn’t much coke in Toronto — enabling him to sell more that month if has the supply others don’t.

Tim also brokers LSD. For $5,000 he buys 100 sheets of LSD. That’s 10,000 hits. Tim rarely sells single hits, but when he does they go for $4 each. If he were to sell single hits it would take him about a year to move to 10,000 hits giving him a total revenue of $40,000 and a profit $35,000.

What does Tim do with all this big money he’s making? “Mostly, I blow it on coke. Whatever money I have left goes for cigarettes and beer.” He claims it’s easy to become a drug dealer. “You just need a good connection and a couple of loyal ‘custys’. Once the word gets out that you got good stuff people will start coming to you. After they’re hooked, they just keep coming back for more.”

Like Jeff, Time doesn’t see anything wrong with his investment choice. He doesn’t have a problem with getting people hooked on a lethal drug to make money off their addictions.

“Everybody has got to die sometime,” he says. “Besides, I don’t force anyone to buy it. They call me.”

When asked if he was happy leading the life of a gypsy drug dealer, Tim replied, “Yeah, I guess. I’ve got my woman. I’ve got my coke and I’m makin’ lots of money. What more could I ask for?”

But what if you don’t want the risk? How do the profit margins on illegal drugs compare with those on mutual funds? According to Colin Cunningham, a broker at Toronto Dominion’s Greenline Discount Brokerage, there is no comparison—illegal drugs are far more profitable. Cunningham named four different mutual funds and their various yields to illustrate the comparison.

For a low risk investment he recommends Toronto Dominion’s Greenline Canadian Money Market and Short Term Money Fund. Although fluctuating yields make it impossible to predict the profits, it is possible to calculate the profits last year’s investor made. Investing $1,000 one year ago would have made $28.80 minus taxes. With the same amount invested in the slightly riskier CIBC Canadian Bond Fund, you would have made $180.26. The AGF Dividend Fund is even riskier but $1,000 invested last year would have brought you $304. Finally, in the high risk equity funds of Trimark Canada one year ago would have netted $235.20 profit.

Even with the comparatively low rates of return on mutual funds, Cunningham maintains he would never give up the stock market to become a drug dealer. “With mutual funds the most you can lose is the money you put in. Drug dealers risk losing other assets, their freedom, their reputation and their lives. Sure you can make a lot more money, but it’s not worth the risks.”
Metro police detective Colin McDonald of 52 Division’s Stret Crime unit agrees. Although he admits that there is a lot of money to be made dealing drugs, McDonald emphasized the risk involved. The most obvious risk is jail. A first-time trafficking offender can expect to spend anywhere between 3 months in the slammer for magic mushrooms to 12 months for cocaine, depending on the individual circumstances of the case.

These individuals will also have a conviction for an indictable offense on their criminal record which can seriously harm their chances of getting a legitimate, respectable job. One would also find it hard to emigrate or even visit other countries with a drug conviction.
What are the odds of a dealer actually being busted in the Metropolitan Toronto area? The detective couldn’t say because it is impossible to know how many dealers are out there. He did say that his unit busts an average of five dealers a week.

“Dealers usually get more and more greedy dealing more and more. Eventually they all get busted,” McDonald confidently declared.

Jail-time isn’t the only risk. Drug dealers face the threat of violence from unsatisfied customers and greedy suppliers. Encounters with rival dealers can also result in personal harm and maybe even death.

If you are not willing to risk going to jail or a criminal record, illegal drugs are not the right investment for you. If you are not willing to risk being seriously injured or killed, illegal drugs are not the right investment for you. But for those who have hit rock bottom and feel you have nothing left to lose, illegal drugs can be a great investment opportunity; the rest of us will just have to make do with the peanuts that can be made off mutual funds.

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