WEBVTT - AdvisorShares Ahrens on Cannabis Investing

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<v Speaker 1>Welcome to Inside Active, a podcast about active managers that

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<v Speaker 1>goes beyond sound bites and headlines and looks deeper into

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<v Speaker 1>their processes, challenges and philosophies and security selection. I'm David Cohne,

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<v Speaker 1>I lead mutual fund and active Research at Bloomberg Intelligence.

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<v Speaker 1>I'm joined today by Brian Dhugherty, head of Thematic Strategy

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<v Speaker 1>at Bloomberg Intelligence, will be my co host, Bri. Thank

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<v Speaker 1>you for joining me today.

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<v Speaker 2>Real pleasure to be here. It's a new podcast, so

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<v Speaker 2>this is the first time I'm joining you. Pretty excited

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<v Speaker 2>about it, actually, David, Great.

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<v Speaker 1>So a couple of weeks ago, you wrote a note

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<v Speaker 1>about a rate. You know what a rate reversal could

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<v Speaker 1>mean for health themes such as neuro mental health. Can

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<v Speaker 1>you describe the types of companies in this theme and

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<v Speaker 1>what a reversal of the risk off tolerance could mean

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<v Speaker 1>for these stocks?

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<v Speaker 2>Absolutely, For those of you who don't know. In Bautomatic Strategy,

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<v Speaker 2>we've got a few different ways that we track themes.

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<v Speaker 2>One of them is we've actually constructed thirty three themes

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<v Speaker 2>ourselves and we have a data set shameless plug here

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<v Speaker 2>head to b I theme go and you can actually

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<v Speaker 2>see that data library of thirty three themes over twenty

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<v Speaker 2>three hundred unique equities map to it. One of the

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<v Speaker 2>themes that we have is called novelneral Mental Health, and

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<v Speaker 2>as you say, we just wrote a piece about it,

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<v Speaker 2>interestingly enough a couple of weeks ago, because we've seen

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<v Speaker 2>a really decent pop in that theme off the back

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<v Speaker 2>of this expected rate reversal that could be on the

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<v Speaker 2>rise of horizon here in the US. So as some

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<v Speaker 2>background on that theme, the real premise behind it is

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<v Speaker 2>that we really need to start tracking within the innovative

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<v Speaker 2>health space, particularly companies that are pursuing more interesting therapeutics

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<v Speaker 2>as well as deep brain stimulations. One of the theme

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<v Speaker 2>exposures within that theme itself is actually cannabinoids and side

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<v Speaker 2>of the sibon. So what's been great about that is

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<v Speaker 2>again we're seeing it go a little bit more mainstream.

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<v Speaker 2>This theme itself is very focused on non OTC so

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<v Speaker 2>pharma grade kind of ainoids in sila sibon. We have

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<v Speaker 2>names in there such as Jazz Pharmaceuticals for instance, which

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<v Speaker 2>is always a big name when we talk about this topic.

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<v Speaker 2>And it's been really interesting to follow because it was

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<v Speaker 2>it was, you know, a pretty rough couple of years

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<v Speaker 2>for that theme. Naturally, the risk off tolerance within the

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<v Speaker 2>US not particularly good for biotech and small cap stocks,

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<v Speaker 2>but we've seen a lot of that come back, and

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<v Speaker 2>in twenty twenty four, actually we've got a decent return

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<v Speaker 2>year to date on the theme as a whole, but

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<v Speaker 2>just as a little bit of a flag here cannaboids

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<v Speaker 2>and sib sil of SIBN theme exposure within that theme,

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<v Speaker 2>it's been a return about thirty one percent, so it's

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<v Speaker 2>definitely been a big mover in twenty twenty four, and

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<v Speaker 2>we think that points again to the fact that we're

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<v Speaker 2>seeing some of this risk off tolerance reverse and we

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<v Speaker 2>expect that this dark we're going a little bit of

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<v Speaker 2>a dark horse theme here that in the back of

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<v Speaker 2>twenty twenty four we could see it get an increased

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<v Speaker 2>amount of attention, especially off the if we do get

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<v Speaker 2>some of those great reversals. That being said, you know,

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<v Speaker 2>it's been a little bit choppy week, so I'm going

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<v Speaker 2>to couch everything I say with the fact that you

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<v Speaker 2>never know, and choppiness could persist. But even in the

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<v Speaker 2>last week, we've actually seen those US small caps actually

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<v Speaker 2>do quite well, and particularly in this novel neuro mental theme.

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<v Speaker 2>They've held up with decent resilience amongst you know, what

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<v Speaker 2>has been some global turmoil. The other way that we're

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<v Speaker 2>actually tracking cannabis though as well, is we also pay

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<v Speaker 2>very close attention we write content around and we also

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<v Speaker 2>have a dashboard that tracks the metfs, so global the

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<v Speaker 2>metfs we track over nine hundred and seventy global theme metfs. Naturally,

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<v Speaker 2>cannabis and psychedelics is one of those themes that we track, uh,

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<v Speaker 2>you know, getting right to the bottom line here, Advisor

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<v Speaker 2>shares pure cannabis theme, which you know we do have

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<v Speaker 2>Dan here with us today is one of those themes

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<v Speaker 2>in there. It's actually the one that has the highest

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<v Speaker 2>AUM within that cannabis theme. It has been another you know,

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<v Speaker 2>it's been another twenty twenty four good story for that theme.

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<v Speaker 2>So against really broad pullback inflows within our whole thematic

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<v Speaker 2>data set, like we're over six billion dollars in outflow

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<v Speaker 2>actually net outflow for theme ETFs as a whole, Cannabis

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<v Speaker 2>and psychedelics have net inflow, so they're fifth highest for

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<v Speaker 2>net inflow. And when you think of the fact that

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<v Speaker 2>only ten of our thirty five themes within that data

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<v Speaker 2>set have net outflow showing some net inflow in twenty

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<v Speaker 2>twenty four. I absolutely mean something. So needless to say,

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<v Speaker 2>I'm excited to be here today to talk about these

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<v Speaker 2>themes and all the action that we're seeing, because naturally

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<v Speaker 2>we have a lot of stuff happening in the regulatory

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<v Speaker 2>environment that has direct impact on cannabis and cambinoids and

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<v Speaker 2>tylo sibon and all these types of things, So I'm

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<v Speaker 2>excited to talk about it.

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<v Speaker 1>So, speaking of cannabinoids, we'd like to welcome Dan Arenz,

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<v Speaker 1>a portfolio manager for several advisors share ETFs, including the

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<v Speaker 1>pure US Cannabis ETF ticker MSOs, which was the first

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<v Speaker 1>US listed active ETF which has been offered to dedicated

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<v Speaker 1>US cannabis exposure. Dan, thank you so much for joining

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<v Speaker 1>us today.

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<v Speaker 3>Happy to be here.

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<v Speaker 1>So before we really begin talking about cannabis, can you

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<v Speaker 1>tell us how you got your start in investing.

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<v Speaker 3>That's going to go way back, and I'm going to

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<v Speaker 3>age myself a little bit, but I had worked at

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<v Speaker 3>a couple different firms in financial services and got directed

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<v Speaker 3>to a investment advisor that put together portfolios of mutual

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<v Speaker 3>funds for individual clients, and then actually launched some mutual

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<v Speaker 3>funds and fund of funds at that firm, and then

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<v Speaker 3>one specialty fund that we launched there was something called

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<v Speaker 3>the Vice Fund that was VIICEX. It got a little

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<v Speaker 3>bit of press for investing in alcohol and tobacco and

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<v Speaker 3>gaming and weapons and so on. I managed that fund

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<v Speaker 3>for its first three years and left there with a

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<v Speaker 3>It bounced between four and five star rated and it

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<v Speaker 3>was in the Lipper top one, two, three percent depending

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<v Speaker 3>on your time frames you're looking at. So successful fund.

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<v Speaker 3>But eventually that led me to Advisor Shares. When Advisor

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<v Speaker 3>Shares was just getting off the ground, our CEO, Noah Hammond,

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<v Speaker 3>had secured one of the very first exemptive reliefs for

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<v Speaker 3>active ETFs. Key knew me for being able to wear

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<v Speaker 3>multiple hats in the investment space. I knew how to

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<v Speaker 3>open funds, close funds, merge funds, and in the back

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<v Speaker 3>of our minds we always thought we might do something

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<v Speaker 3>in the vice or related space, and here we are.

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<v Speaker 2>I can't resist Dan, so before far, before we get

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<v Speaker 2>onto some of the other topics here, I also know

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<v Speaker 2>that you wrote a book about it. So when you

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<v Speaker 2>think about how you've looked at vice over the last. Again,

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<v Speaker 2>we don't need to use yours. I don't need to

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<v Speaker 2>date myself either. Over the last period of time, How

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<v Speaker 2>do you think vice has really evolved from an investor standpoint, like,

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<v Speaker 2>are something still vice or now they just all decent

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<v Speaker 2>investment opportunities.

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<v Speaker 3>Well, it certainly has evolved. It really has. You know.

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<v Speaker 3>Back in the day when I wrote that book, we

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<v Speaker 3>called it the Recession Proof Portfolio. And the idea for

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<v Speaker 3>vice came out of the tech bubble, way back when

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<v Speaker 3>a lot of general indices and sectors fell off a cliff,

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<v Speaker 3>and we were studying different industries and different sectors, and

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<v Speaker 3>we suddenly noticed, hey, alcohol, tobacco, those things that consumers

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<v Speaker 3>are going to indulge in no matter what the economy

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<v Speaker 3>is doing, no matter what stock market's doing, they held

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<v Speaker 3>up real well. And thus we created that fund. But

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<v Speaker 3>I will say it's evolved now at Advisor Shares. I'm

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<v Speaker 3>going to lead us into our subject for today, which

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<v Speaker 3>is the cam A CTF. We were starting to get

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<v Speaker 3>contacted by people who thought they wanted to launch a

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<v Speaker 3>cannabis related ETF, and we studied it and said, no,

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<v Speaker 3>that's not going to work. There's not enough to invest

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<v Speaker 3>in there's not enough large listed stocks that are liquid

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<v Speaker 3>to invest in, and we told people no, but that

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<v Speaker 3>real quickly evolved, much like other vice industries, if you

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<v Speaker 3>even want to call it vice industry, because I strongly

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<v Speaker 3>believe cannabis is a medicine. As things evolved at Advisor Shares,

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<v Speaker 3>we decided to create an ETF, and then we had

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<v Speaker 3>to negotiate with our custody bank and the exchanges and

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<v Speaker 3>everybody else because we wanted to put the word cannabis

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<v Speaker 3>in the perspectus. So what I'm getting to here is

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<v Speaker 3>we launched Advisor Shares Vice ETF ticker symbols actually Vice, VI,

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<v Speaker 3>ic E, and we put the word cannabis initially in

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<v Speaker 3>the perspectus because we were going to invest in alcohol companies, UH,

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<v Speaker 3>tobacco companies, other companies that were ancillary listed stocks to

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<v Speaker 3>cannabis without actually plant touching cannabis. That was our first

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<v Speaker 3>step into you know, vice related slash cannabis related. And

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<v Speaker 3>I'm using all these key words here because when you

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<v Speaker 3>put the word cannabis in a perspectus, it sets off

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<v Speaker 3>all kinds of bells with the regulators and the custody

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<v Speaker 3>banks and even the exchange so we launched this cannabis

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<v Speaker 3>slash related ETF because frankly, a lot of alcol and

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<v Speaker 3>tobacco companies and other companies were starting to dabble in cannabis.

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<v Speaker 3>But I'm glad we had the discussions with our custody bank,

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<v Speaker 3>who was a very good partner of mars At Bank

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<v Speaker 3>New York Melon, and we were able to then talk

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<v Speaker 3>about again. As the cannabis space evolved and more companies

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<v Speaker 3>were becoming listed, we launched Advisor Shares Pure Cannabis ETF

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<v Speaker 3>ticker symbol YOLO. At that time, it still wasn't possible

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<v Speaker 3>to do an investment in pure US cannabis. We did

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<v Speaker 3>not think people have heard of companies like till Rey

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<v Speaker 3>and Aurora and Canopy. Those are frankly, you know, Canadian

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<v Speaker 3>based companies. But if they kept their THHC products on

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<v Speaker 3>the north side of the border, they were allowed to

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<v Speaker 3>list on the New York Stock Exchange and or Nasdaq

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<v Speaker 3>and they got flooded with some institutional investment also sorts

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<v Speaker 3>of things. That's back when you know, Canada legalized. I'm

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<v Speaker 3>slowly getting to the fact that we launched our US

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<v Speaker 3>fund here. When we did that first fund Yolo. We

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<v Speaker 3>knew that we wanted US exposure. We thought the real

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<v Speaker 3>long term growth story was in US cannabis. So we

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<v Speaker 3>sat down with Bank of New York Melon and we

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<v Speaker 3>gave them a what if. What if instead of custodying

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<v Speaker 3>these stocks that are trade at OTC in the United

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<v Speaker 3>States because they can't yet list in the United States,

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<v Speaker 3>what if we serviced the fund with you Bank of

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<v Speaker 3>New York Melon. But we wanted to use a total

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<v Speaker 3>return swap. We want to use a total return swap

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<v Speaker 3>to get access to a US cannabis company that the

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<v Speaker 3>bank frankly is not willing to allow us to trade

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<v Speaker 3>in and custody because they have non permissible lists of cannabis.

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<v Speaker 3>And they said, you know that'll work. We're very happy

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<v Speaker 3>to service. You can take care of that. It's done

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<v Speaker 3>with tri party agreements. It's all you know, collateral movements,

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<v Speaker 3>all sorts of things that are handled by the bank

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<v Speaker 3>without the bank actually custodying stock. So this was an

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<v Speaker 3>idea that we did with our fund, Yolo, which was

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<v Speaker 3>the first actively managed cannabis company approved by the SEC

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<v Speaker 3>in the United States. They asked us to go out

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<v Speaker 3>and get a third party legal opinion on it, which

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<v Speaker 3>we paid for and did. We kind of were groundbreaking

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<v Speaker 3>in that space, and we became the first ETF company

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<v Speaker 3>to have a cannabis fund. With that third party legal opinion,

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<v Speaker 3>the SEC requested utilizing total return swaps. We're the first

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<v Speaker 3>one to kind of invent that structure as a way

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<v Speaker 3>to invest in cannabis in the United States. And I'm

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<v Speaker 3>still talking about our fund yolo here. So US cannabis

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<v Speaker 3>was expanding rapidly, and we filed for with the SEC

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<v Speaker 3>our fund that has become MSOs or you can call

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<v Speaker 3>it MSOs, which is Advisor Shares Pure US Cannabis ETF. Well,

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<v Speaker 3>not a lot of people know that that fund was

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<v Speaker 3>in registration for a full year. It took that long

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<v Speaker 3>the SECS is to get another legal opinion addressing cannabis investing,

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<v Speaker 3>addressing the use of total return swaps. We got that,

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<v Speaker 3>and then we had to go to the New York

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<v Speaker 3>Stock Exchange and say, hey, we not only want to

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<v Speaker 3>have the current allowed limits of use of total return swap,

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<v Speaker 3>we want a much higher use of total return swap.

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<v Speaker 3>And the New York Stock Exchange, very good partners as

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<v Speaker 3>well their attorneys, took the ball and ran with it

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<v Speaker 3>and worked very hard on a on a nineteen before

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<v Speaker 3>rule filing, and not a lot of people know what

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<v Speaker 3>those are, but it is a rule filing to go

0:13:59.120 --> 0:14:04.040
<v Speaker 3>above and beyond the current listing standards for ETFs. And

0:14:04.080 --> 0:14:06.280
<v Speaker 3>you know, they were again a great partner. They worked

0:14:06.360 --> 0:14:09.160
<v Speaker 3>very hard on that, and we got that rule filing

0:14:09.240 --> 0:14:12.600
<v Speaker 3>that allowed us to use more total return swaps than

0:14:12.679 --> 0:14:17.440
<v Speaker 3>people would used before enliced ETFs. We got the Bank

0:14:17.480 --> 0:14:20.080
<v Speaker 3>of New York Mellon on board, we got you know,

0:14:20.120 --> 0:14:23.640
<v Speaker 3>the SEC was satisfied with our legal opinions. So after

0:14:23.680 --> 0:14:27.240
<v Speaker 3>a full year, we were able to launch our advisor

0:14:27.320 --> 0:14:34.239
<v Speaker 3>Shares Us Pure Us Cannabis ETF ticker symbol MSOs MSOs,

0:14:34.280 --> 0:14:39.480
<v Speaker 3>and it's been a success since then, as long as

0:14:39.520 --> 0:14:43.440
<v Speaker 3>we're not talking about federal regulation promises made by a

0:14:43.440 --> 0:14:46.240
<v Speaker 3>lot of pump politicians, the fact that it's taken so

0:14:46.400 --> 0:14:49.440
<v Speaker 3>darn long, everything else. But I wanted to get through

0:14:49.480 --> 0:14:53.000
<v Speaker 3>the story of how that fund came to be because

0:14:53.040 --> 0:14:54.040
<v Speaker 3>it's been a piece of work.

0:14:54.880 --> 0:14:58.520
<v Speaker 2>And when you think about so obviously it was along

0:14:58.600 --> 0:15:00.840
<v Speaker 2>road in there, and you guys put a lot of

0:15:00.880 --> 0:15:04.080
<v Speaker 2>grit into getting it over that finish line. But then

0:15:04.120 --> 0:15:06.960
<v Speaker 2>it pretty quickly did emerge as the biggest cannabis fund

0:15:09.120 --> 0:15:11.680
<v Speaker 2>at least prior data there. So and what do you

0:15:11.760 --> 0:15:15.120
<v Speaker 2>think has been paramount to its success? How has it

0:15:15.160 --> 0:15:18.920
<v Speaker 2>been able? Why has it achieved the investor interest that

0:15:18.960 --> 0:15:20.840
<v Speaker 2>you think it has in a short amount of.

0:15:20.840 --> 0:15:30.600
<v Speaker 3>Time, Because the United States is such a unique opportunity

0:15:30.760 --> 0:15:36.080
<v Speaker 3>for investing in cannabis, and it's very different than the

0:15:36.160 --> 0:15:39.800
<v Speaker 3>Canadian market and other markets around the world that have

0:15:39.960 --> 0:15:44.120
<v Speaker 3>emerged since then for investing in cannabis. So we still

0:15:44.160 --> 0:15:47.360
<v Speaker 3>do a great deal of education trying to get that

0:15:47.480 --> 0:15:51.640
<v Speaker 3>message out and helping people understand. And even though our

0:15:51.680 --> 0:15:54.080
<v Speaker 3>fund has now been around for over three years, I'll

0:15:54.120 --> 0:15:57.480
<v Speaker 3>say investing in the States is still in its infancy

0:15:58.440 --> 0:16:02.640
<v Speaker 3>because when you talk to you, your average advisor, your

0:16:02.680 --> 0:16:06.400
<v Speaker 3>average investor that's really not living in the cannabis bubble

0:16:06.400 --> 0:16:10.520
<v Speaker 3>that I live in. Most people don't know the difference,

0:16:11.440 --> 0:16:15.120
<v Speaker 3>or they still drop names like you know, Canopy and

0:16:15.200 --> 0:16:20.600
<v Speaker 3>Aurora until Ray and they think that's cannabis investing, or

0:16:20.760 --> 0:16:22.760
<v Speaker 3>they hear bits and pieces that have been on the

0:16:22.800 --> 0:16:26.400
<v Speaker 3>news about oh, there's a proposal for safe banking, Oh

0:16:26.480 --> 0:16:31.760
<v Speaker 3>there's a proposal for the for the Safe Act, there's

0:16:32.080 --> 0:16:34.440
<v Speaker 3>you know, the More Act. There's been all these different

0:16:34.440 --> 0:16:38.040
<v Speaker 3>proposals that have been floated. You know, back when Biden

0:16:38.120 --> 0:16:43.600
<v Speaker 3>first got in office, they were talking about decriminalization, legalization.

0:16:45.080 --> 0:16:49.560
<v Speaker 3>The Democrats got control of the Senate briefly sort of,

0:16:50.280 --> 0:16:54.840
<v Speaker 3>and then the runoff elections and everybody thought cannabis was

0:16:54.880 --> 0:16:57.200
<v Speaker 3>going to go through the roof, And now here we

0:16:57.240 --> 0:17:01.200
<v Speaker 3>are four years later. What has happened, though, is enough

0:17:01.240 --> 0:17:07.880
<v Speaker 3>investors have gotten the message, understand the opportunity, and even

0:17:07.880 --> 0:17:10.760
<v Speaker 3>though it's taken a very long time to answer your question,

0:17:11.640 --> 0:17:14.760
<v Speaker 3>there's a large group of investors that know the real

0:17:14.800 --> 0:17:21.440
<v Speaker 3>opportunity is in US cannabis, not in Canadian cannabis. There's

0:17:21.480 --> 0:17:26.040
<v Speaker 3>a difference between the Canadian companies in legalization and potential

0:17:26.240 --> 0:17:30.160
<v Speaker 3>US legalization and the state by state approvals that we've

0:17:30.160 --> 0:17:33.720
<v Speaker 3>had so far in the US. And a very interesting

0:17:33.840 --> 0:17:37.679
<v Speaker 3>thing about our fund. In all the years I've been

0:17:37.680 --> 0:17:42.000
<v Speaker 3>in this business, I have never seen a fund that

0:17:42.240 --> 0:17:46.800
<v Speaker 3>has had as sticky of assets. And what that means

0:17:46.920 --> 0:17:52.120
<v Speaker 3>is usually in an industry or a sector or an

0:17:52.119 --> 0:17:58.360
<v Speaker 3>individual fund, when performance is down, assets flow out. Not

0:17:58.400 --> 0:18:02.080
<v Speaker 3>only does your AUM go down because performance has driven

0:18:02.160 --> 0:18:08.320
<v Speaker 3>down but investors have other options. They rotate other industries,

0:18:08.359 --> 0:18:11.400
<v Speaker 3>they rotate to other sectors, and money flies out the door.

0:18:12.440 --> 0:18:17.480
<v Speaker 3>But very it's very easy to say performance of the

0:18:17.640 --> 0:18:23.400
<v Speaker 3>overall industry and our fund has been really disappointing, very frustrating.

0:18:23.640 --> 0:18:28.720
<v Speaker 3>As we've been waiting on us that'll reform again we

0:18:28.720 --> 0:18:32.879
<v Speaker 3>were promised four years ago, and the assets of the

0:18:32.960 --> 0:18:38.040
<v Speaker 3>fund have only continued to well, they've been sticky and

0:18:38.040 --> 0:18:42.280
<v Speaker 3>it's continued to see net inflows of capital in spite

0:18:42.320 --> 0:18:44.879
<v Speaker 3>of the performance. And that makes us see there's a

0:18:45.119 --> 0:18:51.920
<v Speaker 3>there's a big group of investors here that are very committed.

0:18:52.560 --> 0:18:57.520
<v Speaker 3>They are very let's call them diamond hands if we want.

0:18:58.480 --> 0:19:02.120
<v Speaker 3>Those investors are sicking with it. The fund also has

0:19:03.440 --> 0:19:07.679
<v Speaker 3>it has options. It has a sister fund that is

0:19:07.840 --> 0:19:12.400
<v Speaker 3>a approximately two x version of the fund M SOS

0:19:13.880 --> 0:19:17.359
<v Speaker 3>that adds to the overall assets and the overall because

0:19:17.440 --> 0:19:20.640
<v Speaker 3>one fund and invests indirectly in the other fund through

0:19:20.680 --> 0:19:25.199
<v Speaker 3>counterparties using total return swaps. Again, but the options and

0:19:25.240 --> 0:19:27.280
<v Speaker 3>the two x fund, I have to mention those things

0:19:27.320 --> 0:19:31.040
<v Speaker 3>because that leads to a good deal of market makers,

0:19:31.200 --> 0:19:37.240
<v Speaker 3>market participants that are also holding the fund to hedge

0:19:37.400 --> 0:19:42.320
<v Speaker 3>all those positions and to cover the options exposure. So

0:19:42.480 --> 0:19:45.240
<v Speaker 3>it's a very unique story. The fund has been over

0:19:45.280 --> 0:19:48.280
<v Speaker 3>a billion in assets, even though you know performance is

0:19:48.359 --> 0:19:51.159
<v Speaker 3>up and down, it's still well over eight hundred and

0:19:51.200 --> 0:19:53.399
<v Speaker 3>fifty million dollar fund is so right now that the

0:19:53.440 --> 0:19:56.040
<v Speaker 3>next largest fund might have two hundred.

0:19:55.800 --> 0:19:58.240
<v Speaker 1>Millions as between.

0:19:59.040 --> 0:20:01.359
<v Speaker 3>Yeah, there's a big kasm between. This fund is really

0:20:02.000 --> 0:20:09.000
<v Speaker 3>viewed as the way to invest in US cannabis exposure,

0:20:10.520 --> 0:20:13.480
<v Speaker 3>and the assets have been you know, very sticky. We're

0:20:13.520 --> 0:20:17.679
<v Speaker 3>happy with that, but god, I'd like the uh, the

0:20:17.720 --> 0:20:19.720
<v Speaker 3>net asset value to get a little higher and go

0:20:19.840 --> 0:20:22.520
<v Speaker 3>back to where it was. We're thinking we have a

0:20:22.640 --> 0:20:26.639
<v Speaker 3>very unique opportunity to this fallow to see some growth.

0:20:26.800 --> 0:20:29.160
<v Speaker 2>Can I ask you just sorry? I know David will

0:20:29.160 --> 0:20:31.960
<v Speaker 2>want to get to construction, but you mentioned something fun fact,

0:20:32.040 --> 0:20:34.240
<v Speaker 2>maybe not so fun fact. I'm Canadian, so I take

0:20:34.240 --> 0:20:36.280
<v Speaker 2>no offense to the you know, it doesn't work to

0:20:36.280 --> 0:20:38.800
<v Speaker 2>say it with Canada, but just from your perspective, because

0:20:38.840 --> 0:20:41.159
<v Speaker 2>it hasn't been the silver bullet, like legalization wasn't the

0:20:41.200 --> 0:20:45.040
<v Speaker 2>silver bullet for Canada cannabis? Yes, stocks, can you can

0:20:45.080 --> 0:20:48.240
<v Speaker 2>you just give me your perspective because it's an off

0:20:48.359 --> 0:20:50.639
<v Speaker 2>David debated topic. Actually, I will say between me and

0:20:50.680 --> 0:20:53.760
<v Speaker 2>my friends about why it wasn't I'm interested to hear

0:20:53.800 --> 0:20:58.440
<v Speaker 2>your perspective on why Canada's path isn't necessarily what we

0:20:58.480 --> 0:21:00.680
<v Speaker 2>should expect to see from the US responsor.

0:21:00.800 --> 0:21:03.960
<v Speaker 3>Now, great question. I appreciate that, and I want to

0:21:04.000 --> 0:21:09.000
<v Speaker 3>be very careful. No, I love Canada to Canada. Our

0:21:09.040 --> 0:21:12.800
<v Speaker 3>fund has a lot of Canadian investors. It seems that

0:21:12.840 --> 0:21:18.880
<v Speaker 3>we talked to and our fund YOLO, now we have

0:21:19.160 --> 0:21:22.439
<v Speaker 3>you know, MSOs is a US only and we want

0:21:22.440 --> 0:21:24.000
<v Speaker 3>it to be very pure. We want it to be

0:21:24.040 --> 0:21:28.040
<v Speaker 3>only the plant touching actual multi state operators in the

0:21:28.119 --> 0:21:32.120
<v Speaker 3>United States. Our fund YOLO invests in those Canadian companies

0:21:32.840 --> 0:21:36.840
<v Speaker 3>and US exposure, and it even has exposure in a

0:21:36.840 --> 0:21:41.159
<v Speaker 3>little bit of exposure in Europe and in Israel. But a

0:21:41.200 --> 0:21:44.080
<v Speaker 3>lot of people are very familiar with the Canadians. So

0:21:44.960 --> 0:21:49.080
<v Speaker 3>Canada legalized a number of years ago, and when they

0:21:49.080 --> 0:21:53.880
<v Speaker 3>first had the announcements about legalization, those stocks spiked. They

0:21:53.920 --> 0:21:55.960
<v Speaker 3>went straight to the roof, even though they weren't even

0:21:56.119 --> 0:22:00.320
<v Speaker 3>didn't have sales yet, so they traded like meme stocks,

0:22:01.880 --> 0:22:08.200
<v Speaker 3>and then legalization happened. Well, also these Canadian companies were

0:22:08.359 --> 0:22:10.719
<v Speaker 3>allowed to list on the New York Stock Exchange and

0:22:10.920 --> 0:22:14.560
<v Speaker 3>or more on NASDAC. A lot of them are cross

0:22:14.600 --> 0:22:19.359
<v Speaker 3>listed on the Toronto TSX as well, and they got

0:22:20.600 --> 0:22:24.920
<v Speaker 3>capital that goes along with those listings and the opportunity.

0:22:25.800 --> 0:22:30.239
<v Speaker 3>And they built a lot of greenhouses, they grew a

0:22:30.240 --> 0:22:39.800
<v Speaker 3>lot of weed, and the provincial rollouts in Canada were lousy.

0:22:40.400 --> 0:22:42.359
<v Speaker 3>They didn't have enough brick and mortar stores in the

0:22:42.400 --> 0:22:47.359
<v Speaker 3>most populous Ontario. People couldn't didn't have the stores to

0:22:47.359 --> 0:22:52.439
<v Speaker 3>buy it. They overgrew, they overbuilt, they didn't have the

0:22:52.480 --> 0:22:55.879
<v Speaker 3>sales to back it up, and they burned through a

0:22:55.920 --> 0:22:59.560
<v Speaker 3>ton of capital. Is it a failure, No, it's not

0:22:59.600 --> 0:23:03.600
<v Speaker 3>a failure. There's still plenty of companies that will survive.

0:23:05.480 --> 0:23:11.199
<v Speaker 3>And they had some inroads into the European markets as

0:23:11.240 --> 0:23:15.480
<v Speaker 3>well that are now growing. So our fin YOLO invests

0:23:15.520 --> 0:23:19.560
<v Speaker 3>in companies like Tilray, in sn d L, in Organic

0:23:19.600 --> 0:23:25.320
<v Speaker 3>gram and Canopy even. But yeah, it's been a very

0:23:25.359 --> 0:23:28.040
<v Speaker 3>different market than what we have in the US. And

0:23:28.240 --> 0:23:30.840
<v Speaker 3>I'll go ahead and I'll tell you about the differences

0:23:30.840 --> 0:23:35.240
<v Speaker 3>in the US. The US, these companies for the most

0:23:35.280 --> 0:23:39.000
<v Speaker 3>part were forced to list on secondary exchanges in Canada,

0:23:39.000 --> 0:23:41.960
<v Speaker 3>such as the c S or the NEO that's now

0:23:42.000 --> 0:23:45.280
<v Speaker 3>called the CBO. They couldn't list on NASDAK and n

0:23:45.359 --> 0:23:50.400
<v Speaker 3>y S because these companies are still federally illegal technically,

0:23:50.560 --> 0:23:55.440
<v Speaker 3>even as we see state by state continued growth and

0:23:55.800 --> 0:23:58.399
<v Speaker 3>it's still happening. Just this past week, they turned on

0:23:58.560 --> 0:24:02.080
<v Speaker 3>adult use sales in Ohio, a huge state that how

0:24:02.240 --> 0:24:05.080
<v Speaker 3>I had a successful medical program. Now they have a

0:24:05.080 --> 0:24:07.720
<v Speaker 3>don't use in Alaia. I'm seeing that all over the US.

0:24:08.840 --> 0:24:14.440
<v Speaker 3>So these companies did not get flooded with capital. They

0:24:14.600 --> 0:24:19.960
<v Speaker 3>can't really get institutional investment. They mostly have individual investors,

0:24:20.600 --> 0:24:25.439
<v Speaker 3>retail investors, some family offices and hedge funds and you

0:24:25.480 --> 0:24:30.480
<v Speaker 3>know some some owners and founders. And these companies were

0:24:30.520 --> 0:24:34.600
<v Speaker 3>forced to be quite frugal. That's the best explanation I

0:24:34.600 --> 0:24:37.320
<v Speaker 3>can give. And if you look under the hood, we

0:24:37.400 --> 0:24:42.240
<v Speaker 3>don't see huge executive pay we see solid balance sheets,

0:24:42.800 --> 0:24:47.520
<v Speaker 3>we see frugal operations. And look where they are now.

0:24:47.600 --> 0:24:51.240
<v Speaker 3>We have multi billion dollar companies operating in the US.

0:24:51.520 --> 0:24:54.160
<v Speaker 3>They still don't have it institutional capital, they still don't

0:24:54.160 --> 0:24:58.080
<v Speaker 3>have the exchange listings, but they're actually multi billion dollar

0:24:58.400 --> 0:25:02.880
<v Speaker 3>market cap companies operate rating in dozens and dozens of states,

0:25:03.840 --> 0:25:10.520
<v Speaker 3>and they have beautiful balance sheets and beautiful p and ls.

0:25:10.680 --> 0:25:14.439
<v Speaker 3>For in many cases, if we're looking at, you know,

0:25:14.520 --> 0:25:17.360
<v Speaker 3>the top companies, a lot of people refer to as

0:25:17.359 --> 0:25:22.760
<v Speaker 3>tier ones. So it's really been an interesting story of

0:25:22.840 --> 0:25:27.440
<v Speaker 3>these companies that were forced to have sound frugal growth

0:25:28.440 --> 0:25:34.359
<v Speaker 3>vosus companies that in many cases overbuilt, overgrew, didn't have

0:25:34.400 --> 0:25:38.200
<v Speaker 3>the sales to back it up and had to regroup

0:25:38.320 --> 0:25:41.040
<v Speaker 3>multiple times. That's a difference.

0:25:43.200 --> 0:25:45.720
<v Speaker 1>You mentioned, you know, some of these companies with great

0:25:45.720 --> 0:25:49.960
<v Speaker 1>balance sheets and not exorbit executive compensation. What are some

0:25:50.000 --> 0:25:52.120
<v Speaker 1>of the other things you look at, you know, when

0:25:52.160 --> 0:25:55.440
<v Speaker 1>you're picking securities for the portfolio? Are there any tools

0:25:55.480 --> 0:25:55.920
<v Speaker 1>you use?

0:25:57.119 --> 0:25:59.480
<v Speaker 3>It's not the traditional tools. And I often have to

0:25:59.520 --> 0:26:03.520
<v Speaker 3>remind people of this because I manage a couple other funds,

0:26:04.160 --> 0:26:08.000
<v Speaker 3>you know, and we mentioned the vice ETF, and we

0:26:08.080 --> 0:26:12.000
<v Speaker 3>also have a restaurant theme ETF. I'll give a plug

0:26:12.200 --> 0:26:15.480
<v Speaker 3>tick your symbol eats with a Z, a hotel themed

0:26:15.520 --> 0:26:23.480
<v Speaker 3>ETF beds the Z and for those, they're all MASDAK

0:26:23.560 --> 0:26:26.480
<v Speaker 3>and nys E listed stocks that are perfectly liquid and

0:26:27.119 --> 0:26:30.840
<v Speaker 3>high trading volume. And for those, I'm going to use

0:26:31.720 --> 0:26:37.080
<v Speaker 3>traditional tools. What I like to use personally Inherent Advisor

0:26:37.119 --> 0:26:45.159
<v Speaker 3>shares is we look at earnings revisions and outside analyst ratings,

0:26:45.440 --> 0:26:49.080
<v Speaker 3>and there are some very unique tools for looking at

0:26:49.560 --> 0:26:53.879
<v Speaker 3>high rated, accurate analysts. Because I also think there's a

0:26:53.880 --> 0:26:56.320
<v Speaker 3>lot of analyst ratings out there that are garbage and

0:26:56.560 --> 0:27:01.160
<v Speaker 3>are biased certain industries and certain stocks. Analysts that are

0:27:01.280 --> 0:27:04.760
<v Speaker 3>scored for being very accurate. We pay attention to those

0:27:04.960 --> 0:27:11.000
<v Speaker 3>and not the others, and we like upwards analyst earnings

0:27:11.040 --> 0:27:16.920
<v Speaker 3>revisions intra quarter that can lead to looking at earnings

0:27:16.920 --> 0:27:22.439
<v Speaker 3>beats on the horizon. So I also like managing vice

0:27:23.040 --> 0:27:28.640
<v Speaker 3>and restaurants and hotels because it is a there's pros

0:27:28.640 --> 0:27:33.640
<v Speaker 3>and cons. It's a limited universe of stocks, So I'm

0:27:33.640 --> 0:27:36.399
<v Speaker 3>not saying this is just a large cap growth fund

0:27:36.400 --> 0:27:39.639
<v Speaker 3>and I have thousands of stocks to screen through. I

0:27:39.680 --> 0:27:41.960
<v Speaker 3>have a limited universe, and I'm just trying to find

0:27:42.359 --> 0:27:46.560
<v Speaker 3>which are the best in those particular areas. Which leads

0:27:46.560 --> 0:27:50.320
<v Speaker 3>me to another comment here about active management. You guys

0:27:50.359 --> 0:27:52.840
<v Speaker 3>know from the name of this podcast that active can

0:27:52.880 --> 0:27:55.680
<v Speaker 3>mean a lot of different things. In my mind, and

0:27:55.680 --> 0:27:58.080
<v Speaker 3>most people should understand active simply means it's not an

0:27:58.119 --> 0:28:03.320
<v Speaker 3>index that's the only active really means. Besides that, there's

0:28:03.320 --> 0:28:06.840
<v Speaker 3>funds that are very active, very tactical, and there's funds

0:28:06.880 --> 0:28:11.880
<v Speaker 3>that are simply not so active, but they're not following

0:28:12.040 --> 0:28:16.960
<v Speaker 3>tied to an index. You have some human or group

0:28:17.000 --> 0:28:21.000
<v Speaker 3>of humans or model that's saying we want to overweight

0:28:21.119 --> 0:28:24.359
<v Speaker 3>these docks, underweight those docks. You know, here's something we

0:28:24.400 --> 0:28:30.240
<v Speaker 3>want to avoid. You have some something happening there, whatever

0:28:30.280 --> 0:28:34.200
<v Speaker 3>it is, that's not an index. And I will say

0:28:34.240 --> 0:28:38.520
<v Speaker 3>in cannabis, I think active can be a whole lot

0:28:38.600 --> 0:28:42.040
<v Speaker 3>better than an index, because sometimes some of the biggest

0:28:42.080 --> 0:28:45.480
<v Speaker 3>companies are ones that you absolutely want to avoid and

0:28:45.640 --> 0:28:51.080
<v Speaker 3>might not be the very best. In this US cannabisy

0:28:51.120 --> 0:28:54.760
<v Speaker 3>tf MSOs, we have a very limited universe of stocks

0:28:55.680 --> 0:28:58.840
<v Speaker 3>and the biggest, the tier ones are the ones we

0:28:58.880 --> 0:29:02.440
<v Speaker 3>want to invest in. But our fund does not follow

0:29:02.480 --> 0:29:08.360
<v Speaker 3>an index. We have it very purposely heavily overweighted in

0:29:08.400 --> 0:29:11.360
<v Speaker 3>the top five holdings. The fund has an absolute ton

0:29:11.640 --> 0:29:17.120
<v Speaker 3>in the top five holdings, and that's very purposeful. And

0:29:17.160 --> 0:29:22.479
<v Speaker 3>we have some very small investments in smaller companies that

0:29:23.160 --> 0:29:27.160
<v Speaker 3>don't have a lot of material weight on the portfolio

0:29:27.520 --> 0:29:31.040
<v Speaker 3>but could be a nice call option. If they have

0:29:31.160 --> 0:29:34.240
<v Speaker 3>more torque, we'd call it. If there's some smallest companies

0:29:34.320 --> 0:29:37.120
<v Speaker 3>have more torque double or triple or quadruple or be

0:29:37.200 --> 0:29:40.920
<v Speaker 3>ten baggers, you know, that's great. The fund has a

0:29:41.000 --> 0:29:43.760
<v Speaker 3>very heavy weight in the top five hold top five holdings,

0:29:43.880 --> 0:29:50.920
<v Speaker 3>top ten holdings, and we are very purposely inactive. I

0:29:50.920 --> 0:29:53.120
<v Speaker 3>don't want to be hitting the bid on any of

0:29:53.120 --> 0:29:57.800
<v Speaker 3>those top holdings. These things are OTC traded in the US,

0:29:57.920 --> 0:30:01.080
<v Speaker 3>listed on secondary exchanges for the most part in Canada

0:30:01.560 --> 0:30:03.640
<v Speaker 3>until we get our federal reforms that we're going to

0:30:03.680 --> 0:30:06.960
<v Speaker 3>come back and talk about, I think I don't want

0:30:06.960 --> 0:30:09.880
<v Speaker 3>to hit the bid. So this fund is very inactive.

0:30:10.680 --> 0:30:14.320
<v Speaker 3>I don't use analyst ratings and outside tools. We get

0:30:14.360 --> 0:30:17.959
<v Speaker 3>a lot of information from analysts that we know and trust,

0:30:19.080 --> 0:30:23.200
<v Speaker 3>and a lot of communication. I talk to the companies themselves.

0:30:23.280 --> 0:30:26.200
<v Speaker 3>I have good access to their CEOs and chairmen, a

0:30:26.200 --> 0:30:30.520
<v Speaker 3>lot of communication. It's a pretty unique cannabis bubble that

0:30:30.560 --> 0:30:33.840
<v Speaker 3>we all communicate in, and I know which companies we

0:30:33.880 --> 0:30:37.640
<v Speaker 3>want to have heavy weightings in. So I think that

0:30:37.680 --> 0:30:40.280
<v Speaker 3>was a really long answer to answer your question. But

0:30:40.360 --> 0:30:43.240
<v Speaker 3>I managed this cannabis ETF a lot different that I

0:30:43.280 --> 0:30:48.240
<v Speaker 3>manage those other funds. Cannabis is done through knowing these

0:30:48.400 --> 0:30:52.320
<v Speaker 3>companies and the people there very well and having a

0:30:52.360 --> 0:30:56.280
<v Speaker 3>lot of communication, heavy heavy bets on the top companies.

0:30:57.160 --> 0:30:59.440
<v Speaker 2>So I think that is quite interesting. So that heavy

0:30:59.440 --> 0:31:02.360
<v Speaker 2>concentration on those top five, and you mentioned that the

0:31:02.400 --> 0:31:04.560
<v Speaker 2>focus is on I think the words you use were

0:31:04.880 --> 0:31:07.360
<v Speaker 2>multi state plant touching. Did I get that right?

0:31:07.400 --> 0:31:09.840
<v Speaker 3>Well, yeah, it's they're called most for the most part,

0:31:09.840 --> 0:31:13.040
<v Speaker 3>they're called multi state operators. That leads to our ticker

0:31:13.320 --> 0:31:18.160
<v Speaker 3>ms OS, right, and there's some single state operators, but

0:31:18.200 --> 0:31:22.480
<v Speaker 3>there's also Yeah, these are actual plant touching companies. They're

0:31:22.560 --> 0:31:28.760
<v Speaker 3>usually companies that grow their own product, package their own product,

0:31:29.000 --> 0:31:33.240
<v Speaker 3>sell their own product. That's called vertical vertically integrated, and

0:31:34.040 --> 0:31:40.400
<v Speaker 3>not much of what's called ancillary companies here that sometimes

0:31:40.400 --> 0:31:43.440
<v Speaker 3>can list on the major exchanges, but they're not really

0:31:43.480 --> 0:31:44.640
<v Speaker 3>growing or selling product.

0:31:45.160 --> 0:31:48.200
<v Speaker 2>And in your scope, like how you describe the scope

0:31:48.200 --> 0:31:51.360
<v Speaker 2>of the fund, it does say across industries related to

0:31:51.400 --> 0:31:53.720
<v Speaker 2>cannabis or something. I got that language probably very wrong,

0:31:53.760 --> 0:31:57.680
<v Speaker 2>but something along those lines are meaning that I'm going

0:31:57.680 --> 0:32:00.280
<v Speaker 2>to guess that leaves the door open that if you

0:32:00.320 --> 0:32:02.680
<v Speaker 2>did want to potentially see or you see opportunity in

0:32:02.760 --> 0:32:05.080
<v Speaker 2>other types of industries other than you know, the specific

0:32:05.080 --> 0:32:07.000
<v Speaker 2>plant touching. But it sounds as though to date you've

0:32:07.040 --> 0:32:09.200
<v Speaker 2>been very focused on plant touching. I'd be interested in

0:32:09.240 --> 0:32:12.760
<v Speaker 2>hearing your kind of view on those other types of

0:32:12.760 --> 0:32:15.200
<v Speaker 2>industries that are related to cannabis and why you have

0:32:15.280 --> 0:32:18.120
<v Speaker 2>steered clear of them versus what doors you're leaving open

0:32:18.200 --> 0:32:19.080
<v Speaker 2>or looking at more.

0:32:19.520 --> 0:32:21.600
<v Speaker 3>No, you're absolutely right, and it's not so much of

0:32:21.680 --> 0:32:25.680
<v Speaker 3>steered clear as the portfolio has also evolved over time,

0:32:26.360 --> 0:32:31.960
<v Speaker 3>and our other affiliated fund, our fund Yolo, it does

0:32:32.040 --> 0:32:36.240
<v Speaker 3>invest in some cannabis reads. There's real estate companies that

0:32:36.280 --> 0:32:40.120
<v Speaker 3>really specialize in cannabis only. There's companies like cain of

0:32:40.160 --> 0:32:45.959
<v Speaker 3>called grow Generation. They provide hydroponics and lights and all

0:32:46.040 --> 0:32:50.720
<v Speaker 3>these other systems for growing. There's companies that are just

0:32:50.960 --> 0:32:55.760
<v Speaker 3>in you know, vape manufacturing things like this. So there's

0:32:55.840 --> 0:33:02.680
<v Speaker 3>a lot of ancillary products and support types of companies cannabis,

0:33:02.720 --> 0:33:08.800
<v Speaker 3>and those companies were somewhat in our fund MSOs if

0:33:08.840 --> 0:33:13.760
<v Speaker 3>they were really US focused. But over time, I although

0:33:13.760 --> 0:33:16.120
<v Speaker 3>it's been a painful three or four years, I think

0:33:16.120 --> 0:33:19.960
<v Speaker 3>we're getting closer and closer to the goal line of

0:33:20.600 --> 0:33:24.800
<v Speaker 3>US federal reform and we'll come back and talk about

0:33:24.800 --> 0:33:26.440
<v Speaker 3>it in a minute. But we just came out of

0:33:26.480 --> 0:33:32.160
<v Speaker 3>the public comment period for the DEA to hopefully reschedule

0:33:32.640 --> 0:33:36.440
<v Speaker 3>cannabis off of Schedule one like narcotics and down to

0:33:36.480 --> 0:33:39.120
<v Speaker 3>Schedule three, and we think it's going to be a

0:33:39.240 --> 0:33:42.880
<v Speaker 3>huge step for cannabis. But I digress. As we're getting

0:33:42.880 --> 0:33:46.280
<v Speaker 3>closer to that goal line. In the last year or two,

0:33:46.520 --> 0:33:51.280
<v Speaker 3>we have moved out of those ancillary companies, out of

0:33:51.280 --> 0:33:57.120
<v Speaker 3>the support companies in MSOs because we really wanted the

0:33:57.800 --> 0:34:05.320
<v Speaker 3>pure multi state operator growing packaging, selling actual cannabis products

0:34:05.360 --> 0:34:08.400
<v Speaker 3>in the US. We wanted not only the MSO is

0:34:08.440 --> 0:34:11.680
<v Speaker 3>fun to be pure US, we wanted to be pure

0:34:12.160 --> 0:34:20.400
<v Speaker 3>actual cannabis touching companies because we think that's where the

0:34:20.480 --> 0:34:21.040
<v Speaker 3>upside is.

0:34:21.320 --> 0:34:24.239
<v Speaker 2>Do we want to just delve right into that rescheduling conversation, then,

0:34:25.200 --> 0:34:27.160
<v Speaker 2>I mean we could probably sit here and talk for

0:34:27.280 --> 0:34:29.960
<v Speaker 2>hours about it. As I can attest to the fact

0:34:29.960 --> 0:34:34.919
<v Speaker 2>that on my desk with my texts expert as well

0:34:34.960 --> 0:34:38.719
<v Speaker 2>as with our beverage and he actually covers the cannabis market,

0:34:38.760 --> 0:34:45.360
<v Speaker 2>can say it's an oft debated topic as to exactly

0:34:45.680 --> 0:34:49.759
<v Speaker 2>one will rescheduling happen, and two, where will value get

0:34:49.840 --> 0:34:54.800
<v Speaker 2>unlocked versus how could potentially added cost related to compliance

0:34:54.840 --> 0:34:59.160
<v Speaker 2>and regulatory burden actually present as a drag. So love

0:34:59.200 --> 0:35:00.160
<v Speaker 2>to hear your views.

0:35:01.120 --> 0:35:03.080
<v Speaker 3>And they are just my views. We're going to get

0:35:03.080 --> 0:35:04.719
<v Speaker 3>into a lot of opinions here.

0:35:05.040 --> 0:35:06.000
<v Speaker 2>We all have opinions.

0:35:06.000 --> 0:35:06.640
<v Speaker 1>We love them.

0:35:07.320 --> 0:35:11.239
<v Speaker 3>Yeah, And you know there's people that feel burnt by

0:35:11.280 --> 0:35:17.600
<v Speaker 3>cannabis investing because, man, when the Democratic platform for twenty

0:35:17.680 --> 0:35:22.239
<v Speaker 3>twenty came out, it had cannabis front and center. You know,

0:35:22.320 --> 0:35:25.640
<v Speaker 3>Joe Biden's handlers were you taught him to talk about

0:35:26.920 --> 0:35:31.200
<v Speaker 3>no one should be in jail for cannabis. And and

0:35:31.239 --> 0:35:36.640
<v Speaker 3>again I mentioned earlier when Democrats got control, people invested

0:35:36.680 --> 0:35:40.160
<v Speaker 3>in cannabis because they thought Fiddle reform was right around

0:35:40.160 --> 0:35:44.360
<v Speaker 3>the corner. And we've been waiting very frustratingly for the

0:35:44.440 --> 0:35:49.040
<v Speaker 3>last three or four years. You know, something called safe

0:35:49.120 --> 0:35:53.560
<v Speaker 3>banking was approved in the House multiple times but never

0:35:53.640 --> 0:35:57.280
<v Speaker 3>came to a real vote in the Senate, and people

0:35:57.280 --> 0:36:00.480
<v Speaker 3>were angry about that. And that was just the safe

0:36:00.520 --> 0:36:03.879
<v Speaker 3>Banking bill for cannabis. There's been the More Act. There's

0:36:03.920 --> 0:36:08.040
<v Speaker 3>been a whole slew of different proposals and we really

0:36:08.080 --> 0:36:12.600
<v Speaker 3>haven't seen it. But credit to the Biden administration for

0:36:12.719 --> 0:36:18.160
<v Speaker 3>doing some things right about cannabis is they formally asked

0:36:18.480 --> 0:36:26.799
<v Speaker 3>last fall for the HHS to review cannabis for potential rescheduling.

0:36:28.600 --> 0:36:32.320
<v Speaker 3>They did that, and then under open records the actual

0:36:32.440 --> 0:36:35.160
<v Speaker 3>two hundred and fifty two page document came to light

0:36:35.840 --> 0:36:43.040
<v Speaker 3>that has lots of medical references, actual medical use for cannabinoids,

0:36:43.400 --> 0:36:47.680
<v Speaker 3>and that alone should be the proof that it should

0:36:47.719 --> 0:36:51.319
<v Speaker 3>not be on DEA Schedule one. DEA Schedule one is

0:36:51.400 --> 0:36:57.839
<v Speaker 3>for drugs like carolin that have no medical valid use.

0:36:59.000 --> 0:37:00.960
<v Speaker 3>If you have no medical use, your own schedule one.

0:37:01.680 --> 0:37:03.400
<v Speaker 3>If you have medical uses, you're not supposed to be

0:37:03.440 --> 0:37:09.320
<v Speaker 3>on Schedule one. So then there was a long public

0:37:09.320 --> 0:37:13.400
<v Speaker 3>comment period. It's ninety five percent plus positive. There's more

0:37:13.440 --> 0:37:17.440
<v Speaker 3>than forty thousand public comments. This just came out in

0:37:17.440 --> 0:37:21.799
<v Speaker 3>the last couple of weeks. So I am ninety nine

0:37:21.840 --> 0:37:25.120
<v Speaker 3>point nine percent sure that this rescheduling is going to happen.

0:37:25.440 --> 0:37:30.640
<v Speaker 3>And the problem is investors have been hearing noise for

0:37:30.680 --> 0:37:33.839
<v Speaker 3>the last four years. Your average investor does not live

0:37:33.880 --> 0:37:36.600
<v Speaker 3>in the cannabis bubble that I live in, and your

0:37:36.640 --> 0:37:41.399
<v Speaker 3>average investor just says, oh, yeah, cannabis whatever. No I've

0:37:41.400 --> 0:37:43.319
<v Speaker 3>been hearing this for the last four years, don't I

0:37:43.360 --> 0:37:48.640
<v Speaker 3>don't believe it. And the other part is there's plenty

0:37:48.640 --> 0:37:52.000
<v Speaker 3>of investors that, even if they believe this rescheduling is coming,

0:37:53.120 --> 0:37:58.520
<v Speaker 3>but we can't say exactly when it's coming, can't invest

0:37:58.560 --> 0:38:01.279
<v Speaker 3>in cannabis in the US. And that's something I haven't

0:38:01.320 --> 0:38:04.720
<v Speaker 3>talked about yet. There are the companies that I invest

0:38:04.760 --> 0:38:10.719
<v Speaker 3>in Green Thumb Industries purely, truly Vano. These are all

0:38:11.200 --> 0:38:14.480
<v Speaker 3>you know, tho are the top four holks of the fund.

0:38:14.840 --> 0:38:19.560
<v Speaker 3>They're on non permissible lists at almost all major banks

0:38:19.600 --> 0:38:22.839
<v Speaker 3>and wirehouses. And you know, we all know that most

0:38:22.840 --> 0:38:26.760
<v Speaker 3>of the big wirehouse broker dealers are owned by federal banks,

0:38:27.480 --> 0:38:31.240
<v Speaker 3>Stanley and b of A, Merrill and UBS and everybody else.

0:38:31.440 --> 0:38:35.319
<v Speaker 3>They can't invest in those stocks at all. There's a

0:38:35.320 --> 0:38:42.160
<v Speaker 3>whole number of brokerages that can. People can invest in

0:38:42.200 --> 0:38:47.319
<v Speaker 3>our fund MSOs. It's fully available through all the Bank

0:38:47.360 --> 0:38:50.680
<v Speaker 3>of New York pershing platforms. It's available at Fidelity, Schwab.

0:38:51.320 --> 0:38:54.120
<v Speaker 3>Lots of places can invest in the fund, which also

0:38:54.160 --> 0:38:56.359
<v Speaker 3>helps our fund have you know, well over eight hundred

0:38:56.360 --> 0:39:01.280
<v Speaker 3>million in assets and very sticky assets. But our fund's

0:39:01.280 --> 0:39:04.920
<v Speaker 3>not even available officially at b of A Merrill or

0:39:04.960 --> 0:39:09.719
<v Speaker 3>Morgan Stanley or EBS. I think maybe some very top

0:39:09.760 --> 0:39:12.840
<v Speaker 3>producers and top hedge funds and so on can actually

0:39:12.920 --> 0:39:14.799
<v Speaker 3>hold it because we see the assets at some of

0:39:14.840 --> 0:39:18.400
<v Speaker 3>those places, but retail can't buy it, your average advisors

0:39:18.400 --> 0:39:23.359
<v Speaker 3>can't sell it, so on. So there's a whole lot

0:39:23.360 --> 0:39:27.920
<v Speaker 3>of money on the sidelines supposedly that again, even if

0:39:27.960 --> 0:39:30.560
<v Speaker 3>they wanted to invest in this stuff, they can't. There's

0:39:30.600 --> 0:39:32.879
<v Speaker 3>other investors because of what we've been through the last

0:39:32.920 --> 0:39:36.600
<v Speaker 3>four years, that are like they're in the show me stage. No,

0:39:37.239 --> 0:39:40.040
<v Speaker 3>I'm interested in that, but I'm not going to touch

0:39:40.120 --> 0:39:44.400
<v Speaker 3>it until it's real, until I really see that the

0:39:44.520 --> 0:39:47.759
<v Speaker 3>government is really going to reschedule this, is really going

0:39:47.840 --> 0:39:52.560
<v Speaker 3>to approve it, and we'll go from there. Now, I'm

0:39:52.560 --> 0:39:55.520
<v Speaker 3>of the opinion that again that rescheduling is coming, and

0:39:55.560 --> 0:39:59.520
<v Speaker 3>I think it's coming sooner rather than later, because I

0:39:59.560 --> 0:40:04.520
<v Speaker 3>think the the Democratic side is going to uh when

0:40:04.520 --> 0:40:05.960
<v Speaker 3>they have the DNC in a couple of weeks, I

0:40:05.960 --> 0:40:07.759
<v Speaker 3>think they're going to talk about cannabis. I think it's

0:40:07.760 --> 0:40:10.200
<v Speaker 3>going to be a campaign point and there's going to

0:40:10.239 --> 0:40:13.719
<v Speaker 3>be discussion and they're going to move it to attempting

0:40:13.880 --> 0:40:19.359
<v Speaker 3>to finalize that rule possibly this fall. Now, what does

0:40:19.360 --> 0:40:24.719
<v Speaker 3>schedule three mean. Technically, Schedule three means that it's a

0:40:24.760 --> 0:40:29.279
<v Speaker 3>prescription drug. Okay, there's pros and cons of this. We

0:40:29.360 --> 0:40:32.320
<v Speaker 3>have a multi billion dollar industry in the United States

0:40:32.400 --> 0:40:42.160
<v Speaker 3>that medical marijuana is in forty something states. Now adult

0:40:42.280 --> 0:40:44.320
<v Speaker 3>use or a lot of people will call it wreck

0:40:44.719 --> 0:40:49.360
<v Speaker 3>is in close to thirty states. Now it keeps changing

0:40:49.360 --> 0:40:51.080
<v Speaker 3>so rapidly. I don't even keep track. I used to

0:40:51.160 --> 0:40:53.040
<v Speaker 3>keep close track on it. I keep track of the

0:40:53.080 --> 0:40:56.240
<v Speaker 3>big states like Ohio turning into adult ease this week.

0:40:58.719 --> 0:41:03.560
<v Speaker 3>So that's not to be derailed. What this means is

0:41:03.800 --> 0:41:08.160
<v Speaker 3>when we get Schedule three and they actually put it

0:41:08.239 --> 0:41:12.759
<v Speaker 3>into a formal rule and so on, we are going

0:41:12.800 --> 0:41:18.279
<v Speaker 3>to be required to amend AML and Finsen. We're going

0:41:18.360 --> 0:41:21.719
<v Speaker 3>to have to have guidance from the DOJ or the

0:41:21.760 --> 0:41:24.400
<v Speaker 3>Attorney General. A lot of people in my industry have

0:41:24.440 --> 0:41:27.200
<v Speaker 3>been talking about the Garland Memo. Supposedly what we have

0:41:27.280 --> 0:41:31.759
<v Speaker 3>called the Garland Memo is sitting in a drawer and

0:41:31.840 --> 0:41:35.359
<v Speaker 3>already drafted, waiting for this rule to be final Supposedly,

0:41:35.560 --> 0:41:38.799
<v Speaker 3>that's what rumors say. So there's going to have to

0:41:38.840 --> 0:41:41.880
<v Speaker 3>be guidance from the DOJ, no if ans or butts

0:41:41.920 --> 0:41:48.120
<v Speaker 3>on this that allow the medical markets to exist in

0:41:48.200 --> 0:41:50.719
<v Speaker 3>states where they already allow. You know, we're not going

0:41:50.760 --> 0:41:54.239
<v Speaker 3>to have medical doctors writing prescriptions for cannabis. They're going

0:41:54.320 --> 0:41:57.480
<v Speaker 3>to allow state by state to have their rules for

0:41:57.600 --> 0:42:01.600
<v Speaker 3>how they do their medical programs, and different states have

0:42:01.920 --> 0:42:07.359
<v Speaker 3>more strict and more loose medical programs. On top of that, again,

0:42:07.440 --> 0:42:09.839
<v Speaker 3>there's a huge number of states doing adult use wreck

0:42:10.760 --> 0:42:13.560
<v Speaker 3>So we're going to have some type of safe harbor,

0:42:14.040 --> 0:42:16.640
<v Speaker 3>some types of ruling from the Attorney General and the

0:42:16.680 --> 0:42:22.839
<v Speaker 3>DOJ that allow for states rights and say that those

0:42:22.840 --> 0:42:27.640
<v Speaker 3>states are not contrary to federal law. So here's where

0:42:27.640 --> 0:42:31.120
<v Speaker 3>we're talking about opinions again. I'm of the opinion that

0:42:31.200 --> 0:42:35.920
<v Speaker 3>when that all happens, it's going to indirectly lead to

0:42:37.400 --> 0:42:40.759
<v Speaker 3>banking and listing on major exchanges. I have to say

0:42:40.800 --> 0:42:43.680
<v Speaker 3>indirect because now on Schedule three happens, it doesn't change

0:42:43.719 --> 0:42:46.360
<v Speaker 3>anything for banking, it doesn't change anything for listing on

0:42:46.400 --> 0:42:50.279
<v Speaker 3>major exchanges yet. But I think the snowball effect of

0:42:50.880 --> 0:42:57.239
<v Speaker 3>finsen AML, a letter from the Attorney General, guidance from

0:42:57.239 --> 0:43:00.239
<v Speaker 3>the DOJ, it's going to put those the things in

0:43:00.480 --> 0:43:05.160
<v Speaker 3>progress in motion that lead to banking and federal law.

0:43:05.640 --> 0:43:08.360
<v Speaker 3>The other thing is there's been called the Safe Act

0:43:08.440 --> 0:43:10.880
<v Speaker 3>and the Safer Act. It's been you know, it's been

0:43:10.920 --> 0:43:13.440
<v Speaker 3>through the Senate Banking Committee, even it just didn't go

0:43:13.440 --> 0:43:19.200
<v Speaker 3>to the Senate floor. I think those congressional bills are

0:43:19.239 --> 0:43:23.160
<v Speaker 3>going to become much less controversial. They're going to become

0:43:23.239 --> 0:43:25.799
<v Speaker 3>much less of a political football like they have been

0:43:25.840 --> 0:43:29.319
<v Speaker 3>the last four years. That once we have this rescheduling

0:43:29.400 --> 0:43:34.360
<v Speaker 3>in place, maybe finally the House and Senate can do

0:43:34.400 --> 0:43:38.920
<v Speaker 3>their damn jobs and actually pass some cannabis reforms after

0:43:39.160 --> 0:43:42.600
<v Speaker 3>this rescheduling all gets really done. So that was a

0:43:42.600 --> 0:43:44.640
<v Speaker 3>little bit of a tirade. But I talk a lot.

0:43:44.520 --> 0:43:48.439
<v Speaker 2>About this stuff, and do you think rescheduling is enough

0:43:48.480 --> 0:43:51.480
<v Speaker 2>to unlock particularly and you're concentrated five you know, the

0:43:51.520 --> 0:43:53.880
<v Speaker 2>five that you're most concentrated in your fund enough to

0:43:54.000 --> 0:43:59.640
<v Speaker 2>unlock some of that potential. We don't need broad nationwide legalization.

0:44:01.640 --> 0:44:04.880
<v Speaker 3>I think we're going to have multiple steps. I think

0:44:05.520 --> 0:44:08.200
<v Speaker 3>when that rescheduling hits and people, it's going to be

0:44:08.480 --> 0:44:11.440
<v Speaker 3>huge news and people are really going to see it.

0:44:11.480 --> 0:44:13.319
<v Speaker 3>A lot of these people that are on the sidelines

0:44:13.440 --> 0:44:16.880
<v Speaker 3>and say, oh, it's real now. I think that could

0:44:16.880 --> 0:44:20.360
<v Speaker 3>potentially be a real big leg leg up for these stocks.

0:44:20.920 --> 0:44:27.040
<v Speaker 3>But it doesn't cause listing on the Nasdaq or the NYC.

0:44:27.480 --> 0:44:31.560
<v Speaker 3>It doesn't cause custody at b of a Merrill until

0:44:31.600 --> 0:44:34.759
<v Speaker 3>we get some of the other steps to follow. So

0:44:36.400 --> 0:44:41.319
<v Speaker 3>I think we're seeing a multi leg process, but I

0:44:41.360 --> 0:44:44.240
<v Speaker 3>think it starts the domino to start falling at that point.

0:44:44.280 --> 0:44:48.520
<v Speaker 3>But again, with the what these talks have been through

0:44:50.200 --> 0:44:52.319
<v Speaker 3>the last three years, I think it can be a

0:44:52.440 --> 0:44:57.280
<v Speaker 3>huge leg up when that rescheduling is actually put rules

0:44:57.320 --> 0:45:01.160
<v Speaker 3>in place, because all you have to do is look

0:45:01.200 --> 0:45:05.840
<v Speaker 3>at average trading volume for a multi billion dollar company

0:45:05.840 --> 0:45:09.160
<v Speaker 3>that's our top holding, like Green Thumb Industries GTI or

0:45:09.360 --> 0:45:13.960
<v Speaker 3>Gtbif look at it versus till Ray, and it is

0:45:14.120 --> 0:45:20.800
<v Speaker 3>insane the numbers till Ray canopy. Those stocks trade tons

0:45:20.840 --> 0:45:24.600
<v Speaker 3>of volume listed on NASDAK. You know, all types of

0:45:24.640 --> 0:45:27.359
<v Speaker 3>funds and institutions can invest in them if they want

0:45:27.560 --> 0:45:31.840
<v Speaker 3>or shorten them if they want, and the US trading

0:45:31.920 --> 0:45:36.160
<v Speaker 3>volumes are just anemic. So you know, we're very proud

0:45:36.160 --> 0:45:39.720
<v Speaker 3>that our fund is here as a as a tool,

0:45:40.200 --> 0:45:43.359
<v Speaker 3>as a path so people can invest in these US

0:45:43.440 --> 0:45:47.680
<v Speaker 3>stocks because again, the individual stocks that we invest in

0:45:48.440 --> 0:45:51.919
<v Speaker 3>are they're not available a lot of places, and they're

0:45:52.160 --> 0:45:53.440
<v Speaker 3>comparatively low volume.

0:45:55.880 --> 0:45:58.680
<v Speaker 1>Well, I mean, it'll be interesting to see what happens,

0:45:59.120 --> 0:46:01.560
<v Speaker 1>but this was definitely great. I wanted to thank you

0:46:01.640 --> 0:46:04.760
<v Speaker 1>both Brie and Dan so much for joining me today.

0:46:05.400 --> 0:46:09.200
<v Speaker 3>Happy to be here, thanks for the opportunity to educate

0:46:09.280 --> 0:46:10.120
<v Speaker 3>on all this stuff.

0:46:11.200 --> 0:46:12.400
<v Speaker 2>It's been a real joy.

0:46:12.400 --> 0:46:15.320
<v Speaker 1>Until our next episode. This is David Cohne with Inside

0:46:15.320 --> 0:46:15.680
<v Speaker 1>Active