Cannabis Investors Keep on Selling and I Keep on Buying

Market participants continue to be resistant and are growing increasingly impatient in their perception of the procedural delays in the rescheduling of cannabis.

By contrast I am using the weakness to further accumulate names in the space as the inevitability (at least to me) of rescheduling to Schedule III and an end date to Schedule I grow clearer. With that rescheduling will likely come more uplistings (and eligibility in index funds), an easing of custodian restrictions and remedy and clarification of UTP treatment (with some retroactive suspension of liabilities and lengthening in tax obligation payouts). 

This could lead to a meaningful change in the ownership of cannabis equities from retail to institutional (and index funds) — that has yet to begin. 

I suppose this selling was inevitable given the recency bias related to the dramatic decline in share prices over the last five years and the persistent regulatory disappointments — both of which are etched in traders’ and investors’ memories. (It doesn’t help that the general market has become unstable.)

I remain a buyer.

Position: Long MSOS common (VL) and calls (VS) 

Scarcity of Capital or Scarcity of Demand Willing to Pay?

In today’s Market Recon, Tech’s Capital Problem, Sarge shared the following quote from Nvidia’s ($NVDA) Jensen Huang:

“If you look at the fundamentals, the demand for the neoclouds is off the charts.” Huang paused and then he added, “What is missing in the middle is the working capital to fuel that growth… because there’s just so much demand across so many sectors of AI, there’s a scarcity of capital.”

Then he said: “The demand of the capital is much greater than the availability of the capital.”

This got me thinking. Yeah, I understand that early-stage ideas need capital to grow. But a business needs customers that are willing to pay a fair market price for the thing they’re buying.

In the case of AI, the demand is there, but paying customers are not. Or, at least, customers willing to pay what the product is believed to be worth.

Yes, these companies are growing fast. But when will people be willing to pay what the services are “worth”?

When the demand comes from investors and not customers, is that the sign of a healthy product? Or has AI gotten ahead of itself?

There are lots of good businesses that would make the world a better place that failed for a lack of “capital.” Or was it a lack of paying customers?

I’m not saying AI will fail. On the contrary. It will succeed because the people with the money will make sure that we can’t live a modern life without it. I guess that’s when we’ll all start paying a fair market value for it.

Charting the Late Morning Market

– NYSE volume flat to its one-month average; 

– Nasdaq volume 16% below its one-month average; 

– VIX index: up 0.79% to 19.18

Breadth

SOURCE: Interactive Brokers

S&P500 Sector ETFs

SOURCE: Interactive Brokers

% GAINERS, DECLINERS

SOURCE: TheStreet Pro

Nasdaq 100 and S&P500 Heat Maps

SOURCE TheFly

Another Marijuana Moment

Positions: None.

My Comment of the Day


Dougie Kass

3m ago

The tide is going out and now you understand my resentment towards Fin TV.

Look at their favorite stocks – $BABA $UBER $NFLX $SHAK $GEV $CAT Paramount, $BA, $RDDT  the banks/brokers/private equity et al

They are swimming naked.

Memo to retail investors – they will not take ownership of their mistakes, the will continue to smile, they will be confident in view, they will take your assets. 

They will cost you money. 

Turn off your TVs.

Positions: None