California High on Cannabinoid Wellness

Author: David R. Kotok, Post Date: January 6, 2018

“California High on Cannabinoid Wellness” is the title to this commentary which was written a few days ago.

Now we must ask: “What about the rest of the nation?”

By yearend, 8 states will have recreational Marijuana; 29 will have medical usage. Meanwhile a reversal of established policy gives an “in your face” to the majority of the country. That is the result of the latest gesture by the US Attorney General Jeff Sessions.

CNN summarized as follows: “In a seismic shift, Attorney General Jeff Sessions will announce (he subsequently did -Ed) Thursday that he is rescinding a trio of memos from the Obama administration that adopted a policy of non-interference with marijuana-friendly state laws.” CNN goes on to say, “While many states have decriminalized or legalized marijuana use, the drug is still illegal under federal law, creating a conflict between federal and state law.”

Personal disclosure. I have personal experience with family members who have used medical marijuana derivatives to deal with pain from Chemotherapies. It works. I know cases where a derivative product has helped with seizures. It works. This change from AG Sessions is a reversal without support because of its blanket and broad nature. What it means for a confrontation between the states and the federal government remains to be seen.

Let me get to the lessons from California, the most populous state in the United States and the size of what would be the fifth largest economy in the world were it to be a standalone country. And let’s get to our original comments about the changing world of cannabis.

Todd Harrison is known for previous work (Minyanville, Ruby Peck Foundation, etc.). He is now the founding partner & chief investment officer at CB1 Capital LLC, Todd describes CB1’s effort as a cannabinoid wellness fund and an emerging disruptive healthcare enterprise. I called Todd after reading the CB1 morning note below, and he granted us permission to reproduce it and send to our readers.

The subject of California and the opening of recreational marijuana sales on Jan. 1, 2018, is huge. It is now legal to buy and sell recreational pot in California. As CB1 notes below, California is “the eighth and largest state by far to make the move.”

The morning note that Todd’s firm sent discusses many issues. Federal rules and the restriction on banking and money transfers are among them, as is the whole issue of finance and investment in the developing industry of marijuana agriculture and distribution in this rapidly expanding asset class.

At Cumberland we are watching the development of this industry closely. We haven’t seen any “marijuana bonds” in the municipal space yet. We expect they will be developed and issued by jurisdictions that want to finance state and local government activities with marijuana revenues. Why not? We have seasoned tobacco settlement bonds as a model.

We have seen the launch of the first ETF, whose symbol is MJX. The launch is too small for us to use now and not seasoned enough for Cumberland to place in managed accounts. That situation could change with time. For now a Cumberland client or trader has to buy MJX on his or her own and only for their personal account.

We’ve also watched products derived from cannabis used to treat pain, and we’ve seen the relief afforded to those who are suffering from chronic diseases. So this industry may be about “getting high” for some folks, but it is also a legitimate and now legal industry with a health component.

We have personally observed cases where juveniles have incurred criminal records and had to endure negative consequences in their lives because they were convicted on a charge involving marijuana. Those same cases would never be prosecuted today. Is there a way to cleanse those records? Would expunging those convictions allow many young adults with no other infractions more educational and employment opportunities?

And, finally, there is the antiquated federal legal structure that constitutes an impediment to marijuana-related banking and finance. It is time for a change here. We wonder at the extent of the off-the-books and cash transactions that are taking place due to the federal intransigence. We’ve watched workarounds devised in states like Colorado, where cash commercial activity thrives because of federal restrictions on conventional banking system usage.

Questions abound, but one thing is certain. With recreational marijuana now legal in California, pressures for a national evolution of this industry will intensify greatly. We expect that with those pressures will come changes in the federal system.

We thank Todd Harrison for granting permission to share the following morning note with readers.

David R. Kotok
Chairman and Chief Investment Officer
Email | Bio

CB1 Capital LLC Newsletter – Morning Headlines

It’s more important now than ever to update outdated policies, right the wrongs against communities of color, and continue our work to lift up the voices of the many Americans who are speaking out in favor of legalization.” -Senator Ron Wyden, D-OR

California Prepares For Recreational Marijuana Sales On Jan. 1.

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