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nafregnum

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  1. Yesterday I talked with a friend who is a financial planner. She said she can't recommend cannabis investing to clients because of fears related to federal rules and getting in trouble as a fiduciary. I don't know, but it seems like a lot of institutional investors are unable to hold cannabis stocks as well. I'm sure there's some guy on the super investor list on dataroma.com who holds Cannabis stocks, but they're probably the Canadian tickers and not subject to 13F reporting rules, so I have no idea who is brave enough to buy this kind of thing. Maybe these factors are keeping valuations muted in the US for now. If the federal boogey man turned friendly, we might see the US stocks do exactly what the Canadian company stocks are doing: irrational exuberance might ensue. Would be great to buy before the fed turns friendly and sell some time afterward. But still I can't drum up much courage to buy Mercer Park SPAC shares just yet. Some mornings I wonder if today will be the big day, or even how to tell if it's only a few days away. Their investor deck said they expected the deal to complete in the first half of this year, and we'll soon be past that point.
  2. Yeah, the "Murder Mountain" documentary series on Netflix seems to bolster this idea -- small local governments maybe can't get the "weed is evil" mindset out of their systems so they want to keep punishing growers with endless bureaucratic regulation. That suffocates the little guys, and benefits the big growers like GHG.
  3. Finished watching the last episode last night -- wow! Thanks for the recommendation. That was a good history lesson about the Emerald Triangle area. I wish it all could've stayed in the hands of those peaceful nudist hippies instead of the Mad Max shotguns-on-their-backs types--everyone's a casualty of Nixon's war on drugs. When I went to the Redwoods for the first time in 2017, some locals in Eureka warned me away from visiting the Humboldt towns, especially the ones off the main highway like Honeydew. They gave the impression that the small towns in Humboldt county were dangerous to visit: there was a lot of pot growing in the woods and it would not be good to stumble upon a grow operation while hiking around because some of the growers are dangerous people. In 2019 we went back, and this time we stayed for a few days in the Giant Redwoods RV park in Myers Flat (along the Avenue of the Giants) ... We kept smelling a skunk on the breeze, and the fence between the RV Park and the nearest neighbor's backyard was abnormally tall, like 7 or 8 feet tall. I peaked, and saw a handful of "trees" growing in that back yard. Most of the homes on the road nearby had tall fences even surrounding their front yards--definitely a strange vibe, like trailer park meets industrial. I saw a lot of the same fenced-in look in the documentary. After watching "Murder Mountain" I can see why town councils and county governments would want to keep growers out. If I worked in local government, I wouldn't want to invite Mad Max to come take over my back yard either. It's ironic that years of the war on drugs couldn't stamp these guys out, but legalization might be the thing that puts them out of business. To be a black market grower you have to stay small, because a lot of your grows get stolen/raided/found. On the white market, small growers are never going to be able to compete against big operations. From the way the outlaws describe the pains of going legal, it seems like CA swung its regulations pendulum from zero all the way up to eleven in one fell swoop. They were describing $100K in costs just to get off the ground. I doubt tomato and tobacco farmers have this level of regulation imposed on them. It's almost as if the system wants to continue to punish those guys even after legalization. As a hobby, I like to grow garden veggies in summer. When I saw the owners of those small grows doing all the transplanting and watering themselves, by hand with hoses, I had the sense that those guys are all headed for the dustbin of history now that gigantic tomato greenhouses can legally be bought up and converted to growing pot on a large scale. There are tremendous advantages to running a larger, legal operation. The police aren't afraid to drive through your part of town. You don't get ransacked every time you try to take 2 weeks off. Your whole grow doesn't get wrecked by mold because you hired a couple of potheads who didn't tend your crop correctly, and then get into petty squabbles that might get you shot when you refuse to pay those bums who wrecked your crop. You don't have to carry a shotgun on your back. You don't have to bury all your cash in holes in the ground. You can grow your stuff in a location with decent roads nearby, not thirty miles up a dirt road. You don't have to conduct your sales in the woods at night, nor worry that your buyers might consider killing you with a hammer in lieu of payment as a way to reduce their costs. You're not trapped in a violent deep woods Redneck wonderland... Contra to the way local government seems to be handling in Humboldt county, probably the best and safest thing for them to do would be to enthusiastically embrace the local growers and do everything they can to help all the peaceful guys to integrate into the white market. Instead, they're caravanning into the hills with wood chippers trying to destroy the black market grows but that's the same damned strategy that didn't work for 40 years. I'm not sure why, but I'm reminded of Microsoft's early strategy for dealing with the threat of Linux by undermining/sabotaging common internet protocols instead of open standards (dumb thinking of the late 90s) The IBM strategy was to enthusiastically embrace Linux, and Microsoft eventually came over to the same side of the aisle. Humboldt is hilly country, not well suited to mass agriculture already, so if local gov and growers can't get on the same side then more growers will just stay black market, and the county won't participate in the tax bonanza. Research! For Science! I'm having a good laugh imagining the life of a professional cannabis scout/analyst hired by a big PE firm or Goldman Sachs to do the tastings and find the good stuff... The Parent Co (GRAMF) is 50% off its earlier peak. When their deal closed, they gave $25M in stock to Jay-Z for strategic marketing services, which is probably worth $12M now. They had extra cash, so they're investing $50M into this Mercer Park SPAC in order to get some preferential sourcing agreements in place. That conveys a lot of confidence in the abilities of the Glass House team https://www.glasshousegroup.com/our-team/ Why they gave Jay-Z $25M in stock instead of giving cash seems like a bad move in hindsight since it probably tipped their hand and demonstrated that they considered $12 a share to be a little rich, and easier to give Jay-Z the $25M that way than to spend cash on it? Who knows, maybe Jay-Z insisted on stock. I'm trying to figure out where I can validate the claims that "Glass House Farms" brand is #2 in California. When I poke around on weedmaps I don't see their brand as a standout yet. I really like their claim that the house brands sell 15x better than other brands in their own dispensaries though. The investor deck says at the buildout level of 6m sqft of growing space they'll be making 1.7 million dry pounds/yr but I have no idea if that's the number of pounds they expect to be able to sell at $2000/lb or if the bulk of that "biomass capacity" is just low value stalks and leaves and roots. I'm thinking it's probably the latter, just a big inflated bullet point in a slide deck. So I'm unclear how this all plays out beyond this point -- as soon as the qualifying transaction occurs, then the stock ticker will change to something else and Glass House Group will then be publicly traded, and they'll own a really big greenhouse and begin retrofitting and converting sections of the greenhouse as they grow into its full footprint over the next two years. Graham said it'll take $40M of spending to do that, which they'll have plenty of money to do since it looks like they should have $180M in cash after it's all done. The greenhouse costs $229M ($100M in GHG company stock, $119 paid in cash) At some point in this second half of the year, will GHG stock begin to be connected to the performance of the company itself? It seems like this one hasn't yet begun to go anywhere above the standard $10/share SPAC price point. Is it typically AFTER the reverse merger thing that these share prices rise? I still would love to find a reason to "go against the crowd, and be right" ... it seems like the only thesis I have here is: 1. Aaron Edelheit is pretty excited about it, but I don't really know him or his past investing record. 2. Graham Farrar sounds intelligent in his interviews, seems genuine, has a good record of achieving past goals. 3. I was also impressed by the recent Sandelman interview on the Cannabis Investing Podcast. 4. They're aiming to be lowest cost producer in an upcoming commodity industry that isn't very efficient yet. 5. Consistency of product is a really nice thing. Indoor grown stuff is worth so much more per pound as a reflection of that.? 6. At larger scale and as a legal operator in Ventura, they have some strong structural advantages against the small growers who have no moat. 7. Eventually they might be able to sell to other states too. I remember the story of HorseHead (ZINC) from a few years ago, so I'm suspicious of #4, but when I hear Graham talk he seems to already have all the necessary knowledge for how to produce at higher scale without running into stupid gotchas like not having 500 employees ready when the crop needs to be harvested (he mentioned some other grower who lost a crop because of a dumb oversight like that) ... The HorseHead production problems came because it was a very new production technique they were touting, and there were a lot of unforeseen equipment failures that kept them from being able to scale up production. Growing pot in a greenhouse isn't new in any way. The greenhouse will be owned free and clear, meaning that if prices per pound crash, it's going to kill off the small operators first like it does in oil and gas when WTI tanks. But since the price of MRCQF is just sitting around twiddling its thumbs, I feel more inclined to wait and see if it gets a lot cheaper like GRAMF did. Also, is it weird to anyone else that "The Parent Co" chose GRAMF as an easter egg tribute to Graham Farrar who doesn't work for them when they chose their ticker symbol? Was the board up late smoking pot or something, and the idea was too funny for them not to go through with it?
  4. https://seekingalpha.com/article/4434244-obsidian-energy-has-a-pathway-to-escape-its-debt-issues Someone on SeekingAlpha agrees on the debt reduction outlook, and comes to the conclusion that it'd be worth $4 or $5 once it gets the debt reduced. He didn't mention the possibility of selling the Peace River asset, so I'm assuming if that happens this year then the debt goes down far ahead of the schedule laid out in the SA article and it gets to a good chunk higher than $5 within the year. Also, Summer is coming and everyone is aching to get out and travel after being cooped up a year, so demand for gas should stay high through the summer, supporting a higher price per barrel. Is that basically the current Bull case or am I missing any extra parts of it?
  5. Thanks! That's the funniest cannabis ticker I've seen yet. I actually got that "yolo" feeling after sitting on my hands since buying stuff in March 2020. Watching all the meme stonks and dogecoin has been entertaining, but it probably made me want to "play" a little ... buying YOLO is probably the more responsible thing for me to do between these two options (Mercer Park vs the YOLO ETF) but I'm probably going to have to pick up a tiny amount of Mercer Park if only to feel a little bit of risk too.
  6. I wonder if state governments will compete with each other over offering grower-friendly incentives, kind of how cities fought to get Amazon's next HQ office. Getting a 4% cut of gross sales from a huge pot greenhouse is probably a much bigger revenue source than however they're taxing the tomatoes and cucumbers, even if the tomatoes and cucumbers paid a higher percentage tax rate, since the pot is worth so much more (for now). I can imagine the states competing with each other over who can grab the most of that $$$ by being just a little bit more grower friendly than the other states. If GHG does very well right now, before interstate trade opens up, how long after the grand opening do you think an investor would have to "sell high" before the death-by-competition crash begins to be apparent? I'm debating just "going long on Cannabis" in general by buying an ETF like MSOS.
  7. Graham Farrar was interviewed by Aaron Edelheit and I think it's in there that he mentions having local water reclamation so there isn't runoff ... it's not an exact answer about water rights, but it's a little bit of useful info ... here's the relevant paragraph of what he said on this page : http://www.mindsetcapital.com/wp-content/uploads/2021/04/Graham-Farrar-Interview.pdf "...That said, it is not a purely altruistic thing. I think sustainability, particularly when it comes to agriculture, is actually aligned and synergistic, not at odds with each other. Right. I mean, if you think about what we're doing. Right. We're trying to be as efficient and precise with our cultivation of this plant as we can. That means you don't give it more than it needs because you're wasting something, and you also never give it less than it needs because you're missing out on something that you could have had. So, in that sense, sustainability goes beyond the ESG maybe definition of it into a broader sense of running a good business. I like to call it the triple bottom line, things that are good for the planet, good for our business and good for our customers. Are you take something like our irrigation strategies, right? So, when we irrigate, we capture and sterilize and recycle the water. That is good for the planet because we're not wasting water and because we're not polluting the groundwater table with nitrates. It's good for our business because those are valuable commodities. And so, by not wasting them, we keep our costs low. It's good for the customer A: because we're able to deliver a product at lower cost because we didn't throw things that were valuable away, and hopefully because they also appreciate the fact that they want to support businesses that care about the planet that we all live on. You can take that a step further and say we have light meters tied to our irrigation. On a sunny day we give slightly more water than on a cloudy day. But these are things that historical cultivation we could never do. Right? You had a guy with a wand. And he tried to water and sometimes it was too much and sometimes it wasn't enough and want to go on vacation. This is the computer that does, you get together a bunch of smart cannabis cultivators and agronomists and you program the thing to be perfect and then you give it influences, and then twenty-four hours a day, seven days a week, it always does it right. Like adjusting for light levels, don’t under irrigate on a sunny day because the plant could have done more. Don't over irrigate on a cloudy day because you actually leave the plant worse off because you're suffocating the roots. Right. So, if you can hone that in, you can do quality, consistency and cost all at the same time. And I think that is the definition of sustainable agricultural practices. I'm an environmentalist and so I like that. That's also the definition of a sustainable business. And I'm a business guy and I like that. And if you can make a business that's sustainable and being sustainable, that's actually the maximum good. If you can persist and doing good, that's how you build the biggest pile of good. If you gave it all away, right, you cut to the bone and your out of business three months later, well, you did some good for three months, but then you're done right. What you really need is thirty years of doing good all along the way."
  8. Thanks! I'm also worried about what would happen long term as soon as interstate commerce is allowed, and it definitely gets worse from there if international (Mexico growers) were allowed to compete with a huge Californian greenhouse. I'm going to make a guess that the "short term" reaction would be very positive for whoever is the lowest cost indoor producer in the first few months or year after opening interstate commerce, but in the long term I wouldn't want to try picking the winner among all the states.
  9. https://ballotpedia.org/Ventura_County,_California,_Measure_O,_Marijuana_Permit_Ordinance_(November_2020) https://recorder.countyofventura.org/wp-content/uploads/2020/09/Ventura-County-Cannabis-Initiative-Full-Text.pdf Just looking at the ballot measure for Ventura County that passed in Nov 2020. Looks like they are giving licenses for up to 500 total acres of indoor growing, and Glass House would be scaling up to 125 acres in that huge greenhouse, so they'd be around 1/4th of the full indoor size with that big greenhouse. Graham says they're going to be buying it for around $120M plus $40M capex to build it out. Aaron Edelheit on mindsetvalue.substack.com writes: "This greenhouse is the equivalent of a California unicorn. An irreplaceable asset in the perfect location to grow premium cannabis at a size and scale that no one in the country is likely to ever be able to match." So, I don't know if there are a lot of other huge greenhouses just like this one in Ventura county, but the legal language seems to be concerned with not letting things grow out of control within the county -- they are only allowing licenses for growing to be given to EXISTING greenhouses in the county as of March 2021. That means Ventura County will (at least for now) only allow 500 acres of greenhouse growing -- the county gets a 4% tax on gross proceeds for the growth, and 1% tax on nursery acreage output (small plants then sold to other growers?) Looking further out and guessing what might happen based on how the incentives look: Maybe a bunch of the best tomato+cucumber greenhouses will be bought up across the state to convert into greenhouse cannabis production. If interstate commerce opens up then those growers will see great profits until Mexican growers are allowed to sell theirs...
  10. This was a fun interview to watch for me so I wanted to share it: An impassioned defense for Value Investing philosophy in the first few minutes. Preach it brother Bruce! Bruce gets up to the lectern and yells "Hear! Oh hear! The word of Value!" I also enjoyed the brief history of value investing from Graham & Dodd up to today. He said he thought USD inflation would be brutal. Had a few interesting big picture predictions, one was that China will have a very hard time transitioning quickly from a manufacturing economy to a service economy. Sometimes predictions so huge make me wonder if it's really possible to foresee such things ( if Bruce is right, and the leadership in China became convinced of this economic brick wall, couldn't they now take preventative measures or make other maneuvers to soften the blow? ) He also said that there's no chance Tesla will be the dominant car manufacturer in 20 years. But he did say he wouldn't dare short them and he'd be too afraid to own the stock. "If I were to put the family fortune into TSLA, I would not be a comfortable dude." [ about China, not sure if he's right ] He says at one point that many of China's brightest come to study in the US and then stay in the US, but I think that might be outdated information going forward. I think I recently read an Economist article about more and more foreign students in the US deciding to go back to their home country. https://www.economist.com/special-report/2018/05/17/what-happens-when-chinese-students-abroad-return-home He might have outdated info about the amount of foreign university students in the US who are deciding now to go back to their home countries instead of staying. Fred Liu writes about "Gen-1 Entrepreneurs" in developing nations in his most recent quarter letter: http://www.haydencapital.com/wp-content/uploads/Hayden-Capital-Quarterly-Letter-2021-Q1.pdf
  11. Thanks, that was another good interview with Graham. He comes off as very knowledgeable, confident, and friendly person who really knows how to sing sweet music into investor ears. I can't decide whether that smoothness should make me distrust him as too good to be true, or to give him 2x better odds of success because it's rare for me to hear someone who can talk like a private equity analyst but also come off as a real mensch, a guy who cares about behaving responsibly in the community and treating employees well. One writeup mentioned that Glass House Group gave stock options to every employee. It's heartwarming and generous on the first level, and one level deeper it's also a shrewd way to incentivize each employee to do their best in order to help the company perform well. It's good incentive structure, and it ought to give them a company culture advantage over any competitors who are simply trying to maximize margin by keeping costs to a minimum. They're taking a page out of what private equity firms do to incentivize existing employees of their newly acquired tech unicorns so they stay at the company and work hard to help it succeed. I need to read some more about Graham.
  12. https://www.businesswire.com/news/home/20210603005300/en/Silver-Spike-Acquisition-Corp.-Reminds-Stockholders-to-Vote-in-Favor-of-Business-Combination-with-WM-Holding-Company-LLC Looks like SSPK is close to their June 10 vote - this PR just reminds stockholders to cast their votes in favor of the "merger" so they can change to "WM Holding Company LLC" ... just looking at SSPK's price chart for the last 12 months shows it was up at $29 in February and then declined until it was $14 on May 13. Now it is at $17 and (speculation) looks like it's moving up again. Does anyone have any idea why the price moved so much since just February? Is the price action of SSPK basically a "mirror" of whatever WeedMaps publishes as its quarterly results, if it even reports them?
  13. Oh, I also noticed that the OTC stock price of The Parent Company (GRAMF) has been in decline, but I'm not aware enough of this "sector" to have an intuition on whether that's just what's happening to all such companies right now or if some funny business or lackluster perrformance has been happening at TPCO in the last year... more to research, but if anybody already knows the answer here I'd love to get your takes.
  14. @JRM You mentioned them taking a big swing at The Parent Co and I wasn't familiar with them, but it looks like they're also contributing $50M to the deal in order to have a shared bit of ownership in the Mercer Park merger thing ... for a minute I was confused by the stock symbol for The Parent Company since its ticker is GRAMF (made me think of Graham Farrar the president of Glass House Group) but he's not listed on The Parent Company's executive BIO list so it seems like TPCO is a third party (possibly a competitor) that is also interested in seeing the big greenhouse acquisition go through for GHG -- maybe they don't get involved in the growing part of the picture and just want to secure a great source of the raw material for their products?) https://ir.theparent.co/governance/executive-management/default.aspx
  15. I got back to looking at this, and saw some PR news posted yesterday: Mercer Park Brand Acquisition Corp. Announces Shareholder Approval of Transaction with Glass House Group https://finance.yahoo.com/news/mercer-park-brand-acquisition-corp-175800058.html So, it seems like non-news for the SPAC called "Mercer Park Brand Acquisition Corp" to approve the merger plan that was the reason the SPAC was created in the first place? Is there something new in this PR or is it just a boring part of the process to announce this approval? At any rate, it doesn't seem like this announcement sheds any light on the purchase of the huge greenhouse, except that those in the know would perhaps not continue moving forward if they knew the greenhouse acquisition was in question. I'm not sure what the status is on the big greenhouse acquisition, or how to discover when or if that part will really happen. Are they already in some kind of contracted agreement with the current owners to sell the greenhouse? I might take my weird questions to Aaron Edelheit and see if he'd be willing to do some kind of Q&A for people like me who have been ignoring SPACs... Also, I'm not sure I have enabled Canada purchases in my Fidelity account, so I'm considering buying the OTC MRCQF or MRCWF https://finance.yahoo.com/quote/MRCQF https://finance.yahoo.com/quote/MRCWF/ https://finance.yahoo.com/quote/BRND-A.NE I am assuming that buying MRCQF on OTC market is same as buying the Canadian shares of BRND/A -- are there any important differences?
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