Midas Letter

Wright State University Political Scientist Dr. Lee Hannah examines the SAFE Banking Act and what it means for cannabis companies in the United States. The bill allows cannabis companies to access financial capital and services while protecting banks that interact with and hold money from the marijuana industry. This marks just the third time a stand-alone piece of cannabis legislation has made it out of committee. While part of a broader blueprint for marijuana reform, the next step for the SAFE Banking Act is a floor vote in the US House of Representatives. While Dr. Hannah believes the bill would pass the House vote, he is unsure whether it would survive a vote in the Republican-controlled Senate without amendments. Dr. Hannah weighs the likelihood of President Trump signing such a bill as well as the possibility of descheduling cannabis federally as part of the 2020 election campaign.

Howard Glassman:   Joining me now via Skype is Lee Hannah, Professor of Political Science at Wright State University. Professor, thanks for joining us today, and how are you? Hold on, hold on, Professor. Professor, hang on a second, because apparently everyone – hey, take your shot at the control room, because everyone in there is drunk. Hang on a second, Professor. We’re Canadians. It’s the Blue Jays home opener, and everyone working on the show is just hammered.

They’re like – oh, I can hear you now.

Lee Hannah:   Can you hear me now? Okay.

Howard Glassman:   Thank you, thank you for joining us on opening day.

Lee Hannah:   Sure, thank you.

Howard Glassman:   I want to get into the – first of all, let’s talk a bit about what the Marijuana Banking Bill is, what exactly we’re talking about, and then we can talk about how it’s going to affect marijuana going forward.

Lee Hannah:   Sure. So this was a Bill that was started in the House financial services, and you know, came out with a pretty strong vote – 45 for and 15 against, so there was some bipartisan support to get this out now to the House floor – and primarily what it is trying to do is protect banks to hold money in the marijuana industry.

Historically, banks have been in violation of US Federal law if they do hold marijuana money, and even when, you know, entrepreneurs, whenever they – the few banks, or the few states that have changed the regulations, even there, when marijuana industry goes through their process, they have to report it as a…every time they bank with them, they have to report it as illegal activity. So it’s just become a real mess, and it’s made the industry here in the States a predominantly cash-only industry.

Credit card services, no. loans for entrepreneurs and a number of other aspects…

Howard Glassman:   Well, correct me if I’m wrong, and I know you will, but isn’t part of the deal – I know they have to, the problem is, they have to hold cash, and part of what’s been an impediment to the, you know, not just legalization but companies getting inv

Midas Letter Capital Markets Advisor Steve Misener, CFA discusses the slowing global economy and rising Canadian consumer debt. Misener talks about the Federal Reserve System and why Fed Chairs feel the need to show independence. He laments that Fed Chairs tend to illustrate their independence by being hawkish on interest rates, often to the detriment of the economy. Misener is concerned about the rise in Canadian consumer debt. He notes that Canada has the highest household debt of G8 countries at over 100 percent. Canada’s hot housing market has only added to this problem in major urban centres, according to Misener. Misener breaks down daily use trends for alcohol and cannabis in the United States and finds that while daily alcohol consumption still leads the way, daily cannabis use has tripled over the past decade.

Ed Milewski:  Joining me now, Steve Misener, veteran of Bay Street and man of all seasons, man for all seasons. Steve, you’ve done a lot of things on Bay Street and managed money; you’ve been on the show many times. Lots going on. It looks like the world’s slowing down. It looks like it, and yet markets are close to their highs in the States.

Steve Misener: Well, it’s a cross-current on the stock market, because it certainly looks like the Fed tightening has maybe run its course prematurely based on what the Fed was saying. But that would be the case because of a slower economic forecast. Today they just revised the fourth quarter GDP from 2.6 percent down to 2.2, and that’s a big revision.

Ed Milewski:  Yeah.

Steve Misener: And so that brings the year in last year at 3 percent for the whole year, by one measure, although there are other measures that say it was 2.9. It’s getting crazy that there’s actually different ways to calculate. But stocks like lower interest rates, but lower interest rates – rates can only fall when the economy is slowing, and that should lead to possibly lower corporate profits. So you’ve got this dichotomy that the market seems to be up a little today, even though the economic indicators are pointing to a slower…

Part of it, though, is the US dollar, and the US is the safe haven. And this is compared to other economies around the world, and money flocks to the US dollar and US stocks.

Ed Milewski:  Right. You know, it wasn’t that long ago, October, when the Fed chairman came on, and, you know, we’re going to raise rates now, we’re going to do it again – he was so hawkish. And then, like the world we saw, the stock market got punished, obviously, at the end of last year, it’s had a great run-up. But what an about-face. It really was dramatic, what is dramatic. So interest rates, I mean, the 10-year rate in the States has dropped precipitously, here.

Steve Misener: Yeah. I mean, I think it’s the 7-year bond in the States is the lowest since 2017, so I mean, the yields have come down really dramatically, which is an about-face from what the market was thinking. But whenever there’s a new Fed chairman, it always seems to be, whether it was Yellen or Bernanke or people before them, Greenspan, even, they always feel li

FSD Pharma Inc (CNSX:HUGE) (OTCMKTS:FSDDF) (FRA:OK9) Co-Founder and Co-Chairman Anthony Durkacz discusses the appointment of Dr. Sarah May as President of FV Pharma, FSD Pharma’s wholly owned subsidiary. Durkacz describes the progress the company has made on Phase 2 construction at the former Kraft plant in Cobourg, Ontario. He explains that FSD Pharma’s goal is to convert the space into the largest hydroponic indoor cannabis facility in the world. Durkacz talks about the benefits of indoor grow and why moving away from greenhouse product is vital in Canada. As a cancer survivor, Durkacz believes in the company’s medical focus and suggests that the cannabis industry is at the forefront of a paradigm shift in medicine.

Narrator: FSD Pharma, Inc. is a Toronto-based, publicly traded company whose wholly owned subsidiary, FV Pharma, is a licensed producer under the Cannabis Act and Regulations.

The company is focused on the development of indoor grown pharmaceutical-grade cannabis, and on the research and development of cannabinoid-based treatments for several central nervous system disorders, including chronic pain, fibromyalgia and irritable bowel syndrome.

FSD Pharma has 25,000 square feet available for production at its Ontario facility, with an additional 220,000 square feet currently in development.

FSD Pharma Inc. is listed on the Canadian Securities Exchange under the symbol HUGE.

Tinley Beverage Company Inc (CNSX:TNY) (OTCMKTS:TNYBF) (FRA:45T) President Rick Gillis provides an update on the company’s expansion and an overview of Tinley’s beverage profiles. Tinley has completed construction on its bottling facility in Coachella, California. Gillis emphasizes the importance of taste in the beverage market and describes the ways in which infused beverages differ from edibles. Tinley uses nanoemulsion technology that allows for quick onset and duration of approximately 2 hours. Gillis reveals that most of Tinley’s beverages will have an uplifting, sativa-type effect but the company will also offer mellower beverages, with indica-type results.

Narrator: The Tinley Beverage Company is a Canadian-based company with operations in the United States. The company makes liquor-inspired, alcohol-free cannabis infused beverages for use in California. It also manufactures the Hemplify product line, which is available in retail locations in California as well as online in the US.

Tinley intends to leverage consumer and operational learnings in California to launch operations in Canada and Nevada, followed by other territories.

The Tinley Beverage Company trades on the CSE under the ticker symbol TNY.

Midas Letter Lead Financial Writer Ben Smith breaks down what Canaccord Genuity Group Inc’s (TSE:CF) (OTCMKTS:CCORF) (FRA:C6U) recent downgrade of Cronos Group Inc (TSE:CRON) (NASDAQ:CRON) (FRA:7CI) from a hold to a sell means for the cannabis space. Smith believes the downgrade was the “straw that broke the camel’s back” in a cannabis market that had been trending sideways for two weeks. Smith explains that when analysts are downgrading, investors usually see a selloff. He notes that Horizons Marijuana Life Sciences Index ETF (TSE:HMMJ) (OTCMKTS:HMLSF) broke key support on the Cronos news. Smith addresses the yield curve and how the inversion of the yield curve has traditionally been one of the strongest indicators of recession. Smith wraps his segment by highlighting extractors with stocks that are still performing well, such as Valens GroWorks Corp (CNSX:VGW) (OTCMKTS:VGWCF) (FRA:7LV).

Howard Glassman:   Hey, Ben, welcome, my friend! How you been?

Benjamin Smith:    I’ve been well! How have you been, guys?

Howard Glassman:   Fantastic.

Ed Milewski:  Benny and the Jets.

Howard Gla

StableView Asset Management President and Portfolio Manager Colin Fisher examines the offerings from cannabis technology companies and discusses their long-term viability. Fisher notes that cannabis technology companies primarily provide supply chain logistics. Fisher stresses that cannabis technology companies are merely duplicating platforms that already exist. He is unsure if these companies will be able to scale significantly before the US market opens up and established tech platforms enter the cannabis space. Fisher notes that programmatic advertising platform AcuityAds Holdings Inc (CVE:AT) (OTMCKTS:ACUIF) (FRA:K3S) has been impacted by sector-wide issues in the tech space but based on current revenue is undervalued. Fisher also points to iLOOKABOUT Corp’s (CVE:ILA) (OTCMKTS:ILATF) purchase of Clarocity Corporation (CVE:CLY) (FRA:4ZA) as an incredibly accretive acquisition.

James West:   Colin, welcome back.

Colin Fisher: Thanks for having me.

James West:   Yeah. So Colin, what’s new in the world of Canadian technology since we talked to you last?

Colin Fisher: When did we talk last? It’s been a while.

James West:   I don’t know. Everything to me, these days, seems like it was yesterday. A healthy diet of CBD.

Colin Fisher: Does it? I was going to say, yeah. Um, you know, not a ton. I mean, it depends. I mean, if you want the inside baseball, I think there’s, you know, I think there’s a lot of really good, interesting companies. I don’t know if we spoke about Vena Solutions being bought, recently.

James West:   Venice?

Colin Fisher: Vena.

Strainprint Technologies Ltd President and CTO Dave Berg shares details of the company’s history and provides an overview of the company’s cannabis tracking app. Berg describes the evolution of Strainprint from a mobile tracking app to a suite of services, which includes data analytics. Berg is excited about Strainprint’s recent partnership with Cannabis At Work to provide recruitment, online training, and HR services to the cannabis industry through Strainprint Community’s portal and Cannabis At Work’s platform. Berg reveals that Strainprint is invested in ensuring the responsible use of cannabis in the workplace. Berg believes that the company’s app gives individuals the tools they need to stop using pharmaceuticals with harmful side effects.

Narrator: Strainprint Technologies, Ltd. is a Toronto-based cannabis data and analytics company providing enterprise-grade analytics and consumer solutions for the medical cannabis industry.

The company manages the gathering and analysis of real-time cannabis consumption data and ranks specific strain efficacy against conditions and related symptoms.

It also works with commercial producers and clinics to provide advanced intelligence and optimize operations and treatment recommendations.

Strainprint can be embedded or integrated with most electronic medical records, point of sale, and seed to sale software systems. The Strainprint app is free to patients and can be downloaded from both the iOS app store and Google Play Store.

Howard Glassman:   All right, what a great opportunity to talk to someone that I’ve actually spoken to before. He is the CTO and President of Strainprint Technologies: please say hello to Dave Berg. Dave, how are you, Sir?

Dave Berg:    Hey, Howard, how you doing?

Howard Glassman:   What a pleasure.

Dave Berg:    It’s great to see you.

Howard Glassman:   What a mitzvah!

Dave Berg:    Yes, a mitzvah. We get to come together.

Howard Glassman:   That’s what we say. We get to hang out.

Dave Berg:    It’s special!

Howard Glassman:   It is special.

Dave Berg:    It’s bashert, as we were saying.

Howard Glassman:   Well, we’re – Dave and I have some dealings with one another in another life. Dave, his company, full disclosure, I know you don’t like to talk about that here on the show, but full disclosure, Dave and Strainprint are part of the Humble & Fred show. They are one of our sponsors, and we’ve had a relationship – and it’s interesting, Dave, because it started, the very first time I had somebody from Strainprint on, was just as a guest. And we were lucky enough that you guys decided our show might be something worth investing in, and now here we are talking about investment and the industry in general. But you’ve been at th

Midas Letter Capital Markets Advisor Steve Misener, CFA breaks down the events shaping global markets this week. Misener discusses why German 10-year bond yields have dropped below zero and what that means for investors. He explains the merits of holding particular currencies in the current climate. Misener highlights catalysts that might be indicative of a broader market slowdown such as the price of oil. He addresses recent speculation that the Fed might cut interest rates. Misener explains how Brexit will impact markets and notes that Northern Ireland is playing a pivotal role in keeping Theresa May’s government afloat.

James West:   Hey, Steve Misener joins me now, certified financial analyst extraordinaire. Steve, welcome back.

Steve Misener: Thanks, James. Pleasure to be here.

James West:   Steve, I think we’ll delve right into one of your areas of expertise: German bond yields went negative. Now there’s over $10 trillion in debt that yields negatively. what does this portend for the greater economy, and what other currencies might soon follow?

Steve Misener: Well, the 10 trillion, I believe, is an aggregate of global currencies, because the Swiss has been negative for quite a while. I mean, the Swiss is one of the most prudently managed currencies in the world, and just for the viewers so they understand what negative means, it means that give them $100, you buy T-bills for $100, and you get back less than $100 in three or six or nine months, which is an incredible perspective, but it just shows the security associated with that particular currency, or the hardness of that currency, versus other currencies which tend to inflate.

James West:   Right. So I mean, this is the thing: what kind of individual, or what kind of institution, says, ‘Here, I’ll give you $10 and I’m fine with you giving me back $9.80’?

Steve Misener: Well, they view that the currency is going to be the security, versus maybe a decline in other currencies. And that’s really, it isn’t just the interest rate, it’s holding that particular currency versus other currencies. And remember, all currency investments are all relative, even if we treat gold as a currency, as some people do. But it’s, Do I want to hold US dollars, do I want to hold Japanese yen, do I want to hold Euros? And it’s always a relative thing, and where you’re going to be. And people that hold short term investments, even large institutions holding that aggregate of $10 trillion, they’re about parking cash or sitting on the sidelines, because they don’t want to hold other things at that moment.

So it does kind of boggle the mind that someone would be agreeable to take less back, even a small haircut, after a few months, but that’s because they believe that that currency, and the market is saying, that that currency is the strongest versus other currencies.

James West:   Okay.

Steve Misener: And even interestingly, the Australian bond, which has always had high yields for decades, the Australian market always had high yields – the 10 year government bond in A

Eve & Co Inc (CVE:EVE) (OTCMKTS:EEVVF) CEO Melinda Rombouts explains why the company’s female-focus presents investors with a unique value proposition. Rombouts believes for a company to truly address what women cannabis consumers want, female leadership is required. With women making up just 7 percent of leadership positions in the cannabis industry, Eve & Co has a strategic advantage over its competitors. Rombouts shares construction details of the company’s progress on the 780,000 square foot expansion of its production facility in Middlesex County, near London. Eve & Co recently announced the conversion of its remaining convertible debentures. The move ensures Eve & Co’s Phase 2 expansion is fully funded and strengthens the company’s balance sheet.

Narrator: Eve & Co is a Canadian-based, female-focused cannabis brand. The company is a licensed producer and seller of dried cannabis and cannabis plants through its wholly owned subsidiary, Natural Medco, Ltd. Eve & Co has a 220,000 square foot greenhouse production facility located in Middlesex County, Ontario, with 32 acres of adjacent land for future expansion.

Eve & Co has commenced construction of an additional 780,000 square foot proposed expansion, bringing the company’s total anticipated greenhouse capacity to 1 million square feet.

Eve & Co’s shares are listed on the TSX Venture under the symbol EVE.

James West:   Hey, and guess who’s joining me now? It’s Melissa Rombouts is in the house. She’s the CEO of Eve & Co, trading on the TSX Venture under the symbol EVE. Melissa – Melinda, welcome to the show.

Melinda Rombouts:  That’s okay, I get that all the time. [laughter]

James West:   I go

Delta 9 Cannabis Inc (CVE:NINE) (OTCMKTS:VRNDF) (FRA:V5D1) CEO John Arbuthnot shares details of the company’s agreement to supply private retailers in Saskatchewan. Unlike other provinces, Saskatchewan allows LPs to sell directly to retailers and the agreement provides an opportunity for Delta 9 to grow outside of its home province of Manitoba. Delta 9 recently released fiscal guidance ahead of its reporting in April. Arbuthnot explains that for the quarter ending December 31, 2018, Delta 9 is anticipating revenues between $5.3 million and $6.1 million. In January, Delta 9 sold its stake in the Delta-West facility to partner Westleaf Inc (CVE:WL) (OTCMKTS:WSLFF) for 5.9 million shares in Westleaf. Arbuthnot discusses Delta 9’s licensing agreement with NanoSphere Health Sciences Inc (CNSX:NSHS) (OTCMKTS:NSHSF) (FRA:2CG2). Under the terms of the agreement, Delta 9 has an exclusive license to manufacture and sell products made with NanoSphere’s proprietary technology and will start unveiling these products in the next few months.

Narrator: Delta 9 Cannabis, Inc. is a vertically integrated cannabis company based in Winnipeg, Manitoba. Delta 9’s wholly owned subsidiary, Delta 9 Biotech, Inc., is a licensed producer of medical and recreational cannabis and operates an 80,000 square foot production facility.

Delta 9 owns and operates a chain of retail stores under the Delta 9 Cannabis Store brand. Delta 9 intends to have 20 retail stores in operation in Manitoba by 2021. The company has an agreement to supply 2.1 million grams annually to the Manitoba government, in addition to supply agreements with Auxly Cannabis and Canopy Growth.