You're listening to the Cannabis investing Network before we begin a short disclaimer the full disclaimer follows at the end of this episode. This podcast is a general communication and is being provided for entertainment and information purposes only. It is educational in nature and is not designed to be a recommendation for any specific investment strategy plan feature or other purpose. Please enjoy responsibly.Hello and welcome back to the Cannabis investing Network podcast. My name is Manish and I'm joined today by the Magnificent host a BT. Thank you, buddy. How's it going, man? Um, I'm doing okay doing okay, it's been an interesting week in the Cannabis Market you're on your extremely energetic for such a bear Market or Market crunch, you know racing, you know what I think us, you know, just having done the market update and us about to get into an episode which is about the new reality of where we are right now. Yeah, chiz the episodes called no more easy money. Welcome to the correction, you know, like Welcome to the Jungle. All right, and honestly, it has me. I think one of these things sometimes I walk away from this podcast after doing an episode. Yeah, and it really gets my brain kind of turning. Yeah. Yeah, right and I'm actually feeling I'm actually feeling quite A positive I would say about the opportunity that's available to us right now in cannabis. Okay, because when we started this podcast we asked is it too late to invest in weed stocks and that way? Yes. Yeah. Well that was a feeling that I had that the valuations were getting away from me. Right like I was trying to spend time to learn about these companies and they would be jumping five or ten percent and I would be feeling like I'm the fomo right? I'm missing out. It's going to run away. I'm missing the opportunity. Right right and six eight months later. Look at where we are. I mean these Some of these are some absolutely historic lows for some of these companies and sometimes it's warranted. Sometimes it's not now you're like no mo. Please get away from me. Okay, never mind. We're changing the title from fomo to know Bo no more of those bear Market. I'm glad we can laugh. I'm glad we can laugh in times of Despair but we're going to talk about today is what is the state of the market? Where in what do I mean when I say, you know, Welcome to the correction. How did we get here? Right? What are what is happening? When I say I said no more easy money. Well, what is easy money? Right? What is it? What does it look like? What are the effects of easy money? And I'm not talking just about cannabis. I'm going to bring a lot of real estate examples into this. Okay? Okay, and then easy money in real estate there can be there can be depending right? So and then lastly what does it all mean? What's the ShakeOut? What's the net effect of all of this? How are companies going to be? Negatively impacted by this what are some of the positives of this? What are some of the Civil Silver Linings that have me a little bit upbeat today? And how do we strategize? How do we as investors take advantage and ultimately make money and environment like this because at the end of the day, you know, what when everything is half-priced. Yeah, right. That's an opportunity to make money if we can find the right strategies and I think there's opportunities there today. I think I think there are actually even better than they they were six. Ago because evaluations of come back because the valuations have come back and well, okay, let's get into it. How did we get here? Well, I just want to start off by saying, you know for over six months you and I have been meeting here recording these podcasts and you know that some of them didn't come out till later, but we were talking forever you and I since we met about the fact that Canadian LPS are overvalued. Yes, and we said that in just general terms, you know, just broad Strokes. Croaks and but I feel like we had a good rationale for why they were overvalued at the time and we weren't we don't have a crystal ball. We weren't looking forward. We just said Hey, listen, this doesn't make sense in any other industry. Why is it making sense in cannabis cannabis is not immune to the laws of business and we're finally seeing that story play out. Right? So we've talked about the last few weeks. Also how things have shifted from a Tell me story to a show me story. So if I was going to give you an a Analogy. Okay, when you build a condominium, okay, like a tower right in condos. There's a phrase that goes you sell the sizzle not the steak. So what that's a common thing in sales. Yeah, but I'm saying in condos. It's very applicable in okay for Real Estate. So what that means is that a condo developer succeeds by going out and essentially pitching, you know, the condo opportunity to condo buyers and buyers and they buy a Our plan so essentially they sign an agreement that yes, I will buy a unit. I'm going to pay let's say half a million dollars for the unit and it will be delivered some time in the future. Maybe you say it's maybe two years could be three years and I fell victim to this is called pre-construction. There you go. There you go. We found a ruby. I had literally it was called a groundbreaking opportunity and the ground had not been broken yet. So this was you but by your money or so. You put your money in and they will actually break ground and have the whole ceremony and everything. Right? The room was filled with Sizzle. Yeah, exactly. But that's what it is and look it's partly out of necessity like condo Builders have to pre-sell their units to get financing from the bank. And one of the risks is that things can happen to that project, right? They can run into zoning issues. They can run into construction issues whether issues all kinds of things market market conditions can change all kinds of things that can happen. Right? So you're taking risk. There's uncertainty, right? Taking that risk you get a discount exactly. That's the theory right the idea is if you were to buy this unit if it was already built today, you'd be paying a premium. Right? So there's give and take and that's and ultimately what I'm getting at is that if you lined up a bunch of first time developers, I'd never done it before and You know, everybody just sold the sizzle. Some people would be really good at selling Sizzle. Right, but they would and they would get a lot of buyers to sign up but then we don't actually know if they can build the building right and that is the reality check moment. When it's three years later and you still haven't built anything right? It's like hey, there's not even a crane up what's going on here? Right ground is still not broken exactly exactly and then investors are or condo buyers. Let's say are understandably people like hey what's going on here? And Even if it's a good project real Builder and they're just delayed there's a fear right people don't know is this. Oh it did I just throw my money away. Am I stuck now what's going to happen? Right? So that is part of what we are seeing right now Abby and I talk forever about Canadian elpida overvalued what we what I failed to realize was that once the number start coming out and people start paying attention and seeing that these big companies are overvalued what I didn't think was that the rest of the market would go down with it. I didn't think that there was Just with broad Strokes. Everybody would get hammered with it. The baby would be thrown out with the bath water. Exactly. Very morbid. Exactly analogy. It's used all the time. For some reason. That's it's okay to use yet. She's totally fine throwing out babies and bathwater. Yeah. Yeah, but it's that's what surprised me. Okay, but to be clear some of what is happening right now is legitimate. Some of it should be happening and why I say it's a correction is because you have some companies trading for a billion. Dollars that are probably not even worth a fraction of that and this is what I mean. When I say correction, we have to come back to reality and take more realistic more realistic look at this business. And so that's how we got here and So before you go to the next topic, so I'm just getting into how we got here from the specifics. So what I wrote here is it's just as a natural progression of shifting from tell me to show me right where the biggest guys the show me story doesn't look very good. Right like the biggest mountain canopies. You got you got you can't be in the business plan. Yeah, like and the numbers you're like, oh, these are terrible numbers. Yeah, and also a lot of it has to do with people. There's a lot of the money has been raised. In the last two years. Well, if you I was looking at something on YouTube that was a sort of intro to cannabis investing and it was in 2018 and the guy starts by looking at some, you know, statistics from investment Banks and analysts excetera. And my jaw dropped when I saw this, all right, he was there was a projection for what the Cannabis Market would be in 2019. Okay, and this is a year ago. They projected in 2019. It was going to be a 4.6 billion dollar market. Okay. Wow, this one analyst Investment Bank, whatever. Do you know what it's going to be in 2019. It's going to be about a billion dollars. So a quarter of Yet not even like one out of four and a half billion is probably like 20 percent right? It's like two out of nine. It's insanely low insanely low. So if you think about the fact that people were working off those really aggressive numbers and they use they probably used those to justify or estimate the valuations of the company's. Hmm, when you go from four and a half billion to 1 billion, you lost eighty percent, right? So when your companies lose a bunch of their value from what they were valued at a year ago, yeah that Kind of makes sense. That's not like an unreasonable thing to happen. Right? A lot of the projections were just too aggressive and I blame a lot of the companies to who came out and gave guidance and said, oh yeah, we're going to do you know this much in sales next year right when they when there was too much uncertainty to be able to say that. Yeah, right. So this is what happens you give really aggressive guidance and it allows you to raise a lot of money. Well then later on when that doesn't play out your stock pays for it. Yeah, right. So a lot of that is happening. Then the other thing is too, you know with the heat of what happened how fast everything was going up. You started getting easy money. Okay. And what is easy money? This is a second Point. Like what is Easy Money? Basically what it looks like is you get people who are not doing their due diligence right who are aggressively underwriting who are getting fomo and exactly into the stock exactly. So they're like no mo Exactly exactly. And it's hype driven. That's why I wrote here. So it has to do a lot with the sizzle, right the pretty pictures in the story and the you know, the superlatives right? This is going to be a biggest thing like it's going to disrupt all these industries which is true but doesn't mean your company's gonna be worth 500 million, right? So it's it's that kind of grandiose thinking which basically overrides sort of solid business. Its principles. Okay. It's heavily emotion driven, right? So Euphoria playing on people's Euphoria and their ability to make a quick Buck Right and it attracts some unseen. Sorry that that's a little bit later. Also. It has two people Overlook their corporate governance people don't look as closely as what could go wrong, right? They're focused on the upside. They're focused on the gain. They're not focused on the downside. Greed it's greed. But more specifically it's sort of greed fueling like fueling money to flow into a flow into a area. It's sort of like if I'm taking of an analogy, it's like if greed is like water the capital is like water. It's like there's an area where for whatever reason it all. It's all flowing downhill, right like everything in that area suddenly gets away. Wash with that Capital. Yeah the good and the bad. Well, this is kind of like in capital markets. We call it like the formation of bubbles, right you get a lot of people throwing in money to something. They don't fully understand. They don't know why they're buying a highly speculative highly speculative and the asset class tends to grow somewhere to a bubble. Yes, and eventually it has to pop. Well, this is a b that is a seamless transition to the next point of what are the effects of easy money. Like, what is it actually? Like right so like you said asset value start Rising very quickly because money is chasing after it. Yeah. And what happens to is when this first starts happening, there's typically a limited number of opportunities. Also, sorry. Sorry. Sorry, it was an asset values that start to write quickly valuation start to rise quickly, but the assets don't catch up to it. Well, so when I say when I say asset values I'm talking about market caps. Okay, like what about a company being an asset, right? So got your company valuation start Rising very quickly, right and the fundamentals. No match up to us with the so a disconnect begins to form. Well, the thing is there also are no fundamentals yet right like it for in 2018. Nothing was legalized yet. So you couldn't like you could there's only projections? Okay, so you couldn't point to you couldn't look at at anybody's margins yet, right like so that's one of the problems that is it almost has to be hyped driven and story-driven because there is no quantitative analysis right now what you probably could have done which again we will do in the next episode is you could have looked at some The sales numbers for the more mature markets like Colorado, right and you could have seen that while Colorado at full maturity is selling at you know, this number per head, right? But is the Colorado Market at full maturity like a like how would you know if the markets up maturity? Well Colorado has been around a couple of years they get a lot of pot tourism because they were one of the first ones to do it. So they also like the strategy they use was to go low cost. Ya and combat the black market. So I would look at that as a very sick like a Yeah, I think they have very close to full penetrate. I fully agree with you that Colorado and California. I would I'm using the air quotes here is a mature markets. They're more mature. But in 2018, California had just gone legal so it wasn't a good comp yet. Okay, Colorado was a good cop could have been legal a couple of years. Okay, that's what I'm saying. But my whole thing with my whole thing with using the u.s. Back then as a comp was that, you know, it was still federally illegal in the US still is Sorry by the way caught me. It's comparable. Yeah, so just as something you can you know You look at that set of data and you try to then, you know use it and apply it to Canada in some way. Gotcha. Gotcha. I ignore the people at home. I don't you I'll give you that so you know, what what what I was trying to get at was that I don't think the US was a was a fair comp and the reason I say that is because it's still to this day federally illegal. Eagle in the state's whereas in Canada, you had you had full-on legalization or national level because it was on a national level the sentiment in Canada was very different. Right? So just try to jump in your what I think what you're misunderstanding is I'm not using Colorado companies. I'm only using the raw sales data and Colorado just to see just to have some data points on how big will sail can sales be in a more mature Market. That's Okay, Colorado there was you actually had a law you couldn't have public companies owning the the Cannabis market. So there was no door was very there was really was no data on market caps and stuff like that, but you could get aggregate data how much money how much money was spent on cannabis and Colorado right? Because you have a couple years of data. I mean, it's not perfect but it's nothing God's way better than nothing. Right? It's like it shows you this is an example of a market of five million people that went from zero. You almost full penetration of cannabis in reality in that an analyst report that you read. Did it allude to how they came up with that 4.6 billion dollar sale Revenue. Like did they use the black market? No, not at all. So I don't know but I'm just saying I just happen to be watching this video and scrolling through it and I was like the Cannabis Market Bubba Bubba block for and I was like what 4.6 and 2019 and it's going to be one. One now, I think that'll go up. I think that'll probably double next year, but it's going to be a while before we get to 4.6. I don't know see I'm not I don't consider myself an aggressive investor. I know I consider myself quite conservative when it comes to valuations and look and using numbers, but I think we'll hit for probably next year or mid 20 21 Abby. I will make you a BET right here right now that we don't touch for next year easily whole we would be I we're not going to hit three next year. Why do you hit three next year? Can I can I Can I take three we'll talk about it on the odds. I'll give you some under over odds on the overtime your elbow just go 50/50. I'll say 3 because 4 is a 400% increase basically this before is nuts. But so here's the thing each Court here is three impossible. No, but it's unlikely and I'll tell you why but hold on also keep in mind. Maybe I shouldn't be giving this information from taking from giving this bed, but also keep in mind right now and can't actually drive flower sales next year you're going to addicts exactly so there's two things going for what you're talking about. First of all, the rollouts been very slow BC just approved like I think fifty or a hundred new licenses for dispensaries and dispensers are really the bottleneck right now to big big problem. You get more dispensaries out there. Those numbers are going to shoot up. That's just no question. So Ontario and BC which are two big provinces really need to step it up. And if they if that rollout speeds up which unfortunately is going to be very slow. But that's the X Factor that can really ramp things up and then about you. X Factor also is cannabis 2.0 Vapes Edibles Etc. That's where we're standing today more likely to get delayed the not get delayed, right or at least have a very slow and controlled roll out. So my guess is next year. Yeah, I'll take your bed at 3 billion 3 billion. It's you're probably going to be at the end of the year maybe closer to a run rate of 3 billion, right? But the actual sales. Yeah overall 2020 sales. You're not going to have that because your first few months are going to be light as my opinion. Gotcha, so Yeah, it's you're going to you're going to probably hit around to I think two and a half is like three would be a high water Mark, it's not impossible it would everything would have to really click for that to happen I think okay and I think just the role that will be too slow like the they're going to be careful with these Vapes and Edibles and stuff and yeah the restrictions are going to be heavy they're not going to sell that well at the beginning you can be hard to get on shelves you don't mean so so all this stuff is going to pull it down still okay and again you'll see our next episode If we look at the numbers that will dictate a lot of what's happening in Canada. And that says that you know what there's still more pain to come gotcha. So the effects of easy money IT inflates deflates company prices and I wrote here like the Oprah like you get money you get money you get money, like people just walk in and just start giving companies money and it just pushes prices up and also at these times often, there's limited amounts of opportunity. There's not a lot of companies. Ready to go yet, right. And so what happens is you have a lot of capital chasing few deals, and that's always a recipe for increasing asset values. By the way, I'm going to tell you about real estate. This is actually happened worldwide to real estate since 2008 because since 2008 two things happened interest rates went down a lot. Yeah and risk appetite went down a lot. Look. Well. Yeah, right like people saw in the stock risk appetite went up people were taking on more risk. No, I disagree at the beginning like after oh wait. Yeah people really had no risk appetite no no exactly. So what ended up happening when you lower interest rates then you Borrowing cheap. Yeah, that's why you lower interest rates that allows it to stimulate the economy. When Warren is cheap. Yep. It's not your money. It's called OPM other people's money that you're basically investing. Yeah and the lips and then when interest rates continue to remain low or start going lower asset like bubbles in asset classes form. Yeah, so pretty and one of the reasons is because you have let's say let's say you're a pension fund you have hundreds of millions of dollars in the bank right in cash. Okay. Well when the stock market looks it more. Volatile and you're more scared of that. You want to keep your you want to look at the other asset classes which are fixed income bonds lending money, right or alternative assets. So fixed income the problem is when rates go down now putting your money in the bank you get very little right bonds bonds basically pay nothing. So now the problem is you still need safety, but you need some yield right? So real estate that looks extremely attractive because you know, maybe you can get like let's say you can get 1% from the bank in a GIC right perfectly safe. Yeah you can get Percent if you do a mortgage you lend money to people right, but you can get five six percent if you buy real estate asset, right and then you can actually borrow money at 3% So now you're buying it five or six and borrowing it through you're making it all in return or seven or eight right? So you compare that to your 1% of leaving in the bank or your 3% lending the money that's what drives a lot of that's what's Driven a lot of appetite for commercial real estate right at you and even if people get lower yields, I think There's a real premium on hard assets and safety, right, you know, there's intrinsic value to owning a building. That's brick and mortar, right, you know, there's intrinsic value to a property right? So that's what's Driven a lot of real estate and it creates, you know, it drives up asset values. No question. Like there is significant yield compression in real estate where you could have bought a property with a seven percent yield on it and that might be you know, like five now or four and a half now because the appetite is so strong, right so It's not just cannabis at this happens and it happens in a lot of asset classes. It's just way more pronounced in cannabis like you just see it a lot more in cannabis. So just something to be aware of. What the net effect of this it often attracts a lot of unscrupulous characters. So people see this mad rush people going to take advantage of it and there's some people who just want to throw something together take a quick buck and move on right and they don't necessarily care. If it does well or doesn't do well because they made their money and they'll move on to the next thing right and those kind of people are everywhere in the world. They will always be there. It's a by product of capitalism. Unfortunately and cannabis was a ripe and Is still a right playing field for a lot of these people. Okay, right like it if you're in a hype driven world, right and you can sell some Sizzle and raise a bunch of money, right and you can cash out a bunch Tom people some people in the world is going to do that, right? Okay, and some of that happened in cannabis the ended the so the industry term of that is called a promote a promote. Yeah. Is that a negative term though? It is it I mean I could view it as a negative term. I think a lot of people do as well. But basically It's exactly what you what you say, right? They you're raising Capital off of a story and they promote the stock and bright stars to do really well and then when it comes to the actual execution there out. Yeah, maybe it happened. Maybe it doesn't exactly now. Should I be concerned that I saw your driver's license and your middle name is promote. David I guess I'm kidding. I'm kidding. Okay. So last thing is this is actually something I touched on a long time ago in one of our I think by we're talking about valuations and Etc. And one of the things I always hated was when people said look this were raising money for this company. It's worth 25 million dollars, but look at this, you know, look at what canopy growth is worth is worth this much so comparatively there were 20 times us. Us right so we have a ton of upside. But what I always said was that kind of comparable like just comparing market caps. It's like yeah, they're way overvalued right like you're assuming you're going to catch up to them. They might catch up to you. You know what I mean? So like it's not just like hey, they're worth 2 billion were worth 20 million. Look at how much room we have to go up. It's like yeah, they might come down who says that to billions the right number mean reversion, right? I guess that's what it is. I'd say it's more. I don't know if I would call it mean reversion. I would say it's just that people use these comps as data points, right? It's like same thing. If you get into real estate speculation in the markets really speculative. Well, if you're buying a house, it's based on comps, right? What's what are the proper down the street sell for? Well that person is throwing money at it and suddenly they're being bit up by ten percent all the time. Then your comps are suddenly going to be way higher right? So then if people just use That is their decision making comps that can be very dangerous in a speculative market right? Because like you said ask the value just keep rising and Rising you see you have all these Rising comps. Right, but if it's propped up by cheap money if the fundamentals aren't there that can reverse really quickly. Yeah, right. So that's some of what you're getting today. So to close it off. So what what's the shake out of all of this? What like what does this mean for companies? So let's so I think it's that the party stops the Easy Money party stops now, it's it's not silly done. But I think it's very hard to go out and promote a story. I think people are going to like criticize it a lot more they're going to really look at it. There has to be the right story there. You have to have the right team. You've got to have the ability to raise capital and have some good cash in the bank the bank, excuse me, and I think you also just have to you have to be giving investors good value understanding that they are taking risk. They need to be getting a good potential upside for sure. And here's a positive to all those I mean, I guess technically those are positive. Here's a positive to all this when it comes from a company perspective. Typically what happens when you have these trough. I don't know if we're trough valuation or not or not, but typically what happens when you have these these crew got a beginner pretty clutch. Who knows we're not.we there. There's no crystal ball exactly, but A some indicators of these valuations. Are you have a lot of mas and I don't mean many issues in Abby's and you go literally mergers and Acquisitions more Acquisitions more than mergers, but you'll start seeing the larger well-capitalized companies and what I mean by a well-capitalized company is a company with a lot of cash on their balance sheet go out and they go shopping right because a lot of because there are companies that maybe their competition is cheaper now they can just buy them out as opposed to compete with them. So you see a road here is happening. I wrote here on the ShakeOut part. I mean you jump to the positive part already but I wrote here the strong Will Survive and Thrive and what that means is there if you're strong lot of song reference. Yeah, I was that is not what the songs that I Will Survive. Okay. Wow. Oh, yeah, we have we have very different Spotify playlist. We can have a hot spot if I okay. So the what that means is if you're cashed-up you will survive the downturn But ultimately this will be good because when Other companies are bleeding. Your competitors are bleeding like a bee says you can go shopping. You can buy some ancillary businesses at pretty attractive valuations, right? You can choose, you know, just to sit on your cash. And then if other people get wiped out which will happen. I'm telling you guys right now. There are some companies that have convertible debt that can't pay there are some companies that are burning cash at such a high rate it just you look at it. You're like the party's going to be over for these guys. Like if you're burning tens of millions of dollars in cash or even just a moderate amount of cash and you don't have it on your balance sheet to burn. So, how can people figure out burn right? Okay, great question. It's actually very simple look at the financial statements when they come out. Okay, open them up go through them first thing you so what we look at is we look at the income statement. So what the income statement shows us is what kind of Revenue are they making? What kind of gross margin do they have? What kind of expenses do they have? And then what's their profit now the tricky part about this there's a bunch of weird adjustments in cannabis, especially for biological asset value, which basically means when a when a plant goes from being a but, you know, just a little seedling to a full plant you account for all the money, you know, the value of that thing just went up and you have this Bud now that you you recorded as income essentially, right? That's really weird. You should strip that out. I don't think you should look at that in your decision-making. But you want to see what the company is doing. What are their gross margins? What are their net margins? Okay. On top of that that tells you one piece of the puzzle right A lot of people just look at the net income number that's reported. Well, if that includes fair value adjustments, that's BS. Basically it could be completely skewed. The other than you're going to want to do is you're going to want to look at the cash flow statement. So the cash flow statement shows you so that the profitability statement income statement shows you this is by accounting practices if we made or lost money and how we did. Right, but this is this is definitely surprising for a lot of people you can make a bunch of profit and actually be a negative cash flow. And why is that because Abby if I sell you a bunch of products, I record that as Revenue, yeah, okay, and I record that as gross profit and that profit but we might have payment terms actually most people have payment terms so you don't pay me right away. You might pay me in 30 days. 60 days 90 days whatever your payment terms are. So the problem is Abby. I've spent all this money on all this product I ship it to you. Yeah, I recorded this Prophet. Yeah, but you have not actually paid me, right? So now from a cash flow situation, I've actually got cash. I'm out of pocket and you're just an account receivable, right? So when you look at the cash flow statement, you're going to look at what is the cash flow from operations in the quarter, right? And typically it's negative if they're burning right? Okay, so you can look at that. Look at what is the cash flow in investment? So how much of the invested in themselves? Okay, and if you look at how much they burned right and typically the cash flow from operations is something your you want to spend take a closer look at because the investment part maybe it's discretionary right? Maybe they can slow that down if they need to but the operations part is a lot harder to slow down. Okay, so if they lost for example, you know 5 million dollars from operations. Okay, and let's say they spend another 5 million on investing right? So they burn 10 billion. Ten million dollars cash. Yeah, what's your cash position now, right. Let's say their cash positions now 20 million. Okay, that means if they did the they have the exact same quarter they can last two quarters, right? They burnt n they've got 20 left. They can that 20 will ask them to quarters right? That means the next by the next quarter. They got to start doing another race unless they can slow it down or make it last year something right. Yeah, so probably something for us to dig into deeper in another episode, but Just a quick overview on what people should be looking for and if they don't have the cash guys, they have to raise it they and if they can raise it or they're you know, they're going to have issues is going to be really real issues and some companies will go under absolutely and also if they have to raise share price is very important because that's what they'll tell you what they like. That's what they pegged the did the raised to if they're going to neckli race. Yeah what you're going to see two for some of these companies is People are just going to say no mas. Like they're just going to say no like we don't believe you can do it anymore and either they're going to get really bad terms like convertible debt that really choke holds the company or the company going to take a bath on the price yet, right? But at some point like they just might get to a point where people just say no, they just can't raise the capital like that is a realistic possibility and some of these companies. It's it's definitely possible if some of these companies you might see that happen and I would be surprised actually if you didn't see it happen for some of these companies and that's going to cause more pain probably sector-wide but the caveat is and the positive all this is that you're going to see like when things happen when a company goes under it's going to reverse beware it across the sector sector wide and everyone's going to get hit people aren't going to differentiate about the winners. I don't think they're going to get dragged down with them. Yeah, that's a buying opportunity. Right? If you can get if you can buy the winners at the right price and I think today there's a lot of right prices out there. If you can get in on that when this blows over when those companies start to post their earnings people, I think Will the Market will return to rationality when these companies can show that they can pump out real profits. Okay, right and that they don't need cash anymore. They're It in cash now, right? We will get there for some companies. We just can't say when okay, but it's starting like we're starting to get a clear path like the next one to two years. We're going to start seeing that some Canadian companies. A lot of us companies are actually it's um us companies not a lot makes sense. What do you think? I don't know if to wrap this up sit up or not, but what do you think? Who do you think the first company to go under would be well boy, that's a tough one because an easy one you think so. So it's can trust. Oh, yeah, that's probably true. That's actually that's a good one cause they can't raise their they're basically done. I mean, they're like somebody might come by the assets but it's almost like it's you're buying a massive class action lawsuit. Oh, no, you know, I think you just do an asset sale, right you leave all that behind. Yeah, you just ripped the assets out. But I mean they seem to be moving at such a leisurely pace and no but they seem to be radioactive. Nobody really wants to come in and touch them. Yeah and there. Lost their license now like it just seems to be such a mess. Yeah, and unfortunately Canaan LPS are getting hammered like there's no there's not really positive. It's not really a good story for ya. I guess we've said the commoditization is already began people aren't hot to trot on can help ease any more a year ago. Yeah. There's even a lineup of people to buy these assets and it would have been fixed probably in a second. Unfortunately. The buyers aren't there. They're like, no, we've got more than we can handle right now. There's not a lot of cash floating around. Round right not a lot of help got a lot of people right now of money to spend on that right so ugly and you know, maybe that's what should happen right like can trust. It's just such a ridiculous brutal story. Yeah, those kind of Black Swan events drag down the whole industry. Yeah, and it's a stark reminder that there's real real risk and sometimes comes out of nowhere. Yeah, right which is why you need to diversify. Okay? No, more easy money. Welcome to the correction people. I think that was a good fact-filled or opinion filled episode, but gay people ought to chew on and think about guys. We like to hear what your opinions are cin podcast at gmail.com and until next time welcome to the correction. We've got bulls and bears. There you go. Not bad. I like that. Thanks guys. This podcast is a general communication and entertainment being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product strategy plan feature or other purposes and examples used in this broadcaster generic hypothetical and for entertainment purposes only none of cannabis investing Network or its Affiliates or suggesting that the listener or any other. Listen take a specific course of action or any action at all communication such as this are not impartial and are provided in connection with advertising and marketing of products and services prior to making any investment or financial decisions and investors should seek individualize advice from from a personal financial legal tax and other professional adviser that take into account all of the particular facts and circumstances for investors own situation by listening this communication you agree with the intended purpose described earlier opinions and statement. Of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but should not be assumed to be accurate or complete the views and strategies described may not be suitable for all investors.
In this episode we discuss the new reality of the Cannabis Market - corrected values and the end of easy money 1) The Correction -- How did we get here? - Natural transition from a hype-driven to a results-driven environment - Using real estate developments as an example (selling the sizzle vs the steak) - How the overall sales numbers are WAY off the projections ($4.6B vs $1B) 2) What is Easy Money? - Lack of due diligence; "sizzle" driven investing - Emotion driven investing style - Focus on upside instead of risk mitigation (Greed > Fear) 3) The Effects of Easy Money - Asset prices / Company Valuations start to rise rapidly - How this has happened in Real Estate since 2008 - Attracting shady players ("promotes") - Speculative behaviour of investors chasing comparable gains 4) What Next? What does this mean for investors? - Resetting values can be attractive for investors - "Cashed up" players can take advantage of this downturn through M&A - Investors need to pay closer attention to margins: gross and net - Cash and Cashflow are extremely important - Focus on companies who have a proven ability to execute and make money - How a failing company can create an investing opportunity in a winning company Bonus: Manish and Abi make a $3 Billion Dollar Bet for 2020 