Once again the cannabis industry will not be getting SAFE Banking. Initially, there was optimism it would be in the NDAA and then we hoped it would be included in the Omnibus package. SAFE was quickly excluded from the NDAA and it is not in the Omnibus either. While it technically could be added, or Schumer could call it for a floor vote, this is a very remote possibility.
I could write a lengthy piece about the history of SAFE Banking, why I was more optimistic this time, and why it ultimately was not included. But, I'm not sure how helpful that is right now. It is clear that cannabis is not a priority for congress.
Pharma spent over $390 million on lobbying in 2021. Cannabis businesses invested $4 million, which is less than they spent two years ago. I'm not a political scientist, but I have learned to follow the money. Getting real progress will take more money and a coordinated effort by the top US cannabis companies.
Three weeks ago I wrote about increasing my exposure because I thought SAFE was a coin flip or better and I felt there was more upside upon passing that downside if it did not. This proved incorrect. Over time I believe increasing bet size during politically active periods makes sense, but in this instance, it was the wrong move.
I'm a risk-cutter by nature--I have seen too many traders continue to double down and lose all their capital. So, as the trade went against me, I took down the exposure and am holding a decent cash position. This has been helpful over the past few days and we remain ahead of the major ETFs for the quarter and year. That said, I accept responsibility for my misplaced optimism.
The MSOS ETF (viewed as a benchmark for US cannabis) peaked 678 days ago and has fallen -87%. I would not be surprised if things fall a bit further in the short term as investors harvest tax losses and move on from what has been a trying experience.
Over the next couple of weeks, I'll be working through the 2023 plan and I will write a more detailed outlook. I know I'll be more focused than ever on scale, balance sheets, cash flow, and exposure to expanding east-coast markets.
Despite the miserable environment, I have appreciated the opportunity to share my ideas and get to know many of you personally. I'm not stopping and instead plan to do more and better work in the new year.
Thanks to everyone that subscribes and reads my content. If you want to talk about the current environment, or what might work in 2023, please email me at email@example.com.
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