Is it a technically-triggered short cover rally? Is it the inadvertent confluence of mis-interpreted fundamental catalysts with some real ones? Is it the effects of cannabis on the cerebral cortex?
Or is it the once (or in the case of cannabis stocks) third chance in a lifetime chance to pile into the sector with the historical claim to fame of being the fastest value creation asset class in history? (next to tulips)
Let’s start with the fundamental news bits whose bullshit fundamental interpretation is plain:
- While the “House Judiciary Committee voted to approve the Marijuana Opportunity Reinvestment and Expungement Act” headline is a humdinger of a headline, the effect on the sentiment of the market as a whole is overblown.
As if the republican-controlled senate will ever let a democrat-sponsored cannabis federal de-prohibition bill succeed in an election year!”Good point.This is a meaningless puff in an unprecedented bi-partisan cloud of delusion on the part of democrats. They already know and the republicans already know it ain’t happenin’. (This perspective and subsequent adoption by yours truly was first iterated by Dan McDermid of ChartGuys.com…can’t say enough good about their technical course!…fundamental observations too, apparently…)
Yet the entire cannabis-forward media pounces on it as nearly a guarantee of imminent liberation for the noble herb.
2. Bank of America Merrill Lynch lead analyst for Life Sciences Derik De Bruin published “The cannabis industry is poised for growth if cannabis legalization and use expand”.Duh.Nonetheless, the trumpets and tubas were thrust into high gear to embrace this as certainty that the “Great Bear Market in Cannabis Stocks 3.0” was now credibly declared over. This is such typical big bank bullshit. Dollars to doughnuts they’re now long as Rapunzel’s hair, so now just boosting their book…
In tandem, these are big catalysts -especially amplified by media.
But the legitimate catalyst was for sure Trulieve Cannabis Corp (CSE:TRUL).
Trulieve pulled off another great quarter financially ($0.55 a share EPS) , and is now officially the standard-bearer of the Buy US Cannabis/Sell Canadian contingent of the commentating crowd. Disciplined management in the magnificently entrepreneur-friendly State of Florida and tons of runway (Kim told me during our interview that Florida was the second most populous state with 25 million residents…I had no idea!)
Trulieve’s quarter was impressive. I’m personally troubled by the $89 m upside adjustment value of biological assets, but hey! We need all the sunshine we can get…
All of the abovementioned considered, should we buy into this rally, potentially riding a wave driven by US federal de-prohibition hysteria in a “lift-all-boats” effect?
Or should we short the shit out of this combination misguided news-driven delusion?
Given the ongoing trend of 99 percent of companies still reporting negative cash flow and profit, there is little of substance to support the thesis for a sustained recovery This rally will fizzle as the over-capitalized cannabis mania reverts to the cut throat commodity crop business it ultimately is .
Cannabis is only an ingredient – not a magic potion.
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