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I Can See Clearly Now

Greetings,

On October 6th, American singer-songwriter Johnny Nash passed away. His biggest hit– “I Can See Clearly Now” – was released in 1972, sold +1 million copies (we will explain “buying music” to our millennial readers later…), and made #1 on the Billboard Hot 100 for four straight weeks. And let’s be honest, whether it’s from the movie Cool Runnings or a television ad, we can all can hum a few bars of this ditty. So it’s not a surprise when Nash’s lyrics came to us while we pondered this quarter’s musing…I can see clearly now the rain is gone / I can see all obstacles in my way / Gone are the clouds that had me blind / It’s gonna be a bright (bright) / Bright (bright) sunshiny day.


Well, what has us in such a good mood? It’s not the 49ers passing offense, that’s for sure. Instead, we are feeling inspired by the accelerating pace of cannabis activity, not just in our home state, but for the first time across the U.S. Let’s take a look, shall we?


First off, we’ve got our friends in the Northeast. Vermont became the 11th state to legalize recreational cannabis, while Maine launched its recreational program (passed in 2016) with 7 dispensaries. Additionally, Massachusetts hit ~$100M in monthly sales (including medical) for August, its 3rd straight record month. In the Southeast, Florida hit a major milestone, where its medical-only market launched edibles for the first time in September. Overall, Florida is forecasted to ring up ~$850M in 2020 sales, prior to considering edibles. Next, let’s turn to the Mid-West, where Illinois hit $67M in monthly recreational sales for August ($96M including medical), its 7th straight record month. Lastly, we end our tour in the West, where the “Four Horsemen” of cannabis (CA-NV-CO-OR) saw annual growth of 20-30%. A bright sunshiny day, indeed.


Taken together, we’re finally seeing a broad-based boom in cannabis sales across the U.S., which fits squarely with our thesis that this is a national trend, not just a local one. While there are a number of catalysts here, we’ll recap a few of the biggest.


First, there’s changing consumer attitudes. People are more clearly seeing the potential benefits (whether it’s a therapeutic one or a substitute for alcohol) while better understanding the potential costs (whether it’s actual costs like cannabis criminalization/ enforcement or debunking myths, like the “drug gateway” idea). This is likely why the latest Pew Research poll showed two-thirds of the U.S. supporting legalization.


Second, governments are finally listening to the people (we swear we’ve read that idea somewhere…) and working harder to either pass legalization programs or implement previously authorized ones. This clearing of the regulatory deadwood is pivotal, and we believe it will only accelerate as states gain more experience with legalization and/or copy the best practices of other states. As we turn our eyes to the 2020 election (cue “gagging” sound), we see four states voting on recreational programs (AZ, MT, NJ, and SD) with two others deciding on medical (MS, SD). Several big states – FL, OK, OH, MO – are aiming for 2021 votes as well.


Third, and most near-and-dear to our hearts at Presidio View Capital, there’ve been major improvements in product quality, supply chain efficiency, retail experience, and brand investment by cannabis companies. Despite a limited flow of private capital into the industry, companies are slowly but surely getting better at the serving the consumer. And this is without the ability to export best-of-breed products (like those in CA) to consumers across the U.S. We can only imagine the sales numbers once this restriction is dropped. What are those lyrics again? I can see the clearly now the rain is gone…RIP Mr. Nash and thanks again for your enduring words of wisdom.


Thanks for tuning in, and until our next update, please stay safe and healthy.

Cheers,

Mike, Kip, and Austin

Co-Managers, Presidio View Capital

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