As Good as it Gaetz
Pro-weed AG pick sparks space.
Daily Recap
Rep. Matt Gaetz (R-FL) is President-elect Donald Trump’s choice to serve as the next U.S. attorney general—a selection that would put one of the only GOP members of Congress who actively supports and voted for marijuana legalization into the nation’s top law enforcement position.
Gaetz, while supporting Schedule III, pressed DEA Administrator Ann Milgram to “go further” than rescheduling because he thought it could allow big pharma to overtake the industry, and he has actively advocated to end cannabis testing for the military.
Name that Thune
Senate Republicans elected a new majority leader who opposes legalizing cannabis, called for a reversal of the Biden administration’s plan to reschedule cannabis and criticized Dems for working to increase the industry’s access to banking services.
That’s a tough nut to swallow, we know, but Thune also acknowledged that public opinion has changed towards canna, and we should remember that Sen. Steve Daines (R-MT) helped him to the top spot, which was covered by Politico a few months ago:
Steve Daines could become one of the most influential lawmakers in Washington, thanks to his relationships with Trump and Thune as well as his perch on the tax-writing Finance Committee. Trump nudged Daines to consider challenging Thune for leader. However, he pledged to support his neighbor in South Dakota and Daines, under Leader Thune, will have a carved-out leadership role harnessing his business chops as well as his political savvy and Trump friendship.
Why does that second part matter? Because Sen. Daines sponsored SAFE Banking:
No Smoke Radio
Vice President Kamala Harris “didn’t want to talk about marijuana legalization” when she was invited (and ultimately declined) to participate an interview with Joe Rogan ahead of the election, the podcaster says.
“She didn’t want to talk about marijuana legalization, which I thought was hilarious,” said Rogan, who endorsed Trump on the eve of Election Day last week.
Texas Tease
Just a day into the period during which Texas lawmakers can begin prefiling bills ahead of the forthcoming 2025 legislative session, elected officials have already proposed a number of cannabis-related reforms, including measures to legalize cannabis for adults, expand the state’s restrictive low-THC medical program and impose new restrictions on hemp.
Stocks & Stuff
Cannabis stocks, after bouncing straight into initial resistance yesterday, spent most of the day to the downside, trading as low as $4.44 (-6%) as red sweep fears spread, and Sen. Thune won the Leadership position—but those losses were quickly erased after the Matt Gaetz news crossed the wires in the last 30 minutes of the session.
U.S. cannabis ETF MSOS ended the flurry +10% and is trading higher after hours.
Below, we’ll top-line what it all means, deep dive into the current condition and try to capture sadness madness mindset that has manifested across the industry.
All that and more, just scroll down.
SPY 0.00%↑ QQQ 0.00%↑ IWM 0.00%↑ MSOS 0.00%↑ ETF Notional: $173M
Top Stories
Trump Taps Pro-Marijuana Legalization Congressman Matt Gaetz For U.S. Attorney General
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Industry Headlines
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Convenience stores, smoke shops leaving CBD behind
Pregame (written in real-time at 7:45 AM) 👈 (expanded thereafter)
Turnaround Tuesday lived up to its name as the MSOS ETF bounced directly to the previous ATL at $4.80, where the bears were waiting to redeploy.
They knew this was only the first resistance and I'm sure they'll save some powder to defend the gap above at $5.50, which would work to $6.86, which is where we failed following the Red Sweep.
We can point to Moose Knuckle, perhaps the most vocal prohibitionist we've seen in the GOP, coming full circle on the issue, which demonstrated an evolution of thought as opposed to him having any special insight on the thinking of President-elect Trump.
Given the 44% week-over-week post-election carnage and MSOS rallied straight into resistance, it remains to be seen if the bulls will be able to follow through. The ETF, +19% yesterday, is still off 32% YTD.
I've been on the horn a lot this week, talking to many of the stakeholders we've come to know through this long and arduous journey. There is misery amongst the thinning masses who’ve remained in the space, opting to plug away.
“can’t sugar coat it, trying to stay positive but hard to see a path (hope I’m wrong). I feel stuck, confused, lots of anxiety. trying to figure out where we are but pretty sure I know the answer and it hurts. Hour by hour, day by day, funds are shutting down, smart people are throwing in the towel. hard not to imagine what would have been had we gotten A3 and S3… but I need to stay strong for my family.”
I felt that, and I see it too. A well-known player in our community told me yesterday, he "doesn't own a single share" of cannabis stocks, and another, who was one of the bigger bulls through the years, pared to token size and is focusing his time elsewhere.
One of my most trusted peeps texted me over the weekend to say, “it’s not your job to be an optimist… there are other things in life; you are not cannabis.” I sat with that for a bit before showing it to my wife, who quickly responded, “he’s absolutely right.”
Other discussions were more sobering, as some expressed concerns that several tier-one operators could go belly-up. And we’ve seen sellers—we offered yesterday the price action in Verano smelled like forced liquidation/ tax-loss harvesting and while we have a sense of who that might be, but it’s not my place to share.
Of all the calls, I found one fund that "has been buying this puke" bc, in their view:
"Trump is the most pro weed major party presidential candidate this country has ever seen. I don't see how things haven't gotten much better for the space, but it would seem capitulation was needed first. PM
I give the last dude a lot of credit, as the price action in this space over the last seven days (years) triggered chest pains, nausea, self-doubt and lots of introspection for yours truly. This has been a long, hard road, there’s no other way to put it.
Still, we fight the good fight in good times and bad, and there is a lot of unfinished business/ information to come this year. ALJ briefs for standing were due yesterday (for the 12/2 hearing), Boies in the Hood oral arguments are 12/5, the lame duck (dubious), and we need to see the AG.
Given our ongoing dialogue with the Trump transition team, we continue to take the incoming president at his word on canna. He did what he told Weldon he would do w/r/t The First Step Act in his first term, pushing it through Mitch McConnell, and we expect him to do the same now, particularly given the pro-canna peeps in his circle.
From here to there, we'll need to keep our head on a swivel. Whether it's the MJUS rebalance or tax-loss harvesting or algo-dominated shorts doing what's been working for years, or the binary nature of the AG pick, the readthrough on the Senate Majority Leader, or any other number of things we don't yet see.
Bulls wanna put $4.80 underneath them before they try to un-flunk the flank left at the bottom of last Wednesday’s gap, but here's the thing: even if that gap fills—a 40% move—MSOS will still be in a downtrend as a function of the post-election bitch slap.
One step at a time as we together find our way.
I cannot overstate how big this is for the weed world. Gaetz is one of the most pro-cannabis Republicans on the Hill, one of five Rs who voted for cannabis legalization when it passed the House, and as AG will be overseeing the end of the rescheduling process.
*I am reminded that he voted against legalization in Florida. He told me before the election he was a no vote because it was a constitutional amendment that wouldn’t allow for easy changes and adjustments, which he assumed would be necessary.
Natalie Fertig, Politico
Random Thought
Thune was the tallest midget of the three potential Sen. Majority Leaders given his super-tight relationship w Steve Daines, who sponsored SAFE Banking. It could have been worse, although we still think DT will get his agenda through, especially when the world’s richest man is his Sergeant-at-Arms.
Chart Check
Bears did their thing at $4.80 today but that changed into the close. Bulls are eyeing the post-election / Florida-fail gap between $5.50-$6.87, and you can bet the bears, knowing the structural impediments (custody/ listing) are still in place, will try to fade this news, too. Time will tell, but Gaetz as AG is the single-biggest positive of the year for our space, and while I know that’s not saying much, we needed a win.
Stems & Seeds
What We Know About Cannabis Far Exceeds What We Don’t
Have a safe journey and please enjoy responsibly.
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CB1 has positions in / advises some of the companies mentioned and nothing contained herein should be considered advice.