Legal product, federally regulated. Yes. No. One sec….

That didn't take long.A bullshit piss up in an area of reluctant politicians, municipal desires conflicting with undefined provincial definition, and federal law still un-passed. Might as well be the City of Richmond in BC.There's going to be many of these, and uncertainty in rollout that will be unpredictable. Manitoba says 'no' to home grow. That'll last as long as the first court challenge.10 different Princes and Princesses fighting in 10 jurisdictions (+2 kinda ones) over money, morality, and control. No investor should ever want government near a business.Regulations distort markets, pricing, and make winners and losers. Occasionally picking them, for less transparent reasons.You…

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Market Design and Wholesale Margins

If you've been following the news lately, you'll know that a tax sharing agreement has been struck between layers of government. And, that some regions are lining up supply for their emerging monopolies. Aside from the obvious parallels with booze, the actual end state of distribution matters alot, because it shifts risk to wholesale prices. Booze across the country is essentially a fixed margin game. Market share is the only differentiator of profitability. Provincial monopolies capture a high percentage of market share, because they are the only game that prints money. Or if not notionally, they still have the money to offer infrastructure and…

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Stacking Risk – Measurement and Trading

‘Stacking Risk’ simply means you are increasing exposure to the same risk.Say you own several stocks for investments. You’re the ant, not the grasshopper. Good for you. Diversifying among industry sectors in the economy is a good idea if you want to reduce risk overall.So, here you are, as excited as I about investing in legal cannabis. You want exposure to the sector, and assume risks of gains or losses to your investment.In cannabis it’s in production, processing, and distribution. And like a cake, it has layers.At the top layer….by buying into the sector, you have exposure to legal cannabis revenues and returns. If…

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How Market Design Negates Economies of Scale

Aside from the somewhat negative views being bandied about, what's coming into sharp focus is LP cost structures.While we've already had a look at margin compression when dealing with monopolists, fixed cost structure at scale is the takeaway here.With a non-centrally producing LP with scattered assets and differing grow modalities spread across the country: all you have is G&A sprinkled everywhere, effectively reducing economies of scale in production. And, you will get to compete with craft growers, who are far more nimble in chasing niches.As the provincial monopolies suck the oxygen out of distribution and retail margins, the whole core of being a supersized…

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