Navy Capital : Interview with Cannabis Hedge Fund Navy Capital – Topics & Interviewers
Alcohol, though thoroughly entrenched in society today as a social lubricant has a new, and yet very old rival, coming like a freight train to displace our old friend Johnny Walker Black and friends. Cannabis is rolling in and so is cannabis-focused hedge fund Navy Capital.
Chief Investing Officer John Kaden as well as President/Chief Financial Office Kevin Gahwyler sat down with RebellionResearch.com to discuss the industry as a whole.
We covered it all – from its history, impact on alcohol & tobacco industries, emerging cannabis markets, potential impact of legalization, to Navy’s typical day in the office.
Navy Capital’s John Kaden, Kevin Gahwyler & Sean Stiefel
War on Drugs or War on Mexicans, Minorities?
Cannabis was once a traditional medicine along with opium & cocaine and was once one of the most highly prescribed drugs in the US. However, that all changed once politicians set their sights on it. Mr. Kaden explained that while cannabis was traditionally used as a painkiller, it became illegal on a national level when the Federal Bureau of Narcotics was established in the 1930s.
Mr, Kaden outlined a few events that characterized the government’s sentiment towards the cannabis industry. In 1937, the government enacted regulation as well as taxes on all sales of marijuana, which has become known as a tactic used by the bureau to target mexican-americans and minorities. Yet again, the Mexicans took blame during and after the Great Depression, people cried that Mexicans were taking their jobs.
In the 1970s, President Nixon was feeling harangued by various parties, such as anti-war protesters, the Weathermen and the Black Panthers. Nixon found a commonality among them, cannabis. While it would be seen as un-American for the government to try and quiet these various parties by arresting them for simply protesting the government, Nixon had a simpler solution. By having cannabis classified as a Schedule 1 drug these protesters could be arrested on federal charges for its possession and thus quiet his critics.
Normalization of Marijuana Usage in the US
A 2018 survey highlights that about 6 in 10 Americans support marijuana legalization for recreational usage according to the Pew Center for Research. As marijuana becomes more bipartisan (more than 51% of Republicans support legalization according to a recent Gallup pole), federal legality, or probably in the more near-term non-illegality at the federal level, for cannabis is looking like a possibility.
Some Impacts of Legalization
Legalization’s economic impact, Mr. Kaden explained, would not only add jobs, it would also add $6 billion in tax revenue annually, compared to the $7.6 billion that it currently costs to enforce anti-marijuana laws.
Concerning the social impact of legalizing weed, Mr. Kaden believes that legalization will help drug rehabilitation programs by reducing the high levels of recidivism among its patients. There is a potential for helping to solve opioid, benzole, and valium addictions, and effectively reduce overdoses based on his research.
Legalization will also benefit the black community, since black people are arrested far more than white people for marijuana usage even though about the same percentage of blacks smoke marijuana as whites.
Investments in Cannabis
Consumer packaged goods companies and the alcohol industry are pouring billions of dollars into research & development in the cannabis sector. According to Forbes, “beer companies could lose more than $2 billion in retail sales to legal marijuana.” To protect their interests, the alcohol industry is making investments and acquisitions in the marijuana industry. For example, Constellation Brands, the third-largest beer company in the US, has already acquired a 9.9% stake in Canopy Growth, a premier company in the legalized weed industry.
Other industries such as consumer packaged goods, have been willing to buy up companies. Meanwhile, the tobacco industry has been waiting to see who the winners and losers are. Their thought process is two-fold; first and foremost their industry already carries a significant taint to it and so they are reluctant to exacerbate their situation, but also the one thing tobacco companies do not lack is cash so they would rather spend more and wait for the fallout of a yet quite nascent and undetermined industry.
What is Navy Capital saying about the Cannabis Industry?
The team at Navy Capital cares a lot about the biology of the endocannabinoid system and the interaction of the, 255 and counting, cannabinoids to it, as well as the industry of the cannabis market. Competitors at bigger firms simply do not understand the intricacies of the market. Many professionals were originally afraid to go into the industry, especially the big names at hedge funds who did not want to risk valuable years of their careers.
While Navy is an emerging hedge fund, they appear to run their operations very similarly to other developed and well-managed hedge funds. Throughout their day, they have investor meetings, allocate hours to research, learning about revolutionary cannabinoid technology, securing cybersecurity, and travel to facilities & dispensaries to talk with managers and to make sure that the facilities are “not just a piece of land.”