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Ep.278: Alan Brochstein

Cannabis Economy Podcast
Ep.278: Alan Brochstein

Ep.278: Alan Brochstein

Alan Brochstein join us from this year’s NCIA business summit and shares that the first NCIA business summit was a good and bad time for the industry and for him in that the market had run up so much and there was a tremendous amount of interest, but he was in an awkward position as he saw the promise but stocks were actually on their way down at that point in mid-2014. As Alan says, a lot of people had shown up for the party but were kind of disappointed and on their way out. He’s seen a number of ebbs and flows in interest in publicly traded stocks. But Alan has stuck with it and now sees a tremendous amount of new opportunity in the space.

Transcript:

Speaker 2: Allan Brochstein joins us from this year's Ncia business summit ensures that the first NCIA business summer was a good and bad time for the industry and for him in that the market had run up so much and there was a tremendous amount of interest in the industry, but he was in an awkward position as you saw the promise, but the doctor actually on the way down at that point in mid 2014 is own, says a lot of people that showed up for the party, but we're kind of disappointed. Then on their way out, he seen the number of ebbs and flows in that interest in publicly traded stocks and he's out doing sure. Folks understood his point of view, but Alan has stuck with it and now sees a tremendous amount of new opportunity in the space. Welcome to cannabis economy. I'm your host Seth Adler. Check us out on social with the Hammock can economy. That's two ends and the word economy, Alan Broxton at all

Speaker 1: right, but I'm based in a plane. Alan Braunstein. I mean, you know, we've only been seeing each other at things for what, how many years? Then? About three or four years ago. Right. So it's good to see you. Yup. It's good to turn the microphones on. We're here at the NCIA vent in Oakland busting at the seams. That was probably the first time I met you in Ncia in Denver, in Denver. And there you go. Yeah. So there's now a boost by the bathroom just in case you have now. How, I mean, let's just so that we understand it right? What were you doing in 2014 and what are you doing now? And then we'll kind of go back and see what else would you find in 2014? I had launched a at that time for 20 investor and uh, I think that that Ncia conference was the first conference that I went to and I had been to Colorado uh, earlier in the year right after they legalized and actually some for 20 investor subscribers came out with me and we had a great time.

Speaker 1: So I was really excited to go back to Ncia and the of seeing a cannabis conference kind of blew me away. I was used to institutional investing conferences and uh, so uh, in 14 was a good and bad time at the same time because the market had run up so much and everybody was interested and I was in an awkward position because I saw the promise like I, I felt like I'd be sitting where I am today then, but it didn't feel like it because the stocks were on their way down. There were a lot of people that had showed up for the party and we're kind of disappointed in leaving pretty quickly. So that's, you know, an interesting point of view because for folks inside the industry that felt like, okay, we are now in a shift and this shift is going this way.

Speaker 1: However, from an institutional investor stamp, yeah, I look terrible. You were going down the other side of the mountain as the industry was coming together almost for the first time in a new and different way. Right. You know, and people cared about public stocks then. And then we went through a period where you were a pariah, if you are associated with, with publicly traded stock. How so? What do you mean? Well, so you know, you look like an opportunist, the people in the industry. And that was what was great about that first NCIA conference and a few others that I went to afterwards that I got to see that the publicly traded stocks, we're not the industry and the people inside the industry thought it was going to be there. A road to riches. Yeah. Early on. Yep. And then they realized what a disaster it is.

Speaker 2: Allan Brochstein joins us from this year's Ncia business summit ensures that the first NCIA business summer was a good and bad time for the industry and for him in that the market had run up so much and there was a tremendous amount of interest in the industry, but he was in an awkward position as you saw the promise, but the doctor actually on the way down at that point in mid 2014 is own, says a lot of people that showed up for the party, but we're kind of disappointed. Then on their way out, he seen the number of ebbs and flows in that interest in publicly traded stocks and he's out doing sure. Folks understood his point of view, but Alan has stuck with it and now sees a tremendous amount of new opportunity in the space. Welcome to cannabis economy. I'm your host Seth Adler. Check us out on social with the Hammock can economy. That's two ends and the word economy, Alan Broxton at all

Speaker 1: right, but I'm based in a plane. Alan Braunstein. I mean, you know, we've only been seeing each other at things for what, how many years? Then? About three or four years ago. Right. So it's good to see you. Yup. It's good to turn the microphones on. We're here at the NCIA vent in Oakland busting at the seams. That was probably the first time I met you in Ncia in Denver, in Denver. And there you go. Yeah. So there's now a boost by the bathroom just in case you have now. How, I mean, let's just so that we understand it right? What were you doing in 2014 and what are you doing now? And then we'll kind of go back and see what else would you find in 2014? I had launched a at that time for 20 investor and uh, I think that that Ncia conference was the first conference that I went to and I had been to Colorado uh, earlier in the year right after they legalized and actually some for 20 investor subscribers came out with me and we had a great time.

Speaker 1: So I was really excited to go back to Ncia and the of seeing a cannabis conference kind of blew me away. I was used to institutional investing conferences and uh, so uh, in 14 was a good and bad time at the same time because the market had run up so much and everybody was interested and I was in an awkward position because I saw the promise like I, I felt like I'd be sitting where I am today then, but it didn't feel like it because the stocks were on their way down. There were a lot of people that had showed up for the party and we're kind of disappointed in leaving pretty quickly. So that's, you know, an interesting point of view because for folks inside the industry that felt like, okay, we are now in a shift and this shift is going this way.

Speaker 1: However, from an institutional investor stamp, yeah, I look terrible. You were going down the other side of the mountain as the industry was coming together almost for the first time in a new and different way. Right. You know, and people cared about public stocks then. And then we went through a period where you were a pariah, if you are associated with, with publicly traded stock. How so? What do you mean? Well, so you know, you look like an opportunist, the people in the industry. And that was what was great about that first NCIA conference and a few others that I went to afterwards that I got to see that the publicly traded stocks, we're not the industry and the people inside the industry thought it was going to be there. A road to riches. Yeah. Early on. Yep. And then they realized what a disaster it is.

Speaker 1: I know you've had Jen Murray, I believe on an example. She's here today. She survived. Yeah, doing great. She's a total survivor. She will never not survive. Yeah. But that's a good example of that going wrong. It's still going on unfortunately. But yeah, but there's some good stories and maybe we can talk about kind of how the, the, uh, whole situation has evolved yet. We, you and I, a few years ago, we knew where it was headed, but a lot of people have very short term expectations about how quick it markets would open up, how quick real investors would come to the industry. All these things take time and this is a huge change. This is not. Something happens overnight. There you go. So let's actually go all the way back and, and, you know, kind of understand the trajectory in order chronologically. Okay. So first, where are you from?

Speaker 1: I'm from Houston and uh, I think nobody will care much about that, but I'm actually back in Houston now and that's ironic. It's not really by choice. So that's seven. One, three for those keeping score at home. I'm actually in, in anybody that knows me knows that while I'm regimented I also like to go out in the world and do things. I am living literally half a mile at the most from the first house I lived in, like really sad. I don't like to brag about that because it's actually very embarrassing, but some people will find comfort in that, but sure. In between Houston and Houston was a, uh, at northwestern university in Chicago for three years and then eight years in New York City. Okay. And so that's why I look at you and I feel New York City. I knew you as you have New York in you. Yeah. But when you were up in Houston, I know that there's a large Jewish community in Houston.

Speaker 1: Folks would be surprised to find that out outside of Houston. Yep. Um, or if they're not Jewish in America, uh, what was it like growing up as a kid in Houston and a Jewish kid in Houston for that? So I went to a school called Kincaid, which is a head about a hundred kids. Pretty elite. There's like two really good private schools. We had what we thought was a low number of Jewish people. 10 out of 100. Right. That's actually a really high number unless you live in New York or something like that or Chicago suburbs. So yeah, I grew up thinking everyone was Jewish for instance, coming from New York, but go on. So I don't want to get into it too much. I, I did not like growing up Jewish and Houston. Okay. Now with that said, my children have grown up Jewish in Houston and it's been just an awesome experience.

Speaker 1: So, so what understanding that you don't really want to get into it, that much of what's changed for them to have a positive experience? Let's do it. They just think the world's changed and maybe the world in Houston, but pride the overall world. You wouldn't know it from the headlines today. And I do a lot of interfaith work myself. It just seems like there's a lot more. Uh, my kids never were picked on for being Jewish. There were none of those things I think whereas you might have been growing up in the sixties, there was still some leftover stuff, a world war two and all that. I don't know, some of that prejudice. It's just not there anymore. Interesting. Or it's not out in the open. I gotcha. As much as it was fair enough, he gets there. Yeah. So, uh, what, what did you realize that you were good at?

Speaker 1: Nevermind what you were into, you know, before you got to college, before you got to new at northwest. So I was good at stocks already. Oh yeah. Okay. So I mean a good little story here, when I was 12 turning 13, bar Mitzvah of close family friend gave me a some one share of stock in Pepsi. There you go. And uh, and that was interesting, but it kind of opened my eyes. I was only 13, 12, 13 tour and I started to research and I bought a company called save on drugs with my own, with my bar Mitzvah money and the stock got bought out. I don't even know how that happened, but it was probably with his advice. It wasn't like I just picked it out of the blue. I gotcha. That uh, so it was kind of cool. And so by the time I went to college I was doing, uh, uh, I'm trying to remember this point and figure I think I was doing point and figure charting, which aren't even doing any more of it.

Speaker 1: Fire every night. Charting and watching Wall Street stuff, beating the Wall Street Journal. You are into it, really into it, and then I went to college, I was trading options and I learned how to use a computer and all these things, which is early days for computers basically. Yeah. Or stock trading. So all that wasn't online. That was for sure. What. So then what did you, was that your idea or were you taking classes? No, no self kind of self taught, reading technical analysis with. It was just really interesting to me, but this is the sad part. Yeah. Then it was time to look for a job and I was for somebody that's supposedly smart. I'm really not that worldly. I wasn't there. I didn't realize you could do that for a living. I thought that was just something people did on the slide. Yeah. So I ended up in the bond world, which I hated and that's, that was my profession for a long time.

Speaker 1: Well before. And that's New York as well. That's in new. Right. So when you, you brought up technical analysis and why not? Let's dive in a little bit on, you know, trading and how you look at things. Are you only a technical guy or are you fundamentals plus technical or how do you look at it? Yeah, no, fundamentals is more important in the long run. And technicals may be short term for sure. Right. Everybody likes to say stocks are um, uh, efficient. Right. And they're not random, that's for sure. Uh, but they're not efficient to you though. Well, what do you mean by random and what do you mean by efficient for those that don't trade, it might, it's not investing. It's like you just pick a stock at random and it's going to up or down and there's no rhyme or reason. It just fluctuates and hopefully you get lucky, but there's no way to really tell her.

Speaker 1: You maybe you can use your edge, but basically it's just a random thing. Whereas I don't think that's true. I think really in the long run, companies that do well, their stocks go up. That's, that's pee pee, right? That's Pepsi for those. Again, keeping score at home. That's just going to go up probably. Yeah. Unless it splits or otherwise. Right? Yep. It was split and went up. Um, but, but whereas save on is you maybe get a little lucky with something like that. Yeah. And that was probably my, my broker who gave me the first share of stock that I took my money invested. But uh, so, so when I came back to Houston, I've kind of stuck in the bond world, uh, and it was all right. It just wasn't for me. And I, it to explain it to your audience if you are, if you really well and bonds.

Speaker 1: Yeah. You're not really making that big of a difference. It's so micro. It's like, well, why did they say the smart money's in bonds? Then the, I don't know, but I will tell you this, the smart people, we're in bonds, it's more mathematical and definitely smart, but the smartest person couldn't make that much money without borrowing and doing all sorts of crazy things. It's just there's not a lot of volatility in the security. So you have to have very big money. Yes. In the bond market to make any real money. Otherwise, if you make a one percent extra return that's actually heroic and irrelevant at the same time. For someone like you regular per se, even in the bond market, I started to focus on esoteric things that were like nobody was focused. I've learned a lot of lessons back then that in life, if you want to do really well, you can't do what other people are doing.

Speaker 1: Most likely I'm right. Some jobs you can, but if, and I've never done anything like this, but you need to invent something. I guess I've invented something, but something big like the windshield wiper. You need to invent something big. Do something that nobody else is doing and I love how your example of inventing something big as the winch. I know that I know somebody invented a windshield wiper and they were set for life, so now there is a movie about someone that did that and kind of went to Ford Motor Company. That's not him. It was like some component the winter, but that was. That's a win. That's the. That's the big win that you had always been looking and hoping for. Totally understood. So looking forward to it. Honestly it was intellectual curiosity. Got another thing. I used to ride those elevators in Manhattan and I looked at all these other white men and a lot of them Jewish, like myself right up and down.

Speaker 1: Now it's like I just didn't want to be like everybody that's kind of like I'm living a half a mile from where I grew up. Does not fit with that point of view. Not at all. Did you meet any in the elevators? Did you meet any bond vigilantes? I think we're all by the vigilantes what is bad? But those were the good guys. What does that mean? Uh, it goes back to the Federal Reserve and the people that used to get in front of the Federal Reserve policy so that the kind of like nowadays Donald Trump, you just float a trial balloon and you say something and maybe a company will, will respond and not move a factory or something like that. So you don't have to do a law or anything. Same thing with the Federal Reserve. They wouldn't want to cool the economy, but they wouldn't want to necessarily raise interest rates. So the bond vigilantes would go do their work for them.

Speaker 1: And raise the prices by selling securities. So when we hear that there's probably a couple of more interest rates this year, interest rate hikes this year from the Fed. The bond vigilantes hear that and say, okay, we're going to go ahead and manage that. Exactly. But don't ask me too many questions that aren't about cannabis I am like, so. So let's get this going. The cannabis. So you're like, you're in the bond market, you're trying to do new and different things. These guys and Gals, I'm not, I'm not doing this New York thing. When did you come back to? Back in [inaudible] 98. And uh, so my wife is also from Houston and she wanted to come back. I knew that. What did they say? Happy wife. Happy life. So I knew she would be happy and that'd be a good thing. I really did not want to come back to Houston. I love New York.

Speaker 1: We'd actually just bought a house in New Jersey, which is another reason not to move. That was a disaster. Oh, to sell that house. So that house, that was terrible. But anyway, it's all about timing. But this was a really good job for me and I took it and I was uh, what was the job? So it was a fixed income job as well, but it was a portfolio manager job prior to that I was like kind of an intermediate. I was a, a buy side trader, it's called, but I was working with portfolio managers and maybe maybe I could have stayed there, but this was more money in Houston than in New York. And it was more responsibility I had to say yes. And working directly with people as opposed to being an intimate in intermediary. Well. So we're money manager, but we were managing institutional money.

Speaker 1: I didn't actually deal with my coworkers. Yes. Okay. Yeah. It wasn't really that different from that snoop point. Fair enough. What did you learn though from that position? In other words that I hated bonds. There you go. So what did it inform you? Where, where did you realize that you needed to go? Oh, well, so. Okay. You have to go back to 1998. Sure. Not I, I had been looking. There's a lot of funny stories here. I don't want to take up too much time with it, but I've been looking to make a change, so the first thing I didn't get me back on track in a second. This is a great story. I knew this guy in town who had a money management firm and he was doing a lot of different things and I wanted to switch work more with people and work in a in a, in a smaller firm that I was working and get involved with socks, lot things.

Speaker 1: I went and met with them and I had heard this companies pitch kind of a out on the radio even. They were selling 12 percent guaranteed returns. It's an, you know, me being the bond person and being very skeptical. I was like, David, what? What is this about? And he told me and I said, wait a second, you're taking one person's loan and selling it to another single person. In my old world was you take a bunch of loans, you package them yet and then you sell security. And I was wondering why he didn't do that. He says that's too much sec regulation and that was like, my ears went up and I didn't go work for the guy. Uh, people would ask me about that for years. I always say, stay away. This is not the way to do this today. It was a Ponzi scheme pto.

Speaker 1: So the guy got busted. I'm with you. Just draw that out though. So folks understand exactly what you're talking about. So he was taking in money from one investor and using it to pay off another investor to get the 12 percent returns because he started to get default. So this blew up in 2008. So it took 10 years. Ten years for this to. I'm sorry. No, not 2000. One, 2001. That downturn when all the stocks were learning when Enron blew up. Sure. So. And it all came crumbling down, but. So he saying, ah, that's too much with the SEC. What he's saying is it's too much to be legal the. Exactly. So anyway, so you know, I was looking for a job at the same time. There was some sort of Russian crisis, you know, there's always some sort of prices in 2002, no, 1998 and 1998 Russian crisis.

Speaker 1: Trying to remember when. Yeah, I don't know. There's, I promise you there was some sort of sin or something or I don't even remember who knows, but oil oil was dropping to a, about $10 a barrel and you know, I was in Houston and I had a house and all that was a little concerned about that. Yeah. Well, speaking of one industry, running a town, yes, it's not so much anymore but still at that point. And then, uh, so I was getting nervous about that. I was managing literally $1,000,000,000 of commercial mortgages and they weren't doing very well. Now, you know, and that's an aging tens of millions of dollars for our customers. So bright. So I was getting pretty depressed about that. And uh, in the company was downsizing and uh, just pretty mutual. But I, I got fired one time in my life I ever got fired, but I wanted to get fired.

Speaker 1: So it was a good thing. I made the transition, it took me literally a year and three months to land my job in the equity world and that's where I, it's probably started already to do some equity analysis on my own to get past. We talked earlier about technical analysis to get more into fundamentals, balance sheets, things like that. And I guess I guess I should back up a little. They wanted me to be a CFA. I had no interest in doing that. Why not? Because there's a lot of work and I didn't want to do it and I thought I already knew everything. So don't we all right? Of course I was, honestly, as a young, I was young. I knew everything. Why do I have to do this? So the people that know the most are young men. Yeah. So I, uh, my son, right, exactly.

Speaker 1: So, uh, he actually doesn't, but the, uh, so, so they made me do this program. It's a three year program for your listeners, don't know. The pass rates are very low, a 50 percent the first year and even less. So I got through it all three years, which is good to accomplish it. So what it did for that third one being the beast. Oh yeah. I literally passed by one question. There you go. Fight and not gotten that one. I wouldn't have to take it again. I would've passed, but that was when my son was born in, uh, it would have been hard to do because it's very time consuming. Smart people really need to study hard for that. And you know what, I'm going to Tuck. This is the funniest thing. You know, I told you I knew everything I thought I did. So it's, this covers a lot of different areas.

Speaker 1: Real estate, venture capital, stocks, bonds, everything. What was the area I did the worst on? Take a guess of everything in the bond world. What I do, what should I have done the best at what I do? The worst at what you do, the worst day bonds. Oh No. The thing I knew the most, I did the worst because I didn't study hard. There you go. I know all that. I know all that. But anyway, the good thing was, that's when I really started to learn about the fundamental analysis for stocks and so, so I wanted to make that transition because if you are a smart person in stocks, which they're not as smart as the bomb people, but if they're, if you're, but you can make more money as a regular person can make a lot more money and better for your clients and all that.

Speaker 1: So, so you jump into equity, jump into equities. It was a great position for me and I was a principal there. Uh, it was a small firm. We were about half a billion dollars and then the, the, the guy that founded the firm had a stroke and you think that would cripple the company. But uh, the three of us that were all partners, small partners beneath them, managed it. We did well, everything was fine, but he came back and he came back, unfortunately impaired. And as a CFA, I couldn't tolerate that. I had to literally walk out the door impaired. What do you mean from the stroke? Got It. He, he was not, he did not have good judgment. I see and he didn't know his own limitations apparently. Interesting. And so in A. I had a few clients that I had brought into the firm. I said, listen, I can't in good conscience allow you to stay here.

Speaker 1: This is what's going on. And they started to leave and I literally, within a few days I left. And then what year was this? This was in 2006. Yeah. And so where do you go? So this is where it all got good. So here we go. So I had pitched him an idea. We were a team of, I guess on the analyst side, we had another two people, so there were five of us, six of us with them doing research and we were doing so much research. We couldn't even use it all for just our clients. We had excess capacity. So I said, why don't we get in the business of advising other advisors? Because the industry was moving towards this new thing where people didn't want to hire analysts. They really wanted to do more ets bit and maybe do a little bit of stocks and that was the second really bad idea.

Speaker 1: He passed on. We don't have to go in the first one, he didn't want to do it. So I started to do that on my own. I go out, hang my shingle as a, a vote. My website was analyst for higher dot Tom. I don't use that anymore. But then I was a research analyst and I started working with a bunch of small money managers and uh, which was really great because I didn't work for anybody but myself, although we always worked for somebody of course that I, you know, I was working for myself and that's an o six and a or. Yeah. And I started to write on seeking Alpha, which is a big blog. If your readers listeners aren't familiar, a investors would be a seeking alpha. I would have like 70,000 followers. I put in about 600 articles and it's a big deal.

Speaker 1: That's a big deal. And uh, so I had a big following. I liked it. I was running some model portfolio services. It was kind of 80 slash 20, 80 percent of my income was probably coming from consulting institutional clients, but this other 20 percent was actually more fun for me dealing with people instead of, you know, numbers and things like that. There we go. What I was doing, but it was a lot of fun. There we go. As far as the 80 percent though. Yeah. What were you advising folks at the time? Right. This is kind of the middle of the last decade. Yup. Uh, or kind of late last year, this was in the 2013 before, so even, definitely six to. I had to give it up in 14 I went fulltime. Cannabis. Got It. But before a fulltime cannabis, when you're kind of advising those institutional investors, what were they asking you?

Speaker 1: What were you telling me that. So what they basically wanted me to cover stocks for them. Uh, they were looking for new ideas, monitoring of those ideas. I did some process consulting with them as well, having worked for some large, uh, you know, that one, the first job in Houston was a $10,000,000,000 firm. So a lot of best practices, so I would go and, you know, people start doing things and they get set in their ways and they don't realize there's other ways. So I was that outsider and you'll appreciate this. I was also the uh, uh, the devil's advocate. I was the person that would come in there. I wasn't part of the firm. I can speak very freely. I wasn't, I'm not, I say whatever I want anyway. People love that or hate that about it and let the chips fall where they may.

Speaker 1: But that was a good thing because I could tell them, give them that honest feedback that a lot of people internal wouldn't want to do because it might risk their job or something like that. And from an organizational perspective, you know, hey, you guys are doing this, you guys have done this if you just did that. So I was doing that, but my, my main passion was really finding companies, uh, in the other 20 percent, right? No, no, but it was part of the 80 percent that not the process consultant on that, but literally finding a good, good company at a good price and explaining why and monitoring it. And I was like, I went up to Minneapolis and met with about 10 companies, did a road trip up there and I liked being an, a research analyst and so that part was really good.

Speaker 1: So the first cannabis company you found was, oh God. So that was a president's day weekend, February 19th I think, 2013. And just to, just so people know, people probably don't appreciate this. I love cannabis and I liked it in college. I hadn't touched in 25 years and I was so out of it. I didn't even know Colorado or Washington illegalized they weren't actually open but they had passed it. Sure. And I beat this article on seeking Alpha, which is all kind of coming together. And uh, and so, uh, I find out a, that cannabis has been legalized. It wasn't cannabis, of course it was marijuana. Nobody called it cannabis, no one and then a b that there were publicly traded companies. I was like, whoa. And they were in the OTC, which I really didn't know anything about, uh, and still probably don't. And then just probably better.

Speaker 1: No, I do unfortunately. But there's so much I don't know. And then, uh, and then three that these companies were absolutely terrible. So the first one was medical marijuana, 100. It's still absolutely terrible. Sure. But, so I had this big following and I started to write about it and of course not all people that were following me cared, but a lot did and a lot of new people. And this all led to my launching of a for 20 investors in September 2013. I, I've been encouraged by some people to start this cannabis only service. I was a little reluctant until, um, until, well first of all, a Sanjay Gupta did his reversal that I always, always on people. The movement really needs a mainstream thought leader to really push medical cannabis. And that was the first that I had seen her, that the first 50 episodes are filled with references to his first and how it impacted people.

Speaker 1: And I said, you know, nobody's ever going to believe in this industry until someone mainstream. So, but then at the same time I was saying, but you know, it doesn't matter if you're an entrepreneur and I was meeting these people, if you're an entrepreneur in Colorado or Washington, you don't know what to do now, you want to drive at 80 miles an hour, but there's this huge federal roadblocks. So Eric holder came out that same month. So those two things allow me to open in September. Yes, the rest is history. But before we get to the fact that it's history, let's talk about that moment in time. Meaning we've already spoken about. We were on the other side of the hill in the summer of 2014. Yep. What about those three quarters or two quarters even of runup, you know, what, what were you seeing a, you were finding, you know, you have a good example of a bad company.

Speaker 1: What else were you seeing? And what were you learning? So this, this is a very interesting time for me. I, I never was able to move stocks and I didn't want to move stocks. I've never had a problem with the sec or any sort of regulatory authority. And so what I noticed was that I had this power that is really kind of bothering. Okay. So that had this power that was bothering you? Yeah, because I wanted to tell people that this was a good company, but I didn't want it to just go up because I said it was a good company. It was a little bit of a conflict of interest for yourself, for myself, not an actual conflict of interest in a business sense. This is, you're battling your Id. Yeah. I, I've never bought a cannabis stock. This always surprises people. But uh, I do have some conflicts of interest, but that was just an internal one that was a totally understood.

Speaker 1: I did not want to be in that position of being that there's some people out there that are these gurus that, you know, they throw the Rolex was against the wall and they drive their lamborghinis and Ferrari. I never wanted to be that person. Right. And well I wasn't going to be that person anyway, but these people can really influence stocks and I know that's a dangerous thing. So I don't mind telling everybody to stocks tend to be great in a year and then we check back a year later and it's great, but if it's great that next hour, those kinds of things. So I was dealing with that. I was dealing with a lot of people coming into a. We had a. So you said the first few months we launched September 15th, 2013. By the end of the year there are 165 people. I've been running these other services that if I got 40 people I was lucky to already a hundred 65.

Speaker 1: We went to 2000 people on that run up. So when I went to Ncia there are probably 2000 subscribers and most of these people were there to make a quick buck and that was a really hard thing for me. And then when it started to get bad and I was. Everybody hated that. I was so cautious. I know it. I see my public writings, I know it's all recorded. I was very negative, but at the same time I'm like, if you're going to be in it, this is a better company than that. That was sort of like bite this company. So a lot of people's perceived as by this company. Whereas you were saying be careful, but this is, I'm seeing this, this is be very careful. People always said that. Be Very careful that nobody heard that. I would do surveys. I think I got survey monkey.

Speaker 1: Maybe that was in 15, but I started. I think I did some in 14 and I would do surveys and I would do a. How much of your net? I had a lot of good question. So one of them was, how much of your net worth is in cannabis penny stocks? And I had to put a category for greater than 100 percent. And you're probably going gonna look at me like what the. Yeah, yeah, they were on margin. They were buying these things on margin. And uh, so I, I always tell people don't want any more than 10 percent. That'd be like the most. Yeah. Know I have the surveys, there are people. It was an average of about 80 percent of their net worth, which is, which explains why these stumbles happened. We're on the Jieddo just precipitous the other side of the hill on the way down.

Speaker 1: And here comes Alan smiling and saying, Hey, I'm getting pretty good advice. Right? And everybody saying, well, wait a second. I know everybody likes to point their fingers. But yeah, it was interesting because when they would come in, I would see, you know, I mean it was literally, I had actually, I don't think it was an APP, but I would get like a cell phone with Dean for some reason. Yeah. Whenever somebody would subscribe. I don't remember how that happened, but I'm sitting at dinner and like 42 bucks a pop. Deemed dinner was just paid. The for is crazy. And uh, and so these were a lot of young people because I was serving, I knew that they were first time investors and you know, I saw that and it was hard for me. I was like, as an analyst, you're like, okay, all these people are willing to plunk down 42 bucks a month to learn.

Speaker 1: What does that say about the market? I know these stocks are silly and expensive, but if more people keep coming in. So the dynamic that I tell people to watch out for was that there would be supply because people that were other scammers would see these scammers having their stocks go up and they're like, well, we'll be a marijuana company. So all of a sudden we went from like 15 cannabis companies to I now track 550 and it just keeps, it's, I called them Amoeba. They'd be splitting and everywhere. So subscribers up stocks down. Not a lot of great options. Nope. When did that start? To change, you know, it was really a in 2015, I would say maybe, maybe even 2016 to be precise. And part of it, I know, you know the story was Canada. Yep. And I got lucky or smart. I don't care which.

Speaker 1: But it was right. I got on board Canada very early and there were several chances to make money in Canada. One was that first day after Trudeau was elected in 2015. October. Yep. And I had had a, a, a panel that I did at a conference in Denver on like October 14th of 2015. And there was nobody in that room. It was an impersonal embarrassment to me. I had all these ceos from Canada fly down for this conference and I, I told them, I don't know how many people will be there. It was worse than if I would have told a number it would have been worse than that. And nobody's in the room. Right. But the 10 or 15 people that were there, they wrote me a few weeks later, months later. Like, wow, Alan. That was awesome. I made so much money to, so that was maybe a little bit of luck, but they were having an election.

Speaker 1: Everybody knew that it wasn't a little bit of luck because this is kind of where you and I come together as far as our mindset. Both of us realized that Canada was happening yet. Whereas the United States wasn't federal in a very federal way. So that election that you mentioned, it was unexpected. That true, right. He was not expected to react, we suppose even if it's already was still good because that just ramped up the story that the medical story was good. It's already, there wasn't a right yet, but it was good and getting better. It was already fed federally mandated, you know, regulated market. Yep. So both of us are paying attention to it. You bring down these ceos, know about paying attention to them. When did that change in the, in the next summer. Really. And um, so there was a big rally after that and then a pause.

Speaker 1: And so a new cannabis ventures. Now I don't really tell the world by herself, you know, I just tried it. It's content, it's not analysis. Why did you make that switch? Because we're right around when you switched to. No, no, I do both. Okay. You still do that. Do both. When did you add new cannabis ventures? So I added it in September 2015. Aha. And it was after a failure. It got back to my original goal and some of the observations I shared with you. The real cannabis industry is different from the publicly traded stocks. How so? Uh, well, a lot of publicly traded stocks just aren't really cannabis companies. It's as simple as that. Still to this day, to this day that that number has increased, but so has the number of real companies. So we're still disproportionately unreal. Right. But uh, no, it's getting much better.

Speaker 1: I know you asked me and I will get back to that in a second, but this was in September of 15 and part of the, part of it was Canada. They got me excited and we get 40 percent of our traffic now from Canada. It's been a good thing for us as you should probably get more. Yeah, that was a real well, if we get American traffic, paying attention to keeping content. Yeah. But uh, that was part of what really inspired me to move forward. They're not just that bit. We, we were starting to see some better US companies, but on the private front things, things started to get better too. But honestly things were pretty slow until, uh, oh, well there's some technological things hat our app has been very good at helping us. We're number one in Google on cannabis, a not a cannabis apps but on cannabis invest some sort.

Speaker 1: I don't even go. I'm not an APP person. 40,000 people downloaded our app in like $20,000 a month using it right now. So that's helped us google news. There's a lot of things that have helped us and so that's become a big thing that we don't focus just on the public markets. We were really focused on our private companies as well. How does that square with the folks that are coming to you for private? For Public Information? Yeah, so I have my service and that's where I give my advice and analysis and that's more than just me. There's a forums and ways for people to communicate with one another or a commenting, things like that. Uh, so, so I do try to keep new cannabis ventures to be a lot, almost no, uh, like telling people this is a good stock. It's just not what it's about.

Speaker 1: So this is good information and I'll tell you the secret. I've been at this conference for two, two and a half days now and like every time I get out, people come up to you, I love what you're doing. I love and they always told me two reasons. One, then I'm a filter and I saved them time. There's so much information out there and they're able to get time. But here's the other thing, and this is what I love. He said, you know what? I like Alan, I liked that you're willing to call people out. That's it. And so, you know, and I, as a business person, I could just be a glad hand or not calling anybody out and just get paid by advertisers. Mr Ray is things great. This is great. Invest by our buy these stocks. So I went out a lot of people and when, whenever I see a post from you or whatever it is, you can hear your voice.

Speaker 1: Well it's in the title for sure, but the way that you're looking at it, you're like way to say, here's what actually is the deal here. Uh, and you don't pull any punches a. When do you think you learned that? When did that actually goes back to that 2013 thing? I, you know, I started off in a lot of people forgot about it, right? I was getting a lot of fingers pointed at me when people were losing money. Other people were thanking me, telling me they bought a new house, new cars, all that. And I, I never got credit for that. That was you. But, uh, uh, I didn't want to take that blame either. But the lesson I learned was to be very careful about your messaging and I know what my message was, it's in writing and uh, but I, I probably could've done a better job being even more explicit.

Speaker 1: Yeah. Which is why you're so explicit now. It gets back to that. So I want to be very careful in there are a lot of people that aren't savvy with investing that loved this, this theme or this topic and they're just right to get ripped off. And I want to make sure that doesn't happen. I'm a voice as best as you can. I can't take responsibility, but I want to make sure people realize it's not all gate. And I hear some terrible stories. Uh, you know, we talked about can labs and Jen Maria, but for every one of those, there's a dozen more. And they even happen in the private market. I mean, somebody was just telling me the other day, this horrible story. And in cannabis it can be really tough because it's federally illegal and bankruptcy is not an option. There's all sorts of things that investors need to be doubly careful for it.

Speaker 1: And uh, so yeah, I'd say that that was one of the big lessons and why I really try to stay really balanced right now, but I'll always be skeptical, uh, as well you should be. Yup. We're in the second quarter of 2017 when we're recording this. As you look at the second half of 2017, give us a kind of, you know, state of where we are as far as investment. Investing. Investing is interesting. It's changed a lot. Institutional investors as you know, are certainly interested, if not actually writing checks. It's easier to write a check in silicon valley for a technology play or maybe for a real estate play short than it is for the cultivation in dispensing or even some of the other ancillary place. Uh, but that this is improving a lot and I'm encouraged a capital flows are getting better. Uh, there's this very interesting dynamic where a lot of money was made in Canada through the licensed producers up their investments and it's being recycled and I don't know if it's the same money, but it's the same brokers in a lot of ways that they want to go after the United States.

Speaker 1: And so I think one of the big changes I'm starting to see despite the overhang of, of sessions, I'd say trump, but it's really sessions and uh, you know, things were going really well until then and there is a big overhang. It doesn't appear at this conference. I don't hear anybody. Uh, this is the first conference I've been at the United States since trump was elected and I don't see, this is a bunch of happy people that are moving forward. I keep on bringing up to anyone that will listen to me that it's now, I think two or three days ago that the letter came out from Jeff sessions to Congress saying, can you resend the Rohrabacher Farr? What will be the world record blumenauer? Um, you know, amendment. That's terrible if it were to happen indeed. But that tells us explicitly where his mind is. We've been looking for, you know, oh, we had this meeting with Hickenlooper and everything should be fine.

Speaker 1: Yeah. We've been looking for these little kind of his. Yeah, that's explicit. Right. That's directly know what he wants. That's the most federal thing that we have. That's an actual law as opposed to the whole memos that are not. Those aren't. Those are just guidance. Right. So that's terrible. But I don't think it's going to happen. So fair enough. You may not even be around. Actually by the time people are listening to this, he may not be around, but just, I, I'm going to bet you on that. You will be around. Oh yeah. Oh, this is going to be for awhile. I thought if you get caught lying that you're gone. I don't. I don't think so. I don't think that's how that goes. Marijuana politics better overlap. So when I look out, I think that this, this overhang, it's still, it's an overhang. Some of the people that are, uh, that might have been invested in cultivation.

Speaker 1: Think twice now because you know if you have a lot of money then you have a lot of money to lose if it fell through forfeiture or imprisonment. Yeah. These people don't want that, so we do have a little bit of overhang, but at the same time we're seeing a lot of capital coming from Canada. Yup. Point into the cultivation and dispensing retail space. That is a big change in, in full disclosure, we have a couple of clients that are publicly traded at new caymus vineyards that are taking advantage of that. I'm hearing other one's on the way as well, and this is, you know, I have mixed feelings about it. I at the same time as I would say, doesn't this suck that the money has to be raised in Canada or the United Kingdom, United Arab Emirates, all these other places when all I hear from people all the time in United States that would like to invest.

Speaker 1: So this whole thing is it's, it's sad, but at the same time, isn't it great that entrepreneurs here can pursue their dreams and get capital from somewhere? Absolutely easy as it is. Yeah, absolutely, and I'm with you right there. What are your, you know, that's kind of 2017. What about long range once we have legal cannabis in Canada, legal cannabis in Mexico, uh, and other, um, you know, and medical markets in many other countries, Germany being a big indeed in Australia. And what are your thoughts on all of this money being put into indoor grows where once it's a global market yet we're probably not going to be grown a ton of cannabis in Missouri. Yeah, I think a couple things on that. First of all, I'm pretty pessimistic federal legalization that for us it's gonna be awhile and a lot of people think we're at a tipping point because x number of states, it doesn't work that way.

Speaker 1: So that's the first point. The second point I'd say is you do raise a good point that at some point in time, uh, Columbia could be your producer. You could be or accidentally basically these big Canadian companies that are really refining how to grow and scale. They can come get a license in the United States and blow away the existing competition. I've talked about another big threat and I'm trying to remember what the is called, but there are companies that are doing, it's called biosynthesis. I've written about this a few times and nobody's talking about this, but it's the ability to to grow canabinoids biologically. So not synthetically, but biologically through other things like sugars. I'm trying to remember what the humans do. There's a lot of different processes. We create cannabinoids. Now, the real value to that is not necessarily to create thc and cbd, but to create some of the ones that are expressed much less frequently.

Speaker 1: Right? So, but this is a technology. There's several companies that have gotten funded to A. Tara has put money into a company down in Florida. I'm blanking out on the name. They changed their name. I'll remember in a minute. You enrolled, right? But this is a very, uh, there have been companies that have gotten small business grants, a libra day out of California that are pursuing this technology. Isn't there? But think about this. If you can set up a factory, you don't need to grow all these plants and you can get standardized uniform extracts in expressing all these different cannabinoids and you can add turpines and get, get, uh, you can basically recreate and it's not synthetic that may be a huge risk to people that are plunking down millions for these grows. Absolutely. And, and, and think about this, what you're talking about is not a schedule one drug for instance.

Speaker 1: Yep. And think about this, uh, the industry for a lot of reasons is move towards edibles and I'm not sure. I think a lot of that is distorted because of the rules against social use. Yep. So, but there's other reasons. That's one part of the other thing is there were no edibles and then there were some that we've always had flowers, you know, so, so, but if you think about the way the world's headed flower high end flower always be there, but people are getting much more comfortable with edibles and extracts and various forums and you can use this bio synthetically produced extracts to make shatter or to put into edibles. So I'm talking about the hypergrowth by the way, Bob, with you generally. So that's, I think it's a big risk even without federal legalization, just that you have new ways to create cannabinoids.

Speaker 1: They could lower the cost of production dramatically and just put all these grows out of business for a lot of reasons. It's not everybody likes to say it's so easy to grow cannabis, which may be true. I'm not for me. I tried once, but yeah, no, it's not easy and they have plug and play. So yeah, maybe you can pay your $2,000 from leaf. There's a plug for the shorter get your cannabis. You're still good luck. Twelve ounces a year. How much time are you spending on that plant? That does come out okay. Exactly. But to do scale, that's a whole different. Absolutely. And even the best scale look what's going on in Canada. Like there's been cheating up there where people were spraying Michael Butanol to make it work, which isn't illegal and not the way it's supposed to work. Right? These are large scale facility.

Speaker 1: It happens in California all the time. Uh, the big grows here, they're spraying stuff and that's the truth of that's coming out. So if you could grow it in a, in a, in a biotech type of process where there's no, you know, all those problems that come with growing cannabis and get around that, watch out, watch out. So those are some things to pay attention to, right? Um, last things last a, if I'm listening to you and I've got a dollar in my hand before investing, what are, what's at least one thing I should think, or one thing I should do? I tell people all the time. So the first thing, uh, if it's a public company, it's a private company, think really hard because you may never see that money again, but at the chance that you'll never see that money. But if you're a public company, the first thing I say is, is it a, does it file with the SEC?

Speaker 1: People are often surprised to hear that there are a bunch of OTC stocks, penny stocks that do not file with the SEC. And I say that's a red flag. I mean, yes, it's a giant red flag. There's evidence that people can make money trading these stocks or maybe one of them will work out and they're not total liars, but I doubt it. So that's the first thing. The second thing I would say is a, and I know you'll appreciate this, is really get to know the management team because that's what any stock is about, especially in a new industry, a meeting people that you've interviewed before and listening to all the crap they've had to go through because the rules change and all that. You want to bet on people that know how to adjust their business plan, adjust to changing rules and all that.

Speaker 1: So those are, that's really the first thing. And then there's a whole bunch of other things. Sure. Reading the filings is an important thing. Understanding the capital structure. That's probably the next thing I will tell you because, uh, for your listeners that are interested in penny stocks, the number one downfall is a bad capital structure. Very simply, uh, they issue convertible notes without a floor, meaning that, uh, uh, the company borrows money and they agreed to pay it back with stock, not with money and that stock price. It's whatever. The stock prices, that's how many shares they have to give so that everybody's incentivized to see the stock price go down. And that's the penny stock scam right there. There you go. And the only people that make money in penny stocks are these people that the issue, the convertible notes. So, so that's what I would tell you.

Speaker 1: Don't buy into those types of help. Keep that in mind. There you go. I mean, you know, it's as simple as if you're looking at a company and you go to their website and there's no about us page with people. I do that all day for private and public. If there's no people on the about us page, that's probably say goodbye. Yep. Especially in this day and age, maybe a few years ago, people might have had some sort of reason to be a low key, but I think anymore, not anymore. No. Especially if you're a publicly traded companies. I'm on, you know, public and so the three final questions I've got for you, I'll tell you what they are. I'll ask you them in order. What has most surprised you in cannabis? What has most surprised you in life? And then on the soundtrack of your life, one track, one song that's got to be on there.

Speaker 1: First things first though. Yes. You know, you're an old investment guy. You know, you're there in college reading the Wall Street Journal and looking up and down. I remember the stocks that used to come out in the paper. I had to wait the next day looking, waiting. What happened? What's most surprised you in cannabis? In Cannabis? What's most surprised me? I think, uh, I've been going to sound really weird, but I've seen it. What's most surprising is how quickly it's becoming a great industry for women in a lot of ways. I've met the most incredible female leaders and it's not as good as it needs to be in. Some people look at it as glass half empty. The numbers I see like 32 percent of the executives are women. Some say, oh, that's way too low, but if you know anything about leadership, that's actually a big number and it's not just the numbers, it's these people.

Speaker 1: Uh, I've been really impressed. So I'd say that's half of that. The other part is just how many. I always grew up thinking cannabis wasn't. Cannabis is marijuana, was a men's thing and everybody knows the young stoner type and no, it's now soccer moms and all sorts of different. Even people. I'm past soccer mom, agent in the fifties and sixties. Yeah, I went into harbor side. I just got my medical card, went into harbor side. I look around. I'm the youngest guy in there. It was incredible. So that has surprised me just how great it is for women not only in leadership but also as a consumer, products being created for them. Uh, all sorts of things like that. The only thing I'll check you on, as you said, you always thought that a cannabis was a, a dude's thing for me in high school and college.

Speaker 1: The women always had the best. Uh, cannabis. Oh, without question. All right. This is just, probably might not knowing stuff, not knowing stuff. Exactly. You've proven that you don't know anything in the past. Uh, whatever it is. Thirty five, 45 minutes. What's most surprised you in life? Oh, okay. Well that's a tough one. I know. I knew your third question. I had to give that one a lot of thought to be fair that I did not remember these other questions. So what has most surprised me in life is I didn't think I'd ever get married or have kids. I had no desire to do either. And I think what's most surprised you in life was coming to realize how stupid that was. So that's really the best thing about my life. Yeah. Sorry, go ahead. Well, I've been married for 27 years. I didn't want to have kids.

Speaker 1: I have two great kids and I can't complain about that at all. So that's been a big surprise because young allen was not interested in those things. And you said you didn't even want to go back to Houston. It sounds like she said, we're going back to Houston. No, she didn't. It just worked out that way. I knew she wanted to go in. That probably influenced why that job looked even better, but yeah, I'd say especially in any of your young listeners, I don't know what your demographics are. I know my demographics of 14 investor, the average person is probably about 55 years old, which is kind of surprising to me. I don't know your demographics, but if you have some younger people out there and we kind of touched us, you don't know anything when you're that age and it's really hard for me to explain this to people because I was that age.

Speaker 1: I remember not knowing anything. I can look back now and like, you know, I wouldn't have ever been married had I listened to myself. And you think the opposite. It's the inverse of how much you know and how much you think you know now. Now I've gotten much more humble. I know more, but I know I don't know more that same time. I'm right there with you on the soundtrack of your life. One track, one song. That's got to be that. This one was really hard, but I'm going to come up with just the way my life has been recently in because I love Queen and I love David Bowie under pressure. I have very long days. I'm running two different jobs with different constraints. Sometimes I feel like there's a water hydrant just spraying at me. Other times it can be a little bit boring, but I'd say under pressure, just got to get along, get along, get along, right? Yep. Alan Braunstein. Thank you so much. My pleasure.

Speaker 2: And there you have Alan Braunstein really insisting that you pay attention to his tone and to what he's saying and to how he's offering that insight. So very much appreciated sitting down with Allen and really kind of getting to understand what's behind the way that he thinks. So thanks to him. Thanks to you. Stay tuned.

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Cannabis Economy is a real-time history of legal cannabis. We chronicle how personal and industry histories have combined to provide our current reality.