Wednesday House Cleaning

cash cleaning

Volatility is the name of the game so far in 2015 and today was no different. The U.S. dollar’s strength continued today, which is becoming a headwind for global economies. This strength sounds like the case of too much too fast or too much of a good thing. The Federal Open Market Committee’s statement today added to fluctuations from currencies, fixed income and equities. Stocks did not cheer the FOMC comments as the S&P 500 sold off into the close with a decline of 1.36% to 2,002.

Cannabis stocks were mostly quiet today. Volume is becoming quite challenging as recent actions by the U.S. Treasury Department may take a big bite out of OTC PINK companies. The cannabis market has been drifting lower after the early lift at the start of the year. Today’s action seemed skewed to the negative with many PINK sheet companies declining.

Daily Positive: Oppenheimer fined $20 million for AML failures in penny stock trades. See below for why this is a positive in our view.

Daily Negative: Capital destruction continued today, as several low quality companies declined. Most notably, FITX fell by approximately 20% on more news revealing the scam that is this company. We are happy to see their power diminish, but we do not cheer investors getting hurt by bad people.

With regards to the Oppenheimer fine, we are happy to see regulators clamping down on bad behavior and potentially achieving some much needed house cleaning. We believe this could have a big impact on the OTC markets in general, and specifically the PINK companies. Abuse, manipulation, pump and dump are all the most prevalent in this part of the market. This penalty could significantly reduce the volumes of PINKs, which could cause many names to disappear. We would be very happy to see PINKs be removed altogether, as they are not actual public companies in our view and have been the key place for bad actors to make their money.

 

The discussion above is provided for informational purposes only and does not constitute an offer of, or solicitation for, any investment services or products offered by the author. The author is not making any investment recommendations and the opinions above do not constitute investment advice. Reference to above indices [and companies] is based on information provided by sources the author believes to be credible. Investing in the cannabis industry, as with other industries, presents certain risks including the risk of loss on an investment.

Morgan is a Founding Partner and Managing Director of Poseidon Asset Management. He is the Chief Investor of their Cannabis Focused Fund. Morgan previously worked for a privately owned Registered Investment Adviser and earlier was at UBS Financial Services focusing on wealth management. Morgan believes in the potential of the cannabis industry and likes having an active involvement as it develops. You can follow him on Twitter @PoseidonAsset.

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