The Distillery: Learn Something New This Weekend

We’ve got a full slate of content for you to get caught up on from this week. What’s the latest on cannabis legalization? Does beating inflation mean investing in near-zero-debt companies? What’s going on in Japanese and Chinese markets?

From Teacher to Policeman to… Cannabis Investor?

Kyle Kazan, founder, and CEO of Glass House Brands, gets granular with Real Vision’s Maggie Lake on the commercial, legislative, and practical challenges facing the cannabis industry. A former teacher and a former police officer, Kazan’s backstory — including the personal experiences that made him favor legalization and set him on an unconventional career path — is compelling.

Legalization:?Kyle talks about why legislation has been difficult to pass through Congress and what the chances of federal legalization are.

• “We’re not going to get this legalized before the midterms. We’re going to have to see what the dynamic of Congress is after the midterms to see if legalization is possible.”

Bear market:?Kyle talks about playing the long game when investing in cannabis.

• “If you are a value investor, like Warren Buffett from the Ben Graham mold, and not trying to catch the bottom, per se, but say to yourself, ‘I know I have a good value here.’”

Is This the Best Way to Beat Inflation??

James Davolos, portfolio manager at Horizon Kinetics, is deploying a “hard-asset, capital-light” strategy focused on businesses that don’t tie up a lot of working capital or use debt to finance their operations. As Davolos sees it, with capital-light businesses there’s no need to time market entries or exits. In this interview with Stephen Clapham, founder of Behind the Balance Sheet, Davolos explains the philosophy behind the Horizon Kinetics Inflation Beneficiaries ETF.

?Flexibility:?James explains the process and benefits of being able to reduce a company’s debt in a short period of time.

• “Glencore is in such a unique position right now where they can de-lever the entire company this year.”

COGS:?James notes that companies can raise their prices to deal with inflation, but if the cost of goods sold rises faster, many companies will not be able to manage it.

• “A lot of margin pressure coming to those companies can theoretically move the top line, but if the bottom line moves with it, you are actually treading water or below it.”

Is Japan a Better Bet Than China??

David Salem, of TIFF Investment Management, and Mission Value Partners President Andrew McDermott make a compelling case that investors should give Japanese equities a fresh look.

?Warren:?Andrew talks about Warren Buffett and Berkshire Hathaway’s investments in Japanese equities over the past decade.

• “Mr. Buffett has gone from dismissing the whole country based on the numbers, and I think, for good reason, to making a controlling investment around 2010 or 2011 that's worked out very well.”

Rhyming history?:?Andrew recounts how Japan’s markets peaked in 1989 in an asset bubble. He explains how China could encounter a similar fate.

• “The same people who are assuring us that there is no risk of permanent capital loss in China are, well… their predecessors said exactly the same thing about Japan in 1989.”

Here is a chart from the week that made us think, “wait a sec.”?

Real Vision Essential

Amir Adnani explains why a uranium supply shortage will drive prices higher. “We spent a decade maintaining the art and science of building nuclear reactors, the demand for uranium and we kept adding them to the grid. But in the last decade, there wasn’t a single new uranium mine built.”

We’ll leave you with this quote:?“The best way to protect an asset is with systems that self-organize and self-execute behaviors which function as protective to the asset.”?~?Hendrith Smith