Ross Gerber, Gerber Kawasaki CEO joins the Yahoo Finance Live panel to discuss the market outlook after Wall Street’s strong start to the week, Gamestop sags and the cannabis outlook as Senate Democrats say consideration of cannabis reforms will be a priority.
ZACK GUZMAN: I also want to spotlight what we opened with here in our first hour, a discussion with Congressman Ed Perlmutter, who was the coauthor of the Safe Banking Act, which had previously passed in the House. Really that effort to really let the cannabis sector start to access traditional banking, which has been something they've been locked out of due to federal laws in this country around marijuana.
But interesting to hear new Senate Majority Leader Chuck Schumer joining the forces of Senator Cory Booker and Senator Wyden in an effort to push for more progressive marijuana reforms. We heard from that joint statement that they would be pushing for some more progressive things earlier in the year, not just tying it to federal-level legalization but also some of those expungements and equality we've seen in the way that the racial impact of America's drug war has been very different across racial lines.
I also want to spotlight what we heard though from Congressman Perlmutter on the efforts to push that Safe Banking Act in the next stimulus bill here that we might see come through shortly. Here's what Congressman Perlmutter had to say on the new cannabis reform efforts.
ED PERLMUTTER: So we really need to get the federal laws lined up with the state laws, and we've got to align the laws because banking laws are generally under the federal umbrella and the banking laws. It's difficult for some cannabis companies and cannabis-related businesses to have legitimate banking relationships. So we want to get that part straightened out. And then there has to be some criminal-justice reform attached to that as well.
ZACK GUZMAN: All right, let's bring on our next guest here who has increasingly looked at the cannabis sector as a potential investment theme here in 2021. Want to bring on Ross Gerber, a friend of the show. Gerber Kawasaki CEO joins us now.
And, Ross, I mean, we spoke with Trulieve CEO Kim Rivers before Congressman Perlmutter a few weeks ago, and she had stressed that she expected the Safe Banking Act to be roped into the next round of stimulus here. You heard the congressman speaking. How big of an impact would that be for the overall sector?
ROSS GERBER: Well, I just want to also clarify what you said. We are heavily invested in cannabis right now. I am all in. I am pounding the table that this is one of the greatest opportunities for investors right now that I have seen in a long time in a nontech business.
So what is about to happen is just huge. It's a momentous moment for people who have been fighting for legalization and social justice on this cause, and what we're seeing is now a sea-change move and a huge opportunity for investors.
ZACK GUZMAN: I'm glad you pound the table on that one, Ross, because you know I cover cannabis here for us on--
ROSS GERBER: Oh, it's ridiculously good.
ZACK GUZMAN: Well, talk to me about why you think it's so good because I know the reform fronts there, but I think a lot of people might not realize some of the smaller US operators here since they're not listed on major exchanges. You may not know--
ROSS GERBER: That's right.
ZACK GUZMAN: --you know, the fundamentals and the economics behind the thesis.
ROSS GERBER: Right. Since we're talking about social justice and social equity, well, it's kind of absurd that Americans can't buy American cannabis companies. It's unbelievable you can't trade these stocks on Robinhood and other platforms. You can on some and not on others, and they all trade in Canada.
So here we have one of the most amazing growing industries in America that's all listed in Canada, which is the stupidest thing I've ever heard. OK, so many investors just can't even participate, OK, number one.
Number two, we have states like New Jersey that legalize cannabis, and they just can't get the laws straight right now, and they've arrested 55 people for cannabis. And I'd love to see the pictures of the people they arrested because I guarantee you that it is a complete travesty what's happening in New Jersey right now, that they're literally arresting kids for this and ruining their lives.
We must expunge people's records. We must make this something that we wrap our arms around and make right because cannabis laws are Jim Crow laws. They are Jim Crow laws used to oppress people, and I'm tired of it. Enough is enough. It's legal in most states now. It's a harmless drug that people use to sleep and enjoy themselves, and it's time that we legalize this and give investors an opportunity to participate as well.
AKIKO FUJITA: Ross, we love to have you on the show because you know when you put your money behind something, you are passionate about the investment.
ROSS GERBER: I put a lot of money in this, yeah.
AKIKO FUJITA: I wonder if we can go a little macro here because you heard the conversation last week on what was happening around GameStop, and a number of guests who came out and said, look, this is no different than the speculative behavior we saw around the cannabis space years ago. So walk me through your thesis. Why is this time different if the federal legislation isn't set yet?
ROSS GERBER: Well, this time's different. I call it the Tilray on Yom Kippur move. I was at temple. I was in temple and Tilray was going nuts, and I had vowed not to look at the stock market or God would be unhappy, and I didn't. So yeah, we've seen these kind of speculations often, so I don't see the GameStop thing as that unique.
But that being said, you know, moving forward, a lot of times when industries start out, they get this big boom, kind of like Bitcoin too where everybody gets excited about it but it's not ready for prime time yet. And so cannabis wasn't ready for prime time in the first boom, and now it's shaken out all the weak players, all the corrupt guys, all the poorly run businesses. And what we have left are some incredibly good, well-run businesses. Like you mentioned Trulieve and Kim. She's just an incredibly good operator. What a great business, Trulieve.
And then I'm working with the people at TerrAscend and Planet 13, other great operators that I've dealt with personally. I think management's great, and the opportunity's insanely good. So it would be nice if these stocks trade in the US and everybody could participate, and I see that as a social-equity issue too, kind of what all the kids are complaining about. Like here's this great opportunity that kids can totally understand and should be able to invest in, and most of them can't.
So we see cannabis this time being different because it's matured and grown into a space, kind of like Bitcoin where now it's really ready to move to the next level as a major industry.
ZACK GUZMAN: Yeah, let me also add this too because, you know, we talk about the profitability here of the US operators versus those in Canada, but also, you know, plays to play it. We were shown the MSOS ticker, the ETF there that includes a lot of the multistate operators. That's one way.
ROSS GERBER: Right.
ZACK GUZMAN: But when we look at--
ROSS GERBER: It's the best way I think.
ZACK GUZMAN: --the broader volatility-- when we look at the broader volatility, we saw MSOS and some of these other US multistate operators take a hit because they had run up quite a bit, I guess, to start the year. But what do you make of maybe how these names will trade relative to the broader market if we do hit another air pocket here or maybe if it just continues? Today could just be a one-day salvage, I guess, in the broader market.
ROSS GERBER: No, I mean, I've become a bull again. I think, you know, the Biden and future-- the Biden future for America is super bullish, and we're making strides against coronavirus. And I think by the end of the year, we'll have a much better life. And as you move forward, the pent-up demand is enormous, and cannabis is a huge winner in the pandemic because many, many people have been using cannabis to get through the pandemic. And I'm not going to lie. It's been pretty helpful.
So, you know, I think what we're seeing is the beginning of a boom for these businesses as they become legitimized through federal legislation, which I see happening in the short term. But I think also these are straightforward businesses too. It's not a complicated thing running a cannabis dispensary, and it's a retail operation. It's great for the economy as well at job creation on all economic levels.
So we just see this as one of the greatest opportunities over the next 5 to 10 years. But the volatility is going to be there.
AKIKO FUJITA: Ross, we've been focused on the cannabis space, but I know you have a lot to say about what has been playing out with the Reddit trade, the retail investors that are getting into the market. What do you make of the run-up we saw last week and the significant pullback we're seeing today? Is this an unwind, or is this the beginning of more volatility that has been injected because so many retail traders have come into the market?
ROSS GERBER: Well, I think what we saw was mostly a byproduct of a poorly, poorly run business called Robinhood where they've allowed enormous levels of margin and speculation to manipulate markets and create a lot of, I would say, systemic risk in the system, which was then rectified by the clearinghouses which decided they weren't going to let Robinhood destroy the system through absurd levels of risk, you know, sort of AIG style.
So actually what we saw was the market worked very, very well. It determined that Robinhood was a poor actor and then limited its ability to create chaos, and that's why we're seeing the market come back this week is because the market was very concerned about what the systemic risks of allowing Robinhood nightmare trading to continue unchecked.
And so this is a very healthy check. I don't-- I think it shows that markets work pretty well, and the GameStop trading to me is legit. They caught a bunch of naked short sellers real naked, and they killed them, and the stock will move back to fair value eventually, what all stocks do so.
So I think I typed it this morning. You know, like, earnings is the gravity that brings all stocks back, you know? And GameStop has to report earnings, and they're not that good. So, you know, I would avoid GameStop at all costs if I was an investor.
ZACK GUZMAN: Yeah, I'm glad you-- I'm glad you mentioned earnings because we continue to get the updates there from a lot of companies. We got obviously a few more updates this morning. And generally the theme seems to be right now you're seeing beats but not necessarily pops that also come off of that, which I guess would maybe, you know, signal that right now-- don't know if we're trading at fair value. We've been talking a lot about valuation for the broader market.
But when you look at maybe some of the catalysts here, I know you say you're a bull. You're a believer in where we go from here. But on the stimulus front, I guess that would be the next catalyst here. So how do you see that shaking out and what it means for what moves we could see?
ROSS GERBER: Yeah, I think you're hitting it on the nose. I think markets anticipate-- had anticipated the results that we're getting, and they're in line with what the market had anticipated, which were very positive by the P/E ratio of the market and the growth we've seen in the stock market. So the market's very highly valued right now, so expecting, like, huge pops I think is a little bit unrealistic because we've already seen the growth, and now we're getting the confirmation from the earnings reports that that growth was warranted.
So really the market's saying, what's next? You know, where do we go from here? And stimulus is a big part of it. We've created a country where the government, you know, taxes you and then just gives you free money, and nobody seems to care. And rates are low, so nobody seems to care. So, of course, if they have any stimulus at all-- I mean, most people in America are actually employed. They're just going to spend that money or invest that money, and it's going to be bullish.
But it's bearish long term because we have to pay for it. And as much as everybody is really happy right now, the biggest risk we see is inflation. Inflation is coming back at the end of the year. When this economy opens up, it's going to be a floodgate of spending. I mean, just trying to take a trip to Hawaii is going to cost you a fortune.
So I think the boogeyman is going to be higher rates and inflation that we're going to see when we actually do have the economy come back. But right now I think we're in a sweet spot between too much growth and too little growth, and there's an opportunity in here for investors. That might get more difficult as things get better.