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GameStop saga is just ‘noise’ in terms of the broader market: AdvisorShares Investments CEO

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AdvisorShares Investments Founder and CEO Noah Hamman joins Yahoo Finance Live to discuss the latest market action as GameStop renews its surge.

Video Transcript

AKIKO FUJITA: Let's bring in Noah Hamman, AdvisorShares Investment Founder and CEO. Noah, I know you've been sitting through that interview listening to the regulatory side of things, but of course, you have been looking at the markets. I think a lot of investors sort of just taking a deep breath on this Friday given what has played out. What do you make of the dynamics that have played out, and more importantly, how has that shifted your thinking on your portfolio?

NOAH HAMMAN: It's a good question. I'm probably not too worried about what's going on with Reddit and GameStop. I think these things ebb and flow over time, and I think, relative to people who have portfolios that are investing for longer terms, it's kind of noise at this point. I do think, in part, what you see going on is just a function of, you know, the world moving faster than the regulatory rules can catch up with.

We run into this in our business model as well. There's a lot of rules that just aren't very internet adaptable, and the regulators are moving closer to more flexibility, but it just takes some time to get there. But I do think transparency is the key, both on the institutional side and on the retail side. But for us, it feels like it's a little bit of a continuation of 2020, right? But just part two.

And so the message we're putting out is, there's risk ahead. We are at mark-- all time highs in the market in the middle of a global pandemic with new strains and possibly taxes going up and more stimulus. We're just telling investors to protect themselves, not from, again, what's happened in the last couple of days, but really mindshift changes in the market, even though we think the market can still continue to go up. If the Fed's going to continue with an easing type of an approach, more liquidity in the market, we just would recommend looking at tactical managers or having some downside protection in your portfolio in case things move very quickly the other way.

ZACK GUZMAN: Yeah, and Noah, I mean, we saw the VIX spike here, obviously volatility this week, saw something that we haven't seen in quite some time. But when you think about extending it to where we go from here, it's interesting to think about, you know, the vaccine updates we got, and we're going to get into those in a little bit here in the show. But had we not had to deal with this GameStop and AMC news this week and kind of the market functioning questions, you'd imagine that it would justify why we're at where we're at in terms of the overall market. But when you think about the systemic risks here that underlie, you know, an exchange dealing with what sounds like a liquidity problem, we're going to get into that later, but how much does that maybe spill over into the entire market when you think back to '08 when it sounded like things were contained in one individual bank but then very quickly became a systemic problem?

NOAH HAMMAN: Right, I feel like it doesn't rise to that, right? I feel like what you have is a lot of new investors coming in to what's a very complicated environment between the various rules and regulations, whether it's SEC rules, The '33 Act, The Exchange Act, the FINRA rules and regulations, the brokers own service policy. I mean, remember, we've seen people kicked off, you know, Amazon Web Services and off of Twitter, because companies do have guidelines as to what they will and won't do. And so people are just kind of discovering that now with online trading. And so to me, it's not unusual.

You look at the gambling space, right? They don't have to take every bet that comes in or they have different odds or they'll change the odds on you. Understanding the environment that you're operating in and the rules and the regs associated with it is critical. So right now, this feels just like growing pains for getting new investors in the space, which I actually think is a really good thing, but it's going to be a little bit of a rocky road. But system-wide, I don't feel like it rises to the level of financial crisis by any means.

AKIKO FUJITA: And beyond the discussion of Reddit and the trades this week, there are, of course, three areas that you've been focused on aside from that that you think are real growth opportunities. Walk me through your thesis on cannabis. That's something we talk about a lot on this show, but it sounds like you're quite bullish given potentially the regulatory framework that could change.

NOAH HAMMAN: Yes, you know, very much so. You know, we saw that with, you know, now a Democratic controlled, you know, Congress and Senate, certainly what Biden and Harris have said about their willingness to open up some of the rules and regs and maybe right some wrongs in our history around that. So we think it's a good opportunity, particularly in the US marketplace. Often when people are talking about cannabis stocks, they're mentioning those big Canadian companies and you know, they've done well, and then had some trouble, and then done well. But really, if you're looking at the opportunity in the US, we think it's going to be a slow to change, right, with regulatory rules. Maybe it's not legalization, but it's decriminalization.

But you think about the US companies, US-focused companies, that are operating legally in the states that they're in, that we see as a decade, you know, multi maybe decade long opportunities. So you've got companies like a, you know, a Cresco Labs or a TerrAscend or a Green Thumb, these are outstanding profitable companies operating legally in their state. And with the regulatory changes we see ahead, this isn't a one week or a one month type of trade, we see this as, regardless of where the markets might go, these are going to be good stocks to have into your portfolio in a reasonable amount, but these US multi-state operators we think are a strong opportunity.