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The Daily Alpha: Bill Ackman’s Blues, All-Cash in Marijuana, “and, You Went to Harvard?”

The Daily Alpha: Bill Ackman’s Blues, All-Cash in Marijuana, “and, You Went to Harvard?”

Garrett Baldwin



"As you would expect, we will fully cooperate with the committee's requests."

Over at FinAlternatives, news breaks that U.S. legislators have asked Pershing Square founder William Ackman for information about drug price hikes in the pharmaceutical industry. The investigation is tied to his large stake in Canadian drug company Valeant Pharmaceuticals, which has been facing more-and-more problems it seems each day.

Ackman's Pershing Square Holdings fund is down 25% so far in 2016, largely due to the sizeable stake in Valeant.

The drug company’s stock is off nearly 70% on the year.

Ackman wrote a letter pledging his cooperation with Congress.

“Investors are acutely aware of the need to diversify their portfolios in the search for yield.”

It’s becoming a damn good time to be in private equity.

The Financial Times explains that institutional investors are set to unleash a wave of capital on the industry; however, concerns about transparency are preventing it from reaching its full potential.

A survey by State Street Research shows that 59% of such investors want more exposure and plan to commit more capital to PE over the next five years.

The CEO of Create Research goes on to explain that private equity is set “deliver returns of around 9%.” That’s roughly twice the return for stocks and three times the return on bonds.

However, a rising number of investors are worried about transparency, which is leading to roughly 28% of institutional investors to decrease their allocation.

“We don’t truly think we’ll see a solution unless there’s a federal solution.”

One could make the case that the bigger story about marijuana investment is the fact that legal weed could be a $1.1 billion industry in Massachusetts alone by 2020. The Deep Blue state could use the tax revenue, and voters are set to decide the legality issue very soon.

But the more intriguing – and very frustrating story about weed – is taking place out in Denver, Colorado, where voters have already approved legal cannabis.

The Albuquerque Journal profiles Tim Cullen, a “Potrenpreneur “ who made millions of dollars last year, but still can’t open a bank account for his business.

Why?

Because the U.S. government bans banks and credit unions from taking any money tied to marijuana.

Naturally, this creates massive headaches for Cullen and businesses like his who are also unable to gain access to loans and makes the industry an all-cash business. No credit cards, no debit cards, and – naturally – a serious need for security and cash-hauling operations.

There have been more than 200 burglaries at Denver-based marijuana companies alone since marijuana was legalized in January 2014.

There’s about $5.4 billion on the sidelines from 2015 cannabis sales alone that banks can’t touch. And, if they pass the cash through a shell company, it instantly looks like money laundering…

Here’s more on the problem and why we can expect very little from regulators in the future.

“Actually, even if you do have $100 million and a team to help, these investments are not for you.”

Strange day in the news.

Oddly, my feed ended up finding two very random arguments on alternative investments. The first is in favor of alternatives as an investment class, and the second is opposed.

Where they come from made them interesting.

The “Pro” argument comes from Inside Indiana Business – which at first glance seemed like it said Inside India Business.

Author Elaine E. Bedel, CEO and president of Bedel Financial Consulting, gives a primer and insight on the alternatives industry and makes her case for them as an investment vehicle.

The “Against” argument is written for doctors. One of the primary arguments against alternatives… if you were following closely on private equity trends it’s an easy guess…

Transparency.

“As alleged, Caspersen engaged in a brazen fraud by raising money under false pretenses and simply stealing the funds.”

Finally, comedian Conan O’Brien once delivered a hilarious keynote during the 2000 Harvard graduation. In his speech, he spoke about how when a person with this prestigious degree does anything wrong, they will be subject to shaming that questions how they were able to get into the Ivy League school.

Says O’Brien: “Accidentally give the wrong amount of change in a transaction, and it’s “And you went to Harvard?’”

After several other examples, he concludes with a personal favorite.

“Get your head stuck in your niece’s doll house ‘cause you want to see what it’s like to be a giant, and it’s ‘Uncle Conan, you went to Harvard?’”

Well, today it’s a case of “And you went to Harvard” for Andrew Caspersen, a graduate of the law school and a partner at the Park Hill Group. Thought he may have gotten his J.D. from Harvard, it’s pretty clear that he didn’t get a second degree in common sense.

The New York Times profiles some rather steep accusations against Caspersen who allegedly defrauded institutional investors out of $95 million by engaging in a series of fake private equity investments.

If true, it was a rather elaborate scheme that required the creation of fake employees, fake domain addresses, and multiple fake email accounts.

He is cooperating with investigators, and… yes… he went to Harvard.

Back tomorrow with some insight on the global energy sector… 















































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