INTERVIEW: JEFF SIEGEL, October 2016
Every once in a while an interview opportunity comes up that seems so far out in left-field that it is fun. An ex-hardcore musician turned financial analyst? When given the opportunity to speak with Jeff Siegel regarding Green Chip Stocks and his current analysis and work in cannabis investing crosses my love of music and my job as a forensic accountant and tax professional thanks to the difficult area of taxation of the cannabis industry, this was a true no-brainer...
Toddstar: Hey, Jeff. What's up, man?
Jeff: I just want to let you know up front I'm driving through upstate New York right now. I'm going to pull over when I find an exit, but if I lose you I will call back.
Toddstar: Sounds good. Jeff, thank you so much for taking time out for us man, we really appreciate it. I know you're a busy guy.
Jeff: Yeah. It's funny though, because people say that to me all the time. "When do you sleep?", and stuff like that. I like my job so it's not really... You know what I mean? When you like what you do it’s like, "Eh, whatever." It's either this or do something I don't want to do.
Toddstar: You're one of those lucky guys where you've come to a point in your life where almost every job since you grew up so-to-speak; you had a hand in kind of guiding your own way and creating a job and a life in which you do like what you do. From a young point of view, is that something you kind of set about and said, "I want to live the rest of my life with this," or is this something where as you grew and went through each phase you said, "OK, this is how I'm going to tweak to make the next experience that much better"?
Jeff: Oh, wow. I don't know. When I graduated college I just figured I'll just get a job and get a paycheck and that'll be it. I'll have my hobbies on the side. I don't know, I just assumed that's how things are done. Then I think once I got into the real world and I had some jobs that I was just not into at all, that's when I realized, okay, I've got to make some changes. I've got to do something that's not going to make me miserable. Honestly, my dad was a school teacher for like 43 years and he was miserable most of his life; he hated his job. He loved teaching; he just hated all the bureaucracy and all the garbage that went with it. He was also kind of a teacher that didn't always play by their rules. He was a history teacher, so when it was time to talk about Columbus; he would offer a real history of America and the United States and who was here first and all that. Sometimes that didn't go too well with the administration at school; you're talking the 1970's and stuff. I guess just seeing my dad being miserable at his job, I think at some point once I got out to the real world I decided I'm not going to do that. I think I just figured it out along the way. I was really fortunate though because honestly I'd always wanted to be touring musician; that was one thing I always wanted to do. When an opportunity came up I didn't hesitate. I took full advantage of it. I was working at a financial publishing company at the time and when the guys were like, "Hey, we're going to do this for real doing this full time. Do you wanna come?" The next day I called them and I said yeah. I quit my job, I sold my house, and 2 months later I was gone.
Toddstar: Living the dream, so-to-speak.
Jeff: Yeah, absolutely. I wasn't naïve about it; I knew that, "Okay, I'm not going to make any money for a long time now." It is what it is. I think everyone has their own idea of what's valuable and I guess to me it's always been not being miserable is very valuable to me.
Toddstar: You talk about investing, and we will get to this in a second, but investing in yourself is something that you did early on.
Jeff: Yeah, absolutely. I think even when I look at where I am in the world of invest publishing, that's the first real job I had out of college. After a couple of jobs I didn't like, I went on to this investment publishing company not knowing the first thing about investing or finance, and I actually thought it was a bit boring. It was one of those situations where I was in this job and I worked with a lot of very cool people and I started finding it somewhat interesting and really just kind of worked as an apprentice. A lot of these other analysts were working at this company. At the time I think I was an assistant editor, so basically my job was to go through articles and rewrite them. I liked the idea of writing, but that was kind of boring to me so I said, "Okay, well let me go work with these analysts, maybe I can learn something." I think I spent 3 or 4 years just figuring all that stuff out. It's funny because sometimes people will say to me, "What's your education? Did you study finance?" No, I didn't do that at all. I just worked with really smart people and they were kind enough to show me the ropes.
Toddstar: That's the best way to learn in most cases.
Jeff: Oh, yeah. Absolutely.
Toddstar: It's funny in reading your bio Jeff, according to Wikipedia, and we all know that half of that sometimes is just crap, but it states that you're credited with coining the phrase 'green chip stocks', which if it is true I think it's hilarious. It was foretelling because of your current movement and working in investing in the cannabis market.
Jeff: Right, I know. It's funny because sometimes people, I say "Green chip stocks," and they're like, "Oh, I like that." I'm like, no, it's not about cannabis. The cannabis thing came later. The green chip stocks thing, the company I worked for ... When I got off the road, a buddy of mine who I used to work with started his own publishing company. He had hired me, and at the time he hired me to be an analyst and to write and I was kind of on the fence because I was like, "I don't really like writing about this stuff. I don't care." He was the one that said, "Well, why don't you do something that you do care about? Find something that you care about and see if there's an investment angle and do that." That's when I built the idea of socially responsible investing. He kind of laughed. I've known him for years and he knows I'm a tree hugger, so he just got it; when we thought about what we were going to call the name of the letter, we sit there and we're trying to come up with something interesting and I don't remember exactly if it was him or me that actually said the words 'green chip stocks', but at some point as soon as it was said we were like, "That's it. That makes so much sense." We went with it. It's funny because it's been really cool in the sense that it's been a label that I've been able to carry with me. At times it's also been a hindrance because especially when we first started, if you put the word 'green' in something, a lot of people were just immediately turned off. Over the years people have tried to persuade me to change the name in an effort to get people more interested in what I was doing, but at this point I'm just like, "No, I think this describes exactly what I do," so we just kept it.
Toddstar: I'd agree with you and your sentiment 100% because a lot of what you do really does have to do with green endeavors from the energy stocks and things like that. I think to change at this point, like you said, would just be a change in the whole stream of movement that you started. This really intrigues me, the cannabis investing, because to give you my 30 second speech, I'm actually a forensic accountant during the day. To get the accounting and the taxation side of this, especially in Michigan where medically it's good but there are still not public laws. From a federal standpoint, this is all still very illegal.
Jeff: Right.
Toddstar: From a taxation point it's really odd. If you can, give me a little background on your approach or what you think or how you think you can start ingraining cannabis investing into daily life or for guys who do day-trading or long-term trading or whatever they do.
Jeff: You're right; it is very much illegal on the federal level. That has been both I think a hindrance and a blessing in some ways. For me I guess a lot of on the public side as far as for the public companies that I recommended, every single one to this point has been a Canadian cannabis company. That really started about 2 years ago when I started looking at the industry in Canada and seeing how strong it was on a medical side. That's really why I started looking into the Canadian space. This was before the new Prime Minister came along and said he was going to legalize. At the time I figured, "Okay, I found a couple of stocks that were doing well, they were licensed, so the Canadian government had essentially signed off on these companies as legitimate cannabis distributors and growers. For me I said, "Okay, well I've done a lot of research on medical cannabis and growth projections and it was one of those things that the more research I did the more I realized that this was a very steadily growing market. It wasn't going to shoot to the moon, but it was steadily growing. That being said, when the new Prime Minister came along and said he was going to legalize, that's when things shot to the moon. I was very, very fortunate timing wise. As far as people getting into the cannabis space, a lot's going to change in November obviously depending upon whether California does approve the legalization issue, but up until this point, everything we've done has been Canadian because again, that's where the safest place has been up to this point.
Toddstar: You mentioned California, you mentioned the elections, its stuff that's weighing on everybody's mind and it's all news-relevant. Even this morning on my way into work I heard there is now more than 60% approval rate recent news poll, stating that now there's more than 60% of Americans believe in the legalization of marijuana.
Jeff: Right.
Toddstar: This would point to your analysis and overall picture of the cannabis industry. How do you see that whole analysis trending if you do get states like California or Florida or even Mid-Western states like Michigan, on board to where this is a viable industry? How do you see that coming from an investing point?
Jeff: The thing with California that's interesting is... You might know this, but California's the 6th largest economy in the world. Anything that California does reverberates everywhere. I think it's unlikely that recreation will not pass; I really think it's going to happen this year. When that happens, there was a government agency in California. I can't remember the name of it; it was California Finance Commission or something like that... They did study earlier this year that indicated within the first year of legalization the state of California is going to see something like $1 billion in tax revenue in the first year. Consider where Colorado is. Colorado did, I don't know off hand what it was, but the enormity of the California market, it's not going to just affect California; it's going to affect everything. What will happen is you're going to have all these companies now making so much money in the space, and that's going to affect the pricing of cannabis and the pricing of cannabis auxiliary products and things like that. What's going to happen as well is a lot of other states... They've seen this with Colorado... They're going to see how much money California generates in tax revenue. That's really what it boils down to. Most of these states where it's legal, the politicians don't care. They can sit there and say, "Oh, it's bad or it's good." The bottom line is all these states need money. A lot of states are cash strapped and they know that they can make a lot of money by taxing cannabis. That's really been in my opinion what has facilitated the movement here in the US. Colorado, Oregon, Washington, those are the 3 states right now that are legal on a recreational basis. If you look at what's going on in these 3 states, crime has not gone crazy, schools are getting funding they need, and everything's working out really, really well. People are watching this. These are small states comparing to California. If California does something, everyone knows it. I think the California deal, I think it goes beyond California. When investors look at the cannabis space, especially the US, yeah you have the risk of the idea being that it's federally illegal, there is no doubt in my mind that the federal government is not going to interfere any longer in states' positions because there's no benefit to it. No politician in Washington, aside from maybe 2 or 3, are going to fight this because there's no way they're going to win. They get nothing out of it. Politicians only do something if they can get something out of it. Going against cannabis in another state is not going to help that candidate or that politician.
Toddstar: True.
Jeff: I know that there are a lot of investors that say, "Listen, I don't want the risk," and I get it. If you are completely risk-adverse, if you don't want to deal with it... There's no benefit for these politicians to go after it anymore. If you look at ... The DEA actually by law is no longer allowed to use federal funds to stop legal cannabis operations in various states. Basically, the DEA's had its wings clipped and that's basically been the agency that has been charged with the responsibility of shutting down these operations. They can't do it anymore, the DEA can't do it anymore, no politician's going to fight it, and I don't really see it being that much of a risk. Yes, if people are very risk-adverse and they don't want to take any chances, then there are plenty of ETFs and blue chip stocks that you can invest in and that's fine. For me, it's never been just about making money; it's always been about making a statement. I invested in renewable energy because I believe that the integration of renewable energy will help make our planet more livable. I invest in cannabis because I know that these companies, the stronger they get, the more states that legalize, the less of an impact that one judge is going to have on people. The more this happens, we will have more vets can finally get the medication they need to fight PTSD; kids with epilepsy can get the medication they need so they don't have to have 300 seizures a day. It goes beyond just making a buck. There are plenty of industries and sectors I could invest in and make a lot of money, but it's got to be two-fold. I want to make a lot of money, but I want to make sure that the companies I'm investing in are actually producing more than a profit. I want to see these companies producing services and products that are valuable to society from an economic standpoint, from a social standpoint, from a health standpoint. That's really what green chip stocks have always been about.
Toddstar: Jeff, it's interesting listening to your answers, because it's not the opinions of just one guy wanting a world of "Spicolli’s" floating around; you're actually wanting to make change through things that make a difference to you, but will make positive change. You're not talking about, "Oh, I want everybody to just be able to get high." You mentioned PTSD, which as a veteran is very important to me. You mentioned epilepsy, and as friends who have epilepsy, that's very important to me. As someone who's an advocate with the American Cancer Society, I'm very big on the medicinal use of it in use during cancer treatment. The fact that you're well-educated is appreciated because you're not just saying, "You can make a butt-load of money and we can all have a great Friday night"; you're actually taking a stance, which is something you've done back to your days with dog fashion disco. You're taking a stance, you're saying what you want to say, but you're doing it in an educated manner. It helps it all come across. Speaking on the ... We talk about the legalization and the federal statutes and everything else because the one thing I've always felt was really hypocritical from a federal standpoint is the tax code wherein you're supposed to report all income, even from illegal gains, but you're not allowed to take any deductions, you're not allowed to take any expenses that's used to create those gains.
Jeff: Right.
Toddstar: To take that a step further, from an investing standpoint, how do you see that whole approach? Do you see any overlay or issues with people who want to invest? How is this going to affect their portfolio or even their own tax returns when they're having gains or being able to take losses, whether short-term or long-term, for cannabis-related entities? Do you see where there might be an issue? They're not operating, but they're investing. Can they then take the investment expense and things like that?
Jeff: You know, that's a very good question. You're right; the cannabis industry is unfairly taxed. I get that we're starting at a place where we need to take baby steps. As a person who is disgusted by the fact that the cannabis industry is unfairly taxed, I understand this is part of the process. I don't think this is going to be the case for a very long time. I know there are some congressmen that are working on trying to draft bills to change this. I don't know how they're going to do it, but it's a very frustrating issue. For me, again, I can look and say, "Well, how is it that a tobacco company that makes a product that we know can kill people, how is that company being taxed in a way that is not as burdensome as someone who runs a dispensary and sells cannabis which has never, at least been documented, has killed anyone?" It's very, very, very frustrating. As far as investors, to this point I have not been made aware of any situation where investors cannot claim a loss on investments. I'm not an SEC person or advisor; I'm not a tax person, so I don't know. I could absolutely see someone in the federal government saying, "Hey," and making that an issue. I think that being said, the federal government I think knows that if they try to do that it's going to cause more problems than help them. You know what I mean? It's kind of like the whole thing with going after the individual states. Individuals are investing in cannabis companies. What happens when someone comes along and says, "You know what? You can't claim this loss. You're going to have to be taxed more on your capital gain," or something, I think any politician that took that on is basically saying, "I'm not getting re-elected." People are so over-taxed as it is, I can't imagine anyone coming out and saying, "Hey, you know what? We decided we want to take some more money away from you." Again, this is just my opinion. I could be way off, but I really do believe that the federal government is in a situation right now where it has nothing to gain by screwing with cannabis investors.
Toddstar: All right. Up here in Michigan we've got Detroit, we've got Flint, we've got areas that need something to kind of help kick start other than just rich guys getting rich.
Jeff: Yeah. Boy, Detroit, that's a place that could certainly use it.
Toddstar: Exactly. Listen man, I know you're busy and I really appreciate you taking time out because this is really interesting to me. I'm glad we're able to help spread the word of you and your analysis and the direction you're really taking the whole green chip stocks with the social economic, with the renewable energy, and most recently the cannabis. We wish you well with this, and hopefully we can check in with you in 6, 9, 12 months and see how things have progressed or see what the next cause is.
Jeff: Yeah, absolutely. Please feel free. I appreciate your help and like you had mentioned, I appreciate you getting the word out. There are a lot of people that when they hear about what I'm doing, it's the first time they're hearing about socially responsible investing and it's such a huge movement and we really need to get more people on board; especially young people who I think do really embrace the idea of investing alongside their values. Yeah, I really, really appreciate you helping out with that.
Toddstar: I agree. Again, thank you so much for your time, Jeff and I hope to catch up soon.
Jeff: My pleasure. Take care. Thank you.
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