Landmark Links March 9th – Hot Boxed


Lead Story…. In recent years there have been few segments of the commercial real estate market as hot – or as controversial – as the legalized marijuana space. As landlords, operators and capital sources deal with the growing pains of an already massive industry coming out of the proverbial shadows, they are dealing with an unprecedented amount of red tape as legalizing states try their best to avoid the wrath of the federal government.  Public opinion in the United States has shifted massively towards legalization of marijuana over the past +/- 30 years. As recently as 1990, only sixteen percent of Americans believed that pot should be legal with eighty one percent opposed.  By 2017, sixty one percent were in favor of legalization with only thirty seven percent opposition.  What’s more, a majority in each US adult generation except for the Silent Generation (born between 1928 and 1945) now favor legalization by 56% or greater.  Not surprisingly, nine states have fully legalized pot for recreational use, and many more have either decriminalized, legalized for medicinal use or both.  At the same time, marijuana is still classified as a Schedule I narcotic by the federal government, meaning that many businesses, even those conducting business legally in their state, are unable to access federally regulated banking institutions.

I am not going to make an argument for or against the legalization of marijuana in this post primarily because my opinion is irrelevant.  What I am going to do is explain why having state laws and federal banking laws in conflict with each other is incredibly dangerous from a law-and-order standpoint and I’m going to use Las Vegas as an example.  Marijuana was legalized in Nevada last year which has led to over $200MM in sales over the past 8 months and $30MM in new tax revenue for the state.  The problem here is twofold:

  1. Marijuana is still a cash business in Nevada as with the rest of the US
  2. Nevada’s largest and most powerful industry – casinos – are regulated by the federal government

On a minor level, this means that tourists can’t use pot inside a casino since it would put the casino at risk even thought it is legal outside – not exactly a huge deal although I suspect that this is going to be tested a lot with the growing prevalence of vape pens and edibles that are incredibly hard to detect since they are odorless.  However a larger problem is the incentive for a federally regulated casino to be used as a tool in a form of money laundering.  CNBC’s Jane Wells hosted a segment this week about how money from pot dispensaries is finding it’s way into federally regulated banks via federally regulated casinos.  The process goes something like this:

  1. A dispensary owner has a large amount of cash from sales of pot that he cannot deposit into a federally regulated bank.
  2. Not wanting to stuff it in a mattress or safe, the dispensary owner takes the cash to a casino in a briefcase and trades it in for chips.
  3. The dispensary owner hits the tables for a short amount of time to gamble, then turns the chips in and the casino writes him a check which he deposits at a bank.

The casino is taking a major risk in the transaction that I described above since they just violated federal law.  Casinos in Las Vegas are huge businesses that are owned by very rich/powerful people and corporations.  They clearly want no part of this which is why they are tightening up on compliance and security as much as possible.  However, its nearly impossible to weed out completely (pun fully intended).  Sure, compliance will be tipped off when someone shows up with a briefcase filled with $1MM but in many cases the dispensary owners may only have a few thousand to exchange and are therefore harder to detect.

The sad part is that it doesn’t have to be this way.  Cash businesses are inherently dangerous because their proprietors are targets for crooks who know that the loot will be hard to trace.  In addition, forcing legal marijuana businesses to operate “all cash” encourages and incentivizes all sorts of sketchy/illegal behavior from tax evasion to money laundering and puts other business owners like the casinos at risk.  Whether the federal government agrees with state legalization or not, they should want the money in their system both from a public safety and tax standpoint.  The businesses in this industry are jumping through an incredibly high number of state regulatory hoops in order to stay on the right side of state law.  They clearly would rather have access to the banking system for a host of reasons – if not, why bother with the casino scheme that I outlined above?  The train has already left the station with regards to legalization by evidence of the direction of both public opinion and state law.  If the federal government continues their stance, they risk further encouraging an underground all-cash economy that empowers criminals and tax cheats and encourages money laundering.


Overstated? No, US manufacturing isn’t dwindling away to nothing as some would have you believe but it isn’t exactly booming either.

Backfire:  Why corporations will likely end up absorbing the cost of tariffs rather than passing price increases on to consumers in sectors like packaged food and restaurants.

Lurking: The real inflation danger is that governments won’t raise rates high enough to cool the economy out of fear of raising their own borrowing costs too much and that will eventually lead to the severe inflation that investors are starting to fear.


Expansion Mode: Last year, Apple announced that it is going to build a fourth US campus.  Here’s a good rundown of which cities could get it.

All Clear: Bank commercial mortgage delinquencies have hit their lowest level on record in the US.


Soaring: Mortgage rates are now at their highest level since 2014 and a full 100 basis points off their low.

Over-Parked: California cities’ stringent parking requirements on new construction act as an expensive roadblock to building more housing….and also mean that many buildings that were constructed decades ago would be illegal today. (h/t Daniel Geissmann)

Read the Small Print: It’s becoming increasingly obvious that reverse mortgages are little more than an expensive con hocked to gullible seniors on late night infomercials.


Rise of the Machines: Amazon has admitted that Alexa is creepily laughing at people but doesn’t know how to fix it yet.

Passing on the Joint: Stifling federal regulations have led to the US is essentially ceding the entire $30 billion medical marijuana industry to Canada and Israel.

Chart of the Day

By continuing to finance student loans, the federal government now owns over 30% of the total consumer debt in the US.

Source: The Daily Shot


Happens All The Time: A doctor in Kenya performed brain surgery on the wrong person because brain surgery clearly isn’t rocket science.

Who Among Us… Authorities say a New Jersey man whose home has been without power since last week’s nor’easter threatened to kidnap a utility company employee and blow up a substation.

Rational Response: An American Airlines passenger tore off his shirt and aggressively chased airport employees around the tarmac with a plastic signal wand after being warned about his behavior.  I’ll be the first to admit that I’ve considered doing this more than once while flying American.

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