CANNABIS

Pot: Can't Live With It, Can't Live Without It

Where federal and state policy meet is like the crack between your stove and countertop: The things that fall down there are out of sight, out of mind. 

Well...until a pandemic hits. Policies intended to curb the spread of COVID-19 are highlighting some of the peculiar paradoxes of industries that follow different rules at different levels of government—industries like cannabis.

• Recreational marijuana is legal in 11 U.S. states, and medical use is permitted in 33 (both are allowed in Washington, D.C.). Some states have deemed marijuana businesses "essential" and allowed them to stay open during the shutdown. 
• However, cannabis remains illegal at the national level. 

To recap: necessary for people's livelihoods in some states, breaking the law federally. Or as one law professor put it to the WaPo: “Yesterday’s vice is considered today’s essential service.” 

Essential, but not eligible

While many cannabis companies saw a boom in the early days of lockdown, sales are now dipping. Many are experiencing additional financial pressures adjusting operations to delivery or drive-thru.

• However, because of their status at the federal level, marijuana companies were not eligible for any of the $350 billion in small business loans made available through the CARES Act.

Zoom out: Marijuana companies are used to being denied by large institutions: Big banks won’t touch the stuff, fearing legal blowback. Some small credit unions have stepped in, but the sector still mostly depends on cash transactions. 

What’s next?

Pro-cannabis legislators and business owners are pushing for access to Small Business Administration funds that might be included in the next relief package. Also in play is the SAFE Banking Act, a bill that would keep federal regulators from taking any “adverse action” against financial institutions that work with cannabis companies. It passed the House last year but the Senate is a different story.

+ Want to learn more? Sign up for our newsletter Retail Brew, which is going into more detail on cannabis companies later today. 

BANKING

PPPlease Fund

U.S. lawmakers are nearing an agreement to refill the Paycheck Protection Program’s coffers with $310 billion, days after the first $350 billion evaporated.

Yesterday, Treasury Sec. Steve Mnuchin and Democratic party leaders said the Senate could reach a deal as early as today and secure House approval Tuesday. The bill would also include $75 billion for hospitals and $25 billion for increased COVID-19 testing. 

Will they work out Round 1’s kinks? 

Banking execs compared PPP’s opening day to “a stampede through the eye of a needle.” Most small biz relief funds were accounted for within minutes, but demand hasn’t dropped off since PPP ran out of funding last Friday.

• JPMorgan disbursed $14 billion in loans (more than any other bank)...but still has about $26 billion worth of applications waiting for additional federal funding. 

There’s been controversy. PPP was designed to help companies with <500 employees cover payroll, but several large chains with thousands of employees have secured maximum payouts. Potbelly, Ruth’s Chris Steak House, and Shake Shack received a combined $40 million in loans.

TRENDS

Our New World

When things are uncertain, we often turn to Mary Meeker to pull away the cobwebs. The venture capitalist, best known for her annual “Internet Trends” report, just released a paper on COVID-19 with her team at Bond Capital. It was published first by Axios.

Our takeaways: 

We live in a virus’s dream world: More people are living in cities and traveling between cities than ever before. And viruses don’t need to go through customs.

Scientists are collaborating at warp speed: They’ve published around 3,000 papers on COVID-19, which is 20x the published research of other infectious diseases at the same point in the public health response. 

Zoom has made history: Its surge ranks among the most remarkable growth stories in the internet age, outpacing even Instagram and Fortnite. 

Federal relief was swift and massive: The U.S.’ $4.3 trillion of monetary and fiscal stimulus = 124% of government revenue in 2019. 

Bond Capital

Looking ahead...“It’s hard to know exactly what return to work will look like.” While many businesses will never recover, “there will be new businesses that would have been inconceivable just a few years ago.”

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TESTING

Rhode Island: Short on Space, Big on Testing Capacity

Last Thursday, President Trump handed governors the baton to reopen America. But a new study warns states lack the testing capacity to safely relax lockdown restrictions. 

Harvard researchers estimate states need to conduct 152 tests per 100,000 residents daily. But 34 states were conducting fewer than 50 tests per 100,000 people during the week ended April 15.

Just one state meets the threshold. Faced with the prospect of summer beach walks without Del’s frozen lemonade, Rhode Island mobilized. It's been administering 185 tests per 100,000 residents. 

• The secret sauce? On April 6, hometown hero CVS Health opened a rapid-testing clinic, doubling testing capacity. The state’s also the size of a U-Haul.

Zoom out: The debate around when to reopen is turning into a 2020 edition of the Federalist Papers. On Sunday, Vice President Pence called on governors to mobilize state labs. But Republican and Democratic governors pushed back, insisting they lack supplies needed for widespread testing, like swabs and reagents. Last night, Trump invoked the Defense Production Act to compel private manufacturers to make more swabs.

CALENDAR

The Week Ahead

Before we go forward, let's go back. Today is the 10th anniversary of the explosion of BP’s Deepwater Horizon oil rig, which killed 11 and sent the equivalent of 4 million barrels of oil into the Gulf of Mexico. The spill, often regarded as the worst environmental disaster in U.S. history, cost BP more than $65 billion.

Monday: Boeing resumes production in Washington state; IBM earnings

Tuesday: Existing home sales; earnings (Coca-Cola, Netflix, Snap, Chipotle, Travelers)

Wednesday: 50th anniversary of Earth Day; earnings (Delta, AT&T, Quest Diagnostics) 

Thursday: Weekly unemployment claims; new home sales; NFL Draft begins; Ramadan begins; earnings (Intel, Eli Lilly, Domino’s, Southwest, Capital One, Blackstone)

Friday: Durable goods orders; earnings (Verizon, American Express, Sanofi)

WHAT ELSE IS BREWING

• Facebook will roll out a gaming app today to take on Google's YouTube and Amazon's Twitch, per the NYT.
• Bankruptcy watch: 24 Hour Fitness (potentially in the next few months) and Neiman Marcus (maybe this week). 
• Matt Maddox, the CEO of Wynn Resorts, called on Nevada to conditionally reopen parts of the economy in early May.
• Walmart and Sam’s Club will require store workers to wear masks or face coverings beginning today.
• Marc Andreessen: "It's time to build."

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BEYOND CROSSWORD

Just call us the Brew York Times. Today, Beyond Crossword has graduated from its kindergarten roots to become a real life, 15x15 crossword puzzle thanks to Brew writer Toby Howell. 

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