Marijuana appears to be set up for what could be its best year ever.
The plant, which is currently illegal at the federal level, has expanded like a weed over the past two decades. A whopping 23 states have legalized marijuana for medicinal use since 1996, and four states have legalized the sale of marijuana for recreational purposes since 2012.
Colorado has been a specific shining example of the industry's success. After generating $699 million in legal medical and recreational marijuana sales in 2014, Colorado fell $4 million shy of hitting $1 billion in legal sales this past year. It nonetheless generated $135 million in tax revenue and licensing fees in 2015, of which at least $35 million will be steered toward the state's education system. Legislators in states where marijuana is legal are likely thrilled with the tax revenue boost, and national polls continue to show steady or growing support for legalization.
So what's standing in the way of marijuana's ongoing expansion? Look no further than the federal government. President Obama doesn't have marijuana on his agenda in his final year in the Oval Office, and Congress appears in no rush to act, either.
The primary reason for inaction on Capitol Hill is tied to the safety profile of marijuana. Only within the past decade or so have researchers really stepped up their analysis of the potential medical benefits of marijuana. In prior decades the focus had almost exclusively targeted the adverse effects of the plant. The end result is that lawmakers on Capitol Hill have a mountain of negative data they could potentially pore over, and a considerably smaller amount of positive long-term data. Until regulators feel that they can make an educated decision on marijuana's safety profile, they simply won't change its federal scheduling.
Move over, skeptics, because this marijuana study is great news
However, a new broad-based marijuana study released by two Norwegian researchers last week and published in the online journal Addiction suggests that marijuana may not be as "dangerous" as first believed when it comes to operating a motor vehicle.
The researchers had one simple task in mind: analyze to what degree acute cannabis intoxication increases the likelihood of a vehicle crash. To do this they examined two separate studies.
The first study replicated two previously published meta-analyses (studies that look at multiple other studies under one umbrella), but aimed to correct "methodological shortcomings." This included a group of nearly 51,000 people, of which roughly 23,000 were controls and the remainder were cannabis intoxication case examples, and a second sample size of more than 93,000 cases, of which almost 89,000 were controls.
Study two was a revised meta-analysis that involved 28 estimates from 21 observational studies. All told, study two included a sample count that almost reached 240,000.
Their findings showed that prior studies failed to properly account for certain "known confounders," such as age and gender, thus skewing the results. Following adjustments that were not applied in previous studies, researchers determined that cannabis-impaired driving led to an increase in crash likelihood at a factor of 1.2 to 1.4. In plainer terms, it was a statistically significant increase of low-to-moderate proportions, which is in stark contrast to prior study findings. Comparatively, alcohol increased the likelihood of a motor vehicle crash by a factor of almost four.
This study is important, but there are other concerns
This study could prove particularly important for supporters of the marijuana movement because it's large, representing multiple hundreds of thousands of cases, and it examined data over more than a three-decade period (1982 through 2015). In other words, it could be construed as largely representative of the global population.
More importantly, it hits on one of the largest marijuana concerns; namely, what might happen to driving under the influence offenses if marijuana is legalized nationwide? Lawmakers are clearly worried about what sort of recipe smoking marijuana and driving a vehicle could create, but this study may indeed help lessen those fears.
Of course, this is by no means the last worry for legislators. For example, concerns remain about the consumption of marijuana edibles. It's a lot tougher for state regulators to govern edibles since they aren't as easily recognizable as a marijuana product and could, in theory, wind up in the hands of minors much easier (which is a major concern of lawmakers). Regulators also worry about whether or not THC-content in edible products is consistent from one batch to the next.
There are also worries about other societal impacts. For instance, based on data from the Seattle Police Department, property crimes rates jumped by more than 8,000 incidences from 2012 to 2014, after recreational marijuana's approval. By a similar token, total crime in Denver County jumped 29% from 2012 into 2013, and another 15% from 2013 into 2014. It's not concrete that marijuana is to blame, but the coincidence is uncanny.
Keep this in mind
For investors following the progress of marijuana, there is clear excitement. According to ArcView Market Research, legal marijuana sales expanded 15% to $5.4 billion in 2015, and they are forecast to grow by 30% per year through 2020. This would imply a $22 billion industry by the end of the decade. Investors would struggle to find this sort of growth from other industries.
The concern is that few avenues exist for investors to take advantage of this growth. Very few marijuana stocks trade on reputable exchanges, meaning it could be tough to get accurate and up-to-date information on marijuana companies. Even with more than $5 billion in legal marijuana sales, you'll also struggle to find publicly-traded marijuana businesses that are profitable.
Perhaps the bigger concern is that inaction on Capitol Hill continues to put marijuana businesses at two inherent disadvantages. First, they have no ability to take normalized tax deductions. The other issue is banks tends to ally themselves with the federal law regardless of whether or not states have legalized marijuana. For marijuana businesses, this means minimal to no access to basic banking services such as checking accounts and lines of credit.
Thus, even though marijuana's long-term outlook may have brightened a bit with the aforementioned study, the drug itself still remains a long shot to make investors money.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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