The marijuana movement has been nothing short of unstoppable over the past decade.
Can marijuana's expansion be slowed?
As it stands now, nearly two-dozen states have legalized marijuana use for medicinal purposes, while residents in four states (Oregon, Washington, Colorado, and Alaska) have voted to legalize the sale of marijuana for recreational, adult use.
The early results of marijuana's expansion have been impressive. In Colorado, depending on how its residents vote in the upcoming election, the states' education department could wind up netting $40 million of the more than $50 million it collected in marijuana tax revenue in 2014. In Washington state similar success was demonstrated with tax revenue totaling $58 million over its first trailing year of legal recreational sales.
Most notably, consumer perception of marijuana has made an abrupt shift in recent years toward favorability. As recent as one or two decades ago, according to Gallup, between 25%-34% of respondents had a favorable view of marijuana. In a number of recent-year surveys, marijuana's "approval" rating with Gallup has surged to between 51%-58%.
The assumption is that if consumer opinion of marijuana is growing more positive by the day, states are eager to explore the revenue-generating opportunities of marijuana, and the federal government is observing a hands-off approach to marijuana management, then the door could be wide open for its expansion to continue.
However, things just aren't that simple. In fact, recent results from an ongoing study out of the University of Michigan demonstrate that while certain aspects of expansion are going great, those same catalysts could also cause it to grind to a halt.
Marijuana use hits a major milestone
Released in early September, Monitoring the Future is a 416-page report on drug use over the last four decades in adults aged 19 to 55. With the assistance of research grants from the National Institute on Drug Abuse, the latest MTF report focused on collecting data of drug and alcohol users entering middle adulthood, an age range where data is still relatively sparse. The purpose of its study is to log trends in behaviors and attitudes toward select drugs and alcohol, as well as determine what types of young people could be at the highest risk of abusing drugs in the future.
Arguably the biggest milestone uncovered in the MTF was that college students are more likely to use marijuana than they are to smoke a cigarette on a daily basis. A whopping 5.9% of college students (or about one in 17) reported daily or near-daily marijuana use, which is the highest percentage on record for the 35 years researchers have been keeping track of college student marijuana usage. It's also up from just 3.5% in 2007.
Additionally, the percentage of college students admitting to marijuana use within the last six months rose to 21% in 2014 from 17% in 2006. For marijuana use over the last 12 months the percentage of admissions rose to 34% in 2014 from 30% in 2006. As consumer perception of marijuana softens and fewer people have a negative view of the drug, it would appear that more college students than ever are willing to try marijuana.
Marijuana's no-win situation
But, as the study also shows, college students aren't just attracted to pot.
Completely illegal substances on the state and federal level, ecstasy and cocaine, have made quite the comeback on college campuses. The MTF study shows that cocaine use of at least one time in the past 12 months jumped dramatically on a year-over-year basis to 4.4% in 2014 from 2.7% in 2013. Ecstasy use within the prior 12-month period hit 5% in 2014, more than double the 2.2% use rate in 2007. It should be noted that the report questioned the validity of the upturn in cocaine use and is reserving its judgment until it has data next year.
On the flipside, alcohol is losing a bit of its allure with college students. Although the percentage of college students who admitted to drinking alcohol at least once over the past 30 days is down four percentage points from 2000, it's the 9% drop in binge drinking (defined as having more than five drinks in a row within the past two weeks) between 1980 (44%) and 2014 (35%) that's the real head-turning statistic.
What could this possibly mean? Although correlation does not imply causation, it's possible that a softening stance on marijuana, a federally illegal drug, may be softening the views of college students for other, arguably more dangerous, drugs such as cocaine and ecstasy. Presidential hopeful Chris Christie has regularly called marijuana a "gateway drug," and that's possibly what the latest data could be implying.
Thus, as the marijuana industry succeeds in planting the seed for the next generation of marijuana users and pushes to improve public perception of the drug, its safety could be questioned now more than ever with younger adults pushing into marijuana and more dangerous substances. Lawmakers' desire to keep kids away from these potentially dangerous substances could prove all the more reason for Congress to dig in its heels even further.
An important point raised
The MTF study from the University of Michigan raises a key point about marijuana that remains arguably one of its greatest hurdles: We still don't fully understand how it affects a person's body or mind. We know that it's practically impossible to overdose on marijuana, and we have quite a few long-term users out there who are more than happy to offer their opinion that marijuana is perfectly safe.
But, the fact of the matter is that decades worth of studies on marijuana were predominantly undertaken to examine its risks. Only within the past couple of years have researchers seriously been analyzing the possible benefits of marijuana. Even with some early studies suggesting marijuana may help curb the symptoms of epilepsy or even help fight cancer, researchers are still nowhere near completing their benefits profile of the drug in terms of how it affects the body or mind. It will be years before this data matures, meaning it'll likely be many more years before the federal government seriously considers changing its stance on the illegal drug.
For investors it means that putting your money into marijuana stocks could be a very dangerous and unwise move. Although there is undeniably a multi-billion dollar business opportunity afforded to the industry, it's unlikely to realize that opportunity as long as Congress remains unwavering in its stance that marijuana is a schedule 1 drug. Sometimes it can be smart to invest in a business before it becomes the next big thing, but in this instance there are no assurances that marijuana businesses can survive at all. With this in mind, I'd continue to urge potential investors to remain on the sidelines until we see a concrete change from the federal government.