As an investor, you have no doubt noticed the emergence in America of an entirely new legal industry, the marijuana industry—well done, there is one. You may also have noticed that it is tiny—again congratulations—and you may be assuming that it is poised for spectacular growth. The case for rapid, exponential growth in the marijuana industry is compelling: since marijuana is already America’s biggest cash crop, the industry, once fully legalized, will surely tower over the rest of American agriculture, and those few perspicacious investors who get in on the ground floor will be made into wealthy weed tycoons and spend their retirements spitting from hazy penthouse windows on anyone stupid enough to have remained invested in tired old agriculture companies like Archer-Daniels-Midland (ADM) and Monsanto (MON).
Compelling, as I said, but very, very wrong. How so? Well, let’s start with the fact that marijuana is not the US’s largest cash crop and never was. This comes from a new book, Marijuana Legalization, What Everyone Needs to Know on the economics of Pot by Jonathan Caulkins, Angela Hawken, Mark Kleiman, and Beau Kilmer. The book has been widely praised—and attacked—for debunking many a myth propounded by both sides: those for and those against legalization. Looking for real facts in a field where both sides notoriously cherry pick their data can yield startling results, and that seems to be the case here.
For those interested in the medical potential of THC, the active ingredient in pot (or one of its active ingredients, depending on who you ask), there is at least one public company to invest in. What it is and whether it’s a good buy are things I’ll be getting to shortly.
But first: The elephant in the room.