In the world of issue management, you need to understand what the stakeholder questions and concerns are around a given issue to understand the balance of outrage and acceptance.
–Issues Management Expert (source given below)
When I started this project on digging into the morality of pot stock investing, I went to several people who have significant expertise on the subject to help me. One of those was the head of issues and crisis management at a major U.S. corporation. I was once again impressed with this person’s deep and broad knowledge of issues management that can only come from decades of experience. In reviewing my morality of pot investing outline, she gave me the quote at the top of this article.
To be honest, during the process I fell in love with this world-renowned resource all over again. And that’s a good thing – because she’s my wife.
And so, I won’t wax rhapsodic too much about this lovely and talented woman. The bottom line of our discussion was this – you have to start with the safety issue of cannabis, because that’s the main source of division. That’s the issue where the outrage exists and where acceptance is well on the way – we’ll dig into whether that’s justified or not…
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Cannabis Safety – What We Know and What We Don’t
With pot, it seems none of the issues about its effects are simple, or even well understood. And this is largely because of the long-term illegality of the substance. And if that weren’t enough, a lot of the data we do have comes from the 1980s and 1990s, when pot was much weaker than it is today. How much weaker? Here are the results of a peer reviewed paper titled: Changes in Cannabis Potency over the Last Two Decades (1995-2014) – Analysis of Current Data in the United States. It came from samples the DEA has confiscated over that 20 year period. Lots of samples…
A total of 38,681 samples of cannabis preparations were received and analyzed between January 1, 1995 and December 31, 2014. Overall, the potency of illicit cannabis plant material has consistently risen over time since 1995, from approximately 4% in 1995 to approximately 12% in 2014. On the other hand, the CBD content has fallen on average from approximately 0.28% in 2001 to < 0.15% in 2014, resulting in a change in the ratio of tetrahydrocannabinol (THC) to cannabidiol (CBD) from 14 times in 1995 to approximately 80 times in 2014.
For those who don’t know the lingo, THC is the psychoactive component of pot (the part that makes one “high”) and CBD is the substance also found in pot with lots of medical promise that is not psychoactive. Oh yeah, and CBD actually inhibits the effects of THC. So the weed that’s around today is a much different beast than what was available 20 years ago.
For all these reasons, we simply don’t know a lot about pot from scientific perspective.
I know some people are already howling – I can hear the protests, “We have this study and that study that proves my particular point of view…”
First, let me say that the general popular opinion regarding the legalization of pot has definitely shifted in the last five years. Going from “The Devil’s Lettuce” of Reefer Madness fame in prior generations to the investment sweetheart of today, in just a few short years, is quite the feat. Gallup started polling U.S. sentiment on the legalization of pot in 1969 when those in favor measured a scant 12%. Today that number has swelled to 64%:
And as legalization becomes more widespread, it’s interesting that the blowback about our lack of understanding on the safety of the substance is growing as well – but in all likelihood it’s an “after the fact” response.
Let’s look at the main safety issues today and the current state of research for those. Then, based on your feedback, I’ll dig more deeply into any areas that are of interest to you 10-Minute Millionaires as we try to wrap our heads around this important issue of the morality of pot investing.
As a resource, I’ll use the National Academies of Science Engineering Medicine (I know, I want to put an “and” in there, too… and – I’m going to call them NASEM from here out) panel study concluded in 2017, titled The Health Effects of Cannabis and Cannabinoids as the standard that trumps smaller scale studies. I’ll list other resources on an “as used” basis.
In this area, we have to begin with the premise that even though legalization is only for adults (21+), the effect of legalization will lower the cost and effort required for underage users to gain access to pot.
This is the area of primary safety concern, and one where some of the strongest evidence exists. NASEM notes:
- A moderate correlation between acute cannabis use and the impairment in the cognitive domains of learning, memory, and attention.
- Limited evidence for impaired academic achievement, increased rates of unemployment and/or low income
In general, as I mentioned above, the theme for research-based outcomes is “we don’t have enough evidence”.
Other individual papers have given compelling (though not conclusive) evidence of diminished cognitive development and or performance. The National Institute of Health published a meta study in the New England Journal of Medicine that presented this laundry list of at least partially substantiated concerns:
Effects of long-term or heavy use
Addiction (in about 9% of users overall, 17% of those who begin use in adolescence, and 25 to 50% of those who are daily users)*
Altered brain development*
Poor educational outcome, with increased likelihood of dropping out of school*
Cognitive impairment, with lower IQ among those who were frequent users during adolescence*
Diminished life satisfaction and achievement (determined on the basis of subjective and objective measures as compared with such ratings in the general population)*
Bottom Line Morality: Increased efforts to reduce pot use in the underage population is a societal mandate. This is the among the strongest reasons why people oppose legalization.
Bottom Line Investing: That pot is bad for kids is not news, and has had only modest impact on legislation thus far. Any new studies that could show the developmental effects of pot use can be reduced or reversed would be a big positive for the pro-legalization crowd and would boost the investment prospects.
This is one of the more conclusive areas of research:
- There is substantial evidence of a statistical association between cannabis use and the development of schizophrenia or other psychoses, with the highest risk among the most frequent users
- There is moderate evidence of a statistical association between cannabis use and:
- Increased symptoms of mania and hypomania in individuals diagnosed with bipolar disorders (regular cannabis use)
- A small increased risk for the development of depressive disorders
- Increased incidence of suicidal ideation and suicide attempts with a higher incidence among heavier users
- Increased incidence of suicide completion
- Increased incidence of social anxiety disorder
- And on the positive side: Better cognitive performance among individuals with psychotic disorders and a history of cannabis use
Bottom Line Morality: This issue is troubling. But it’s also a lower-incidence issue (meaning there are fewer cases) and so it’s by and large out of the public eye. Better education on this aspect of recreational or medicinal use of pot is a minimum need.
Bottom Line Investing: The lower incidence nature of this safety issue makes it a lower impact issue. Potential uses (almost all unproven as of yet) of pot for treating symptoms of mental health issues makes this strangely an area of unbalanced response. Said another way – the negatives that may come from further research will have only a mild to modest impact on pot stock prices while any positive news about treatment efficacy could provide a big jump up in price, in anticipation of more support for broader legalization.
According to the NASEM study, there are few major health issues that seem to be caused by marijuana use. Almost the opposite:
- There is moderate evidence of no statistical association between cannabis use and:
- Incidence of lung cancer
- Incidence of head and neck cancers (5-2)
- The worst negative: substantial evidence of a statistical association between cannabis smoking and:
- Worse respiratory symptoms and more frequent chronic bronchitis episodes
Almost all other issues tested for had insufficient evidence to support or refute a link to cannabis.
Bottom Line Morality & Investing: This area of physical health is one where there’s relatively little to get worked up about cannabis. Many researchers point out that the high incidence of cigarette smoking among routine pot users makes the data hard to parse. But in general the “safer than tobacco or alcohol” mantra seems to be true from a causal relationship to major medical issues.
For our next edition of our look at the morality of pot investing, we’ll look at the issue of impairment with a focus on driving while impaired and the issues surrounding the safety and enforcement of rules. I have some intriguing comments from law enforcement officials and lawyers who both deal with this in the trenches every day. It’s a discussion you don’t want to miss.
Great Trading and God bless you,
D.R. Barton, Jr.