A $300 Billion-a-Year Mistake

It may be the biggest paradox in modern human society.

More than half of Americans have used it, while tens of millions use it habitually.

Similarly, more than half of Americans are now calling for its legalization, and yet it remains illegal in all but a handful of states, where its status is shaky at best.

However, the greatest surprise when it comes to cannabis is just how little the average person truly understands about the demand, the industry, and the costs/rewards associated with making it legal versus keeping it punishable by imprisonment.

For one thing, its legal status itself is likely to shock most Americans.

The fact that it remains a schedule 1 drug — the most restrictive of the five categories used by the DEA to classify illegal substances — while far more nefarious narcotics, including cocaine and even methamphetamine, are actually one tier below it, is a perfect example of how rationality and policy diverge on this topic.

The Numbers May Stun You, But They Don’t Lie

But when you start to look at the numbers, you realize that all that is just the tip of the paradoxical iceberg.

According to a study done eight years ago, the cost of marijuana prohibition, which is the sum total of what it takes to investigate, prosecute, and incarcerate offenders, stood at a whopping $41.8 billion.

That’s more than 5% of our national defense budget — or about the gross domestic product of Libya.

It’s less, however, than the estimated value of all the marijuana grown in the U.S. annually, which is pegged at close to $50 billion — making it the top cash crop in 12 states and one of the top three in 30 others.

Remove the financial burden of controlling it, and the total upside for the U.S. for legalization runs close to $100 billion per year.

For some states, the plant is already an industry unto itself.

California growers alone made more than $13 billion off the plant in 2015, with more demand driving more production every month.

The World’s Most-Hated/Most-Loved Plant

Across the globe, those numbers only expand.

It’s by far the number one cash crop in the world, topping wheat, rice, and corn at $300 billion worth of product grown annually.

It’s also by far the most valuable crop in terms of cost per square acre.

While rice brings in about $560/acre, marijuana is worth an average of $190,000 — trumping even its closest illegal competitor, cocaine, which comes in at $149,000.

And yet for some reason, the vast majority of the world’s governments, including our own, sees this plant, which has found viable commercial applications in everything from textiles to building materials to a new generation of pharmaceuticals, as contraband.

It defies reason that such massive industrial potential remains wasted — especially in a nation and on a planet where something far more dangerous and deadly, alcohol, is not just legal but a time-honored component of everyday life and culture.

The CDC estimates that alcohol killed about 85,000 Americans each year between 2006 and 2010, with those fatalities coming both from alcohol-caused accidents and chronic alcohol abuse.

For working-aged adults between 20 and 64 years, one in 10 died as a result of excessive drinking.

Compare it to tobacco, and the results are even starker.

More than 400,000 smokers die each year as a result of their habit.

Between first- and secondhand smoke, however, cigarettes kill a staggering 960,000 Americans every year — or about one in five people.

Compare it to most anything else in terms of direct physical effects to the user, and the divide between logic and legislation only widens.

The illustration below may seem glib, but it’s surprisingly accurate. No deaths have ever been attributed to marijuana overdose.

The End of an 80-Year-Old Mistake

But I don’t want to get into the politics or history of why this great disparity of views exists between one substance and another.

What I do want to say is that after decades of this utterly irrational approach to controlling what turns out to be one of the most benign — not to mention useful — plants known to man, things are finally starting to change.

Legislation is finally swinging back in the direction of reason. 20 states have softened marijuana laws, and five of those, including Washington, D.C., have approved legislation legalizing the adult use and personal cultivation of the cannabis plant.

What this means is quite simple and should be an awakening for investors across the world.

We’re approaching a sudden emergence of an industry that, despite herculean efforts by federal and state authorities, has continued to grow and blossom on the black market.

Once the tipping point is reached — and I’m confident we’ll see that happen during the next presidential term — federal agencies will finally quit their campaign against the world’s most divisive plant and allow the markets to take over.

What few holdout states there are left by that point will probably fall in line, because after all, tax revenue is far better than spending public funds on the enforcement of prohibition.

And all of that makes it look a lot like one of the biggest investment opportunities I’ve ever seen.

It’s Happened Before; It’s Happening Again

Just imagine owning stock of Budweiser on December 4th, 1933 — the day before Franklin Roosevelt repealed the Volstead Act with the passage of the 21st amendment.

One day you’re selling “near beer” — a beer-like drink that had little to no alcohol — as well as brewing products like yeast and malt, and the next day, you’re cranking out the product that made you famous and that the entire nation thirsts for.

Trust me when I say there was no better day in the 160-year history of the legendary American brewer to have owned its shares.

You see the smiles on the faces of post-Prohibition drinkers who just got their right to consume booze back?

That’s exactly the sort of moment we’re rapidly approaching with the marijuana industry today.

By some measure, this transformation has already begun — with growth rates in the still-nascent industry outstripping just about all other sectors.

In early 2015, researchers from The ArcView Group, a cannabis industry investment and research firm based in Oakland, California, found that the U.S. market for legal cannabis grew 74% in 2014 to $2.7 billion, up from $1.5 billion in 2013.

And it will only gain momentum from here on out.

So what do you do?

Well, the first thing you do is find the companies doing the best work in the field today — and there are a good number.

Lacking federal legality, however, these companies, operating in the few jurisdictions where marijuana laws have evolved the most, remain stunted in growth and limited in potential.

In short, they’re perpetually stuck on the ground floor.

Removing the Shackles

However, the moment that single hurdle is passed, we may just be witness to the fastest and most aggressively expanding sector since the emergence of the dot-com bubble almost 20 years ago.

Today’s projections show substantial growth in both medical and recreational markets — even without additional changes in federal and state laws.

Thousands will make fortunes off this coming legislation-driven trend, but if you want to be among the elite, you need to know exactly how to play it and when.

My colleague Jimmy Mengel, founding editor and investment director of The Crow’s Nest investment advisory, has recently put together a report that does just that.

He’s spent the last several years studying the evolution of this industry and the laws regulating it, and he believes that the tipping point moment is fast approaching.

Which means that now is the best and maybe last time to own a piece of this financial juggernaut before it gets its engine cranking at full speed.

The report may shock you. It may anger you. It may even leave you disgusted if you’re among those who stick to the old-world view of cannabis.

But it will definitely leave you informed and armed to take advantage of this historic social and commercial revolution.

Get instant access to it here right now, absolutely free.

Fortune favors the bold,

Alex Koyfman

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His flagship service, Microcap Insider, provides market-beating insights into some of the fastest moving, highest profit-potential companies available for public trading on the U.S. and Canadian exchanges. With more than 5 years of track record to back it up, Microcap Insider is the choice for the growth-minded investor. Alex contributes his thoughts and insights regularly to Energy and Capital. To learn more about Alex, click here.