Frager Factor

Monday, September 17, 2018

The Case Against Legal Cannabis

Photo: Instagram/MedMen
As I have been the evangelist for Cannabis investing, I should bring you another side of the coin.

I have been promoting investing in Canadian Cannabis producers, where it is legal. I have also stressed that I see the value not in recreational use but in medical applications-- potential cures for terminal conditions that have eluded traditional science.

While Cannabis has been legalized in many states, and chains like MedMen are opening investments, opening Apple-like store, hiring "budtenders" and bringing local brick and mortar commerce back to life again, there is a downside. Marijuana is a federal crime. That restricts banking and interstate trade.

Today, American Flags (.com) Domain Investor Jeffrey Reynolds, whose day job is as an addiction expert, posted this study for consideration:

As New York considers its marijuana policy, it's important to look at what's happening in other states. There's a new brand report out in Colorado that offers some troubling findings: 

- Since recreational marijuana was legalized, marijuana related traffic deaths increased 151 percent while all Colorado traffic deaths increased 35 percent

- Colorado past month marijuana use shows a 45 percent increase when comparing the three-year average prior to recreational marijuana being legalized to the three years after legalization.

- The yearly rate of emergency department visits related to marijuana increased 52 percent after the legalization of recreational marijuana. (2012 compared to 2016).

- The yearly rate of marijuana-related hospitalizations increased 148 percent after the legalization of recreational marijuana. (2012 compared to 2016)

- RMHIDTA Colorado Task Forces (10) conducted 144 investigations of illicit market marijuana in Colorado resulting in 239 felony arrests and 7.3 tons of marijuana seized.

- Violent crime increased 18.6 percent and property crime increased 8.3 percent in Colorado since 2013

- Marijuana tax revenues represent approximately nine tenths of one percent of Colorado’s FY 2017 budget.

There's lots to these numbers that isn't captured in bullet points, but it's important that we continue to use data (not politics) to make important policy decisions that can potentially impact public health and safety. Here's a link to the full report:

A commenter on Jeff's thread offered this rebuttal:

A Review of the Rocky Mountain High Intensity Drug Trafficking Area 2017 Report

Photo: Forbes

Following the governments position on lifting the Federal Statues against marijuana will give you a flip flop headache:

In January 2018

Attorney General Jeff Sessions has launched a new war on marijuana legalization.

"On Thursday, Sessions rescinded guidances from former President Barack Obama’s administration that allowed states to legalize marijuana with minimal federal interference. In a statement, Sessions said that the move will allow federal prosecutors “to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across our country.”

In effect, this will let federal prosecutors use their own discretion to crack down on marijuana businesses in states where pot is legal for recreational purposes.

The move is a big deal for legalization efforts. While marijuana has been legalized for recreational purposes in eight states and Washington, DC, it remains illegal at the federal level — classified as a schedule 1 drug (the strictest such category in the scheduling system) with criminal penalties attached.

The Obama administration took a soft approach to the drug, essentially letting states legalize as long as they met certain criteria. But Sessions, who now heads the US Department of Justice, has pulled back the memos at the core of past lax enforcement."

Then in July 2018 Forbes writes:

Why President Trump Is Positioned To Be Marijuana's Great Savior 

"And now we have a president—one known for his unpredictability—who recently signaled a willingness to support reform. President Trump, whether premeditated or not, is putting himself in a position to make history by becoming the U.S. president who reversed a nearly century-long policy of marijuana prohibition and, in so doing, reap the political spoils of taking on the mantle of “the legalization president.”

Now in September 2018

Why the Trump Administration's Plot to Derail Marijuana Momentum Will Flop Bigly
Marijuana stock investors shouldn't worry about the federal government's secret plans to whack weed before it grows too much support.

"On Wednesday, online news site BuzzFeed reported that the Trump Administration is engaged in a "secret war on weed." BuzzFeed stated that the Marijuana Policy Coordination Committee told multiple federal agencies to submit "data demonstrating the most significant negative trends" about marijuana use. The goal appears to be to try to prevent further support for relaxing federal anti-marijuana laws.

If the committee is successful in its efforts, companies with U.S. marijuana operations such as Scotts Miracle-Gro (NYSE:SMG), CannaRoyalty (NASDAQOTH:CNNRF), and Kush Bottles (NASDAQOTH:KSHB) could see their hopes of operating in a fully legal environment dashed.

The effort to cast marijuana in a negative light isn't coming from Trump. Instead, it's being coordinated by the Office of National Drug Control Policy (ONDCP). Jim Carroll is the head of the ONDCP, a position also known as the "drug czar." Carroll isn't a close confidante of Trump."

It's important to get all the facts, and research all angles before making responsible investment decisions.

Meanwhile the two stocks I support are up today, With Canopy (CGC) up 2.45% for the day and 692% since I acquired my initial shares for $6 on 5/9/17.


Sunday, September 16, 2018

Cannabis rally braked by Tilray downgrade, allowing investors to lock in recent gains

Cannabis stocks are risky. Tread carefully.

There’s a lot of hype. Also a lot of manipulation. 

Beware of Peter Thiel's Tilray (TLRY: NASDAQ), for example, that went IPO in July at 1$9 and got pumped up to $127. This will rapidly lose half. It started today with a 10% drop.. 

There are only two Cannabis stocks I support based on their IP which are medical cures that give a ten year lock on the market. They will probably be acquired by big pharma. 

The main one is Canopy Growth which is positioned to be the Amazon of its industry. The time to buy it was when I recommended it here last December at $19. Or the second chance I suggested at $40- on August 21

Recent merger of Monsanto and Bayer suggests a prospect. Bayer can control the pills. Monsanto can lock up the seeds the way they have on other crops. The valuation is in cures for ALS, Parkinson’s, Alzheimer’s, MS, Autism, Epilepsy, Lupus and various cancers. 

It’s not about Stoner’s buying joints. 

If you bought 1000 shares of CGC a year ago for $8k they’d be worth $45k today. 

10k shares would have turned 80k into a half million. 

Like Amazon and Apple 10 years from now these shares would be worth 10x more. 

There aren’t many opportunities to get in on the ground floor of a revolution. Worth considering as an alternative to domains or bitcoin. But carefully..  because...

There could be an industry-wide correction and I wouldn't get in at the high mark. When the market opens in Canada next month it will rebound and go further. I'll keep you posted. Meanwhile check out the articles below for analyst insights.


Thursday, September 13, 2018

$5 Billion Reasons Why NIKE Stock Will Double In 12 Months (Hint: It's Not Kaepernick)

While participating in many of the social media debates about the Nike strategy, I realized that domainers are still stuck on CPC economics and really miss the point of a direct-to-digital model. For this post I will reprint a post from 2012 about Lifetime Customer Value.  Here's the story.

The pressure is on for Nike to really listen to consumers about what they want—and deliver it.

It's not about the controversy. It's about new strategy. Retail is dying. 

Sports Authority, for example closed all of its stores. Other stores like Macy's have become a bargain hunters basement. Big brands no longer can stake their futures on third parties. 

The face of America is changing. Minorities are soon to comprise the majority of the population. The majority of Nike’s 73,000 employees are minorities, with 38% African Americans. They are one of the key audiences this campaign speaks to and it will instill pride and motivate 140 million social media ambassadors to drive sales in their communities. Nike also recognizes that with 43% of the 75 million Millennials in the U.S. identifying as African American, Hispanic or Asian, if a brand doesn’t have a multicultural strategy, it doesn’t have a growth strategy.

So Nike's have built a platform and app to sell direct to urban cultural markets. Like Amazon Prime, it's a members-only subscription club. They already have 140 million subscribers and are on the way to 300 million. With it they will eliminate 70% of the product catalog, and most retail partnerships. 

That’s why I am intrigued by Nike's plan to focus on 12 Key Cities in its Consumer Direct Offense:  New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan.These are the places the company predicts will generate over 80% of Nike’s projected growth through 2020. Why? Because the company is tapping the biggest, baddest, but old-fashioned data of all: Consumer Demographics to leverage what's arguably become its most profitable asset: African-American cool. 

It’s a good business decision that will drive record sales. Because those sales are coming millennials. And the investors will follow.


The Bottom Line

It costs Nike an average of $28.50 to make a sneaker that will retail for $100. That sneaker will be sold to wholesalers at $50, meaning Nike will get back $21.50 (the profit on this comes to $4.50 after SG&A and taxes). This cut for Nike will of course increase in their direct-to-customer channels of retail.

SG&A includes all non-production expenses incurred by a company in any given period. This includes expenses such as rent, advertising, marketing, technology, accounting, litigation, travel, meals, management salaries, bonuses, and more. On occasion, it may also include depreciation expense, depending on what it’s related to.

Selling direct from the app increases the profit 3x on the same sale with Nike pocketing the distributor's share. If half of their current subscribers bought just one shoe, that's a $$ FIVE BILLION bump in profit.

But subscribers buy more. 3x more than shoppers at retail brick and mortar. So what I see is a company using a good marketing strategy that also empowers a generation of athletes and young people to stand up for what they believe in and the changes they want to see in the world:. And as the information below explains, the lifetime value of these customers, the big data advantage, is why you can look at any direct to consumer digital business and see they are the ones with the $2000 share values. I expect Nike to rapidly join them.

'Measuring Visitor conversion rates (Visit based conversion rates promote bad marketing behavior) is akin to declaring success after a one night stand."

One of the most important papers on web business valuations, a way to look at a business that is overlooked by traditional metrics and as result by analysts, in particularly Apple's case, is lifetime customer value.

The expert of this subject is Avinash Kaushik, "Director of Research & Analytics at Intuit, Web Analytics Practitioner, The Digital Marketing Evangelist for Google, author of two books and a VERY Nice guy."

In an April 2010 blog posts titled, "Excellent Analytics Tip #17: Calculate Customer Lifetime Value," Avinash claims that traditional metrics fail because they focus on short term success.

Says Avinash, "Even measuring Visitor conversion rates (Visit based conversion rates promote bad marketing behavior) is akin to declaring success after a one night stand."

Some of your customers are going to be spending more with you, for longer.

Let's say I am a car insurance company, or a subscription publisher, with a desire to sort out some of tomorrow's problems today.
I know that the initial cost of acquiring customers (or policies/subscriptions) will only go up as more of my competitors sail for the calm waters of "cost per acquisition" pricing.
So, if I need to sell 10,000 policies every year I have 2 options.
Buy cheap customers and hope that a few may buy again
Buy the right customers that stay with me for 2 or even 3 years
Without doing the value-based segmentation we'll never understand which channels bring in the best customers and that would be a terrible shame.
The ground truth is that I can re-new a policy or subscription for considerably less than buying a new one. How?
One strategy might be to spend an extravagant $1.00 of marketing costs to show my love an appreciation to our customers throughout the year via email or social media, increasing the chances they'll buy again.
That means I won't have to spend $20.00 buying a new one… a saving of $19.00 per renewal.
So if I can grow my repeat purchase rate from 20% to 40% that means I will generate 2,000 policies at $1.00, not $20.00.
That's a $19.00 savings on each of the 2,000 policies. BAM!!
Moving to a Life Time Value acquisition strategy will save my company $38,000. Not bad for a couple of days work.
Let's finish off the concepts of value based segmentation and lifetime value by going back to the original example we were working through.
If we can identify channels, campaigns, media or propositions that deliver "better than average" customers we can begin to see how much more profitable they are and decide how much more we should be spending on them.
Read on for an (sample) analysis I (or you!) should do:


Wednesday, September 12, 2018

A Glimpse Into The Dark Underbelly Of The Crypto Crash: Hard Lessons For Investors

Today: $20 Million Millennial; Cannabis, Bitcoin, Cryptocurrency, Bayer, Monsanto, Food Trucks

On Dec. 7, 2017, the price of bitcoin was above $17,000. Nine months later, it’s below $7,000.

We’re surprisingly unreliable narrators of our own life story

CNBC's Kate Rogers reports on the success of the Van Leeuwen ice cream truck and the business of food trucks.

Want some predictability in your work and your income? Then strive to become a reliable and dependable partner to your clients.


Tuesday, September 11, 2018

Einstein Was Wrong: The Next World War Looks To Be Over Sneakers

So what's all the fuss about?

If you watch the corresponding commercial the company released on Wednesday, it’s clear that Nike is playing it as safe as possible with its supposedly risky move. He's not advertising shoes, he's not kneeling, nor is Nike taking a position on his politics. The ad is about courage, self-esteem and human potential. It's not the one print ad you saw, it's a series of inspirational commercials that are not about him but feature both celebrities and ordinary people from all walks of life who have overcome tremendous obstacles to live their dreams. There's nothing left or right about it.

Nike has likely figured out that its core consumers -- the people who regularly buy its sneakers and clothes -- are mostly the millennials and minority youth who already support Kaepernick or at least don't mind the stance he is taking.

The ad’s overarching message is that everyone should dream big and try to be the very best athlete there ever was, even if personal or structural obstacles stand in the way. It functions as a greatest-hits reel of sports stars, including Serena Williams, Megan Rapinoe, and LeBron James, all three of whom have come out in support of Kaepernick. 

One athlete who doesn’t appear in this collage of rapid-fire clips is Kaepernick himself. The quarterback, who hasn’t played in an NFL game since January 2017 after being blacklisted by the league, appears only as a narrator ambling down city streets in a black turtleneck and camel coat. There’s no footage of him on the field, nothing that depicts his protests or their consequences, and not a single allusion to the police brutality and racism that prompted them. The radical statement that Nike hinted at in that initial ad never gets fleshed out. The brand gets close enough to Kaepernick to draft off his stardom but stays far enough away to avoid any explicit association with his message.

The ad campaign’s connection to Kaepernick has everything to do with his fame and nothing to do with his ideology. It’s no surprise, then, that the commercial fails to make a coherent statement about belief, sacrifice, and struggle. It isn’t meant to sell a political message. It’s meant to sell shoes. 

Our service doesn’t entitle us to get offended by Kaepernick’s choices or anybody else’s.

And some of them are walking right into it, to the glee of Republicans.

The brand’s online sales jumped 31% following the campaign

50 years:  We are still talking Social Injustice. 1968 two young men look down and hold up a fist during the National anthem. 2018 athletes take a knee during the National anthem.  2 peaceful demonstrations looking to change the way we deal with people but in 2018 instead of just accepting his right. He is practically banished, loses a career, and chastised for his basic right of free speech and peaceful demonstration. Sadly. Not much seems to have changed... 50 years

Just Erase It

-The mostly positive publicity outweighs the outrage on Twitter
-Nike’s been backing controversial athletes since Prefontaine

A Veteran Comments:
"it always amazes me how people let "patriotism" blind them to reality and negatively effect their thinking.... You can love this country but still admit their are huge injustices, that quite frankly are way below where we should be ... a true patriot recognizes what makes this country great and calls us out when warranted, i come from a cop family and married into a family of veterans, i've never voted democratic, but to say there's not a problem is idiotic.... this isn't about terrorists or cop killers, it's about an undercurrent of prejudice bias that creates and tolerates an unacceptable rate of extreme and unjust treatment of colored youth.... both that reality and the reaction is based on one thing... FEAR... we should face the problem to truly make this country great, instead of spending so much time being diverted to these arguments that aren't doing anything to address the issue. It's ok to admit the problem exists, that doesn't make you a racist, or a sympathizer, if you're white."


Thursday, September 06, 2018

Update: The Domain Gravy Train Has Passed. Time For A Better Idea.

Money Talks. Bullshit Walks.

One August 24th I wrote about finding an easier way to make money. And right now there is a better alternative: a once in a lifetime opportunity to get in on the ground floor of and industry that will be bigger than Pharma or Clothing: Pot.

I wrote:

A couple of days ago I reminded you about Canopy Growth Corporation. 

Canopy is a Canadian marijuana conglomerate that has grown by acquisition and has cornered the market. Marijuama is legal in Canada. Unlike investing in a US company where regulators make it risky, this stock is perfectly safe.

There is still time to get in one this now and turn a $1000 into a million if you have the patience to take a 5-10 year nap. 

The market is a no-brainer. We're not just talking stoners here, we're talking cures for diseases for which there was no hope before. Consider that one big pharma brand generates $70 billion year from a single pill.

We first recommended this here when it was $6 a share just about a year ago. Then we covered it again last December at $19 when Corona opted in

On this day about a week ago it was $40. I bought more and suggested you do as well.

Today its t $52 and analysts are forecasting growth to $74.

According to reporting by StreetInsider, Azer believes an "ability to establish an early lead in the adult use cannabis market, as well as domestic and international medical cannabis markets" justifies the increase in her target price.

Making $12 a share in a week- on just 100 shares- gives you a $1200 profit on a $5200 investment.

There's no doubt this will take time to catch on, like Amazon who needed first the infrastructure, technology and supply chain, but didn't move the market until customers came along. The iPhone helped. 

Had the average Joe decided to save $5,000 and spend it on Amazon’s stock when it first hit the public markets 20 years ago, they be worth at least $2.4 million today.

So imagine an alternate reality in which Warren Buffett, the Oracle of Omaha, decided to take the leap and invest in Amazon in its early days. In that world, Buffett decided to put say $50 million in company on Thursday, May 15, 1997 — the day Amazon it debuted on the Nasdaq. Today, that same stake would be worth $24.4 billion as the company’s shares have grown some 488 times.

You can't do this any more with domains. And there's only a few stocks in a lifetime that ever afford an opportunity like this at all.

There may never be another chance in your lifetime to REALLY accumulate the wealth that domains failed to deliver.

So get cracking!


Tuesday, September 04, 2018

Oprah Turned $30 Million Into $400 Million In Three Years Leveraging Marketing's Best-Kept Secret... Which Leads Me To Nike

Good marketing isn’t about appealing to everyone, it’s about appealing to your core audience. 

Black consumers are an underestimated force in the American economy. 

Oprah understood this and also recognized African American women struggle with the dual challenge of weight control and diabetes which is partly a genetically-driven curse. 

But Weight Watchers ads and images were of suburban white women. This huge prospect base had a problem but couldn't see a solution they could relate to. The brand was dying and the stock feel to $6. 

Something had to change. 

They needed a big jolt and a different idea. 

Enter Oprah as investor and spokesperson.

As Einstein said, "problems can't be solved at the level that created them."  The plan to open a new culturally driven market worked and the stock is now at $73. 

Oprah's $30 Million investment for a 10% stake is now worth $400 Million and DJ Kalhed is stepping into refresh the idea and bring his influence on a whole different generation  of social media connected consumers. 

Which brings me to Nike and the controversy surrounding it.

Nike’s brand has been built and maintained by African Americans and benefits from African American sneaker culture. With $1.2 trillion in spending power, African-American consumers are an important population to grow market share and brand preference. 

Black folks are the original purveyors of “cool.” The shoe industry is a prime example of how African Americans have been trendsetters in fashion and pop culture. 

The face of America is changing. Minorities are soon to comprise the majority of the population. 

The majority of Nike’s 73,000 employees are minorities, with 38% African Americans. 

They are one of the key audiences this campaign speaks to, and it will instill pride and motivate 73,000 social media ambassadors to drive sales in their communities. 

Nike also recognizes that with 43% of the 75 million Millennials in the U.S. identifying as African American, Hispanic or Asian, if a brand doesn’t have a multicultural strategy, it doesn’t have a growth strategy.

Look at their website Nike (.com) -- those images and ethnicities are their targets.

They understand the importance and impact of portraying black men in a positive light, and the power of showing black men as role models in the black community. Likewise, it's evident to that African American males' purchasing decisions are often influenced based on a product's association with a celebrity.

Losing share for the first time to Adidas, they needed a big bold marketing move like Weight Watchers did to jolt sales.

Nike's plan with this campaign is to focus on 12 Key Cities in its Consumer Direct Offense: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan.These are the places the company predicts will generate over 80% of Nike’s projected growth through 2020. Why? Because the company is tapping the biggest, baddest, but old-fashioned data of all: Consumer Demographics. They also symbolize how the company has leveraged what's arguably become its most profitable asset: African-American cool. 

39% of their growth is coming from direct to consumer sales on their website and these are the demographics of the buyers. They wouldn’t have launched this without research.

Not everyone is impressed…or honored. Especially shareholders. But it’s a good business decision that will drive record sales. Because those sales are coming from millennials. And the investors will follow. In fact, right now may be the best buying opportunity to double your money or better.

So what I see is a company using a good marketing strategy that also empowers a generation of athletes and young people to stand up for what they believe in and the changes they want to see in the world:

🏈Shows Authenticity 
🏈Resonates with Target Audience
🏈Shows Support for Athlete Partners
🏈Takes a Stand
🏈Creates Culture 

Sneakers have become a cultural mainstay with the help of hip-hop and basketball over the past few decades. Plus the USA is only a small part of their business. Like it or not we are in a global, diverse economy and the older we get the more disconnected we are and the stranger it seems.

About The Author: Owen Frager is an Internet marketing expert ready to help take your company to the next level.

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