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http://finance.yahoo.com/news/why-bill-ackman-is-targeting-herba...

Bill Ackerman (Hedge Fund manager) did by shorting Herbalife. I started a thread on it. It will be interesting to see what happens when/if the FTC rules on it.

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I don't think you understand put options...

Ch4NewsTeam (Jan. 11, 2013 @ 4:24p) |

imbatman (Jan. 26, 2013 @ 9:51a) |

I'll bet it's significantly less than that, as the 4 billion figure likely includes the revenue from new salesmen/member... (more)

Glitch99 (Jan. 26, 2013 @ 10:39a) |

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I would bet on the failure if I thought that I had the power to help make it fail. That is obviously the situation with Ackerman.

You probably didn't read latest news:

Billionaire hedge-fund activist Dan Loeb announced yesterday that his Third Point fund has taken a 8.24 percent stake in the company. Icahn is also believed to have taken a long position in Herbalife.

Not that way, the market can be irrational much longer than I can remain solvent.

I would if I ran billions of other peoples' money and the fee structure were setup so that my take is 20% of the profit. The entire hedge fund business, and wall street to a lesser extent, is setup so that the folks that run the money are essentially in a home run contest. You don't make noise/money by simply making contact and going for singles.

mwa423 said:   Not that way, the market can be irrational much longer than I can remain solvent.
At that rate you'd never short anything. I believe the reason not to short a MLM in particularly is because

1. there's a sucker born every minute, and they're likely to become a HLF customer, and
2. the SEC is too busy watching porn to care (and HLF beat the last MLM investigation)

No position, but I'd rather be long than short at this point.

So is it a MLM scam ?

I know the companies name but don't know anybody buying their products. I have seen people selling them though.

I think Herbalife is a shady scam company... but I would not want to be in Ackerman's position right now. They company is very profitable with low debt. There are a lot crappier companies that will be bankrupt in a few years that are much easier to short.

Shorting stocks is scary as your potential losses are infinite... he's got lots of billionaires betting against him. As the stock rises it will consume more of more of his cash. Ultimately he'll be vindicated on the pyramid scheme thesis but shorting is a very stressful way to make money.

Not sure I'd bunch all MLM together in making that short/long decision. IMO it depends on the quality of their product vs. the competition.

For HLF, I'm not so sure they have a long term viable product. Weight loss is big money but I don't know how sustainable is their model of selling a similar product for 2-3 times that of regular retail competitors. It's hard to imagine it supporting their claim that most of their revenues come from distributor sales with such a value proposition. But there are plenty of suckers who want to work from home for much less than minimal wage. So that pyramid scheme could keep going for a while.

One thing is for sure, as much as I hate all pyramid schemes, I'd be very reluctant to short a MLM based only on my intuition that the FTC is gonna take action against them.

We know one of them (Ackman or Loeb) is going to be wrong.

SEC opened investigation on Herbalife.

Herbal life is not totally like other MLM's. People are starting to be more conscious about their health and if they build a brand/product loyalty it can become a stable revenue stream. Not to praise them, just don't see them disappearing either. Especially since they are still around after their founder died for mysterious reasons, since that didn't kill them then they are tougher then most may perceive.

xerty said:   mwa423 said:   Not that way, the market can be irrational much longer than I can remain solvent.
At that rate you'd never short anything. I believe the reason not to short a MLM in particularly is because

1. there's a sucker born every minute, and they're likely to become a HLF customer, and
2. the SEC is too busy watching porn to care (and HLF beat the last MLM investigation)

No position, but I'd rather be long than short at this point.


You stated what I was think better than I did. The company can keep finding more success far longer than I can stay solvent.

With 3.2 million employees, they're making less than $2000 a seller. That's horrible!

DamnoIT said:   Herbal life is not totally like other MLM's. People are starting to be more conscious about their health and if they build a brand/product loyalty it can become a stable revenue stream. Not to praise them, just don't see them disappearing either. Especially since they are still around after their founder died for mysterious reasons, since that didn't kill them then they are tougher then most may perceive.

You're right, it's a MLM but it's "totally" better than all the other MLM's.

It cannot become a stable revenue stream because it's UNSUSTAINABLE.

They'll die, it will be a slow and painful death with billions of dollars being lost by normal people and hedge funds managed by complete idiots but it will be a death at the end of the day.

Just because they have a lot of idiots willing to invest in get rich quick schemes doesn't make it sustainable, and their business model IS a pyramid scam, regardless of what the lawyers they pay to say otherwise think.

http://www.youtube.com/watch?v=Y60XdZJG83U

Also watch part 2, it amazes me how many millions of people get suckered into believing "their" pyramid scam is legitimate.

Would I bet a billion dollars on the near term failure of an MLM? Hell no, suckers and their money are easily parted and pyramid scams die slow painful deaths.

What we need is a company recruits people to tell people about the pitfalls of a pyramid scam and how to avoid them, for a nominal fee of course. Then we can get them to recruit more people who pay me and the recruiters a nominal fee and sign up even more people.

I came up with a catchy name to make it sound all legitimate and we can sell "products" and starter kits to get people started.

What do you guys think? Want to get in early?

Name of the company will be Amway.

http://en.wikipedia.org/wiki/Amway

Looks like we're already on track to make like 10.9 billion dollars a year....

America sure does love it's Pyramid scams. Like I said, slow and painful deaths with 99% of the people losing money.

There are only so many suckers left, the reason this disease of a company has been around for so long is because it branched out into other countries to spread the disease. Stupid people out number the smart people on the earth probably on a 8 to 1 ratio.

Check out another scam health company going by the name of Yor Health

technolich said:   
Name of the company will be Amway.

http://en.wikipedia.org/wiki/Amway

Looks like we're already on track to make like 10.9 billion dollars a year....

America sure does love it's Pyramid scams. Like I said, slow and painful deaths with 99% of the people losing money.


This was what I was going to note - Amway has been around (according to Wikipedia) since 1959. It is a horrible investment / "job" for those involved, but that doesn't mean that I expect the business to go belly-up anytime soon. (Just think about it - Amway is older than just about any tech company (except for IBM) - they very well could out-live me.)

Shorting a stock because the business model is essentially "lets rip off our clients" (e.g. MLM) doesn't seem to be the financially smart decision...

I almost got sucked into Herbalife.. it is totally a MLM scam. I recall some Coach calling me, informing me she would be sending me a free informational DVD. Five minutes after I got off the phone, I got an alert via e-mail that my AMEX was charged for like $400. I called her back and told her I'm done and to refund the fee, or else I will dispute with AMEX. You would have to be a full-time salesmen to turn a profit. If they just told everyone the truth, that you gotta sell it just like Mary Kay or any other product as a consultant, it'd be a lot less of a MLM scam.

They will die, Herbalife is garbage.

jnheinz said:   I almost got sucked into Herbalife.. it is totally a MLM scam. I recall some Coach calling me, informing me she would be sending me a free informational DVD. Five minutes after I got off the phone, I got an alert via e-mail that my AMEX was charged for like $400. I called her back and told her I'm done and to refund the fee, or else I will dispute with AMEX. You would have to be a full-time salesmen to turn a profit. If they just told everyone the truth, that you gotta sell it just like Mary Kay or any other product as a consultant, it'd be a lot less of a MLM scam.

They will die, Herbalife is garbage.


Wait, you seriously verbally agreed to give someone your credit card information for a free informational DVD?

I'm surprised they gave you a refund, shit getting $400 a person with millions of suckers out there, no wonder they're extremely lawyered up and rich.

Mary Kay and the other "consultant" based products aren't telling people the truth and the whole business model doesn't involve actually selling the product to consumers, it's all about getting more layers working under you.

Every single damn MLM company is lying through it's teeth when they say you have to be motivated to make it work because it peddles the same crap over and over that it's not the product, it's you.

No, 99% of the time it IS the product and it is the business structure that sets them up for failure.

Sometimes I wish there was a dictator out there that could take out every MLM and every investor in an MLM, every single person that sells for an MLM, and every creator of an MLM in one swoop. The world would be a much better place sans MLM people.

technolich said:   jnheinz said:   I almost got sucked into Herbalife.. it is totally a MLM scam. I recall some Coach calling me, informing me she would be sending me a free informational DVD. Five minutes after I got off the phone, I got an alert via e-mail that my AMEX was charged for like $400. I called her back and told her I'm done and to refund the fee, or else I will dispute with AMEX. You would have to be a full-time salesmen to turn a profit. If they just told everyone the truth, that you gotta sell it just like Mary Kay or any other product as a consultant, it'd be a lot less of a MLM scam.

They will die, Herbalife is garbage.


Wait, you seriously verbally agreed to give someone your credit card information for a free informational DVD?

I'm surprised they gave you a refund, shit getting $400 a person with millions of suckers out there, no wonder they're extremely lawyered up and rich.

Mary Kay and the other "consultant" based products aren't telling people the truth and the whole business model doesn't involve actually selling the product to consumers, it's all about getting more layers working under you.

Every single damn MLM company is lying through it's teeth when they say you have to be motivated to make it work because it peddles the same crap over and over that it's not the product, it's you.

No, 99% of the time it IS the product and it is the business structure that sets them up for failure.

Sometimes I wish there was a dictator out there that could take out every MLM and every investor in an MLM, every single person that sells for an MLM, and every creator of an MLM in one swoop. The world would be a much better place sans MLM people.


There is. He's in North Korea.

I just did the math...4 billion in sales from 3.2 million salespeople. The average salesperson is only selling $1250 in product a year???

edit I see someone else posted this earlier, still makes me shake my head.

DutchessPDX said:   I just did the math...4 billion in sales from 3.2 million salespeople. The average salesperson is only selling $1250 in product a year???

93% of distributors in this pyramid scheme make $0 in profits.. so the typical salesperson sells next to nothing... perhaps to a few family and friends.

A lot is probably personal consumption

If Herbalife tried to sell their products through normal channels (store shelves, web site, etc.) they would be nothing special and may have been out of business decades ago. While this MLM marketing stuff may not be illegal, it's certainly the mark of a shady company. I wouldn't touch them with a ten foot pole, but also wouldn't bet the house shorting them. If people would get smart and ignore schemes like Herbalife, they would just go away. Unfortunately, there seems to be an unlimited supply of suckers to keep them around.

DutchessPDX said:   I just did the math...4 billion in sales from 3.2 million salespeople. The average salesperson is only selling $1250 in product a year???

edit I see someone else posted this earlier, still makes me shake my head.


The majority actually don't see $0, they LOSE money.

Penn and Teller put it eloquently when they say MLM's are BS.

1 guy<------CEO makes the majority of the money.
2 guys<---- work under the CEO, make decent money.
4 guys<---- work under the two guys working under the CEO making money.
8 guys<---- Round out the web development, marketing head honcho, product head honcho
Everyone else is at the bottom recruiting more and more people to be "consultants" resulting in over 90% of the profit going to the top.

Remember the consultants have to pay the people above them, it doesn't matter how much $ the sales of the actual product come in because eventually the entire thing collapses.

Getting in while it's early(read you know the guy who starts it) means you'll be at the top of the stream while the majority of that 3.2 million work force ARE the customers forced to buy the "starter kits".

It's easy for people upstream to guilt trip the people at the bottom telling them they're just not working hard enough.

There has yet to be a MLM where 90% of the people buying in don't lose money.

It can take a long time for a MLM to collapse. A safer bet would be put options.

DamnoIT said:   Herbal life is not totally like other MLM's. People are starting to be more conscious about their health and if they build a brand/product loyalty it can become a stable revenue stream. Not to praise them, just don't see them disappearing either. Especially since they are still around after their founder died for mysterious reasons, since that didn't kill them then they are tougher then most may perceive.

...if you think drinking shakes and taking a bunch of pills is being "conscious" about health. There are a ton of "nutrition" centers in this part of the country (Southwest), they are mostly fronts for selling this sort of stuff. The guys in the storefronts hold seminars and such for the salespeople under them.

It's unfortunate, most of the people going in and coming out look to be going on hard times.

unnamedone said:   It can take a long time for a MLM to collapse. A safer bet would be put options.

Options are even riskier. You have to be right about the stock going down and predict when it will happen. Even the longest dated options go out to maybe 2015 but you will pay a hefty premium to get long dated options.

DutchessPDX said:   I just did the math...4 billion in sales from 3.2 million salespeople. The average salesperson is only selling $1250 in product a year??? I honestly thought it would be in the hundreds of dollars.

nyarrow said:   technolich said:   
Name of the company will be Amway.

http://en.wikipedia.org/wiki/Amway

Looks like we're already on track to make like 10.9 billion dollars a year....

America sure does love it's Pyramid scams. Like I said, slow and painful deaths with 99% of the people losing money.


This was what I was going to note - Amway has been around (according to Wikipedia) since 1959. It is a horrible investment / "job" for those involved, but that doesn't mean that I expect the business to go belly-up anytime soon. (Just think about it - Amway is older than just about any tech company (except for IBM) - they very well could out-live me.)

Shorting a stock because the business model is essentially "lets rip off our clients" (e.g. MLM) doesn't seem to be the financially smart decision...



IIRC, Amway had such an "interesting" reputation that they changed their name to something else, and then when that name became rather "interesting", too, changed their name back to Amway. They did and still do ads ala AIG, i.e. as in "we have been around so long so that makes us good" or somesuch boatload of BS.

I can remember some poor bastard Prof at college that had his wife buy into one of the amway MLM "deals." She apparently had him trying to unload that crap at school and when he walked into the hall tween classes, everyone (and I mean everyone - students, profs, staff, etc.) all ran like hell. Was a sight to behold.

Crazytree said:   DutchessPDX said:   I just did the math...4 billion in sales from 3.2 million salespeople. The average salesperson is only selling $1250 in product a year??? I honestly thought it would be in the hundreds of dollars.


or single or double digits if you exclude "buy-ins."

AMWAY is still there..

NBC Article on HL

I predict more victims signing up with all the free publicity the company is getting.

dealonalltime said:   AMWAY is still there..I don't why, but I perceive Amway and Mary Kay as being substantially less virulent as Herbalife. They interviewed a high-ranking Herbalife exec on BBC two weeks ago... and the guy sounded like an angry cult member.

Ackman's Pershing Square Capital Management has also made all of their research and their presentation available on http://factsaboutherbalife.com/ for anyone interested in their arguments.

You can also see Herbalife's rebuttal webcast from Jan 10th at http://ir.herbalife.com/events.cfm

dpid said:   We know one of them (Ackman or Loeb) is going to be wrong.

SEC opened investigation on Herbalife.


So would anybody buy a long straddle believing that at least one will prevail and HLT a year from now will be in a very different place?

madcowdisease said:   DamnoIT said:   Herbal life is not totally like other MLM's. People are starting to be more conscious about their health and if they build a brand/product loyalty it can become a stable revenue stream. Not to praise them, just don't see them disappearing either. Especially since they are still around after their founder died for mysterious reasons, since that didn't kill them then they are tougher then most may perceive.

...if you think drinking shakes and taking a bunch of pills is being "conscious" about health. There are a ton of "nutrition" centers in this part of the country (Southwest), they are mostly fronts for selling this sort of stuff. The guys in the storefronts hold seminars and such for the salespeople under them.

It's unfortunate, most of the people going in and coming out look to be going on hard times.


I didn't say the crap they peddle compares to good quality Dymatize isolate and a core of a daily multi, B and D. I was just saying people are thinking about nutrition more and so there is more demand for products like that, they just happen to get herbal crap. I am speaking of the viability of the company and how it might survive. Gots me lots of red on the first post becase people thought I was a fanboy, ha ha ha I once had to tell my x-boss that the stuff was 4 times overpriced and didn't contain a good nutrition content vs some bulk powder.

unnamedone said:   It can take a long time for a MLM to collapse. A safer bet would be put options.

I don't think you understand put options...


DutchessPDX said:   I just did the math...4 billion in sales from 3.2 million salespeople. The average salesperson is only selling $1250 in product a year???

edit I see someone else posted this earlier, still makes me shake my head.

I'll bet it's significantly less than that, as the 4 billion figure likely includes the revenue from new salesmen/members/whatever signing up, in addition to any actual product sales.



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