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Daniel Price-Harrison

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  • Southern Copper Vs. Freeport: Which Is The Better Buy? [View article]
    I love SCCO: one just has to take a look at the quality of their presentations, their assets, their general efforts re: investor relations (specifically, clearly and tangibly outlining operations and how the company intends to make money in the coming year) to see that this company deserves a premium well in excess of its competitors in my opinion. Often in mining (TOO OFTEN in fact), its really hard to see where the value lies and is going to come from in the future without at best making a guess based on vague reports of new exploration projects, potential uplifts in production quotas etc. In my experience, SCCO leaves you in no doubt after reading the annual report, interim filings - if anything, everything is somewhat underplayed and overly-focused on the "tangible" aspects of the business going forward. That's not just refreshing for a mining play, it's comforting too.
    Nov 28 04:17 PM | 1 Like Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    I completely agree that Herbalife's growth will at some point topple off a cliff and that the day is growing nearer, but I am not sure that it's a sound argument for hammering a company, let alone going short on the insistence that a regulator take it apart.

    After all, there are many, many companies that end up saturating their market; in fact, I would argue that MOST successful companies' business models and their products end up making them a victim of their own previous success at some point (unless they adapt, which is considerably rarer, or they are bailed out, which is seemingly becoming more common ;) This does not need to have to be anything to do with the fact that competition takes them down; as times evolve, so fads and business models change. While some adapt to the changing times, others fall by the wayside.

    If HLF does topple, it's because it became a victim of its own success and that it's business model wasn't geared up for the kind of growth that was thought. BUT ... when you think about it, that's slightly different to a ponzi scheme, in that the only model there was to have no business model at all except to lie to the participants in it ...

    ... it's all these very fine academic distinctions in the argument that make this a bad trade, I'm increasingly convinced. A good trade is asymmetrical by definition and doesn't need endless back-and-forth on the minutae. Strangely, shorting HLF, while maybe interesting as a trade, doesn't feel as sure a thing as maybe the inevitability of the company's business model breaking is. Just like you say, it could be 2018 or 2025 ...

    Life is too short!
    Nov 25 08:12 AM | 1 Like Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    I see what you are saying clearly, and there is substance there. In that sense what you say certainly adds to my nagging suspicion that, pyramid scheme or no pyramid scheme, there are much, much better trades out there than buying put options on HLF (let alone naked shorting!) This is especially the case as the economy appears to experiencing somewhat of a directional upturn (if a little laden with Beta).

    I think what I've taken away from reading what HLF bulls are saying these past weeks - and I would STRONGLY encourage other HLF bears to do the same now - is that while the Herbalife pyramid scheme vs. great direct sales business is a very interesting academic debate, as your comments clearly imply, there is almost no way you can argue that this is a great asymmetric trading opportunity (this point is especially ripe at the moment given there are so many not-so-subtely hidden trading asymmetries out there right now as a result of the sharp Beta direction across various individual stocks/sectors ...)

    I'm really pleased you've put me off this trade now to be honest, but as you correctly hint at, being open minded is a really underrated quality in today's market. Everyone wants to have a massive conviction - so much so, that you wonder whether some investors are in it for profit or merely point-of-view-analysis. Cheers again - hope you have a good close of year ...
    Nov 24 08:05 PM | Likes Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    Doug - just because Ackman's predictions are not all coming to fruition now, it doesn't mean that the reasoning behind them is necessarily invalid. I'm not sure anyone would have lost money yet either on the short side if they purchased long-dated out of the money put options, either (I agree that shorting the stock naked is a very stupid thing to do however). Also, the issue of leverage is not one that is relevant for one to take a short position here; rather, it is the thinking that the operating model is faulty and that there is a natural limit to the earnings capacity of the company that is being rapidly approached.

    But I concede that your personal experiences with the company and its distributors are surely equally valid here and receive too little press (which is mostly focused on the company ramming the product down the throats of everyday consumers, something that you - and other distributors - maintain simply is not the case).
    Nov 24 11:57 AM | Likes Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    Hmm ... now I think about it, I must admit that the one area I have a problem with is this argument that I perhaps have not given enough attention to: specifically, WHO are the victims here?

    For it's not as if a) the customer gets nothing in return except for the false illusion he or she is making money (on the contrary, they get health products) or b) the customer wasn't trying to take his or her own big share of the pie signing up distributors to earn commissions off the downline. You have actually given me pause for thought here with this very straightforward and logical enough response, and I appreciate that. Thanks.
    Nov 24 11:50 AM | Likes Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    Let's get to the crux of the argument then: retailers are incentivised

    a) more to recruit other retailers than they are to sell product and
    b) to buy excess (unwanted) product in order to meet their commission payout thresholds.

    These are facts, and even Herbalife cannot (and does not explicitly) deny this. Given this knowledge, how can you not construe Herbalife as a very sophisticated pyramid scheme? I am genuinely interested to hear the response to this question from a Herbalife long, not antagonising here, so definitely take the time explain your position to me given the mentioned.
    Nov 24 08:30 AM | Likes Like |Link to Comment
  • The Baidu 'Bubble' Destroys Any Real Valuation [View article]
    Well, it appears that if you had taken this advice 3 years ago you'd have a 123% return vs. a 44.7% return - in other words, you'd have made an additional 26% per annum for what amounted to less than half the risk (Beta of BIDU: 1.7 / Beta of YHOO 0.7). As I said back in 2010, the fact is that YHOO is putting your money to work more effectively than is BAIDU. I am more bullish than ever on this trade now, and would actually go as far as buying puts on BIDU - this is given a number of really smart acquisitions by YHOO (Tumblr being the very best of them as it makes the tech giant the only one to capture the early teenage market share that will comprise tomorrow's online revenue base) and BIDU's increasingly unstable position.
    Nov 24 07:16 AM | Likes Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    Here is an interesting question: why is a pyramid scheme not legal AS LONG AS YOU DISCLOSE that it's a pyramid scheme to the investor upon taking his or her cash? I think the answer is that people would still invest/participate!

    It's quite interesting to think of a world in which this was the case, since the largest and longest-living pyramid schemes would by definition be the riskiest to invest in, and most likely to come toppling down, but they would ironically in many cases have the most credibility ("Oh, I know pyramid schemes are unsafe and all, but this one has managed to stay the course more than 20 years" etc.)

    This very realization alone ought to abolish any basis for EMH that currently still exists.
    Nov 24 03:48 AM | 1 Like Like |Link to Comment
  • Herbalife: Pyramid Scheme Or Goldmine? [View article]
    The fact that Herbalife is a pyramid scheme is no "debate": anyone who has read Bill Ackman's presentation from start to finish is forced to conclude on the basis of hard evidence that the company is a pyramid scheme. In fact, Herbalife is very similar to the (BLMIS) ponzi fund, in that it is a pyramid scheme with a multinational bent (making it that much larger and more complex in size and therefore taking quite a bit longer to crumble as the components of the scheme are distributed over a wide, multi-country system).

    The fact that the government and the SEC have had this a year already and have still done nothing shows how little actual reform there has been over the past 5 years at the same old tired institutions that stood by when Marcopolis et al. presented compelling facts in a similar way about BLMIS running a ponzi scheme. Of course Herbalife's earnings will start to tail off soon, and then slide, very, very quickly when they do (as Herbalife will have no "new" emerging markets to penetrate ...)

    Just as BLMIS was the hedge fund world's most memorable ponzi scheme, so Herbalife will become the "emerging economies'" most memorable ponzi scheme. If only regulators and government officers would step in and shut this sham of an operation down now, it could save billions of dollars in potentially uncorrelated but inevitably related exits from good quality emerging market companies and direct sales companies when the thing does finally come tumbling down.

    What a shame that those in charge are asleep at the switch again!
    Nov 24 02:38 AM | Likes Like |Link to Comment
  • GM (GM) forecasts that the growth in China's car market this year will fall to 7-10% from 30% in 2010 and 50% in 2009, although CEO Daniel Akerson indicates this is a good thing. "You can't have totally unbridled growth in a country evolving as quickly as China," Akerson says. Surely that spinning sound is not coming from GM car wheels.  [View news story]
    This is a great illustration of one of the biggest problems about investing in China, and emerging markets more generally: the growth rates are so erratic. From an operational standpoint, this means that while you might project 25% CAGR over the next 15 years, every year, the reality is that 2 years ago was 50%, which fell to 30% growth, which fell to 10% growth, which jumped to 50% again for 5 years and then slumped and spiked thereafter. That makes managing your cashflow enormously hard. For firms like GM, which rely heavily on consistency in the numbers, this task will only get more challenging as different markets evolve and open up over the next 30 years.
    Oct 30 08:52 AM | Likes Like |Link to Comment
  • Is "Is AA+ So Bad?" asks Mark Gongloff. Not really he says, pointing out that Japan, Canada and Australia have lost AAA ratings without borrowing costs rising in the long run. And what about investors with stipulations about AAA securities? Some "put Treasurys in a special category," while others "are considering tweaking their rules."  [View news story]
    That's exactly right. The S&P now looks beholden to corporate America ... If my neighbor has a $25k salary, a $150k o/d and and $50k on credit cards, and he asks me to lend him $30k and I agree, even if he had a $1 million salary three years ago, how does that make my paper AA+??
    Aug 7 07:52 AM | Likes Like |Link to Comment
  • Is "Is AA+ So Bad?" asks Mark Gongloff. Not really he says, pointing out that Japan, Canada and Australia have lost AAA ratings without borrowing costs rising in the long run. And what about investors with stipulations about AAA securities? Some "put Treasurys in a special category," while others "are considering tweaking their rules."  [View news story]
    WSJ's Mark Gongloff always misses the point when it comes to Japan. The point is not that "borrowing costs (haven't) risen in the long run," it's that growth hasn't either!
    Aug 7 05:50 AM | 1 Like Like |Link to Comment
  • Groupon is dropping a controversial accounting measure in an amended IPO filing that could come as soon as Monday. The SEC began investigating the company's use of adjusted consolidated segment operating income, in which it counted customer acquisition not as normal costs, but as a capital investment.  [View news story]
    It's a hard one this, because it is true that the customer acq costs for Groupon resemble capital investment more than they do normal biz costs. But then that makes the whole thing look like a B2C ponzi scheme.
    Aug 7 04:36 AM | Likes Like |Link to Comment
  • In an unusually blunt I-told-you-so, China's official Xinhua news agency publishes a commentary demanding the U.S. address its chronic debt problems: "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone."  [View news story]
    "Everything in life has a price. We have debt, but a decent standard of living. They have no debt, but live like serfs."

    I live in Asia, and you know, I can't count the number of times I have heard this one muttered by even the Chinese themselves! The average Chinese worker (contrary to western media opinion) can only dream of having a house with a mattress warm enough to wake up comfortable and soft enough to sleep undisturbed.

    A country's GDP/debt figures are really quite irrelevant in the short-/medium-term for most of the people who live in a country, sort of like the way Wal Mart's quarterly earnings really don't matter at all to most of its employees! It's how the company (uh-hmm, country) takes care of the employees that matters most to them.
    Aug 7 02:40 AM | 3 Likes Like |Link to Comment
  • In an unusually blunt I-told-you-so, China's official Xinhua news agency publishes a commentary demanding the U.S. address its chronic debt problems: "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone."  [View news story]
    "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone." -- Xinhua

    I know there is a lot of support for this, but I must say this kind of father-child speak is unhelpful at best and at worst just pathetic and immature political posturing. This is the equivalent of the US saying it is going to bomb countries into "the dark ages" (ie hyper-aggressive speak); this quote reflects the very worst qualities of the Asian mentality, which occasions towards acting superior and using power in such a way as to attempt to psychologically control its opponent/partner. Instead, the Chinese ought to use one of their best attributes: to just get on as usual and do their thing.

    It smacks of hypocracy, too. After all, the only reason the country is buying US government paper is because if it didn't, then its manufacturing base would go bankrupt overnight. By that rationale, it's not inaccurate to suggest that Treasuries -- and therefore by extension the US credit rating -- are the only reason China even has a GDP in the single digits in the first place (if you don't believe me, look at all the African economies flush with natural resources while their currencies and economies spiral daily further out of control).

    In the real economy, there are many different different forms of "borrowing" and China I am afraid is one of the largest debtors of all -- to none other than the USA!
    Aug 7 02:20 AM | 1 Like Like |Link to Comment
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