Herbalife: Carl Icahn Delivered Bill Ackman A Valentine He'll Never Forget [View article]
You hope Ackman takes Icahn to the "cleaners?" How is that possible? Icahn is worth over $16 billion. That is four times the market cap of Herbalife. He could literally buy Herbalife the way most people buy Nutritional Shakes.
More important, however, is the fact that Ackman is short virtually the entire supply of HLF shares available to be shorted. Due to the size of Ackman's short position, Icahn doesn't need to buy Herbalife. He can make even more money by continuing to buy the stock until Ackman is forced to cover. Then, Icahn can basically name his price for his shares and Ackman will have no choice but to pony up. Its called cornering the market.
Today, I bought 2,000 shares near the close of the market at an average price of about $41.00.
Wrong again Pinocchio. Short selling is available in most markets. For example, farmers sell produce to grocers before crops have even been planted. Petroleum refiners sell gasoline to transports before the refiners even take delivery of the underlying crude. Airplane manufacturers take orders from airlines years in advance of delvery.
Only in markets, which trade items that have a finite supply or are one of a kind, is short selling limited or nonexistent. For example, it would be extremely difficult to short sell Leonardo da Vinci's original Mona Lisa because only one exists and it isn't traded on a regular basis. However, even then, short selling could exist if, for example, somone simultaneously had the opportunity to buy and sell the Mona Lisa.
Lets say Bill Gates knows the owner of the Mona Lisa who offers to sell it to him for $50mil. Gates knows that Warren Buffett wants to buy the Mona Lisa so he contacts Buffett and negotiates a contract to sell the painting to him for $100mil. Gates then goes back to the current owner and buys the Mona Lisa which he subsequently delivers to Buffett.
At its essence, short selling in stocks is nothing more than a contract between the buyer and a short seller whereby the short seller agrees to deliver the underlying stock to the buyer at a later time. Contrary to your usual babble, short selling exists and occurs on a regular basis in the vast majority of markets. Banning short selling in equity markets would be catastrophic.
Finally, your useless banter contained another error. As far as your posts are concerned, late isn't better than never.
If you don't like "greed," you can substitute self-interested, ambitious, driven or any other word of similar meaning. In the end, this is what motivates people to be productive.
As for short selling, it needs no more regulation than buying. I haven't seen any complaints from you about Hedge Funds who maintain large long positions in a given equity. Remember, no one can go buy unless someone is selling. Moreover, short selling is self-regulating because of the inherent dangers it presents (i.e. unlimited losses, margin calls, shares called away, etc.).
I hope you will reconsider what I said. In certain markets (e.g. equities, real estate, etc.) there is a fixed supply. This is not the case with the examples you give for automobiles, food, gas, etc. When demand goes up for cars, prices and, in turn, profits go up. As a result suppliers build more cars because they can make more money.
With stocks, on the other hand, in the absence of short sellers, the only people who could sell would be those that own the stock. So, without short sellers, demand for a given equity could, theoretically, be unlimited, while supply would be limited to those who own the stock.
You accurately point out that, even with short sellers, equity markets still experience bubbles. However, that is hardly justification for banning short selling. Only if we want even bigger bubbles would that make sense.
You characterize short sellers as manipulators and greedy people who want to hurt the people on the other sides of their trades. You go so far as saying they are profiting from the stupidity of the buyers. How are the motives of a short seller any different than those of a buyer? Certainly, the buyer thinks the stock is worth more than he is paying or he wouldn't be buying.
While I don't like Bill Ackman, or what he did with respect to Herbalife, that dislike isn't because he sold Herbalife short. It is because he made misrepresentations, about a perfectly legitimate company, to line his own wallet. I am a frequent short seller but I don't build my position and then make false statements to bolster the trade.
As for your disdain for what you consider human frailties, especially greed, such emotions are what make the world go round. For lack of a better word, greed is good. I know, its been used before, but it is true. Greed is what motivates people to, among other things, go to college, build businesses and, for that matter, trade markets. There are, of course, bad people who are willing to achieve the objectives of their greed through nefarious tactics. That, however, is a result of a character flaw, not a flaw in the emotion itself.
In the end, short selling serves a very good purpose.
Short selling is vital to all financial markets but especially equities. Most equities are owned by institutions and are held for the long term. In the absence of short selling, the demand for most equities would far outweigh supply. As a result, the equity markets would frequently experience extreme overvaluations followed by crashes.
Short selling is practiced mostly by traders who, for the most part, are contrarians. They tend to sell when others are buying and buy when others are selling. This trading, whether it is done on the buy side or the sell side, helps moderate markets and prevents extreme over-valuations and under-valuations. Therefore, contrary to what most people believe, traders on both sides of a transaction, including short sellers, provide liquidity that reduces market volatility.
Traders are even more important during market extremes. During these periods, they provide liquidity to the market when, in their absence, there might very well be none. They buy during crashes when no one else will buy and sell into bubbles when no one else will sell. For example, during a market crash short sellers cover shorts and some even begin going long putting a bottom in the market. Without them, there literally might be no buyers in the market at all.
The recent bubble in real estate markets illustrates what happens without short sellers. Everyone believed that real estate values would never go down so demand for real estate far outstripped supply. In turn, real estate values climbed to the point of absurdity. This bubble was sustained for an unprecedented period of time by the government which pumped money into real estate through low interest rates, tax breaks and government subsidized and guaranteed loans. There was literally no check on the demand for real estate. In the end, the massive bubble burst, as all bubbles do, and almost brought down the entire global financial system.
Similarly, the next bubble to burst will be the global sovereign debt bubble. In the United States, the Fed is keeping interest rates low by purchasing massive amounts of treasuries. They are aided in their efforts by countries such as a China that enjoy large trade surpluses with the U.S. and are willing to hold their massive reserve of dollars in treasuries. As a result, the demand for these securities far outweighs supply.
The Bond Bubble will burst when China and others begin to demand a larger risk premium on their treasury holdings. When that happens, the massive government debt and budget deficit will render the Fed incapable of allowing rates to rise. If they did allow such a rise, the debt service paid by the government would grow exponentially to an unsustainable level.
When the Fed fails to provide an adequate return to these investors, they will begin pulling their money out of treasuries and transfer those dollars to higher yielding assets. At that point, the Fed will, in essence, become the lender of last resort to the government and will be forced to expand its balance sheet in a never-ending stream of quantitative easing. In the final analysis, the Feds ever-expanding balance sheet will result in massive inflation that will bring an ugly end to the monetary and fiscal orgy in which Washington has been engaged for so long.
Today, I closed by 1,000 share long position, which had a basis of $28.25, at $38.63. In addition, I got to keep the $2.40 premium on the 10 put contracts I wrote with a Dec 28 expiration and a strike price of $27.50. Not a bad return for a two week holding period. I expect a correction in the next couple of days and, if it occurs, I will get back in. I hope everyone made some money on this one.
Herbalife's 'Magical' Disclosure Math Doesn't Add Up [View article]
Actually, it is very easy to have shares, which have been loaned by your broker to a short seller, recalled. First, only shares which are held in a margin account can be loaned out by a broker. So, if your shares are not held in a margin account you don't have to worry about them being loaned out. If, on the other hand, you own shares, of a hard to borrow stock, in a margin account, you can be virtually certain the shares are out on loan. To have the shares recalled, all you have to do is enter a good till cancelled order to sell the shares at a limit price much higher than the current market price. At that point, your shares are subject to an open order and must be recalled.
That is what I do with all of my trades where I am hoping for a short squeeze. So, if you want to have your HLF shares recalled from short sellers, but you don't want to miss out on the upside potential of a short squeeze, just enter a good till cancelled order to sell your shares at a limit price of say $60.00.
Did The CEO Of Herbalife Violate The Fair Disclosure Rule? [View article]
McGonicle:
I agree with your assesment of Ackman's predicament. When I heard the size of his short position, relative to float, I was dumbfounded. By shorting to the point where virtually no more shares are available for further shorting, he has produced the perfect opportunity for someone to corner the market on Herbalife shares.
Herbalife is much too small to do what he has done. This is one of the most facinating trading situation since Porsche attempted to corner the market on Volkswagen shares in 2008. It will be another great learning experience watching it play out. I am long HLF.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
It is quite obvious that you will write anything, true or not, as long as it is derogatory towards Herbalife. This is a website dedicated to the investment community, not a place for psychotics to come and babble about their obsession with MLM companies. You have written the same thing hundreds of times and clogged up an otherwise constructive thread. While the professional therapist would have been a smart move, I just can't make it to Wednesday. http://bit.ly/UpjEE4
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Everything you write demonstrates that you know nothing about which you speak. The prima facie case for defamation does not require the Plaintiff to prove the Defendant gained from the defamatory statement. What you are probably referring to is the requirement that the Plaintiff prove Damages (i.e. that his reputation was damaged by the statement). Even if the Plaintiff were required to prove personal gain by the Defendant, the Defendant couldn't escape liabilty by giving the money to charity. That would be tantamount to the Defendant in a patent case claiming he isn't liable for illegally using the Plaintiff's patent because the profits were donated to charity.
At this juncture, i realize that you are a Dumb Ass of the first order. Reading your moronic comments is causing me to lose all faith in the human race. i intend to seek the assistance of a professional therapist the day after Christmas. In the meantime, please respect my privacy during this difficult period in my Life.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Thanks Lazy. I am sure you have a whole lot of experience and really know what you are talking about. What do you do for a living and how long have you been investing?
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
As I understand it, Bill Ackman started shorting MBIA in 2002. His short thesis only became profitable 6 years later after one of the worst financial panics in history. A panic which brought the entire financial industry, including institutions far bigger and more important than MBIA, to its knees.
While Ackman was obviously correct in seeing greater risk in MBIA than did the market as a whole, he was far from the only person who warned against those risks prior to September of 2008. Moreover, you could have shorted any financial stock in 2007 and made a fortune. So, to make Ackman out to be some lone wolf who single-handedly fought the establishment and made a fortune by picking the perfect stock to short is absurd.
Confidence Game makes Ackman out to be a modern-day, Wall Street Robin Hood who tried to save everyone else's money. Nothing could be further from the truth. In that trade, Ackman did what he always does. He built his position and then went out and talked it up so he could make as money as possible.
While I have no problem with people making as much money as they legally can, don't try and make them out be altruistic soldiers for the little guy. People like Ackman don't care about little people, they care about making money and they will accomplish their goals any way they can. For example, if Ackman really believed that Herbalife was a pyramid scheme, and wanted to help the little man, why did he wait until he had amassed a 20 million share short position before letting retail investors in on the "truth."
In the end, all of the small investors who had positions in Herbalife sold out and took a huge loss based on Ackman's statements. Now, those same people, some of whom are posting glowing reviews of Mr. Ackman here on Seeking Alpha, have initiated short positions in Herbalife after it has crashed more than 65% since March of this year. Again, their actions are based on Mr. Ackman's comments. Of course, Mr. Ackman will now ring the register and force even more losses on all those poor people he loves so much. While I guess they deserve what they get for playing a game they don't understand, that does nothing to build credibility in Bill Ackman. If you think it does, give me a break.
Herbalife: Carl Icahn Delivered Bill Ackman A Valentine He'll Never Forget [View article]
Herbalife: Carl Icahn Delivered Bill Ackman A Valentine He'll Never Forget [View article]
Herbalife: Carl Icahn Delivered Bill Ackman A Valentine He'll Never Forget [View article]
More important, however, is the fact that Ackman is short virtually the entire supply of HLF shares available to be shorted. Due to the size of Ackman's short position, Icahn doesn't need to buy Herbalife. He can make even more money by continuing to buy the stock until Ackman is forced to cover. Then, Icahn can basically name his price for his shares and Ackman will have no choice but to pony up. Its called cornering the market.
Today, I bought 2,000 shares near the close of the market at an average price of about $41.00.
What's Ackman's Herbalife Game? [View article]
Only in markets, which trade items that have a finite supply or are one of a kind, is short selling limited or nonexistent. For example, it would be extremely difficult to short sell Leonardo da Vinci's original Mona Lisa because only one exists and it isn't traded on a regular basis. However, even then, short selling could exist if, for example, somone simultaneously had the opportunity to buy and sell the Mona Lisa.
Lets say Bill Gates knows the owner of the Mona Lisa who offers to sell it to him for $50mil. Gates knows that Warren Buffett wants to buy the Mona Lisa so he contacts Buffett and negotiates a contract to sell the painting to him for $100mil. Gates then goes back to the current owner and buys the Mona Lisa which he subsequently delivers to Buffett.
At its essence, short selling in stocks is nothing more than a contract between the buyer and a short seller whereby the short seller agrees to deliver the underlying stock to the buyer at a later time. Contrary to your usual babble, short selling exists and occurs on a regular basis in the vast majority of markets. Banning short selling in equity markets would be catastrophic.
Finally, your useless banter contained another error. As far as your posts are concerned, late isn't better than never.
What's Ackman's Herbalife Game? [View article]
If you don't like "greed," you can substitute self-interested, ambitious, driven or any other word of similar meaning. In the end, this is what motivates people to be productive.
As for short selling, it needs no more regulation than buying. I haven't seen any complaints from you about Hedge Funds who maintain large long positions in a given equity. Remember, no one can go buy unless someone is selling. Moreover, short selling is self-regulating because of the inherent dangers it presents (i.e. unlimited losses, margin calls, shares called away, etc.).
What's Ackman's Herbalife Game? [View article]
With stocks, on the other hand, in the absence of short sellers, the only people who could sell would be those that own the stock. So, without short sellers, demand for a given equity could, theoretically, be unlimited, while supply would be limited to those who own the stock.
You accurately point out that, even with short sellers, equity markets still experience bubbles. However, that is hardly justification for banning short selling. Only if we want even bigger bubbles would that make sense.
You characterize short sellers as manipulators and greedy people who want to hurt the people on the other sides of their trades. You go so far as saying they are profiting from the stupidity of the buyers. How are the motives of a short seller any different than those of a buyer? Certainly, the buyer thinks the stock is worth more than he is paying or he wouldn't be buying.
While I don't like Bill Ackman, or what he did with respect to Herbalife, that dislike isn't because he sold Herbalife short. It is because he made misrepresentations, about a perfectly legitimate company, to line his own wallet. I am a frequent short seller but I don't build my position and then make false statements to bolster the trade.
As for your disdain for what you consider human frailties, especially greed, such emotions are what make the world go round. For lack of a better word, greed is good. I know, its been used before, but it is true. Greed is what motivates people to, among other things, go to college, build businesses and, for that matter, trade markets. There are, of course, bad people who are willing to achieve the objectives of their greed through nefarious tactics. That, however, is a result of a character flaw, not a flaw in the emotion itself.
In the end, short selling serves a very good purpose.
What's Ackman's Herbalife Game? [View article]
Short selling is practiced mostly by traders who, for the most part, are contrarians. They tend to sell when others are buying and buy when others are selling. This trading, whether it is done on the buy side or the sell side, helps moderate markets and prevents extreme over-valuations and under-valuations. Therefore, contrary to what most people believe, traders on both sides of a transaction, including short sellers, provide liquidity that reduces market volatility.
Traders are even more important during market extremes. During these periods, they provide liquidity to the market when, in their absence, there might very well be none. They buy during crashes when no one else will buy and sell into bubbles when no one else will sell. For example, during a market crash short sellers cover shorts and some even begin going long putting a bottom in the market. Without them, there literally might be no buyers in the market at all.
The recent bubble in real estate markets illustrates what happens without short sellers. Everyone believed that real estate values would never go down so demand for real estate far outstripped supply. In turn, real estate values climbed to the point of absurdity. This bubble was sustained for an unprecedented period of time by the government which pumped money into real estate through low interest rates, tax breaks and government subsidized and guaranteed loans. There was literally no check on the demand for real estate. In the end, the massive bubble burst, as all bubbles do, and almost brought down the entire global financial system.
Similarly, the next bubble to burst will be the global sovereign debt bubble. In the United States, the Fed is keeping interest rates low by purchasing massive amounts of treasuries. They are aided in their efforts by countries such as a China that enjoy large trade surpluses with the U.S. and are willing to hold their massive reserve of dollars in treasuries. As a result, the demand for these securities far outweighs supply.
The Bond Bubble will burst when China and others begin to demand a larger risk premium on their treasury holdings. When that happens, the massive government debt and budget deficit will render the Fed incapable of allowing rates to rise. If they did allow such a rise, the debt service paid by the government would grow exponentially to an unsustainable level.
When the Fed fails to provide an adequate return to these investors, they will begin pulling their money out of treasuries and transfer those dollars to higher yielding assets. At that point, the Fed will, in essence, become the lender of last resort to the government and will be forced to expand its balance sheet in a never-ending stream of quantitative easing. In the final analysis, the Feds ever-expanding balance sheet will result in massive inflation that will bring an ugly end to the monetary and fiscal orgy in which Washington has been engaged for so long.
Trading Volume Boosts Herbalife's Buyback Opportunity [View article]
Herbalife's 'Magical' Disclosure Math Doesn't Add Up [View article]
That is what I do with all of my trades where I am hoping for a short squeeze. So, if you want to have your HLF shares recalled from short sellers, but you don't want to miss out on the upside potential of a short squeeze, just enter a good till cancelled order to sell your shares at a limit price of say $60.00.
Did The CEO Of Herbalife Violate The Fair Disclosure Rule? [View article]
I agree with your assesment of Ackman's predicament. When I heard the size of his short position, relative to float, I was dumbfounded. By shorting to the point where virtually no more shares are available for further shorting, he has produced the perfect opportunity for someone to corner the market on Herbalife shares.
Herbalife is much too small to do what he has done. This is one of the most facinating trading situation since Porsche attempted to corner the market on Volkswagen shares in 2008. It will be another great learning experience watching it play out. I am long HLF.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
At this juncture, i realize that you are a Dumb Ass of the first order. Reading your moronic comments is causing me to lose all faith in the human race. i intend to seek the assistance of a professional therapist the day after Christmas. In the meantime, please respect my privacy during this difficult period in my Life.
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
Is Ackman's Hatchet Job On Herbalife Justified? [View article]
While Ackman was obviously correct in seeing greater risk in MBIA than did the market as a whole, he was far from the only person who warned against those risks prior to September of 2008. Moreover, you could have shorted any financial stock in 2007 and made a fortune. So, to make Ackman out to be some lone wolf who single-handedly fought the establishment and made a fortune by picking the perfect stock to short is absurd.
Confidence Game makes Ackman out to be a modern-day, Wall Street Robin Hood who tried to save everyone else's money. Nothing could be further from the truth. In that trade, Ackman did what he always does. He built his position and then went out and talked it up so he could make as money as possible.
While I have no problem with people making as much money as they legally can, don't try and make them out be altruistic soldiers for the little guy. People like Ackman don't care about little people, they care about making money and they will accomplish their goals any way they can. For example, if Ackman really believed that Herbalife was a pyramid scheme, and wanted to help the little man, why did he wait until he had amassed a 20 million share short position before letting retail investors in on the "truth."
In the end, all of the small investors who had positions in Herbalife sold out and took a huge loss based on Ackman's statements. Now, those same people, some of whom are posting glowing reviews of Mr. Ackman here on Seeking Alpha, have initiated short positions in Herbalife after it has crashed more than 65% since March of this year. Again, their actions are based on Mr. Ackman's comments. Of course, Mr. Ackman will now ring the register and force even more losses on all those poor people he loves so much. While I guess they deserve what they get for playing a game they don't understand, that does nothing to build credibility in Bill Ackman. If you think it does, give me a break.