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No Mean Sum

 
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  • Forget Belgium, Here Are 7 Reasons That Herbalife Fits The SEC's Definition Of Pyramid Scheme [View article]
    It has nothing to do with the Belgian Courts opinion. Here are my reasons.

    1. HLF distributors on average derive the majority of their compensation by means of royalty payments.

    2. The vast majority of HLF product is sold within the network. ( I realize that HLF claims that its product is consumed by network members, nevertheless this in network consumption fits the description of a pyramid scheme.)

    3. A significant portion of HLF's marketing pitch is devoted to selling the "business opportunity" which an opportunity with an extremely low chance of being an worthwhile opportunity for it's prospects.

    Thus I believe HLF fits the bill as a pyramid scheme. Whether or regulators will chose to enforce is another question entirely.
    Dec 3 06:54 PM | 7 Likes Like |Link to Comment
  • Forget Belgium, Here Are 7 Reasons That Herbalife Fits The SEC's Definition Of Pyramid Scheme [View article]
    1. "All royalty payments are based on sales produced by a downline."

    That doesn't matter it is still income derived from another persons production which is not retail income and therefore indicative of a pyramid scheme.

    2. "You have been lied to by the Anti-MLM cabal ... the amount of internal consumption does not determine if a company is running a pyramid scheme or not."

    The CEO said on television that 90% of the product is consumed by distributors. End of story.

    3. "There is nothing at all wrong with marketing a business opportunity. You have no clue as to a new distributor's motivations and expectations. You are being very arrogant in claiming to know what is worthwhile or not."

    There is something wrong with marketing something as a business opportunity when the failure rate is > 90% and a significant portion of the earnings are based on recruiting people to undertake said opportunity after you.

    Finally, I don't even know why I'm wasting my time responding to you when it is clear that you are probably paid by HLF or some MLM organization based on the fact that you have 800+ comments on only 2 stocks HLF and AVP. Such a history leads any reasonable person to conclude that you are either an employee of the company and/or lead a very sad existence spreading misleading information about MLM companies.
    Dec 3 10:27 PM | 5 Likes Like |Link to Comment
  • Forget Belgium, Here Are 7 Reasons That Herbalife Fits The SEC's Definition Of Pyramid Scheme [View article]
    Let me make it nice and clear for you, I didn't say that sales to distributors weren't "real", I said they were in network sales. As the CEO said, 90% of distributors buy for personal consumption. According to the FTC, one indication of a pyramid scheme is that the most of the sales occur within the distribution network for personal consumption or otherwise. Even if the 30% rule was correct, that still doesn't pass the hurdle for "most" occurring outside the network. Further, as Mr. Ackman points out in his presentation, HLF does not consider in network sales retail sales (slide 27, http://bit.ly/1etJFdv ) so I'm not sure how you've decided that in network sales now count as retail sales, "Under certain circumstances". But since HLF doesn't release the data, we don't know what the actual retail sales figures are, so I guess you can make up whatever you want (see slide 28).

    Also, whether or not distributors leave HLF satisfied or not has no bearing on the pyramid criteria of whether or not the success rate is both extremely low and there is an emphasis on recruiting.

    I'm sure it's clear to Mr. Ichan and others that HLF does in fact have all the attributes of a pyramid scheme but being intelligent investors they realize that, that may not matter in our present regulatory environment. It is that leap of understanding that separates savvy professional investors from the mob on SA arguing to that HLF is the Alpha and Omega of business models. The smart money is keeping their mouths shut and working behind the scenes to make sure HLF keeps the cash coming and not making presentations or posting on SA about whether or not it is in fact an pyramid scheme. Recognizing that, I suggest you emulate your betters and drop the subject, or at least come up with some more relevant arguments in favor of the long side.
    Dec 3 11:17 PM | 4 Likes Like |Link to Comment
  • Tesla: Shorts Should Heed This Warning [View article]
    Good article. TSLA is a great company but it's like Jerry McGuire man, "Show me the money!" and TLSA has very little to show. It's priced to perfection and as Solon said, "the uncertain future has yet to come, and with every possible variety of fortune."
    Aug 30 11:54 AM | 4 Likes Like |Link to Comment
  • Forget Belgium, Here Are 7 Reasons That Herbalife Fits The SEC's Definition Of Pyramid Scheme [View article]
    Yes, it is a non-negligible risk, especially as the valuation increases. I think a likely but not often mentioned outcome is that regulators impose some additional disclosure and/or transparency requirements on the company. Not wanting to be seen as asleep at the switch or supporting hedge funds, the regulators can be seen as having done something but not killing the stock. Ackman will be hoping that the model collapses under the strain of additional transparency - a "sunshine is the best disinfectant" strategy. Longs on the other hand, will argue that whatever the regulators make the company disclose is immaterial to the model and we'll be right back here arguing again :)


    On another note, Ichan's lockup ends if the stock trades at over $75 for five consecutive days - so it will be interesting to see how long he stays in for after that expires. Although it is kind of personal for him so he might go along for the ride just to burn Ackman. Sort of a reverse version of the classic scene in Wall St 1 between Gecko and the rich Brit.
    Dec 3 07:21 PM | 3 Likes Like |Link to Comment
  • Forget Belgium, Here Are 7 Reasons That Herbalife Fits The SEC's Definition Of Pyramid Scheme [View article]
    HLF does appear to be pyramid scheme but it doesn't look like anyone who matters cares. I think the more interesting question is whether or not HLF can sustain these levels of sales and profitability. As Ackman pointed out there is a certain fad aspect to the sales-distribution system. I believe the company called it "pop and drop".

    I suspect Ackman Believes the model is unsustainable and hence he is willing to ride the short to its logical conclusion a.k.a the end of the earth. This stock is what happens when weak shorts meet weak longs.
    Dec 3 04:44 PM | 3 Likes Like |Link to Comment
  • Pandora Is About To Get Shellacked [View article]
    I thought that too. Upon further consideration, I've come to think it's unlikely companies with that much muscle would want to buy into the legacy of Panodra's relatively bad licensing deals.
    Sep 26 10:17 AM | 3 Likes Like |Link to Comment
  • Pandora Is Done [View article]
    You may be right. But I would NEVER put Pandora in the same quality category as AMZN and TSLA. All this talk about the music Genome is just marketing. People are lazy and people who stream internet radio especially. iTunes is convenient and at least half as good as Pandora so people will migrate. This doesn't mean Pandora is going to drop dead but it won't grow at the rate people are hoping for.
    Sep 22 07:03 PM | 3 Likes Like |Link to Comment
  • The Tile Shop: Like Crazy Eddie's, But With An Undisclosed Related Party And A Chinese Twist [View article]
    Think of the synergies this will create!
    Nov 14 07:46 PM | 2 Likes Like |Link to Comment
  • The Tile Shop: Like Crazy Eddie's, But With An Undisclosed Related Party And A Chinese Twist [View article]
    So, from what I can tell, the company basically said it had no idea that its largest supplier was owned by the CEO's brother-in-law. I guess the subject just never came up... In any case, this should make for an awkward Thanksgiving dinner.
    Nov 14 05:50 PM | 2 Likes Like |Link to Comment
  • The Tile Shop: Like Crazy Eddie's, But With An Undisclosed Related Party And A Chinese Twist [View article]
    This would seem to affirm at least some of the reports conclusions.

    "The Company has been made aware of changes of the ownership of Beijing Pingxiu which were not previously disclosed to the Company. As a result of this disclosure, The Company has suspended its relationship with this entity.

    The Company intends to thoroughly investigate this relationship. The Company believes that any issues associated with the ownership of Beijing Pingxiu, or the utilization of other export trading companies, have had no material impact on the economics of inventory purchases." - http://bit.ly/1idEYXO
    Nov 14 03:43 PM | 2 Likes Like |Link to Comment
  • Tile Shop Holdings - The Louis Vuitton Of Tile? - I Think Not [View article]
    wow
    Nov 14 10:49 AM | 2 Likes Like |Link to Comment
  • Memo To Apple: A Map To Pandora's Jugular [View article]
    I would disagree because I don't think MSFT would want to purchase the legacy royalty agreements Pandora has negotiated.
    Nov 11 06:43 PM | 2 Likes Like |Link to Comment
  • The Tile Shop: Poisoned Tile, Bad Actors, Unsustainable Margins, And A Stock Ready To Crack [View article]
    Here's my take away.

    1. The lead claims are interesting but not substantiated, and I find it unlikely that any action will be forthcoming as a result of the authors findings.

    2. Management is obviously not of the highest caliber and this should be a concern for investors. I find especially troubling the involvement of the individual who was a board member at Enron.

    3. The firm seems, at least to me, to be inadequately capitalized and should take immediate action to increase cash levels.

    4. I would rank margin contraction as a real concern given the mediocre quality of the management, comparatively short track record of the business, the focus on expansion and the competitive nature of the industry.

    In sum, it's not a mouth watering short but I wouldn't sleep well parking my own or anyone else's money with this company.
    Oct 23 09:50 AM | 2 Likes Like |Link to Comment
  • Don't Be Fooled By Pandora's September Metrics [View article]
    Also, active listener numbers from Apple are probably misleading. That would be like Microsoft reporting active Internet Explorer users the month they first launched the software - not really that meaningful. That said, I agree that Pandora is overvalued - the sharks are circling and without a profitable operating model it is extremely hard to justify the +5 Billion valuation.
    Oct 21 05:32 PM | 2 Likes Like |Link to Comment
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