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Shorts Keep Digging Bigger Hole For Themselves

|Includes:Herbalife Ltd. (HLF)

8/31/12 to 10/15/12 -> 2,764,022 more shorts & $3.85 increase in share close price (My best guess is that the average share short price was slightly above $50)

10/15/12 HLF short interest 15,244,880 share close $52.24

08/31/12 HLF short interest 12,480,858 share close $48.39

If shorts are expecting a slow down in growth & EPS for Herbalife any time in the near future, they will be very disappointed. MLM's can continue to grow and churn out cash even when under a lot of pressure from bad publicity. I made a lot of money off shorts betting against Prepaid Legal which not only endured a lot of bad press from Herb Greenberg, Jim Cramer & Mallisa Davis but also went through a SEC investigation that resulted in a major change in accounting. Prepaid Legal didn't have anywhere near the growth story or quality of a product/service that Herbalife has had. Even with all the constant trashing by various people, SEC investigations, etc., after 10 years the stock was sold to a private investment firm for over twice the share price as when Greenberg, Cramer and others started their attack.

The only hope for shorts is a major government investigation in to the legitimacy of MLM's which I highly doubt will happen since MLM's have key representatives in all areas where an investigation could potentially occur. Also with the current economic problems, most politicians aren't going to shake up an industry that employs a lot of people. MLM's grow like a religion/cult and attacks by outsiders whether factual or not usually only make those people participating in the MLM more likely to become more loyal to their MLM.

NOTE: The recent share price drop are shorts digging themselves in to an even bigger hole. They are trying to drive the share price down before 3rd quarter EPS to shake out a few more weak longs and as a preemptive effort to reduce the share price gain after the earnings release.

Settlement Date Short Interest Avg Daily Share Volume Days To Cover

10/15/2012 15,244,880 1,555,550 9.800315 Share close $52.24

9/28/2012 13,918,663 1,461,316 9.524746 Share close $47.40

9/14/2012 12,849,201 792,147 16.220728 Share close $52.53

8/31/2012 12,480,858 860,926 14.497016 Share close $48.39

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Disclosure: I am long HLF.

Stocks: HLF