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Dr. Kris has two degrees from MIT because one just wasn't enough. Her life goal was to figure out the universe and having done that (at least to her satisfaction), she decided to tackle something even more difficult—the stock market. Applying the scientific method along with an insatiably... More
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  • Market Notes: A Note On Ackman's Herbalife Fiasco -- July 22 8 comments
    Jul 22, 2014 6:04 PM | about stocks: HLF

    Well, Bill "Egg-on-his-face" Ackman's earlier supposed expose of Herbalife's (NYSE:HLF) business malpractices lit a spark under investors--but in the wrong direction. The facts didn't live up to the hype and the resultant sigh of relief sent Herbalife stock soaring into the close, gaining a whopping 25% on the day. That's the biggest one day rally in years. Adding insult to injury, Herbalife management said they are considering suing Ackman for slander. One wonders if employees of Ackman's Pershing Square Capital aren't quietly dusting off their resumes in fear of a mass exodus out of his funds...

    On a tangent note, I do think it may be impossible for Ackman to bring Ponzi-scheme charges against the company. In other previous court decisions, it was decided that multi-level marketing (NYSE:MLM) companies such as Herbalife, Amway, and Nu Skin do not operate as Ponzi schemes if a product is supplied to the end use, as it is in all of these cases. These companies have a battery of highly paid attorneys to keep them on the right side of the law and I have questioned Ackman's motives in going after Herbalife from the very beginning. Even Carl Icahn couldn't find any wrong-doing with it and proved his case by making a tidy profit from buying a chunk of stock and riding it up. (Icahn may have exited his entire position by now.)

    Although I've never used Herbalife's products, I have friends who say they are very good and are repeat buyers of their products. As for me, I've been a customer of both Amway and Nu Skin and think they both offer superior products (although Nu Skin's items are a bit pricey). Honestly, I'm not a fan of the MLM concept and I've never met a person in any of the above mentioned companies who was able to make a decent living off of selling MLM products. If these companies are guilty of anything, it would be the way they lure people into being distributors by promising them income streams that are neigh impossible to attain for all but the most savvy and dedicated (and with a lot of time to develop an underlying distributor base). If stretching the truth is a crime, then yes, I would find them all guilty...but not of operating a Ponzi scheme.

    Themes: market commentary Stocks: HLF
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Comments (8)
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  • KJP712
    , contributor
    Comments (445) | Send Message
     
    At times I think Ackman believes he is the star of his own T.V.show. You know the one that is cancelled after five episodes...
    22 Jul, 07:59 PM Reply Like
  • Dr. Kris
    , contributor
    Comments (319) | Send Message
     
    Author’s reply » I think his run has run out.
    22 Jul, 11:10 PM Reply Like
  • WaveRider007
    , contributor
    Comments (334) | Send Message
     
    Learned that you can manipulate a stock chart on a daily, but longer term is much more difficult. I have seen chart movements like this that create an exhaustion hammer. Last few days haven't really moved and look more to me like 3 crow pattern which signals carrion. (this is my interpretation of the pattern disregarding the shadows)
    http://bit.ly/1k0hN7b
    If the stock was actually being bought I would figure the short covering would continue the move. Added more put options. Imagine how many people covered and returned shares to make them available again for shorting. Maybe Ackman is playing chess. As for his crying, it really wasn't necessary.
    26 Jul, 12:38 AM Reply Like
  • WaveRider007
    , contributor
    Comments (334) | Send Message
     
    HLF may be getting ready to really tank here. Finally people are understanding how restricted their growth will become when you have the public amateur as your retailer. Bearish engulfing pattern also looking ominous.
    30 Jul, 07:10 AM Reply Like
  • Fred Piard
    , contributor
    Comments (590) | Send Message
     
    I almost cried when he was speaking of his grandfather. An actor is born. Maybe his new vocation.
    23 Jul, 08:02 AM Reply Like
  • Dr. Kris
    , contributor
    Comments (319) | Send Message
     
    Author’s reply » I hear they're looking to cast a new Gordon Gekko for Wall Street 3.
    23 Jul, 01:51 PM Reply Like
  • William M. Wright
    , contributor
    Comments (220) | Send Message
     
    Bill Ackman's short bet turned into an obsession somewhere along the line. No where in the history of short-selling has any billionaire been so obsessed with his position that they spend $30 million on follow-up research to rationalize the logic of their multi-million dollar losing short-position bet....Claiming their MLM is an illegal pyramid scheme is an act of desperation in hopes of sparking a government investigation.

     

    Ackman's relatively young but surely he knows AMWAY (started in 60's), Herbalife (started in 1980) and Nu Skin (started in 1984) are the granddaddies of MLM. They've been under State and Federal scrutiny for years, even decades, with many regulators questioning and disgruntle distributors making similar claims. Grandfather always used and endorsed Herbalife as beneficial to his arthritis. Unlike grandfather I've been trained to take expensive medication and get multi-thousand dollar knee replacement operations for my arthritis. Nu Skin is as you say.....and they openly admit their products are more expensive than Procter and Gamble because they include more superior natural ingredients. Their original target market was the aging baby bombers who were willing to pay more to get more. Yes all these MLMs seek to get you to buy boxes of products to sell upfront. So? Trying buying a McDonald franchise with no money down. And yes like a lot of things 20% make 80%. Hey, that sounds like USA CEO's pay vs their worker bees. Expensive products? Perhaps. But try buying any seniors monthly supply of American Pharmaceutical medication and tell me that's not outrageously expensive relative to the rest of the world.

     

    Ackman needs to consult a professional about his Herbalife Obsessive Compulsive Disorder.
    25 Jul, 06:56 PM Reply Like
  • Dr. Kris
    , contributor
    Comments (319) | Send Message
     
    Author’s reply » William,

     

    Completely agree with you on your analysis.

     

    Carl Icahn tried to give Ackman a few pointers but that didn't seem to work out so well...

     

    Kris

     

    PS: Have you considered getting your knee surgery done in Thailand? I hear the quality is much better at a fraction of the cost here. Realizing the savings, some medical insurance companies are beginning to cover foreign procedures. Plus, you get to eat Thai food!
    25 Jul, 07:42 PM Reply Like
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