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  • Herbalife Is An Endless Chain [View article]
    Ghosts,

    If you truly believe that HLF is a pyramid scheme and that the authorities (whichever) will act forcefully within the next six months then, by all means, wait and then short the stock.

    If they don't act right away, one can still make a handsome profit long.

    I don't really know why you think that a 'direct' short is better, as that exposes you to having the lenders recall your borrow stock, and also, to a short squeeze. Using options is safer and cheaper as you cap your downside risk.

    In my opinion, for whatever is worth, the company is not an ILLEGAL pyramid scheme, so I don't really see the authorities acting. Even if they were to take a look in the US, I understand that the majority of HLF's revenue comes from outside the US.

    So, we have a different opinion about HLF and, most importantly, about how things may develop in the short term, and this is the beauty of investing: the market will reward whomever gets it right.

    Nevertheless, timing is also crucial.

    As I wrote before, even if Ackman is right, it won't help most shorts much unless the authorities act quickly. I don't see that happening and I intend to profit from it, in the mean time.
    Mar 2 12:44 PM | Likes Like |Link to Comment
  • Herbalife Is An Endless Chain [View article]
    The FTC has had 32 years to act and is not going to do anything at this point just because Ackman asks them to. That's the reality, IMHO.
    Mar 2 07:33 AM | 3 Likes Like |Link to Comment
  • Herbalife Is An Endless Chain [View article]
    Sorry Matt, what do you mean by my thesis? I am surely missing your point.

    I don't know what you understood by my thesis, but my hypothesis is simple: The authorities are unlikely to act and without them acting, and quickly, the stock will go up and most shorts (maybe not Ackman) will be squeezed.

    I did not own HLF in the past and, most probably, will not own it in the future. In the short term, though, I fully intend to see the reality as objectively as possible, discern from it a way to trade intelligently and profit from it. That is what an investor is supposed to do. That is, simply, it!

    What about you, Matt?

    BTW, under the current circumstances a discussion of HLF's P/E is completely meaningless. It doesn't matter, at all.
    Mar 1 05:39 PM | 6 Likes Like |Link to Comment
  • Herbalife Is An Endless Chain [View article]
    Here is a bit of unrequested advise, if I may. Assume you are right in your short term and long term assumptions and act accordingly. Buy Leap calls and ride the short squeeze. Wait for the pause and then flip to Leap puts, but not before the short squeeze. Do not waste your money on Leap puts right now, as it goes against your own assumptions of what is likely to happen in the short to mid term.
    Mar 1 05:28 PM | Likes Like |Link to Comment
  • Herbalife Is An Endless Chain [View article]
    Interesting post. Thanks.

    "Longs who ignore this do so at their own risk -- including Mr. Icahn."

    I am one of those longs who has bought plenty of Leap year calls and, as it is the case with every investment I make, I do so at my own risk (fortunately, I am already up well over 200%).

    Whether you and Mr. Ackman are right, it remains to be seen, but it is disingenuous to short the stock and then ask the authorities to close down the business. I am all for shorting but if it is the common good that is sought, perhaps one should choose between quietly shorting and asking the FTC and the SEC to act on your behalf.

    You claim that the "pyramid scheme" will put the distributors in danger. Your remedy is for the authorities to intervene and close down the business. Oh, the irony! What good would do those 3 million distributors if the business is closed down?

    In the mean time, without the FTC and SEC help, I am afraid you and Mr. Ackman may not have time to prove your point. Ackman is now down $280 million on his JCP investment, and Icahn has the right to appoint two directors to the HLF board and can increase his 14% HLF stock to 25%. He can exercise his calls which, in all likelihood would make the stock lenders recall the stock borrowed by the short sellers forcing them to close their position by buying in the open market and making the price go up.

    The bottom line is that unless the authorities follow your advise and intervene, which is highly unlikely, Icahn and the longs have the upper hand and Ackman and the shorts will face monumental pressure. My money is, literally, on most shorts giving up first. We'll see.
    Mar 1 05:16 PM | 2 Likes Like |Link to Comment
  • Icahn Enterprises (IEP -12.5%) prices its secondary at $63/unit, giving Icahn another $200M with which to battle Bill Ackman on Herbalife (HLF +3%). (PR[View news story]
    Icahn has also received permission to raise his HLF position to 25%, basically doubling his current one (if he does).
    Mar 1 03:59 PM | 2 Likes Like |Link to Comment
  • Icahn Enterprises (IEP -12.5%) prices its secondary at $63/unit, giving Icahn another $200M with which to battle Bill Ackman on Herbalife (HLF +3%). (PR[View news story]
    I don't think what Icahn is doing is simply a vendetta with Ackman (but I am not on a first name basis with them, unlike you). Regardless, why exactly would you be unhappy? He is already up on his trades and seems very well positioned to make lots of money on HLF. isn't that what he is suppose to do?
    Mar 1 12:53 PM | 3 Likes Like |Link to Comment
  • Herbalife (HLF +3.7%) is halted on news it's expanded its board with two Icahn reps nominated to fill the slots. (PR[View news story]
    HLF is up 7% today and 17% in the last three days. Icahn is starting to tighten the noose and Ackman is starting to run out of time. Even if Ackman decides to stay put, other shorts are bound to blink and close their positions adding to the upside pressure.

    Add to Ackman's growing problem a $180 million loss in JCP today and you'll start to paint a bleak picture. Not a good day for him, at all.
    Feb 28 03:52 PM | 4 Likes Like |Link to Comment
  • Handicapping The Icahn Position In Herbalife [View article]
    He could, indeed, but he may run out of time. Since he has invested himself emotionally and put his reputation on the line by saying that he will only cover when the stock hits zero, I doubt that he will.

    I am often asked about the worst trading mistakes one can make. I say that they are often caused by wanting to be right. I think I said this a million times, but I will say it again. The number one rule for me, bar none, is: one should never be more invested in being right than in making money.

    At this point, Ackman appears to be overly invested in being right. He may not be, but it sure looks that way.
    Feb 28 10:53 AM | Likes Like |Link to Comment
  • Handicapping The Icahn Position In Herbalife [View article]
    The 21% drop on JCP represents a $180 loss for Ackman. More worrisome, credit markets appear to be even more concerned with JCP than equities, as CDS cross 1.000 bps. JCP will likely need liquidity.

    So big losses on JCP for Ackman. And HLF, which found its floor at Icahn's overall average price of around $36, keeps on moving higher up.

    I know I am long HLF but, in all honestly, I wouldn't want to be in Ackman's shoes right now. His situation looks bleak and getting worse.
    Feb 28 10:28 AM | Likes Like |Link to Comment
  • Handicapping The Icahn Position In Herbalife [View article]
    Well, Zeus, your opportunity is here right now: down 21% to $16.67 - 17. Good luck!
    Feb 28 10:20 AM | Likes Like |Link to Comment
  • Handicapping The Icahn Position In Herbalife [View article]
    JCP was down 8.1% when I posted and it is down 9.83% right now. It is after hours, so it remains to be seen how it opens tomorrow and if someone steps in to catch the falling knife. If not, look out below.

    Regardless, this is an added blow to Ackman, which represents an $80 million paper loss on his investment. It can't be good for his confidence to see JCP collapsing and HLF moving up. Ironically for Ackman, shorts have a valid reason to short JCP right now, and it doesn't need a convoluted exercise on labeling it a "pyramid scheme." It is simply a bad business right now.
    Feb 27 05:33 PM | 3 Likes Like |Link to Comment
  • Handicapping The Icahn Position In Herbalife [View article]
    4:34 PM J.C. Penney (JCP): Q4 EPS of -$0.24 misses by $0.06. Revenue of $3.884B misses by $200M. The firm's video earnings call is scheduled for 5:00 PM EST. JCP -8.1% AH.

    Will today's JCP miss mean anything to Ackman in the grand scheme of things?

    Will today's 3.74% up move in HLF add pressure?
    Feb 27 04:41 PM | 1 Like Like |Link to Comment
  • Handicapping The Icahn Position In Herbalife [View article]
    Well, no one really knows whether Icahn is behind this move (at least publicly), although many things seem to point in that direction. If he is, beyond the moral implications of driving JCP into involuntary bankruptcy he doesn't do it to 'screw' Ackman but to force Ackman's hand and make money in HLF.

    ...and yes, I am fully aware that it may seem it is only semantics as, if this works, Ackman is truly screwed. But my point is that the screwing is because he is on the other side of the trade and this produces money for Icahn, not for the screwing itself.

    For the rest of as, though, the important lesson as investors is that it is very important to see the various scenarios developing, try to discern the possible outcomes and profit from them.
    Feb 26 07:25 PM | 1 Like Like |Link to Comment
  • Stocks give up sizable early gains following Bernanke's dovish testimony, with the S&P and Nasdaq now in the red. Hurting is Europe sliding back to session lows after an attempted late-day bounce. Stoxx 50 -2.6%, led by Italy -4.4%. Performing best across the pond is the U.K., -1.2%. The euro is flat at $1.3065. [View news story]
    No need to apologize, we all make mistakes from time to time. I congratulate you for having the courage to recognize this and state so here. Most people wouldn't, but those who do are the ones who can then go on and profit from the marketplace unburdened by preconceived biases.
    Feb 26 07:13 PM | Likes Like |Link to Comment
COMMENTS STATS
293 Comments
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