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poortorich

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  • Is Herbalife A Pyramid Scheme? A Simple Question Of Law [View article]
    DJ

    I think you are right. Many who comment here probably have never ran a business or have very little understanding of how business works in real life. Getting an MBA is not a substitute for real life experience. Im not talking about just working for someone on a salary. I am talking about actually building and managing a business. Just reading about it is not enough.

    Assuming all consumers buy based on price alone is downright dumb.

    I would venture to say that those who have succeeded in building their businesses in Amway, HLF etc would probably succeed again if they had to start from scratch.
    Mar 27, 2014. 02:02 PM | 1 Like Like |Link to Comment
  • The Richest Man In History Reveals His Simple Wealth Generating Secret [View article]
    For people Gates, Sergy etc who started businesses, there was a very narrow window of opportunity for them to have mega success.

    In the case of investors like Buffett, the window of opportunity is always open.
    Mar 27, 2014. 01:37 PM | 1 Like Like |Link to Comment
  • The Richest Man In History Reveals His Simple Wealth Generating Secret [View article]
    Rockefeller happened to be at the right place at the right time. Of course, he was a legend in the art of frugality.

    If he was alive right now and started with nothing, I doubt he would become the world's richest man. The same goes for Gates, Sergy, Bezo, Jobs etc.

    Now if you are talking about Buffett or Carlos Slim, Im certain they could still become billionaires or close to it if they started from scratch today.
    Mar 27, 2014. 11:44 AM | 3 Likes Like |Link to Comment
  • Letter To John Hempton From A 'Clueless Short Seller' [View article]
    peter

    so i guess what you are asking is why would a consumer would buy at a higher price when he can get even a bigger discount from an upline person.

    consumers do not make a choice to buy based on price alone. perhaps the consumer was introduced to a product by a distributor who provided good service and results. in which case he/she might not mind paying a bit more.

    consumers do funny things like
    -paying more for a pair of old of jeans with holes in it.
    -paying more for branded cereal even though the manufacturer is the same
    -paying a premium for water when its essentially free

    excuse my lack of cap. my computer is not working well.
    Mar 26, 2014. 07:27 PM | Likes Like |Link to Comment
  • Is Herbalife A Pyramid Scheme? A Simple Question Of Law [View article]
    Reel

    Sometimes we make investing more complicated than it really is. Seems like a dumb question but the answer solves the riddle that is plaguing the shorts and uninformed. Keep it simple. Read my previous post.
    Mar 26, 2014. 03:34 PM | 3 Likes Like |Link to Comment
  • Letter To John Hempton From A 'Clueless Short Seller' [View article]
    Peter

    Seems complicated but when you consider the following, it is so easy to understand hlf. You do not need hundreds of slides. Where does the vast majority of the product end up? Here are some clues.
    1) 70 percent of hlf distributors are only in it for a discount with no intent to sell. In other words, they plan to consume the product. This is confirmed by both Lieberman and Nielsen survey companies.
    2) About 7 million people buy hlf products. Keep in mind, these are not part of the hlf network. This again, is from Lieberman and Nielsen.

    This tells me that it is company driven by product demand. If recruiting stopped, I doubt it would collapse. Sure the growth might slow but to suggest that the company would collapse is comical. The 7 million or so customers would still be consuming/buyingthe product.

    So back to the original critical question. Where does the vast majority of hlf product end up?
    Answer. To me its clear... In the stomach of a willing consumer.

    You dont need Ackman or Hlf's information to make a very logical/rational investmentl decision here. Quite simple actually.
    Mar 25, 2014. 02:57 PM | 13 Likes Like |Link to Comment
  • Herbalife - The Fractal Nature Of Failure [View article]


    Frankly, I think the FTC looking into HLF is a good thing. There will be more clarity and in fact, will dissuade any unscrupoulous behind the scenes shananigans on both sides.
    I am not a fan of MLM in general. But there must be a reason why HLF is still around when one considers many thousands have come and gone, either because they were shut down or because they collapsed.

    Lieberman and Nielsen in particular are companies we rely on for accurate data. Nielsen is a company with 35,000 employees. Its hard to ignore their findings. HLF has about 500,000 distributors and according to these research firms, more than 70% are in it for the discount only. Furthermore, only 4% are in it for full time income. The remaining % expect to make part-time income only. So any money, is a bonus. The most striking numbers, in my mind, were 3.3% of the general populaton or about 7.9 million people (keep in mind there are roughly 500,000 distributors) actually bought Herbalife products over a three month period. I don't trust HLF completely but I do trust Nielsen. You can spin this any way you want and ask "but I've never seen an HLF customer", but 7.9 million is still 7.9 million.

    Which begs the question. What is keeping HLF afloat? The churn in distributors who supposedly fail or the steady purchasing by the millions of repeat customers who are not even part of the network. The 7.9 million is a number that is very hard to ignore and its something to think about if you're in the camp demanding receipt of retail sales.
    That got me thinking about my mom again. My mom has spent roughly $60,000 worth of products from Amway over the past 15 years and she certainly has done her part in keeping Amway afloat.

    Fear is good.
    Mar 22, 2014. 02:17 AM | 2 Likes Like |Link to Comment
  • The Pyramid Scheme Industry: Examining Some Legal And Economic Aspects Of Multi-Level Marketing [View article]
    Oops. In a hurry here.
    40% of distributors make money, not 82% based on the numbers. Thats my final answer.
    Mar 18, 2014. 01:46 PM | 3 Likes Like |Link to Comment
  • The Pyramid Scheme Industry: Examining Some Legal And Economic Aspects Of Multi-Level Marketing [View article]
    Looking at the data again, the % of distributors who actually made some money was 82%, not 13%. Sorry for the confusion.
    To get a perspective on this, the franchise with lowest success rate in America was Wings N Things with a success rate of 6%. The initial start up cost is $215,000. HLF's startup cost, to my knowledge, is much lower.

    The compensation break down is very similiar to any big corporation in America.


    One more thing that should be pointed out. We are talking about in, many cases, a part time job.
    Mar 18, 2014. 01:29 PM | 3 Likes Like |Link to Comment
  • The Pyramid Scheme Industry: Examining Some Legal And Economic Aspects Of Multi-Level Marketing [View article]
    hat

    You are making assumptions that are not true
    1) Every distributor is in to make money. Not every 500,000 people are in it for the business opportunity. In fact over 70% are in it to get a discount only
    2HLF is a full time job for every distributor. Not true. Many are in in part time or for supplemental income only.

    If you take these into account by my calculation 13% of distributors make some form of money.
    Mar 18, 2014. 12:14 PM | 3 Likes Like |Link to Comment
  • The Pyramid Scheme Industry: Examining Some Legal And Economic Aspects Of Multi-Level Marketing [View article]
    "Meanwhile, approximately 54% of all commissions paid by these MLM firms go to the top 1% of distributors"

    Interestingly, these numbers are very similar to the wealth distribution in the US. The top 1% own 42% of financial wealth in the US. The bottom 80% of the population own 4.7%.
    Mar 18, 2014. 01:44 AM | 4 Likes Like |Link to Comment
  • The Mystery Of Icahn And Herbalife's AGM Delay [View article]
    I talked to my parents (they typically purchase $2000 worth of items at a time which last them about 6 months. The cost is slightly higher than products in Costco. So why do they purchase these at a slightly higher price?
    - according to her, she likes Amway products more than Costco's
    -they've known this distrubitor for a long time and are happy with the service she has provided
    -they can call the distributor for any problems with the products
    -the distributor delivers these products directly to their home.

    Not everyone goes for the lowest price. Thats a fallacy in business. The service and context surrounding the product can be more compelling than price alone. If you understand business, this concept should be clear to you.

    So over the past 15 years, my parents have bought $60,000 worth of products.

    BTW. My mom said that this distributor has many other customers who buy regularly from her and they are not distributors.
    So $60,000 X many other customers = Revenue for Amway.
    Mar 17, 2014. 09:30 PM | 5 Likes Like |Link to Comment
  • The Mystery Of Icahn And Herbalife's AGM Delay [View article]
    @Jlucky

    "why not just ditch MLM and stock it at a grocery or nutrition store?" The reason it is that they are completely bypassing retailers like Walmart etc. Retailers carry immense power over suppliers. The suppliers are often at their mercy.

    This is where the understanding of business is very important.
    Mar 15, 2014. 04:04 PM | 6 Likes Like |Link to Comment
  • The Mystery Of Icahn And Herbalife's AGM Delay [View article]
    @G Hudson

    True story

    I visited my parents not too long ago. I noticed some personal home products, including vitamins, tissue paper , soap etc. They said they were bought from an Amway distributor. To my surprise, they have been regular purchasers of Amway products for the past 15 years, despite being Costco members. My mom swears by them. My parents would never even consider becoming distributors.

    The other day I noticed a young woman probably in her late 20's at work drinking an Herbalife drink from an Herbalife cup. Out of curiosity, I asked if she was a distributor. She thought about it, but didn't want to put in the time and effort. She is a discount buyer. She's been going to a nutrition club almost everyday for the past 4-5 years and even prefers it over Starbucks (no joke). When I asked her about other members at the club, she mentioned that there are core members, like her, who have been going there for several years. There are others who come for a few weeks to months, then stop coming…only to come back again at a later time when their weight starts to climb again. They had no desire to become distributors.

    That got me thinking…. I'm sure my parents are not the only regular purchasers of Amway products out there. I'm also sure the young lady is not the only regular consumer of Herbalife products.
    I tried to estimate the amount of money my parents spent on Amway products over the past 15 years and Im sure its a lot

    I've read somewhere that there are 50,000-60,000 MLMs that have come and gone. They have either been shut down or collapsed once they reached around $100 million. So what is so special about Amway and HLF that they still remain?
    Could it be that what's actually keeping them afloat are people like my parents and the young lady ….real consumers of real products. The money my parents and the young lady regular spend ultimately end up as profit for the companies. Some say these are commodity products. To some, they might appear to be a commodity, but to my parents and the young lady, they are not. To me an Evian water is a commodity. But apparently to others its not.

    Full disclosure: I am not a fan of MLMs in general but I don't think they're illegal.
    Mar 15, 2014. 12:25 AM | 8 Likes Like |Link to Comment
  • Herbalife resumes trading [View news story]
    I too am disappointed that the price did not drop that much.
    Fear/panic is very good for long term investors.
    Mar 13, 2014. 12:42 AM | Likes Like |Link to Comment
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