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The Mighty Wart

The Mighty Wart
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  • Bank Of New York Mellon Still Looks Like A Sell [View article]
    I’m intrigued on why you say that BK will see little to no benefit from rates as they rise… You are probably missing the fact that BK is the biggest custodian in the world with +$20 trillion under custody including more than a trillion dollars under management through their fully owned subsidiaries such as Newton , Walter Scott, etc. BNY by itself is one of the biggest asset managers in the world with a lot of the assets invested in FI and money markets; assets which performance are linked directly to the level of rates. That’s not counting their security lending business which should also benefit from a rates increase.
    Jul 27, 2015. 10:25 AM | 1 Like Like |Link to Comment
  • Will Greece be in or out? [View news story]
    Europe’s leaders cannot show Greece the door because this is not stipulated in any treaty. Is either them leaving in their own terms or remaining is a state of despair.
    Jul 8, 2015. 06:23 AM | Likes Like |Link to Comment
  • Ackman: Shutting HLF is 'one of the most important things' [View news story]
    I agree with you Ackman. Just make sure you remain solvent in the process of shutting it down.
    Apr 1, 2015. 10:55 AM | Likes Like |Link to Comment
  • Consumer advocacy group takes exception to proposed Herbalife class-action settlement [View news story]
    Yes shipping doesn’t mean selling. Most of the cash-flows are within the pyramid and your five trucks worth of products are in very few cupboards and garages.

    What you need to understand about HLF and many other MLM is that the stock is not in HLF and not accounted for there but it’s in the distributors. That allows the company to have a positive operating margin and “amazing” cash reserves but the reality is that “selling HLF products” by and large can only happen after recruitment. No recruitment = no selling of products and the distributors and the bottom feeders get most of the hit.

    Hence the pyramid scheme, hence the massive short position of Ackman, hence the endless (but entertaining) discussions here in SA.

    I haven’t met yet the first person in my life using HLF and NOT being part of the scheme BUT I know quite few people selling HLF and using their products (as it’s meant to be). So I’m not denying revenues coming from outside the scheme. I’m just saying that this should be minimal and certainly not enough to sustain a $3 billion company.
    Mar 18, 2015. 12:51 PM | Likes Like |Link to Comment
  • Herbalife's Venezuela Woes Continue [View article]
    It’s a simple weighted average calculation. The government claims that up to 90% of dollars enter the country at 6.30. So that leaves 10% entering at a series of different prices being the maximum at around 270 (black market). Assuming the government is exaggerating, which probably is the case, let’s say that 70% of the total enters at 6.30 and the rest at 270. The weighted average of that is around 85 Bolivares per dollar which is what most analysts are pricing it. This price has the current oil price as the underlying driver. Any amelioration of the oil price will tend to push down the black market price and thus this implicit rate.

    Giving that less dollars are entering the country, albeit the majority at 6.30, there isn’t simply enough dollars at this price to repatriate the profits of many multinationals without incurring in further scarcity (already it’s a big thing there) and probably creating a humanitarian catastrophe. My guess is that the government is waiting for the entities holding huge amount of bolivares to burn themselves at 270 (effectively writing off their profits) before rationalizing anything. But I’m probably grossly overestimating the intelligence of the government there.
    Mar 17, 2015. 11:42 AM | Likes Like |Link to Comment
  • Bloomberg: Apple's first car could arrive by 2020 [View news story]
    Let's hope it doesn't get slower with every new iOS update
    Feb 24, 2015. 11:13 AM | 1 Like Like |Link to Comment
  • FTC chief OK to share stage with Herbalife exec riles prominent critic [View news story]
    I really don’t understand what is the point you are trying to make. Actually churning rate is what matters. Whether some people come back is totally irrelevant as they have to start from scratch. Why you don’t answer better this question for me: What does leaving HLF mean for you?

    Leaving is leaving my friend.

    They might come back because they have shit loads of products in the living room they don’t know what to do with them and that they find impossible to sell outside an attractive “business proposition” (i.e.: pyramid) as HLF offers . But they left before HLF for a good reason don’t you think?
    Feb 13, 2015. 10:34 AM | Likes Like |Link to Comment
  • FTC chief OK to share stage with Herbalife exec riles prominent critic [View news story]

    A Pyramid scheme IS NOT where you pay for recruiting. That's total nonsense. If that was the case HLF would have been broken long time ago. Just look at the churn rate of the company.

    A pyramid scheme is one where the participants obtain their monetary benefits primarily from recruitment rather than the sale of goods and services to consumers. Herbalife business model in fact.

    Yes it does sale some products, and yes it does (only very recently) have some retail distribution channels outside the net. At elast in some LATAM countries. However these don't make it a non-pyramid I'm afraid.

    Get your facts right first.
    Feb 12, 2015. 08:05 AM | 1 Like Like |Link to Comment
  • FTC chief OK to share stage with Herbalife exec riles prominent critic [View news story]
    Herbalife is a pyramid scheme, no doubts about it. Whether this can be proved is a different story and whether you can remain solvent until it’s proven is also a very different story.

    I wouldn’t go long on the ability of the incumbent parties to prove this, which is essentially what a short position on HLF is atm. I would short HLF based on other more mundane things like I do with other stocks. But not an (highly) unlikely event happening.

    Too many moving parts and politics involved for this to happen. HLF only needs to carry as it is that prices will keep following a random path. Ackman is betting on a price dropping to zero. That’s a tall call.

    Nuf said.
    Feb 11, 2015. 12:18 PM | 2 Likes Like |Link to Comment
  • Australia repeals carbon tax, BHP says move will help competitiveness [View news story]
    By taxing polluters you are effectively taxing economic agents. These are entities that keep the world moving.

    It’s impossible to generate growth without polluting as we rely so much on fossil fuels. It’s impossible to fulfil all current human needs without polluting. Every economic activity has at the bottom of the chain few hundred barrels of oil.

    So the challenge here is to discriminate between standalone polluters and producers. This is very difficult I’m afraid and not always straight forward.

    A carbon tax will only generate inflation while doing very little to reduce pollution. It will have to be implemented world-wide as individual countries will not shot in their foot themselves and put them in a disadvantage when compared to other more lax countries. This is a gargantuan task. To really do something about it a new economic system must be brought forward, otherwise this is all futile.

    A new economic system can be implemented locally so it doesn’t have to rely on World consensus. Not only that but it’s more sustainable than taxing an economic activity. Taxing is a wealth transfer from one agent to normally a government. A new economic system will create wealth and not just simply transferring it. Tackling pollution is not a matter of transferring wealth from polluters to non-polluters. Tackling pollution is about producing things in a different way or producing different things all together and the economic activities that sustain this.
    Jul 17, 2014. 10:57 AM | 1 Like Like |Link to Comment
  • Apple: Soon A Member Of The $1,000 Club? [View article]
    Apple is dead
    Jan 28, 2014. 08:17 AM | 2 Likes Like |Link to Comment
  • Herbalife Grows Like Pinocchio's Nose [View article]
    Shorts are arguing that the market is saturated GIVEN the nature of their business model. They are thinking in terms of filling a building with water not filling an ocean with water. Big difference. A pyramid can only grow up to a level so I can’t see here room for growth tbh.
    Dec 20, 2013. 11:05 AM | Likes Like |Link to Comment
  • Herbalife Grows Like Pinocchio's Nose [View article]
    just2look: Can’t see any contradiction here. I narrowed it down to friends, family and colleagues. As I said in a post earlier the closest I have been to HLF is via acquaintances. Like the friend of a neighbor I might have met twice in a bbq and that wanted to organize one of HLF’s communal (cult) presentations. Indecently all these acquaintances are not consumers out of the network, absolutely none of them. They were all in the process of becoming “millionaires”, sorry supervisors.

    It would be interesting to know your views. Do you know of anyone, not being related to HLF in any shape or form now or in the past, saying something like “well honey when we get back home remind me to but some HLF products from Amazon. I just love them and we are running out”. I just can’t visualize it. It simply doesn’t happen or not to the level to justify this valuation (around 15% more than Avon).

    And please don’t take me wrong: I don’t think it doesn’t happen because of the quality of their products. I could believe they are very good. It doesn’t happen because that’s not their business model. The incentives are not there.
    Dec 20, 2013. 10:55 AM | 1 Like Like |Link to Comment
  • Herbalife Grows Like Pinocchio's Nose [View article]
    Some people argue here that it cannot be a pyramid scheme because the share price keeps going up. That’s really scientific.

    HLF IS a pyramid scheme. At least in the way it operates in the US and LATAM. This article goes in great detail to offer some hard evidence supporting this.

    This doesn’t mean that Ackman might ever profit from his bet. Neither it means that the share cannot still go up and up. On this aspect I disagree with the article. It took 30 years to catch Madoff and hadn’t be a financial crisis he probably would be still in business.

    Markets don’t have to be right. They can be wrong for a long, long time.

    I just realized that HLF is worth more than Avon. I don’t know their respective margins but I know both are consumer goods company. If I look around, in my family, colleagues, and friends I can see some usage of Avon, nor massive but some usage. I see none for HLF. Literally zero. People get to know HLF because their jump into their bandwagon of bogus prosperity and wealth.

    Where are HLF products to justify that valuation? I bet they are in the cupboards of millions of members. Those are the massive sales of that company. That’s the “growth”.
    Dec 20, 2013. 08:49 AM | 2 Likes Like |Link to Comment
  • Herbalife Grows Like Pinocchio's Nose [View article]
    Dec 18, 2013. 09:32 AM | Likes Like |Link to Comment