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  • Update: Berkshire Now Holds Over 10% Of Verisign [View article]
    This is almost certainly not a Warren investment, more likely one from Combs or Wechsler. You may want to spend some time learning the new investment structure at Berkshire.
    Aug 5 10:57 AM | 4 Likes Like |Link to Comment
  • Lesson For Herbalife: When Your CEO Gets Arrested, It's Bad For Business [View article]
    You certainly believe that MLM and pyramid schemes are the same. I disagree.

    Have fun.
    Jun 10 07:44 AM | 2 Likes Like |Link to Comment
  • Lesson For Herbalife: When Your CEO Gets Arrested, It's Bad For Business [View article]
    I checked and you are right, the AP High Court has judged it unlawful.

    Couple of things however. In 1978 there were no MLMs in India. The law that was promulgated was mainly for chit funds and pyramid schemes, they do not anticipate the MLM industry and therein is the problem. The law is worded broad enough for MLM to be icluded within it if the authorities deem so.

    Secondly, in the US there are laws specific to MLMs, in India they all come under this act which does not anticipate MLM. And since US has stricter definitions, the Amway rulings in India may not be applicable for Herbalife.

    And no, I am not in contempt of court, nice try.
    Jun 9 04:57 PM | 2 Likes Like |Link to Comment
  • Lesson For Herbalife: When Your CEO Gets Arrested, It's Bad For Business [View article]
    QTR: I don't think the arrest of the Amway CEO has as much to do with the Herbalife case as you would claim.

    The arrest was made under the Prize Chits and Money Circulation Schemes (Banning) Act (PCMC Banning Act) which was actually instituted in 1978 for something completely different - chit funds. While the act has some language pertaining to MLMs it is unclear. You can refer to any article on chit funds to understand the distinction.

    You may be right in contending that Herbalife is a pyramid (I don't think it is as black and white as you think) but this act in India is not the right yardstick for that anyway.
    Jun 9 11:48 AM | 7 Likes Like |Link to Comment
  • AIG Warrants Or AIG Common Shares? An Update On The Math [View article]
    If they can improve their combined ratio across all businesses, this stock will run like a thoroughbred. They really need to get that below 100.
    Jun 6 03:04 PM | Likes Like |Link to Comment
  • Ohio geologists link earthquakes to fracking, state unveils tougher rules [View news story]
    This is not the first time that such evidence has been found. Cuadrilla, a company engaged in fracking in England admitted that their actions had resulted in increased seismic activity.

    Of course there are many questions - whether this will only happen in certain places depending upon the geological structure there or can it happen just about anywhere, whether these are mild in nature or can they have dangerous consequences and so on. This requires scientific research, not religious or ideological reasoning.

    Also just because there has not been any earthquake previously in a place because of fracking, does not mean it cannot happen in the future. That's why this needs careful and serious investigation.
    Apr 12 12:38 PM | Likes Like |Link to Comment
  • Nearly Everything About Ally Financial IPO Is Promising For Investors [View article]
    Why will the cost of debt come down? It seems the only shares on offer are the ones from the Treasury so the money is not going back to the company.
    Apr 10 05:09 PM | Likes Like |Link to Comment
  • 5 Things I Don't Like About Chesapeake Energy, And How They Affect Numbers [View article]
    Carl Icahn is......well Carl Icahn. His investment style is sometimes similar to Buffett and sometimes its not. The question for you is if the management can deliver what Icahn wants then what can happen to the stock. That is what the best essentially is on. And Lawler seems to be doing just that.
    Aug 5 04:31 PM | Likes Like |Link to Comment
  • 5 Things I Don't Like About Chesapeake Energy, And How They Affect Numbers [View article]
    In CHK's case I don't think you should look at the history of FCFs and predict the future based on that. What you need to look at is what assets sales they are doing, how are they reducing their debt and interest payments and then look at what can happen to their future FCF based on how gas and oil prices can be in the future.

    Let's take your points of contention one by one:

    -Enormous Debt: True but if this comes down dramatically as Lawler is trying then the picture gets rosier

    -Weak Interest Coverage: If asset sales and refinancing can reduce debt and interest payments then interest coverage may not be as much of an issue.

    -Negative Free Cash Flow: This can turn positive as a result of divestments, refinancing and commodity price increases.

    -Negative Working Capital: Again a factor of what I mentioned above

    -Dilution: If CHK is FCF positive and share prices remain low, it might make a good case to buy back stock.

    So the question is not what happened in the past or is the picture today. The question is that if Lawler can do what Icahn. Berkowitz and others want him to do what can happen to the stock price.

    In reality, a bet on CHK is really a bet on Lawler and the CHK management. If it works then you have a multibagger on hand. The chances are unlikely that you will lose much even in case the recovery is slower. So the upside-downside is sharply skewed and that is why people feel comfortable in betting on CHK rising.
    Aug 5 04:27 PM | 2 Likes Like |Link to Comment
  • Why Robert Chapman Is A Better Leading Indicator Of The True Value Of Herbalife Than Bill Ackman [View article]
    Sorry, I meant FTC. Thanks for correcting. I had another thought re: FDA in my head and conflated the two.

    The reason I don't buy the "net harm of deceptive MLM practices" is that there are other industries that do harm as well. The tobacco industry has caused a lot of harm all over the world as has the alcohol industry. One would argue that even the global munitions industry is responsible for a lot of harm all over the world as well.

    At the end of the day it is a technical issue of how to classify Herbalife's payments to its distributors. The fact that the FTC has done nothing so far and the fact that Herbalife is tightening up any loose holes now makes it more likely that it will survive this attack. As long as Herbalife has products that consumers buy, it has the leverage to do that.
    May 5 11:39 AM | 1 Like Like |Link to Comment
  • Why Robert Chapman Is A Better Leading Indicator Of The True Value Of Herbalife Than Bill Ackman [View article]
    Enron and Herbalife are not comparable nor is any comparison with Madoff valid.

    In case of Herbalife, the bone of contention is its business model, whether it is legal or illegal. In case of Enron, there was a widespread accounting and corporate fraud that was going on. That is how EPS went up. No one including Ackman has accused Herbalife of accounting fraud and eliminating debt and unprofitable entities from its balance sheet. Herbalife's balance sheet is far far more transparent than Enron's.

    Similarly Madoff operated in a niche market using a split strike conversion strategy that required an expert like Harry Markopolos to understand. Herbalife is not operating in any such niche arcane market.

    The problem with Ackman's attack is that it targets Herbalife's business model and is solely based on the reasoning that the FDA will close Herbalife down. That is almost impossible, firstly, because it is inconceivable that the FDA was sleeping at the wheel for so long and secondly, because it is more reasonable for the FDA to resolve any alleged infraction through other measures like fines and/or asking Herbalife to change some processes. In the latter case Herbalife could argue that its only the interpretation of the regulations that are at question and that they operated legally within those. FDA would probably have to release more clarifications and that would raise more hue and cry.

    I would have far more sympathy for Ackman's argument if he said that Herbalife needed to be more transparent and operate more clearly then they are doing so. Going after the business model shows a mix of hubris and desperation that is surprising given an investor of his stature and sophistication. It does not inspire confidence given the opposition he is getting from within the finance community.

    Ackman also hurt his case when he confessed that if required he would lobby for laws to be changed to bring Herbalife to justice. State Attorney Generals or FDA officials would be very wary of attacking Herbalife because they would not want to be seen working for a Wall Street operator at a time when Wall Street is almost universally despised on Main Street. Also the Latino population is critical for both parties so a regulator with any political aspiration would be very careful before he goes after Herbalife.

    Anything can happen, but Herbalife's decline to zero seems a rather remote event.
    May 3 11:33 AM | 9 Likes Like |Link to Comment
  • IBM: A Disaster In The Making [View article]
    Actually there is a fair amount of gap between the h/w, s/w and services wings of IBM. The company I work for, competes with IBM in services and partners with them on s/w and h/w.

    Get over the cloud, look at the services part of their business, that is where they have the most serious headwinds.
    May 1 11:26 AM | 4 Likes Like |Link to Comment
  • Sorry Warren, IBM Is Too Risky [View article]
    You just cannot compare the IT industry with retail industry. The IT industry requires M&A because a lot of the innovation actually takes place in start-ups. That is why there is a Silicon Valley for IT and nothing of the sort for the retails industry or almost any other industry apart from life sciences/pharma.

    Most of IBM's M&A will have been in hardware and software and less so in services. In h/w and s/w acquiring smaller companies with compelling products/solutions is an imperative.
    May 1 11:25 AM | Likes Like |Link to Comment
  • IBM: A Disaster In The Making [View article]
    Actually Netflix could be a potential customer for IBM. Not sure why you think otherwise.

    As for the other organizations you mentioned, I KNOW for a fact that at least one of the first two does use cloud services. Also many US govt orgns also use cloud.

    I am actually amused that almost the entire discussion here is around cloud computing. The discussion should really look at each of the h/w, s/w and IT services that IBM provides, of which cloud is but a part. Especially when it comes to services, which accounts for almost half of its revenues IBM has serious challenges in the next few years. If you are in the industry it should be pretty obvious.
    Apr 23 10:34 PM | 1 Like Like |Link to Comment
  • Herbalife's Tragic Flaw: Understanding Inventory Loading [View article]
    Chanos didn't call it a pyramid scheme or an illegal scheme. He said he believed that the product is a commodity and the business model around that is flawed. You can agree or disagree with that assertion depending on whether you think it is enough of a differentiating factor or not.

    Coca Cola is an unhealthy sugar drink and the manufacturing and logistics is only a fraction of its retail price. Most of the expenses are actually in marketing that "crappy" drink and the developing the brand. At the end of the day what matters is if you have a sustainable market segment that will continue to consume your product. If HLF is able to sustain itself as a premium brand with its target segment they can survive.
    Mar 7 12:16 PM | 4 Likes Like |Link to Comment