This is a straight tip. I am slow to it - but go read Roddy Boyd's piece at the Southern Investigative Reporting Foundation. It is two weeks old - but hey - its good fun.
And now my review:
Multi-level marketing schemes are a highly profitable business for those running them. If you manage to get two to twenty thousand people selling things to their friends and giving you a cut you are going to get rich.
The road to those riches are laced with the dreams of all the people who hold tupperware or candle parties or even worse - sell weight loss schemes or insurance.
Listed multi-level marketing schemes (such as Nu-Skin) are a really strange investment. The basic proposition is that they offer investors is the claim they have a really profitable businesses conning people out of their money and getting them to cash in their friendships.
The pitch summarises: I am a crook but you can trust me. I am your crook.
That is a surprisingly common pitch in financial markets. Chinese property developers listed in Hong Kong make the same pitch - but in their case the pitch is that I am a guy with lots of guanxi. I can get a property forcibly acquired from peasants at a deflated price and have it rezoned high rise. And I can thus make a profit. But I don't have the money to develop it - so you - dear Hong Kong investor can help me out. You see I am a crook - but you can trust me. I am your crook.
It rarely ends well. The last person they always screw is the bag-holder with the equity.
Shorting multi-level marketing schemes or for that matter Hong Kong property developers however is an exercise in painful endurance. Stalingrad gets mentioned.
You can even get a real one - one that does distribute some of the loot to shareholders and can survive a long time (Avon, Tupperware). Some of the products even become respectable. [I used to share house with a lesbian Avon lady who was the best sales woman in Australia. And was surprisingly respectable to boot. And she never tried to sell me make-up.]
Spectrum: At one end there is Avon. Cosmetics are a product that overtly sell a dream and it is hard to argue anyone is defrauded.
At the other there is insurance and weight loss products.
Roddy takes us through ViSalus - the best weight-loss product MLM I have ever seen. And there are a lot of them. And he shows us some over-the-top sales techniques with sales people who look like models and party like rock stars.
And it is a good story - but I keep coming back to Mediolanum (an Italian insurance company). Nobody has ever beaten the sales culture of that place. I met Ennio Doris (the CEO) once with his not one but two beautiful translators. Life is good at the top of a sales machine.
This video is funny. But it is really funny when you realize that this is the boss of an insurance company trying (successfully) to excite a bunch of insurance salesmen. [If you have a higher resolution copy of this video please send...]
If this video is a guide then ViSalus could go for a very long time.
The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.