tag:blogger.com,1999:blog-4815867514277794362.post1869542508297534618..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: It was the night before Christmas... falsifying Bill Ackman's Herbalife thesisJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger42125tag:blogger.com,1999:blog-4815867514277794362.post-14575751683115521812015-01-30T03:34:53.153+11:002015-01-30T03:34:53.153+11:00This is terrible analysis masquerading as scientif...This is terrible analysis masquerading as scientific method. You didn't find your assumed buildup of Herbalife product in one or two possible channels and you claim that means you've proved Ackman's thesis "false"? Did you check the storage unit of every hoodwinked believer who doesn't have room to shelf boxes of diet powder in his dwelling? Did you check every municipal dump for the expired product that the more pragmatic among the suckers would have thrown away?<br /><br />As of yesterday's close, HLF is down 48% from its close on the day you posted this article. That doesn't prove Ackman's thesis (though it sure supports it), but it does prove your epistemology is horrendous. Talk about starting with a conclusion in mind and fitting the facts to your end.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-92130921663990531342014-11-10T03:07:55.154+11:002014-11-10T03:07:55.154+11:00Now a year later the share price is collapsing, so...Now a year later the share price is collapsing, so was Ackman so wrong?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-57026687773571965442013-09-04T08:37:34.130+10:002013-09-04T08:37:34.130+10:00What are the chances of 2 top executives of one co...What are the chances of 2 top executives of one company die mysteriously within about 10 years apart ?<br /><br />looks like the health is not so good !Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-87796220259625683062013-08-01T15:34:17.434+10:002013-08-01T15:34:17.434+10:00Having an obsession with epistemology can lead to ...Having an obsession with epistemology can lead to problems of its own. There are somethings that we don't know and can't know and as an investor you are better off accepting that, putting it into the "too hard basket" and moving on to other opportunities. <br /><br />The pyramid definition turns on one fact - does the business generate sufficient sales to people who buy the product for the purpose of consumption to pay the recruiting based rewards. I don't know that drawing "logical" conclusions from isolated observations (e.g. is there an inventory pile up)provides any certainty in answering this question. <br /><br />Although I hold no position in HLF and have no idea if it is or isn't a legitimate MLM I am personally suspicious of the fact that management do not publish or (as they have claimed) do not track the information required to form any sort of reasonable view on this issue. It appears they haven't even attempted to focus the argument on this point or made any effort to collect that sort of information if they do not have it already. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-72678299746310507252013-07-31T05:27:28.027+10:002013-07-31T05:27:28.027+10:00Hey, try looking on ebay.com for herbalife. 4000 r...Hey, try looking on ebay.com for herbalife. 4000 results. CraigsList? WTF?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-31249146860104388952013-07-28T22:55:53.688+10:002013-07-28T22:55:53.688+10:00John - another take on this idea might provide som...John - another take on this idea might provide some interesting/alternative feedback: <br /><br />Advertise (on Craigslist etc.) that you want to BUY (large amounts of) Herbalife products, and see who/how much actually comes out of the woodwork...Wexboyhttp://wexboy.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-68513798430780266552013-07-27T20:46:18.184+10:002013-07-27T20:46:18.184+10:005kg is personal consumption. My cumulative persona...5kg is personal consumption. My cumulative personal consumption of protein weight loss shakes is about that since January. 20 pounds lighter. <br /><br />The volume of GNC maybe half Herbalife and nobody doubts that it is consumed... John Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-65321677332119678802013-07-27T18:05:59.605+10:002013-07-27T18:05:59.605+10:00John - really well written (as always).
However, ...John - really well written (as always).<br /><br />However, the conclusion ("We can take the 300 page Bill Ackman presentation and throw it out. Falsified..." seems premature, under-developed and based on emotion.<br /><br />For example, the 50kt pa seems plausible to me given it is not sitting in 10 or 20 basements but rather is being distributed and redistributed...and redistributed...and redistributed...amongst millions of people worldwide.<br /><br />It seems plausible to me that 5kg of product is sitting in 10m basements/garages across the globe.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-36562367867248871272013-07-27T16:08:49.441+10:002013-07-27T16:08:49.441+10:00Fascinating post.
But the ultimate question is no...Fascinating post.<br /><br />But the ultimate question is not whether Herbalife truly is a pyramid scheme or not...<br /><br />...but whether the FTC thinks it is. Falsify that.<br /><br />Good ideas in any case.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-51039513233175222172013-07-25T03:46:29.755+10:002013-07-25T03:46:29.755+10:00Wouldn't you think that Ackman could have - at...Wouldn't you think that Ackman could have - at the very least, found at least 1000 HLF distributors to illustrate his point? For crying out loud, he shorted $1 billion of the stock! Given all of your assumptions finding 1000 failed distributors to show the world should be easy. Show us how much each one of them lost. It wasn't done because it can't be done.<br /><br />Shorts explain why, when surveyed, 87% of FORMER Distributors would recommend Herbalife products to friends and family, and 63% of former Distributors would recommend becoming an Herbalife Distributor.<br />Go to slide 47 here to see my reference... http://bit.ly/12WKL8E<br /><br />As far as the laws being broken - the FTC has NOT been asleep. In fact, they recently closed down a MLM company without any press pressure or Ackman, etc...<br />Anonymoushttp://reneporcile.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-79083072358809840442013-07-25T02:22:13.924+10:002013-07-25T02:22:13.924+10:00Your analysis overlooks the issue of the discounte...Your analysis overlooks the issue of the discounted retail sale. Distributors can buy product at a 25%, 35%, 42% and 50% discount. If they turn around and sell the same product for that same discount, the only parties making profit on that sale are the upline distributors -- the markup has already been made. <br /><br />When there is a greater incentive towards recruiting (because a distributor always profits off downline purchases but does not necessarily profit off their own purchases for retail) the scheme moves into the pyramid scheme territory. <br /><br />TL;DR: There doesn't need to be a fire sale on products to indicate that Herbalife rewards recruiting unrelated retail sales, a discount at purchase price demonstrates this. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-79818952987973421212013-07-24T23:42:02.655+10:002013-07-24T23:42:02.655+10:00John
I worry about this post because I think you a...John<br />I worry about this post because I think you are doing it out of some feeling of intellectual superiority over Bill Ackman. I too read his paper over Christmas and unlike you, I was mighty impressed with his thoroughness and the expense he incurred to prove his case. However, you have won the argument because you saw a cash rich company which could afford to buy back stock and kill the shorts. That has happened. You have made money. Move on. Hubris is a dangerous thing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-59690700353930624032013-07-24T23:41:19.032+10:002013-07-24T23:41:19.032+10:00Your scientific rigor falls apart on a simple laps...Your scientific rigor falls apart on a simple lapse of logic. Since Herbalife products are non-durable, the evidence of widespread distributor failure would be huge volumes going into the trash, not building up. The trouble with Ackman's case is that this has been going on for a long time with no evidence that anyone wants to interpret the pyramid ban as applying to Herbalife. Nonetheless the company is potentially vulnerable to a sudden change of mind on that somewhere.Tomnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-71987543141408357252013-07-24T17:34:25.963+10:002013-07-24T17:34:25.963+10:00The test that you had designed is also subject to ...The test that you had designed is also subject to falsification...<br /><br />Your implicit assumption "majority of failed distributors will wish to liquidate their product online" has (prima facie) been falsified by people leaving comments...<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-70249566181942042352013-07-24T17:26:25.034+10:002013-07-24T17:26:25.034+10:00John,
As quite a few people pointed out, your anal...John,<br />As quite a few people pointed out, your analysis is flawed since you picked out only one way of detecting a failed distributor. By your own process, you failed.<br /><br />That said, I do believe that your previous posts on HLF offered a much better thesis - i.e. that the product HLF sells is not the diet powder (which is a commodity), but the social network (whic is not). <br /><br />The powder is just an excuse - and it can be well dropped down the sink or whatever, just to keep the social network.<br /><br />So failed distributors may not matter, since they can knowingly keep in the game for reasons othes than acquiring the powder & money from that.<br /><br />Then Ackman thesis is falsified much earlier - i.e. he misunderstands what is being sold.<br /><br />Of course, it still leaves the question of whether HLF technically is or isn't pyramid scheme, and to show it isn't you'd probably have to show in court that the "side-benefits" are worth a lot to the customers.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-82536466287841890092013-07-24T15:31:06.621+10:002013-07-24T15:31:06.621+10:00@Curmudgeonly Troll - you can't find these con...@Curmudgeonly Troll - you can't find these consumers willing to form a class action suit because they only lose a few hundred dollars at a time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-37369227157128655702013-07-24T15:27:18.365+10:002013-07-24T15:27:18.365+10:00Selling would be to admit to failure for most of t...Selling would be to admit to failure for most of these people, who; may have failed on the business as well as the diet! Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-71218129973451627912013-07-24T15:22:34.148+10:002013-07-24T15:22:34.148+10:00John, I don't believe you have successfully in...John, I don't believe you have successfully invalidated the hypothesis because your test doesn't have the capacity to observe all the variables. We are talking far less accuracy than Heisenberg's uncertainty where there's a trade-off between position and momentum; in this case, the uncertainty being that we can't ascertain the amount of product disposed of by failed or active distributors, even with your thorough research; nor can we observe the amount of product sold to end consumers (perhaps why HLF don't state). <br /><br />For all companies selling weightloss shakes the used by date works in the same way as planned obsolesence, the supplements require people to conform to a regime, albeit, many don't. Indeed, I have thrown out more protein powder than I wish to remember... In addition, I have seen HLF products stocked up in wardrobes of friends and relatives high up in the hierarchy. The difference with HLF products is that as part of the structure you don't buy when you need it because as a distributor you have to buy monthly (I believe), whereas, if you want protein powder you visit your local supplement shop. Arguably HLF products are thrown out at a higher rate than say GNC or BSC because the latter are bought at the consumer's discretion, and the former based on a minimum volume. <br /><br />Assuming the goods will be sold online is assuming actor rationality, similarly, assuming visibility on unused HLF product is like asking a fat man if he has been sticking to his diet, arguably his shopping list will not correspond to his answer. <br /><br />Full clarity on this I think is unattainable, HLF is a wilderness of mirrors.Cnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-50668639454240393952013-07-24T12:45:00.490+10:002013-07-24T12:45:00.490+10:00With MLM one of the criteria for it not being a &#...With MLM one of the criteria for it not being a 'pyramid' as per 'Golden Products' and 'Holiday Magic' is the fact that there is a fixed retail price and purchase discount is the same for everybody at a certain level- but more discount at the top levels less at lower levels - profit comes from distributor discount not product markup. <br /><br />In MLM there is just enough margin at the lowest level to maybe make part time selling of retail look worthwhile - especially repeat consumables to friends. With the old true pyramids I think you also had a class of priveleged ditributors (maybe volume based)and eventually with each level selling at a markup there would be a level of buyer who to make a profit would have to sell at a price that was not viable - i.e too high vs prices in the shops so no end consumers who would buy - that is where the pyramid stopped with last buyer as bagholder and no buy back.mokwitnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-46687608876534166692013-07-24T12:16:59.273+10:002013-07-24T12:16:59.273+10:00Have you considered that the high level distributo...Have you considered that the high level distributors selling on ebay bought the product to qualify that month for the commissions generated by their downline - it is worthwhile for a distributor with a big network to do this - he likely has to sell on ebay because product for downline is ordered direct by the downline so he can't sell the product direct to them maybe. He is not selling at a price that gives him a viable profit margin he is offloading unwanted inventory at just enough of a discount to entice buyers on ebay. Selling retail size to multiple end users as a high level distributor makes no sense and is not the best returning strategy - building and motivating the downline is (- selling his own seminars and motivational products is even better and maybe the real business for some/many/all).<br /><br />Secondly have you considered how awkward it is to send back product - you likely have to physically deliver it back to their warehouse maybe at HQ (maybe can ship) and likely have to fill in forms etc - many small failed distributors in addition to not wanting to admit failure also would be of the level where they don't have the motivation/time off work to do it - especially if small amounts.mokwitnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-6837913553840804942013-07-24T12:14:30.484+10:002013-07-24T12:14:30.484+10:00This is nowhere near as alluring as the crime bein...This is nowhere near as alluring as the crime being perpetrated on Fannie and Freddie. Get to it, John, my interest is waning.Robert Maehttps://www.blogger.com/profile/02644223173141631317noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-34095403148511779212013-07-24T07:43:02.755+10:002013-07-24T07:43:02.755+10:00John,
What about the hypothesis that pyramid sche...John,<br /><br />What about the hypothesis that pyramid schemes can profit off of failure.<br /><br />I remember as a kid going to an Amway presentation and got the whole 9 yards that anyone who has been to one of these is familiar with (nice car parked out front, one sales person who is insanely successful, etc). Luckily, for myself, my father had educated me about the insanity and drear of MLM companies. <br /><br />I had a friend who, against the advice of a bunch of us there, bought the scheme hook line and sinker. He became a distributor and convinced his friends and family to buy the product (a phone service), which a bunch of them did. When I talked to one of the people who bought from him they said they knew the product was crap (and in fact had kept their old phone service), but they were doing it out of pity for my friend. Needless to say the whole thing ended in a year and he ended up joining the Navy, but in that time I'm sure the company made a ton of money off of his failure.<br /><br />I guess I don't disagree with your assessment that Ackman's thesis is wrong, but I still think that Herbalife is a pyramid scheme. That doesn't mean they aren't selling their product though. Eventually they will have pillaged and burned enough friends and family to come tumbling down. When is anybody's guess.njshttps://www.blogger.com/profile/00792767178978446714noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-47464523339752560952013-07-24T06:50:37.790+10:002013-07-24T06:50:37.790+10:00I would like to share my experience from a man, wh...I would like to share my experience from a man, who was my professor (Kostas Christopoulos) in economics and finance in Economics University of Athens, back in 2005..and set up a pyramid with high interest rates per month (even higher for those who brought more clients-victims) depending on the capital you had trusted to the MAN..<br /><br />His target was the savings of the cleaning personnel of the university, the maintenance stuff and even some students (I guess the less clever ones). Later on I imagine he extended to any kind of believer, who seek easy money..The business went well for couple of years, the pyramid kept widening its base and the payment of the interest gradually faded and changed from monthly basis to biannual and then to none at all.<br /><br />To make a long story short, I believe the Herbalife case, as any story who reminds us of a pyramid by the first look, it's actually a pyramid OR a potential pyramid.. IF THE ORIGINAL PRODUCT IS SOLD WAY OVER THE COST (more than 200%), creating the profit margin that gradually shrinks as we move down the pyramid. In our example the 50% discount at some point and then 35% I think. <br />In contrast to a normal business that sells its product with a 20-40% profit, leaving space to only large distributors to claim a piece from the pie and to the others (maybe small or part time distributors) no space at all, due to increased fixed costs, scaled economies etc..<br /><br /> -sorry for the long sheet!<br /><br />P.S. The MAN is still in jail I think or maybe under the Greek law, is free spending the 15 million euros he embezzled in 2 years and carefully laundered using numerous off shores.<br />(original article in Greek - http://news.kathimerini.gr/4dcgi/news/economyepix_2Kath/edition?fdate=09/09/2005<br />google translated link in english - <br />http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fnews.kathimerini.gr%2F4dcgi%2Fnews%2Feconomyepix_2Kath%2Fedition%3Ffdate%3D09%2F09%2F2005)<br />Tony Apostolidesnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-69924068969643604332013-07-24T05:02:45.923+10:002013-07-24T05:02:45.923+10:00Nice post. I do think you are missing a big part o...Nice post. I do think you are missing a big part of Ackmans short, which is to publicize the short into trying to get 'distributors' to drop the brand, and thus cause a self fulling cycle that benefits the shorts. <br /><br />I guess he is still waiting. But I'll give it to him, he was short Ambac for years before it finally blew up. http://factsaboutherbalife.com/<br /><br />Activist investing to a new level!<br /><br />PS . At least he wasnt short Tesla!abee crombiehttps://www.blogger.com/profile/13320039155613443039noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-28664222859371596462013-07-24T01:12:43.954+10:002013-07-24T01:12:43.954+10:00Everything on ebay sells at a 35% discount: jeans,...<br />Everything on ebay sells at a 35% discount: jeans, toys, electronics, movies, etc.<br /><br />There are too many risks like slow shipping, inconvenience, fraud, used sold as new, poor packaging, misleading picture, incorrect description, stale, expired, fake, mislabled import, etc.<br /><br />I laugh at Ackman's ebay comparison he clearly doesn't understand the ebay marketplace.<br />Anonymousnoreply@blogger.com