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Whi(t)ney Tilson Does It Again
After an incredible day in Herbalife - its best performance ever - following Bill Ackman's "death blow," none other than Whitney Tilson (who oddly has not been seen on CNBC for many months) has penned a letter to his investors explaining "why I am more confident of my Herbalife short position." As a gentle reminder, Mr. Tilson entered his Herbalife short in December 2012 in the low $20s (shortly after Ackman's initial pitch) and recently made it one of his firm's largest short positions. It appears there are now two ways by which Herbalife shares implode - Ackman buys a 'minority stake' and 'fixes it' or Whitney Tilson gets on TV and shifts to a long position...
Whitney Tilson – Why I’m More Confident of My Herbalife Short Position Today
The Herbalife bears won the day yesterday and the bulls won the day (and then some) today. Yawn. This is why I run a diversified short book.
Over the past year and a half since his initial presentation, Bill Ackman and his team at Pershing Square uncovered a lot of great new information about the company and how it operates that neither I nor anyone else (nor even Ackman himself) knew, but much of this didn’t come through clearly in his presentation today (which you can watch here) for various reasons – just read any of the harsh media coverage. But I don’t care about the messaging – that can be fixed. I care about the substance.
To be short this stock (as I am), you have to believe two things:
- That the majority (not all) of this company’s operations are based on a pyramid scheme, false and deceptive marketing, etc.; and
- That regulators will act to shut the company down or at least seriously rein it in.
On these two measures, I have more confidence in this investment now than I did before his presentation. To put rough numbers on it, before today I thought there was a 90% chance #1 was true and a 70% #2 would happen, so that’s a 63% chance of this investment working out. Now I think the odds are 95% and 80%, meaning I think my odds have improved to 76% — so I’m perfectly happy to have a 25% larger short position (which the market took care of today – I didn’t have to do a thing!).
The main reason for my increased confidence is that I think Ackman showed convincingly that nutrition clubs (which he estimates account for as much as 50% of Herbalife’s U.S. business and nearly all of its incremental profits) are fundamentally not about genuine consumption of Herbalife products by people pursuing healthy lifestyles and weight loss (as the company would have you believe) but almost entirely by: a) Those pursuing the business opportunity (i.e., building a downline rather than real sales as, for example, Amway, Tupperware and Pampered Chef); and b) Their friends and family who are trying to support them.
And, critically, the business opportunity is being sold in a false and deceptive way in which mostly vulnerable, unsophisticated people are promised that if they just work hard and invest their time and money they are likely to become President’s Club members and earn $500,000 annually forever. There is, of course, no disclosure whatsoever about how much time and money the average person invests, the real financial characteristics of the average nutrition club (almost all lose money), and the likelihood of anyone ever earning $1 in revenue, much less breaking even, much less earning enough money to make it worth one’s time, and much less becoming a President’s Club member (approaching 1 in 100,000).
In short, Ackman present voluminous evidence that Herbalife is aggressively selling millions of people a promise of the American Dream but is instead giving them the American Nightmare – bleeding them dry and discarding them. This is the very definition of fraud.
The best analogy I can think of is a slimeball going around targeting people dying of a terrible illness and promising them that he has the cure – all they have to do is pay him $3,000, do what he says (or take the “medicine” or “treatment” he gives them), and they’ll be cured. In fact, scams like this are all too common – see this 60 Minutes expose, for example, of stem cell fraud. However, these frauds are mostly located overseas because, of course, they’re illegal here!
To be clear, this is not like Amway, in which a relative of mine, years ago, peddled Amway products to her friends and family (which we reluctantly bought to support her). She wasn’t pursuing the business opportunity, but rather, like the vast majority of Amway reps, was just selling products and making a commission. That’s the difference between legitimate multi-level marketers and pyramid schemes: are most of the people in it to sell products or for the business opportunity? The key thing Ackman showed today is that these nutrition clubs, which the company, analysts, and bulls point to as evidence of legitimate end demand, are really just fronts for people pursuing the business opportunity and few of the people coming to them are what any sensible person would view as real customers.
Nor is it like buying a lottery ticket (where people knowingly waste their money in pursuit of a big payday) because everyone who buys a lottery ticket knows what their odds are (close to zero). Could you imagine the outcry if the lottery ran ads of lottery winners saying, “Just pick numbers like I did and you’re certain to strike it rich! (And if you don’t, you’re a loser.)”
A final point: I think Ackman today rebutted the primary bull argument (which was the only lingering doubt I had): that if Herbalife were a pyramid scheme, there would be a ton of excess inventory in the system and one would see large volumes being sold at distressed prices on eBay and elsewhere. But now we know why: the majority of the product is actually being consumed – but not by real consumers, but rather millions of people (and their unfortunate friends and family) caught up in a vast scam that’s like a cult, with vast promises, huge rallies, etc.
* * *
It seems the 'market' disagrees... for now.
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A lot of ink for a bitch match over a fucking shampoo company.
Did someone say "shorting opportunity?"
I Report, You Decide: PBYI up Almost 200% after the Market Close on $0.00 in Sales
I have been wondering when Titney Wilson's fund finally goes Tits Up. He's Ackman's bitch...
"It appears there are now two ways by which Herbalife shares implode - Ackman buys a 'minority stake' and 'fixes it' or Whitney Tilson gets on TV and shifts to a long position..."
Or Dennis Gartman issues a buy rating...
LOL perfect.
Although, Gartman would go long HLF and short oil. Who the fuck knows why that pair, but he said it so well.
A cock fight between two shorters (Ackman & Tilson), but they both have VAGINAS
Supposedly hes holding on by a thread. Next fiancial crash hes toast.
But its called Herbalife, it must be OK with a name like that!
almost as good as his netflix short for $100 in the face, then threw in the towel and went long right before the first collapse from $305 (2012?), what a tool
OK, so now we have "activist investors" trying to act like "regulators" in identifying and shutting down pyramid/ponzi marketing schemes.
Aside from the almost comical loss of investment capital (OTHER people's capital, I'll point out), what is really going on here? This is bizarre. Herbavore have been around for a LONG time. So have a lot of other similar schemes. Yet, only Herbavore is singled out by these "activist investors" for destruction.
I'm trying to figure out if they are trying to set a precedent they will use against all other similar companies in the future or if somebody at Herbavore just pissed them off at some point. Not like Ackman isn't known to hold a grudge.
they should probably read the story about the guys going short on CYNK the other day. Fundamentals no longer matter
This entire bullshit thing is like 10 dudes sitting around fucking each other.
It's a symbol to the waste fraud and things to erase completely once you bitchez get your shit together and realize we don't need markets.
Have another shot of mosquito blood ! How many shots of triple malt did it take for you to muster up that comment?
Oh I see. You troll people who think you're an idiot. That must keep you pretty busy.
I just play with idigent idiots that don't do their homework! Kinda like you Tickhound.
I see nothing of value from you in months, then you suddenly explode in some facitious rant?
Go back through my comments. It's obvious where my proclivities trend...
I don't really know wtf you're talking about, but just the thought of you associating value around here makes me wanna yak. The only thing you ever find valuable around here is your own echo splattered all over these pages.
And you're just pissed cuz no matter how distasteful, Francis' joo jokes were funny. Yours suck. All I implied was if they got rid of him, then WHY the fuck are you still around?
It's just my opinion. Get a grip.
Then "beat it". By the way, what was the Fed. takeup today smart ass? Your comments have zero to do with the thread and just deflect the subject matter to another direction. NSA much Tickhound?
Het Tickjuice, you're just digging a deeper hole for youself. I've never taken sides on religion. Ask anyone here at Z/H. I come here to trash banksters and trade.
It's open season on any religion , race, or gender, if you're fucking with humanity! (period) Now go get me an eggrole you worthlees little garden knome!
Omg you are pathetic. LOL NSA??? See this is the type of shit that lowers the collective cachet of this place. And why, because I called you a 2 party boomergoon?
And wtf religion??? Dude... Are you ok?
I Am I upsetting you Tickjuice? You can't tell me what the fed takeup was today? Y Now you're really slipping.
You presume to know what my affiliation is, and still can't produce "facts" ? Hey , I think the State Department has a job with your name on it!
So my honest non-click knowledge of the Feds security purchase schedule FOR TODAY is some indication of what exactly... That you're not a tool?
Your affiliation is whatever the fuck it is and I'd be disappointed if you were any kind of spokesperson for it.
The best thing your affiliation can do is have you shut the fuck up on its behalf.
You've lost the argument. I've better things to spend my time on.
Have fun playing in your house of mirrors.
P.S. I'm Christian you stupid fucking troglodyte.
I wasn't asking your religion idiot I was wondering how you saw fit to pull religion into this pile of shit you've strung together to call an argument??
Religion, nsa, fed speak... Geeezus you're fucking nuts dude.
Do you actually "proof read" your comments? To include my name in the same sentence with Fracis Sawyer, is beyond bizarre.
Seriously... If I were you, I'd re-read some of your(my) posts.
You still can't answer my simple question, can you. Why is it you disappear for months at a time then reappear, without any actionable evidence, other than your bloated opinions. I publish charts regularly, and engage other traders. Were you locked up in a rubber room?
My comments are incoherent, yours are batshit crazy! What's your plan all knowing Tickhound?
Ok, detective, let's examine this incriminating evidence...
Oh, and side note I find it interesting how the oh so anti-statist is the one policing everything.
Now, regarding your conspiracy...
I realize exponential function and non-growth models are things you consider "batshit crazy" .. So let's not complicate things.
Let's apply Occam's razor to this bullshit right here: "Why is it you disappear for months at a time then reappear, without any actionable evidence, other than your bloated opinions. I publish charts regularly, and engage other traders"
-"disappear for months" = cuz the stimulation and curiosity and thought experiments have vanished since idiots like you high five one another and assign krugman, nsa, and various ad hom to anyone anytime you're challenged. You and yours have helped to lower that collective cache. There are no new ideas in your world. Eventually I limp back to remind your dumbass. Hence right now.
-"Without any actionable evidence". LOL you just wanna hear yourself talk right there I don't even know wtf youd consider that to be.
-"I publish charts". I don't give a fuck about your charts. Particularly now and forever from now. Other than for nostalgia of how fucked our society was and how blind shamans such as yourself astrologize the charts.
I tried for the simplest answers that didn't include nsa-Dom or fed-pimp.
How'd i do? Are my paperz not in order?
Seek help/ http://www.suicidepreventionlifeline.org/
I'm finished with you, and your ad-hominem drivel. When you have something of value to offer the forum post it.
Eg; charts, trading ideas, macro news, ect...
Charts? If the last 5 years has taught u anything, it's that your charts are absolutely meaningless.
Trading ideas? If the last 5 years has taught you anything, it's that your trading ideas are absolutely meaningless.
Macro news? Just cuz you can't see outside that narrow corridor u call a worldview, doesn't mean there won't be people, like me, who think you're part of the problem. Deal with it.
You two should turn that act into a Broadway Musical.
You'll make a fuckin' fortune!!
deleted
stupid shorts. i wouldn't short shares of actual dog shit in this environment.
"the majority of the product is actually being consumed ... (by) millions of people."
I have no dog in this fight but isn't this the whole point, Whitney?
Disclaimer: I hold no position in HLF (wish I did) up 25% today.
So Ackman "talks it down" from $47 to $65 and now Tilson thinks that he should pile on from a $20 short?! Who on God's green earth would invest a wooden nickel with these idiots??? Double up and throw up has been taken to epic levels.
So, ya think Carl Icahn was calling in buys today and tweeting Ackman smiley faces?
the majority of the product is actually being consumed – but not by real consumers, but rather millions of people
This is a laughable statement.
I just about fell off of my chair laughing when I read that. You too, huh?
Can't believe this guy makes money. Can't believe people give him money to make.
All indicators of cronyism.
I said from DAY ONE ackman was fos, and had all the appearances of someone commiting financial suicide.
we all know hlf is a con, but its grandfathered in. you know, like cramer.
The fastest way to lose a fortune trading is by 'knowing something' for sure. I know Jesse Livermore would agree.
Why is his head so big?
Brain tumor ?
The irony is, of course, that the company probably is a scam, but won't go down until these big shorts capitulate or are forced out in some final, cardiac-event-enducing (for them) short squeeze.
I'm not going to call Ackman one way or the other.
He might be another fucking slime ball on the make or he might just be trying to show the world what a complete cunt that asswipe is running HL
One thing I know for certain, I know a scam when I see one ans I can smell one too.
And this has fucking deep fried pigshit minced and with fucking rotten goat bladders written all over it and stinks like it too.
But Acman will fail.
The reason why is actually simple.
Because almost every single fucker buying this stock of HL do not give a flying fuck what happens to the people who get ripped off, as log as they make a profit.
In fact so many actually thoroughly enjoy the fact they get rich as some peasant starves somewhere and the fact that the fucking US govt sanctions it.
They would cream themselves and buy buy buy if HL actually murdered the losers and and boiled their kids for hamburgers if it made more profit and the USG still called it legal.
The stock would go through the roof.
That's the world we live in today, that's human nature now, and that is why, although ultimately it will fail as fucking scam Ponzis do he will be a loser too.
And USG,
Does anyone think they care a fuck if some Chinese get scammed. Fuck no, its why they will let it run because they get the fucking tax dollars too.
zh taunting the shorts? pretty soon td will be employing joe weisenthal. i lost a fortune buying the poison he sells. now hes going to roll over? fleckenstein and zh: two names i wish i never heard.
Whoa......Whenever you ever run into a consistent source that is totally wrong, you have been given a once in a lifetime gift from whatever pagan gods you worship.
Think about it.
With supreme confidence of finally being right over a 5 year period ( how many can claim that, who aren't front running the information they got from the Bernank?) borne of the knowledge you acquired here, and after a short time of one year, taking a complete opposite position, in 2010, Buying every fucking dip and selling every fucking spike, you could be having Sushi with Soros, Fink, Lord Blankenstien, Buffet, and/or Carlos Slim.
NEVER ever! deride a man who is in the process of defeating himself, nay, just bet the other way.