QTR’s Note: Oh, the irony of Herbalife on Labor Day.
You know, Hempton was right – no, not about Herbalife, God no – but when he said that this saga is like hedge fund porn. I still, after 2 years, find myself scouring the internet trying to find any and all blog posts, videos, and information relating to Herbalife. Whether or not Mr. Hempton knew he was going to wind up the proverbial star of that porn by calling Herbalife “scumbags” on national television remains to be seen (suggested porn name: The Thunder from Down Under) .
Regardless, judging by my hits on Herbalife articles, the momentum and interest in this story has picked up as the months go on and we get closer to resolution. I can’t get tired of covering it, because the second I ease off the gas is going to be when the FTC is going to act, and we’re going to have some closure. So, I’m bludgeoning my way through the headlines still, and staying on my toes with the Herbalife saga. I’ve learned some good lessons; it’s going to be hard to get emotional about a trade once this saga and the Mallinckrodt one finally comes to closure one way or another.
And that’s not a bad thing.
Now, onto new business.
I stumbled upon an Herbalife interview with Carl Icahn tonight that I hadn’t seen for some reason. Maybe it’s because I’d rather watch C-SPAN 2 all day (motto: Get all the action you can’t get on C-SPAN!) than turn on Fox Business News.
Fox Business News can be summed up by this picture of Don Imus, who still drags his ass into the studio every day to mumble his incoherent thoughts into a microphone before falling asleep on the job.
It’s time to retire, Don, for fuck’s sake.
Anyway, back to Herbalife.
Remember the old Carl Icahn? The one that badmouthed Bill Ackman in public during their feud on CNBC and then presumably (taking an educated guess here) recruited a ton of hedge fund managers to try and orchestrate a short squeeze that worked momentarily – until the wrench of the re-audit was thrown into his gears of trying to recapitalize the company? Yeah, that Carl Icahn. You know, LBO, tender offer, $150/share, guys on the board Carl Icahn? I remember him.
Remember Michael “Shrieking on the conference call about Bill Ackman” Johnson?
Both of these guys have been MIA. My guess? Icahn’s lawyers issued a STFU order to him and the company’s not letting Johnson speak because he’s got a bit of a tendency (see: John McEnroe) to slightly lose his cool.
As far as I know, this is one of Mr. Icahn’s last interviews regarding Herbalife. He didn’t speak at the Delivering Alpha conference and since then, Herbalife has beefed its earnings and is awaiting its fate, which will likely come at the hands of the FTC.
Check out the link and watch the video, then we’ll review some of Carl’s quotes.
This 3 minute clip contained so much muck polishing by Gasparino he could be enlisted to buff the green off the Statue of Liberty. As Icahn gets stuck with questions, Gasparino actually edges in and answers for him a couple of times. Then, at the end, Gasparino thanks him like he’s thanking an old buddy from college. “You dog! Catch ya next time, you old so and so!”
So, after initially dodging Charlie Gasparino’s first question on Herbalife and speaking about eBay instead, we get these gems from Icahn on Herbalife:
“With the FTC in there, I’m hoping we get a clean bill of health – or – close to a clean bill of health “
Look, at this point, even the bulls are openly admitting to me that the chance of the FTC leaving this company alone without doing anything at all is 100% delusional. You don’t get a vote of the commissioners together and open a formal probe only to conclude that “everything was fine to begin with.” It’s the scope of what the FTC is going to implement that’s going to be the difference maker. Shutting down the company would be great, but stopping nutrition clubs, limiting downlines, and enhancing transparency to distributors could all cause the company to implode from the inside out. Call me old fashioned, but I much prefer the criminal indictment route, as there seems to be some interesting RICO questions that need answers with Herbalife. For more on this, see Matt Stewart’s piece, “Did Herbalife Executives Conspire to Commit Mail Fraud?“
“A lot of Hispanic people – you know, women that can’t get jobs, are making money from this”
Lest we forget that Hispanic people are just one part of the Herbalife equation. And, assuming “making money” means getting a check from the company without regard for how much it’s for and how much they’ve spent in the first place, I’ll concede the first ridiculous part of this quote. But one question I do have: Why do Hispanic women need jobs more than men? What bodily orifice did Carl just pull this one from? What would compel a human being to say something so degrading towards women live on TV?
“Did some marketing stuff…was that wrong? This company, I believe, has cleaned that up. And yeah, there was some marketing things, but that wasn’t the company doing it – that was some of the distributors. Did they make promises? Possibly. There’s also a lot of people earning a lot of money.”
Here’s Carl admitting on live TV that the company has screwed up recently. This is better than Hempton calling the company scumbags. Claiming it was the distributors and not the company is a ridiculous thing to say. This company and it’s distributors are one in the same, and if you don’t understand that, watch video of any of the company sponsored extravaganzas or events. Or, look no further than the company’s own Board of Directors, where distributor John Tartol is compensated a cool couple million to sit. If Herbalife was Scientology, John Tartol would be Tom Cruise.
The head distributors indoctrinate the rest of them. Here’s about 200 examples of Herbalife and its distributors being one and the same.
Hell, John Tartol was even Michael Johnson’s personal instructor into Herbalife.
Have they cleaned it up? That’s a huge “hell no”. All you need to do is look at:
- any recent extravaganza script/video
- Club 100/Universidad del Exito
So Carl, when you ask, in a very pedestrian and matter of factly way “Did they make promises?“, I urge you to look at John Tartol – yet again – an Herbalife BOARD MEMBER to this day promising incomes of $100k/month through his Success Connection lead generation scam. This is how Tartol got himself to the top of the pyramid.
That doesn’t look like a “possibly” to me. To the question “Did they make promises?” the answer is a resounding “fuck yes.”
But, I digress. This isn’t the first interview I’ve seen where I’ve felt the need to point out some bizarre things Mr. Icahn has said.
The more I think about it, Icahn has really began to wither away from Herbalife. As a matter of fact, I think we might be dealing with Blockbuster Carl Icahn. Remember him?
As I once commented on Icahn and Ackman:
You have to remember that the best in every industry, no matter what it is, are at some point replaced. Sometimes, it’s ceremonious, like the turning over of quarterback passing records in football, or when one hall of famer inducts another into the NFL hall of fame.
Sometimes, it isn’t ceremonious, like when Leno’s timeslot was replaced by Conan O’Brien.
But, hey, that’s Darwinism. And we could very well be witnessing a sea change of massive proportions about to take place here.
What we have here is one 48-year-old hedge fund manager in the fight of his life with the three pictured below [Icahn, Stiritz, Soros], worth tens of billions and weighing in at a combined age total of over 1,000.
Sometimes, not unlike the original aristocrat, C. Montgomery Burns from the Simpsons, guys that have had success their whole lives are less interested in the ethics behind a situation and more interested in simply crushing those who have the moxie to stand up to them. This could very well be a case study in that, and then, the psychological effects of the underdog eventually winning.
One thing you can say about Ackman over all of 2013 and into the Robin Hood conference/interview is that he’s kept his head. As a matter of fact, that seems to be one of the things that Carl Icahn hates the most about him. During their original CNBC interview, Icahn alluded to a statement similar to, “no one is more sure of Bill Ackman than Bill Ackman.” I don’t know about Bill, but I’d take this as a compliment.
Ackman, despite what the bulls will tell you, has really always conducted himself in a classy and respectable manner during interviews and when presenting his case. He’s persistent and calm, and rope-a-dopes you over and over with this case.
Ackman was even noted for, against the advice of his lawyer, volunteering much more information than necessary while he was being interrogated by the attorney general and SEC over the MBIA case. He wants you to hear his case – he feels if he can just get the sun to shine on his case, the people will eventually come to the right conclusion. And, I happen to agree with him. His first step was in late 2012, when he finally introduced his case to the world on Herbalife. Now, it’s had some time to stew – and stirring the pot is the regulatory agencies and the general public’s skeptical eye on the company.
This is because Ackman knows how to separate emotion from his trades, one of my other cardinal rules of investing.
Emotion is what prevents real success for many novice traders. Emotion is the catalyst behind making trades that make no sense on paper. Emotion is why people sell off positions after the crash and why they begin buying at the tail end of rallies. Emotion makes idiotic things run through your head, like:
“This stock may never stop going up! Better get in no matter what cost!”
“This company is doomed! We are going to zero right here, right now, on this crash!”
This may seem like idiocy when you read it now, but even the savvy investors know this voice still comes out in their head when they’re in the midst of a rally or crash. Ackman is showing a great example how to ride out emotional situations with resolve and class over 2013 and into 2014.
By bringing attention to Herbalife, he’s doing two things – aside from handing regulators everything they could possibly want on a silver platter, he’s forewarning potential Herbalife distributors for what they’re in for. It’s a legal, ethical, two-pronged effect to make his point. And, I’m convinced his point will be made.
Remember the original CNBC interview with Icahn? Ackman was cool and collected, while Icahn sounded like the maniac; screaming, cursing on live television, interrupting, and generally making himself look like a whiner.
I’ll leave you with a couple more quotes, and an updated Herbalife chart.
“[Ackman’s] missing the real analysis.”
– John DeSimone, CNBC, July 22, 2014
“The big-picture story here is the stock going to $300 and that’s where I think the stock is going if it stays public. I’m going to take a page out of Carl Icahn’s book – making money in a stock is a lot of fun. Making money when Bill Ackman’s losing money is like a ride at the circus. It really is the cherry on the top of the sundae. “
– Robert Chapman, CNBC, July 31, 2013
“A thesis that says, ‘I have to wait for the government’ is a bad thesis.”
– John Hempton, CNBC, January 4, 2013
““Our target price is zero, because we think the business will fail.”
– Bill Ackman, Forbes, December 20, 2012
Judging by this chart, who’s winning…
…and when’s that lawsuit Herbalife is going to file against Pershing Square coming?
Happy Labor Day!