It is very rare that I see a commercial that makes me laugh out loud, but this one did:
I could watch it a hundred times. In fact, I probably have.
If you haven't watched the commercial (come on, it's only 30 seconds), the grandfather is too transparent about his answers to some questions and unfiltered with his thinking.
The commercial was the first thing that came to mind this blog post by John Hempton, Chief Investment Officer, Bronte Capital:
"I agreed with Bill Ackman that Herbalife is mostly about ripping off distributors and people at the end of the chain. The product is more than twice as expensive as competitor shakes. I called Herbalife 'scumbags'. But they are highly cash flow positive scumbags and they will use the cash flow to buy back shares. ... They are scumbags then - but they are scumbags working for stock market investors."
So John Hempton's theory is that defrauding people ("ripping off distributors" to use his own words) is okay as long as the company is publicly traded and funnels some of the ill-gotten profits back to investors.
I wonder if he'd support and invest a public company that simply robbed banks if it paid a handsome dividend. Sounds like he would.
Where do you draw the line on being fine with illegal activity as long as it helps stock market investors? Would he back Murders 'R' Us?
Let's continue with some more of his blog post:
"That I pointed out was similar to tobacco companies. Tobacco companies kill 5 million people globally per year - 400 thousand of them in the USA. Is anyone stupid enough to think the government would close them? That has been a bad short thesis for decades!
Bill Ackman is shorting a profitable company - and his argument is that they run an illegal pyramid scheme. By implication his argument that the government is going to somehow close them down.
That is a really truly awful short thesis - the short thesis that Government is going to come and help poor people and a billionaire hedge fund manager! Normally neither group is high on the agenda!"
First off, I'd be all for the government shutting down tobacco companies. I don't know why the government hasn't done it long ago unless lobbying and political contributions are keeping them in the game.
However, there's a difference between ripping off distributors and tobacco. Is there anyone out there who isn't aware of the dangers of tobacco? It's not like people think tobacco is healthy and is going to make their lives better. Yet the marketing of MLM is that it is good and going to better the lives of distributors. Tobacco is bad, but it isn't fraud.
It's worth taking note that the government shut down Bernie Madoff's scheme. So Hempton thinks it is going to cherry pick which schemes to shut down? He thinks the government is going to ignore fraud, because it doesn't want to help a billionaire hedge fund manager? I honestly think that the government has more on its plate than caring about Bill Ackman.
To be fair this blog post of Hempton's was written over 18 months ago. With the benefit of that hindsight, we know that the FTC is investigating Herbalife. So the process to shutting them down is underway.
I couldn't let it go unnoticed that even when some people admit that MLM is fraud, they shrug their shoulders and support them anyway. One has to wonder how Hempton got in the position to be a chief officer of anything with the lack of logic... maybe the lack of morals got him the position. Can't imagine why anyone would put a dime of their investing dollar with Bronte Capital.
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