What Herbalife Apologists Are Ignoring (And You Shouldn't)

Warren Buffett, whose Berkshire Hathaway
owns Pampered Chef, a MLM. Is it comparable
to Herbalife though? (source:Wikipedia)

Hedge fund managers, being handlers of other people's money, tend to be very smart people, and usually very careful, but once decided, still do the Bush thing: "stay the course", based on their own analysis and their own criteria. And ever since Ackman started his "assault" on Herbalife at the end of 2012, the hedge fund managers have been divided on this issue, and roughly falls into three camps:

• Ackman-camp: I agree with Ackman and Herbalife is going down... eventually
• Icahn-camp: Ackman is wrong, Herbalife is NOT pyramid enough to be shut down!
• Spectator-camp: I'm not getting between those two gorillas... or Godzillas.

Most articles you find on Herbalife nowadays are about stock movements, rather than about the company itself. If Herbalife stock goes up, people publish some opinions about how Ackman's losing and Icahn is winning, even though they don't really know how the company works. One such title is "Carl Icahn is Squeezing Bill Ackman to Death", leaving aside the "merits" of Ackman's case.

Everybody is guilty of confirmation bias and automatic cherry picking. People see facts that support their own side, and unconsciously ignore facts that does not. Even hedge fund managers. One of which is Bronte Capital's John Hempton, who has a nice blog. Recently, he published a blogpost that repeated his view that Herbalife is just misunderstood and some MLMs are very good.

It's a pretty long post, and mentions multiple MLMs, so I will summarize here. I understand I'm as guilty as anyone I'm accusing of potential bias, so feel free to read it and check it for yourself. But basically, his premise is that "MLMs don't sell products, they sell the value AROUND the products". His primary example is Pampered Chef MLM (owned by Berkshire Hathaway, Warren Buffet's company).  He claims that while Pampered Chef's cookware is overpriced, what they sell is not cookware, but cooking lessons and the entire lifestyle change around adopting cooking for oneself (instead of eating out).

Then he claimed that Herbalife's value, unlike Ackman's claim that Herbalife products are commodities, is actually the diet clubs and the distributors' relationship with the participants, and Ackman is "missing the point" about the whole thing.

Frankly, Mr. John Hempton himself is missing a few things, and this wasn't the first time he did so.

BREAKING NEWS: Zeek Receivership will continue, despite some Winner's Attempt to Stop It

Trudy Gilmond and Kellie King, both net winners in the Zeek Rewards ponzi, had previously filed a motion to dissolve the receivership. The motion has been denied.

The only reason why they would file such a motion is so they don't have to pay back their ill-gotten gains, i.e. keep the net loser / victim's money. And now, they will have to (eventually, when receiver sue them).

http://www.patrickpretty.com/2013/07/23/urgent-bulletin-moving-federal-judge-denies-alleged-zeek-winners-motion-to-intervene-in-case-and-dissolve-receivership/

Why You Cannot Treat Money With Rationality (and How to Fix It)

Lifehacker pointed out a TEDx presentation (kinda TED conference, but locally organized) where psychologist Daniel Crosby points out 4 biases that we share... and we have the same biases on finance AND love. That's why we behave toward both with irrational behavior.

The "I Can Change Them" (or "Fixer Upper") bias

Do you marry the person you love, thinking that you can change them, fix them up? You do the same with your money, investments, income opportunities, and the like.

Basically, you overestimate your power to compensate for the weaknesses of whatever your choice was. The person's bad habits? I can help him/her change that... maybe not. The business have a dark past? Don't worry about it, just worry about the future!  Hmmm... that may not help at all.

"This Time It's Different" Bias

Those who divorced are more likely to divorce again (and again). People believe "this one will be different", "this one will be the one". Unfortunately, this new one is probably just a rebound, and the problem that caused the original divorce was never found and fixed.

Same thing with money. Scam victims often fall for a reload scam, with the victims thinking "this one will be different", without considering what made the scam a scam. Just because there's something "new" mixed with this whatever doesn't make it new. This is called "new era thinking". Pyramid schemes have been around as old as money itself. HYIPs are the new pyramid schemes and Ponzi schemes, except they operate online. eToys, the online equivalent of Toys R Us, had a bigger evaluation than Toys R Us, despite never earning a profit. It's a bubble fed by new era thinking. Scam victims often fall for the same thing... over and over.

Profitable Sunrise Pitchwoman Nanci Jo Fraser Charged by Ohio Attorney General as Fraud Front

According to PatrickPretty, com, citing multiple sources, Nanci Jo Fraser, who ran a "Focus Up Ministry", was charged by Ohio Attorney General for defrauding the public for her part in the Profitable Sunrise ponzi scheme. Full asset freeze was ordered.

This came 2 months after the Feds closed down Profitable Sunrise and froze its assets all over the globe (but most of that had disappeared/laundered).

Fraser, along with another pitchman Albert Rosebruck, were appearently head of this group that claimed to be a "Christian Enterprise" that recruited locals into contributing milions into this scheme, never disclosing she profited heavily from the recruitment.

Rosebruck had previously complained that it was the SEC that ruined everything (i.e. closed Profitable Sunrise), and Ohio alleged that Rosebruck was previously Ad Surf Daily ponzi and Zeek Rewards ponzi member. Indeed, "blame the SEC" was a position frequently advanced the more ardent Zeekheads who, to date, still refuse to admit Zeek is a Ponzi scheme.

Makes you wonder why, doesn't it? Perhaps it's because they had a good thing going?

http://www.patrickpretty.com/2013/07/09/urgent-bulletin-moving-ohio-calls-nanci-jo-frazers-focus-up-ministries-front-for-profitable-sunrise-hyip-fraud-scheme-state-says-it-believes-frazer-was-an-adsurfdaily-pitchwoman-with-his/

HYIP Pitchpeople Beware: Legisi HYIP Pitchman Gagnon got 5 years FEDERAL PRISON SENTENCE

It seems the Feds are really going after the criminals... Not just the ringleaders who start up the HYIP scams, but also their primary pitchmen (and pitchwomen).  Many of these HYIPs were created and ran out of Europe, but the US authorities can get their hands on the LOCAL perps... Such as Gagnon here, who pitched the Legisi HYIP (Ponzi) for all its worth, as well as ran his own scams.

Gagnon claimed to run an "internet income opportunity review website", but in actuality he colluded with McKnight's Legisi ponzi scheme and shared the profits, while giving Legisi a clean bill of health (when he clearly do not have such information to base his ratings on). Gagnon also is believed to have ran a Forex scam and a resort investment scam in addition to being a pitchman for Legisi ponzi.

Gagnon is now ordered to pay back 44.5 million in restitution, AS WELL as spend 5 years in a Federal prison.

So those people who think that the Feds only go after the Ponzi organizers... So you can PITCH the HYIPs in safety... Beware! The Feds may be after you next!

http://www.patrickpretty.com/2013/07/12/full-statement-of-sec-on-criminal-conviction-restitution-order-and-civil-liability-of-serial-hyip-ponzi-pitchman-matthew-j-gagnon/

BREAKING NEWS: Brazil shuts down BBOM, another pyramid scheme (pretending to sell GPS trackers)

According to The Gazette in Brazil, the courts in Brazil must be working overtime, as they just shut down BBOM, a suspected financial pyramid scheme. It's only a few weeks ago that another court shut down TelexFree, a suspected financial pyramid scheme.

This link is in Portuguese:

http://gazetaonline.globo.com/_conteudo/2013/07/noticias/dinheiro/1452728-justica-federal-decreta-o-bloqueio-dos-bens-da-bbom.html

MLM Mythbusting: Did Harvard Business School Really Develop 3 Criteria of Successful MLM Companies? (No, they did not!)

English: Harvard Business School (Photo credit: Wikipedia)

Here's one of the most often repeated MLM myths: Harvard Business School teaches Network Marketing. That is a LIE. HARVARD BUSINESS SCHOOL DOES NOT TEACH Network Marketing, Multi-Level Marketing, or any such similar schemes.

MLMers who tries to legitimize the industry often repeat the claim that "network marketing is taught in 200 schools around the US, including Harvard Business School", and "HBS studied network marketing in detail and have developed a 3 item checklist to locate the successful ones."  Sometimes the list is also supplemented by a "4 stages of business success".

This is repeated ad infinitum by MLMers attempting to legitimate their own particular scheme, be in neutraceuticals and next uberfruit juice to woo bracelets and body wraps to... anything! In fact, search in Google for "Harvard Network Marketing" and you'll get bazillion hits. Okay, about 12 million hits. Almost all of them are lies.

Here's the honest truth:

There is only ONE SCHOOL in the US, that I know of, that offers a a degree in network marketing. It's a tiny little community college in Kansas called Bethany College. Technically it isn't even that. It's degree in marketing, with emphasis on network marketing.

(If you can cite another one, please show proof: magazine or newspaper article, school syllabus, etc.)

Harvard Business School (HBS) themselves are VERY TIRED of network marketers claiming something they do NOT do. In fact, if any MLM business claim so, it will very likely face a LAWSUIT from HBS, as this article (back in 1995!) had already busted. Quoting from the article:

 ``If the registrar's office had a dollar for every call we've had over the years over whether Harvard Business School teaches multilevel marketing or has studies on it, we could throw a very nice Christmas party,'' reads one internal business-school memo. ``This claim is harder to kill than a dandelion.''
What was once a nuisance now looks like grounds for potential defamation or libel lawsuits, says Frank J. Connors, a Harvard lawyer. Some handouts, for example, now claim _ falsely _ that Harvard has conducted ``extensive research in the network marketing industry,'' and that the business school calls multilevel marketing ``a once-in-a-lifetime opportunity.''

Got that? REPEAT AFTER ME: 

Harvard Business School DOES NOT TEACH NETWORK MARKETING!

Okay, where did this came from? How did this nasty rumor got started? 

From a network marketer, of course.