Herbalife - Pyramid scheme or not?

[Craig B]

I don't mean to pile on, but you're generally better informed than this. Be certain: SSA most definitely pays out on the basis of the amount you paid in over as much as 35 years of working (they'll take your highest quarters of contribution).

What have I said wrong? I wrote

Social security payments are made on the basis of applicants' need. They are not paid back to contributors in proportion to the amounts contributed.​

You are agreeing with me. You are stating that the level is set as a function of the highest quarters of contribution. But that isn't like an investment scheme, which is normally based on the total amount contributed, not on the level of contribution in a particular period of time. Unless I am misunderstanding you.

 

[Foolmewunz]

What have I said wrong? I wrote

Social security payments are made on the basis of applicants' need. They are not paid back to contributors in proportion to the amounts contributed.​

You are agreeing with me. You are stating that the level is set as a function of the highest quarters of contribution. But that isn't like an investment scheme, which is normally based on the total amount contributed, not on the level of contribution in a particular period of time. Unless I am misunderstanding you.

SSA is not paid out on need. It is paid out according to what you paid in. I'm not disputing that it's not a "normal investment scheme", just clarifying that it ain't the dole. Minimum wage workers and billionaires get SSA benefits. The billionaires will have topped out pretty early on their contributions, but if they've had SSA witholding at all, they're entitled to whatever the max is, around $3000/month, I think. But lots of lower-paid workers top out at the max, also.

 

[fuelair]

You mean the construction of the tomb was financed from current revenue, contributed by people hoping to collect in the future when Cheops would become a god and answer their prayers? What a scam!

But they should call it "The Great Ponzi" not "The Great Pyramid".

Technically they should call it the Cheops Scheme as he apparently founded it long before Ponzi remembered/borrowed the technique!!!!!

 

[Beerina]

Possible I guess... but that makes it no different than any other pension plan I'm aware of.

So, if it's a Ponzi Scheme, then Ford has been involved in one for four generations of assembly line workers.

Seems like maybe Ponzi Scheme is hyperbole.

Ford, the other auto makers, and various localities are straining and collapsing (or collapsed, in the case of the other car companies) under the weight of retirement promises made by past executives or politicians.

The car companies used bankruptcy laws (or threats of it, in Ford's case, to ape GM and Chrysler) to shrug off a good chunk of the retirement stuff, and restructure how future retirements will work (here comes 401k's!) Detroit did the same thing, as it was ruled federal bankruptcy law trumped the state's constitution which forbid reduction in retirement benefits (they ended up getting functionally something like 95% of it anyway.)

States like Illinois, California, and territories like Puerto Rico, are severely struggling given states themselves are forbidden from going bankrupt, and the politicians are as week as a Greek politician in bringing it under control. This is fun because the repayments are thus first to tap the revenue stream, which is plentiful still if you are first in line. Everything else self-interested but mathematically illiterate wishful voters get to see reduced by force.


So this is the exact opposite of your conclusion. These things get into problems because the math makes them similar to what made these schemes illegal.

 

[Puppycow]

Herbalife to cut sales guidance; exceeds key FTC mandate

Herbalife will lower its sales outlook for the current quarter before Monday's market open, the company told CNBC, as it gears up for tougher new Federal Trade Commission regulations appeared to hurt business more than anticipated.

According to a press release reviewed by CNBC, Herbalife now expects revenues to be 1.5 percent lower than prior estimates, with a key sales metric known as volume points expected to be 3 percent below its earlier view. Earnings per share were actually increased for the quarter and the full year.

The company said the transition to the new FTC rules along with softness in Mexico was to blame for the lowered numbers.

. . .

The news comes only about a week after Herbalife had to begin adopting stricter new regulations mandated the FTC as part of its landmark settlement with the company back In August 2016. As part of that deal, Herbalife agreed to a $200 million fine, the biggest ever imposed by the commission, and stricter new rules related to how it accounts for sales of its nutritional products.

Herbalife must now prove that at least 80 percent of its sales are made outside the company's distributor network, with a small portion of that number allowed for personal consumption by the nearly 300,000 distributors in the U.S. Those distributors must also provide receipts for their sales to show they have legitimate end customers. In addition, the company agreed to an outside monitor for seven years to make sure it complies with the new rules.

Though the company said preparing distributors for the new regulations likely impacted sales, there was a silver lining in the disappointment. Herbalife said it easily exceeded the new FTC threshold, showing that 90 percent of sales since May 1 have met the new guidelines.

"We knew we would be able to meet the threshold test of 80 percent because we knew we had real customers," Hoffman said.

The company said it could also show that it has 400,000 so-called "preferred" members in the U.S. who buy products at a discount and aren't pursuing the business opportunity in any way.

If that's legit, (90% of sales to end users) then maybe their business isn't really a ponzi scheme? Also, it sort of seems to me that if it were actually a ponzi scheme, it would have collapsed by now, wouldn't it? But, the new rules they agreed to only went into effect a couple weeks ago.

 

[Joecool]

http://www.cnbc.com/2017/06/05/bill...ife-after-the-company-cuts-sales-outlook.html

"On May 4th Herbalife raised guidance driving the stock to new highs. Insiders including [CEO Michael] Johnson sold their stock and options. Fewer than three weeks after the stock sales, the company is now lowering guidance, somehow claiming that it is surprised by reduced volumes the first month the FTC settlement takes effect," the hedge-fund manager said in a statement emailed to CNBC.

CNBC's Scott Wapner reported Sunday evening that Herbalife would be lowering its sales guidance for the second quarter. Herbalife now expects revenue to be 1.5 percent lower than prior estimates, with a key sales metric known as volume points expected to be 3 percent below its earlier view. Earnings per share were actually increased for the quarter and the full year. The new FTC regulations went into effect in recent weeks.


"We also recently learned that Mark Friedman, the company's general counsel and the only signatory of the settlement agreement with the FTC, and other top executives have left the company. Remarkably Herbalife has yet to disclose, let alone explain the reasons behind these departures," the Ackman statement continued.

An Herbalife spokesperson declined to comment on either Ackman's statement or Friedman's current employment status.

Herbalife's claims of 90% outside sales have yet to be verified by the FTC compliance monitor.

 

[applecorped]

80% of the company’s sales are overseas, where the FTC has no oversight authority.

 

[Joecool]

80% of the company’s sales are overseas, where the FTC has no oversight authority.

There is an SEC investigation going on with Herbalife now and the FTC injunctions were supposed to be fully implemented by May 15, 2017. Herbalife's Q1 sales were down about 7% in the US and that was prior to the FTC injunction kicking in.

Just the other day, Herbalife announced that it has lowered their sales guidance which happened just after some company insiders liquidated their stock positions. This may also be looked at by the SEC.

Going forward, there is a compliance monitor that will be watching Herbalife (at Herbalife's expense) to be sure that they comply with the FTC requirements. Herbalife lowered their sales guidance because of the FTC oversight.

If the US sales tank, you can bet that Bill Ackman and other Herbalife infested countries will be watching.

 

[Puppycow]

There is an SEC investigation going on with Herbalife now and the FTC injunctions were supposed to be fully implemented by May 15, 2017. Herbalife's Q1 sales were down about 7% in the US and that was prior to the FTC injunction kicking in.

Just the other day, Herbalife announced that it has lowered their sales guidance which happened just after some company insiders liquidated their stock positions. This may also be looked at by the SEC.

Going forward, there is a compliance monitor that will be watching Herbalife (at Herbalife's expense) to be sure that they comply with the FTC requirements. Herbalife lowered their sales guidance because of the FTC oversight.

If the US sales tank, you can bet that Bill Ackman and other Herbalife infested countries will be watching.

I wonder though. Now that Trump is president will the FTC and SEC back off from Herbalife because Trump's buddy Carl Ichan is a big investor in Herbalife?

http://www.foxbusiness.com/politics/2017/01/20/carl-icahns-herbalife-conundrum-trump.html

 

[blutoski]

I wonder though. Now that Trump is president will the FTC and SEC back off from Herbalife because Trump's buddy Carl Ichan is a big investor in Herbalife?

http://www.foxbusiness.com/politics/2017/01/20/carl-icahns-herbalife-conundrum-trump.html

This was guaranteed from day one.

The whole administration is MLM friendly.

The Amway Queen is Secretary of Education.

 

[Joecool]

I wonder though. Now that Trump is president will the FTC and SEC back off from Herbalife because Trump's buddy Carl Ichan is a big investor in Herbalife?

http://www.foxbusiness.com/politics/2017/01/20/carl-icahns-herbalife-conundrum-trump.html

As far as I can tell, the FTC injunctions are already in place and being enforced. Unless backdoor politics nullifies the FTC injunctions, I still see Herbalife sales in the US hurting. But who knows, if the administration are MLM apologists, who knows what will happen.

It would look fishy though, if Icahn has a hand in pulling the FTC off Herbalife when he owns 25% of the company.

 

[Joecool]

Herbalife just reported for Q2 and it looks like the FTC injunctions have hurt their US operations. The stock dropped more than 10% in the last week or so.

Maybe Bill Ackman was right.

 

[Joecool]

New Lawsuit Against Herbalife

The Herbalife saga continues:

https://www.usnews.com/news/busines...tributors-claim-in-1b-suit-events-were-a-sham

MIAMI (AP) — Patricia and Jeff Rodgers figured they did everything right to get rich beyond their wildest dreams selling Herbalife health and personal care products. They attended all of the "Circle of Success" events, brought in new recruits, met their quotas on buying Herbalife goods to sell and even set up a storefront shop.

But they didn't get rich. Instead, Patricia Rodgers estimates the couple lost over $100,000, including about $20,000 spent on attending Herbalife events. Now, the couple and others are suing the multi-level marketing company that sells its products through a network of distributors who recruit more distributors. The potential class-action case could involve more than 100,000 plaintiffs and might mean as much as $1 billion in damages.

"We did everything they told us to do. We attended every event. We traveled and we spent money. And we didn't get successful like they said we would," Rodgers said in an interview at the couple's home in Hallandale Beach, Florida. "You get involved in it, it's almost like a cult mentality."