Thursday, March 6, 2014

The fattest finger is the middle one

Zero Hedge is pithy, engaging and snarcastic.  I particularly enjoy reading Tyler Durden's posts. He posted yesterday about the FTC retweeting a Canadian Herablife permabear that seems to be short the stock and long a certain Torontonian Rob Ford-like apoplexy ( Winter in Toronto is tough, so I sort of understand the rage. Not to mention there appears to be plenty of rage on both the long and short side.

I was admittedly very intrigued by the possibility ZH had uncovered a previously unnoticed linkage between this otherwise uninteresting and uninformative interaction during the #NCPW2014 chat session between a Federal Regulatory agency with ~21K followers and an otherwise unknown, anonymous twitter user like myself. It was an alluring concept to think that the FTC was somehow exhibiting a bias in the questions they responded to. As much as markets love certainty, I was sort of disappointed that they clarified they were simply following the pre-stated policy. Fizzle fo shizzle, oh wizzle.

You can see for yourself in ZH's updated post, the twitter stream and in the FTC response that the FTC was simply following the guidelines they provided for the Q&A.
During the session, it looks like the FTC directly retweeted and answered about 10 questions. Edith Ramirez even hopped on the chat to participate. Although I was disappointed there was no fat finger, and no hidden bias, I thought the chat session (embedded at end of post) was an engaging way to provide access to government officials that is not normally available to your average citizen/visiting alien/trading algorithm. I really hope the FTC and other agencies continue to host such sessions.

What I found more useful than the interaction ZH wrote about was the answer to another question from a consulting firm (more appropriately named Whelan, Whelan and Whelan) in which the FTC revealed that some of the top complaints for 2013 were ID Theft, Imposters, Autos, Mobile and Phantom Debt. A few days prior to the chat the FTC fully disclosed in their annual Consumer Sentinel Network report the Top 30 complaints registered last year. The report is very informative and aggregates a tremendous amount of data in a very user-friendly format. If you dig into the data a bit, of all 2,101,780 complaints collected by the CSN, 1,829 of them were for the "Multi-level Mktg\Pyramids\Chain Letters" subcategory of Business and Job Opportunites Fraud complaints, representing 0.09% of all complaints. For a random comparator that is 1/4 the number of complaints received for Payday Loan services (9,804) and less than 1/2 the number of complaints received in the Student Loans category(5,627) and a tad more than those received in the Social Networking Service category (1,661).  I'm not advocating that Sallie Mae, Cash America or Facebook are good shorts, but based on this data would it appear that MLM companies such as Herbalife, Nu Skin, Avon, and Tupperware represent a credible threat to US consumers? Even if you assumed that ONLY these four companies were responsible for every single one of the 1,829 complaints in the category and not a single one of the twelve other publicly traded MLMs had a complaint filed against them, this would represent about one one hundredth of 1% of those four companies customers. If you push that further to assume that all 1,829 complaints were filed solely against Herbalife, that would still only be six one hundredths of 1% of their US customers. Considering that in 2012 Herbalife only had a little over 200 complaints filed against it in the CSN you can begin to understand why I think Pershing Square resorted to lobbying their Herbalife short thesis, even though they should have been exiting it.

Oddly enough, there were only six metropolitan areas in Massachusetts that even made the complaints per capita list, all ranking very low for fraud complaints (I had no idea lobsters were such satisfied consumers).  In a city where I feel like I could easily get extra fraud  sprinkled on my onion-crunch dog, I was also proud to see that the entire New York metro area did not even make the top 100.

Number 1 on the list was Homosassa Springs, FL. With a median age of 54 and 93% Caucasian, I can only imagine what the number one complaint was; not enough monkeys on Monkey Island maybe?

You wouldn't believe what metro area was number 4 on the list; Washington-Arlington-Alexandria. Maybe lobbying fraud is contained in the "other" category.

Based on the FTC's #NCPW2014 chat forum, maybe I'll get lucky and the SEC will host a #NIPW2014 session. I've got my questions ready and waiting. Maybe I'll be first in the queue and the SEC intern will follow protocol, retweet me and the internet will alight with the soft clicking glow of fat-finger theories and questions about how trading in Herbalife securities. I doubt that'd ever happen though since regulatory agencies like the FTC and the SEC would never ever confirm/deny/discuss any potential investigations.

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