Saturday, May 31, 2014

Sleepless nights

I recently had coffee with a friend and I didn't have much to say. In fact a bunch of people have been wondering why I haven't had much to say recently. Why say anything at all when someone has already said so much for you?
"I have to ask how the Shorts sleep at night? As a percentage of shares outstanding, I believe that the company is one of the most heavily shorted of all companies listed on a U.S. exchange. The shorts are playing a dangerous game of musical chairs. When the music stops, I believe that there will be a furious rush to match players with chairs and the price at which the market clears will be materially higher than it is today. If that were not enough, the game of musical chairs gets more dangerous with each passing week. I estimate that the company currently generates millions of free cash flow a week and uses that cash to retire shares. At the current share price, the company is able to remove millions of shares annually."

Wednesday, May 7, 2014

MY MOST IMPORTANT BLOG EVER: I Am Bill Ackman's Identity Crisis

It's hard to keep up with Bill Ackman sometimes. I can't tell if he wants to be a portfolio manager, a journalist, a website producer, a movie director or a geologist (he's digging under rocks).

There have been some interesting developments in Herbalife today. I saw today that Gasparino confirmed that the NY Attorney General has not subpoenaed Herbalife. It's kind of hard to have an investigation without a subpoena no? On the Gasparino's report I contacted the company separately and confirmed his claim; Herbalife has not been subpoenaed by the NY AG. That news comes on the heels of Herbalife announcing their ASR with BofA.

And last week Ackman debuted his documentary and hosted a discussion panel afterward that both clearly demonstrated a serious disconnect between Ackman's claims and the reality of the situation. The stock is not at an all time high, but Ackman is still underwater on his trade (if he's still in it) and it seems that no matter what he does, it just isn't enough. Theta decay is a bitch.

Back to geology. Let's lift up a few rocks:

  • I, TheSkeptic21 (@theskeptic21) am one single person that writes blogs and tweets that are entirely my own opinion and my own thoughts.
  • My girlfriend is in finance. I asked her and she has never tweeted or blogged about Herbalife or any other company.
  • I have reason to believe that Michelle Celarier of the NYPost is about to profile me in an article.
  • I think that Michelle Celarier is blatantly attempting to support Bill Ackman's failed short trade on Herbalife.
  • I believe Michelle Celarier may have used nefarious means to obtain information about me (or that someone used nefarious means to obtain that information and then gave it to her).
  • Michelle Celarier and the NY Post (and anyone they may be writing such an article at the behest of) are baiting the hook with someone I love (my girlfriend); I believe this is the short side's desperate attempt to silence me.
  • Anything anyone may write about my girlfriend, aside from basic facts like age, employment history etc., will likely be fabricated. She has nothing to do with TheSkeptic21 and the opinions expressed by me have been entirely my own.
  • What is particularly unfortunate and unacceptable is that my pregnant girlfriend (we don't know boy or girl yet, but I will tell you in a few months) is likely to face difficulties and aggravation in the industry she loves because a conjuring, conniving billionaire has made a reckless bet that has moved against him. You only need look back on my previous posts and some excellent articles by the NY Times and others to observe his tactics.
  • Based on his previous tactics and Michelle Celarier's previous articles, I have little doubt that they'll still write a story about me anyway and they'll probably include names and facts about people I love, although I hope they don't.
  • All that being said, it would appear that Ackman is finally desperate enough in his trade to go after a lone blogger that speaks truth.
In light of all that, I have to ask what type of world we live in where behavior such as this is acceptable?  My identity and the identity of my girlfriend has absolutely nothing to do with any of this. My girlfriend has done nothing wrong, and I have done nothing wrong, yet our identities and privacy are being used as a threat. Say what you will about blogging, but I thought confidentiality and privacy were inviolable within the hallowed halls of journalism, yet a journalist is using that very privacy as a threat. And to what end?

If my identity comes out, it will not stop me from writing the truth, and writing about my observations, nor should I be threatened into submission by the threat of my identity being revealed (or the identities of people I know) by a powerful billionaire and his journalistic cronies. Keep in mind, I've never blogged or tweeted anything that was material non-public information, nor have I received, traded on or disseminated anything of the sort for that matter. I have merely pointed out the shortcomings in Bill Ackman's Herbalife short thesis and the whole while I have maintained that everyone should form their own opinion entirely separate from my own. I fully intend to protect myself if they print lies.

It's time for Ackman, Pershing Square, the NY Post and Michelle Celarier to stop pretending that they're doing the right thing and to actually start doing it.

(*disclosure: considering the intimate threat of her identity being revealed, I have allowed my girlfriend to read this before publishing.)

Monday, May 5, 2014

Harvey Pitt is an Asshole

Assholes get little credit. They're always there in the darkness and heat, constantly, yet tirelessly flexing for all they're worth; one transient, relaxed moment away from total disaster. We take our anuses for granted, we even refer to unsavory folks we don't like as assholes. When I think about working at the SEC, FBI, DOJ or AG's office, I imagine it's probably a lot like being our asshole.

They work long hours filled with shit and hot air. The equipment only gets upgraded in case of emergencies. They have limited resources, but potentially unlimited demand. Although they have little input into what goes into the system, regardless of how much gets crammed in there we expect them to make ZERO mistakes. If they let down their guard for one minute the filth and muck could spill out anywhere.

It is in a spirit of respect and admiration that I make the analogy, particularly because they have to deal with shitstains like me. My sincere thanks to all of the assholes in the world (both figurative and literal) because my life would be a huge mess without you.

And as the bowels of Wall Street gurgle and churn, binging on information, acidifying and then extracting the nutrients out of every morsel of news and rumor, ever so tightly the sphincters hold the line. As the masticated compendium snakes its way through our system, those sphincters act as gatekeepers, ultimately responsible for the timing of that information's release. It is tiring, thankless work.

Like college frat boys clumsily attempting to explore the system in reverse order, we often attempt to probe those regulators in an effort to take their temperature, judging the digestive health of the systems they regulate. Anyone that has ever attempted to extract information out of a government regulator knows that 'tight' does not even begin to describe the inflexibility of their sphincteral fortitude. It's like trying to open a clam that's caught in a bear trap. So when the former head of the SEC ascends the throne and voluntarily puckers up I'm not so quick to flush.

Last week, when Chairman Pitt was asked by Trish Regan (embedded below) about the recently confirmed news that the SEC was investigating trading in Herbalife he said,

"They've been looking at HLF, I suppose in part, based on Ackman's allegations. These allegations actually redound to Ackman's disadvantage because they are about lack of trading principles at Ackman's hedge fund and that I think will have a serious consequence.

he continued...

Every hedge fund like Ackman's is required to have effective policies to prevent the disclosure of material nonpublic information. And so, if Ackman's employees are divulging information, that would be a violation, both of it's policies and of insider trading requirements.
Later on Chairman Pitt added:
It is very clear that Ackman's whole strategy has not been about imparting news to the public its been about creating trading opportunities for his short position. 

When asked by Ms. Regan if it would be in Ackman's interest in terms of making money to leak information about his short position Chairman Pitt responded:

Exactly, and one other thing is to encourage other funds to sell stock as well, even if not before the event, to try and put more pressure on Herbalife's stock price.

To put Chairman Pitt's comments into context, it was previously reported that Mr. Ackman was personally peddling material non-public information to others at an idea dinner in an effort to encourage them to short Herbalife. Forget Pershing Square employees, Ackman himself appears to have wiped his ass with any policies governing insider trading requirements and confidential information.

As much as Mr. Ackman has positioned his short interest by swaddling it in the false aura of a bleeding heart, it is increasingly clear his investment style is to become a bleeding, inflamed hemorrhoid attempting to throb forth with misinformation, pain and discomfort into the bowels of American investing. Harvey Pitt is no regular asshole either. He was THE asshole at the SEC and prior to that he worked directly with Congress to draft a plain language restructuring of insider trading rules. I wouldn't be surprised if we begin to see more assholes decide to drop off a couple friends in Bill's pool.