Pharaoh Ackman Smoking Herbalife? ~ The Risk Averse Alert

Wednesday, December 19, 2012

Pharaoh Ackman Smoking Herbalife?

It's the question everyone wants answered. And how can I resist adding my two bits expounding on the technical tea leaves brewing from the stock of a company that, well known and respected hedge fund manager Bill Ackman has called "little more than a 'pyramid scheme'?" All the more given the timely segue such language provides to commentary on Fed policy from the age of King Ponzi, Sir Greenspan, to today's doctorate offered at the Weimar School of mass murder cultivation.

Before we begin, have you seen the pictures of the innocent angels? Heartbreaking. And to think of what otherwise might have become of their killer, too, reported to be an intelligent young man, had the nation of my childhood which had risen to the challenge of murdered president John F. Kennedy delivering men to the moon and returning them safely, accomplishing a most challenging task within the decade of the 1960s, rather than succumbing to the sophistry of imperialist money changers who wrecked the Bretton Woods System, instead leveraged the nation's investment in space such that at this date fifty years later was colonizing the moon and creating a physical economy whose productive capacities spanning every humanist discipline positively would put to shame today's slaughter house. Even the most awkward and socially challenged evidently hunger for power over life. What more of all the world might be presented it in endeavor and spirit winning the hearts of children at the cutting edge of physical projects changing the social landscape, much as astronauts once did? A sense of hopelessness is growing among young people, and this the world over An essential element of civilized humanity is missing our collective command. The battle lines in the mainstream are weak distractions and have been this way much too long. A most irrational mass murder rather vividly proves this now. We certainly should better appreciate why the U.S. is called "the home of the brave," as well. More importantly elected representatives. A profoundly patriotic outrage, too, pouring from the Ivy League is long overdue. May I suggest this venom be satiated only with the creation of a Hamiltonian bank?

And speaking of bank, looks like Ackman is about to...


Herbalife's April 2012 rather bears marked similarity to the Dow Jones Industrials of October 1929 and the NASDAQ Composite of April 2000. In both instances there was much more selling yet to come. So too does it appear here.

Herbalife's noted volume in the 2007-2008 period suggests shares were being accumulated over the interim, keeping prices levitated and its relative strength in fair balance between buyers and sellers, as well, never reaching any absolute extreme.

Then came collapse of Adam Smith's Leveraged Ponzi scheme in '08 and accumulation was done. Subsequently, shorts were programatically squeezed to the high heavens, with Herbalife's price driven up manipulating appropriate mechanisms of price discovery, generally speaking, to the point when those accumulating HBL in the 2007-2008 period, after having lifted its price as far as its thinning new interest would bear, bailed out in a big way in April 2012.

One other point of technical interest here are upside RSI extremes I have circled. From these relative strength peaks has seen a weakening whose damage in the present instance has been deeper, but never extremely so in an absolute sense (i.e. RSI below 20). So, there's "room" for worse. Finding in place now a technical reaction displaying balance between buyers and sellers (both per relative strength and momentum, i.e. MACD), a short seller fanning the flames has brought to CNBC Herbalife's CEO for an excursion down Alan Schwartz Lane, and soon enough his pain, too, it appears.

Bottom line, buyers weren't terribly interested in this stock when it rose from $6 to $60 off March 2009 bottom. Why would they be anymore now after April's dump? Which is not to suggest an extension of the "we're hyperinflating the banking system, but not really" charade lasting sometime into next year will not result in HFT's momentary save back to the mid-$50s or so.

Everything right now really depends on whether the ECB (a.k.a. the Brussels Reichsbank) will be coaxed to a full Weimar stature. Sylvio Berlusconi is playing his part. Says Italy will be forced to leave the euro if Germany doesn't pony up the European bet calling Capo Confetti's latest raise. In other words, Italy is in about the same mood for austerity as is the United States. The only difference is over there politicians have courage enough to put it in London's face.

Word on the Street
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