Herbal life story started on this show, at this post, january 25, 2013 when bill ackland and carl icahn brawled on live tv. Herbal life, we simply provide to the public full transparency on this investment, 330 slides in detail, not scaring people, but going through the facts about the company. Okay . We exhausted research over a year and a half. Could have fooled me. Well be proven right or proven wrong. And i believe goes out, has 300 people in a room. I wouldnt care if it was anybody else was ackman. Goes in a room, gets 300 people, tells how bad the economy is. Did it in the 90s. Scare the hell out of people. Well, icahn, already herbal lifes shareholder certainly looking good today. Stock up more than 50 since the billionaire brawl. The settlement also gives icahn the ability to increase his stake in the company to nearly 35 . He says, i have always believed in herbal life strong fundamentals, and pleased the board decided to increase my nership limit. While ackman, who famously put a billion dollar short position behind his claims that herbal life was a pyramid scheme doubled down yesterday right here on the halftime show, saying i think it will end up with the government suing herballife for being a pyramid scheme or herballife capitulating and agreeing to changes. Here it is from today, the two sides, though, they settled. Outspoken herballife saying the settlement is a profound victory for the company. Mr. Ramie joins me now. Tim, welcome back. Thanks, scott. Boy, so many conversations about this over the last couple of year pms ws. Why is this a profound victory today . Well, just looking at the terms of it, its roughly in line with what we expected. Herballife looked at doing a preferred customer strategy in the spring of 2013. And i think wisely kept this as a bargaining chip with the fec. Hurdles to get over for sure. This 80 rule, but it applies, as you know, to only the u. S. , and the biggest thing has always been nutrition clubs. How do you document those sales . Its going to look a lot like kind of starbucks loyalty card. Its going to essentially, i dont know whether youll get a free shake after ten or Something Like that, but theyre going to be able to, i think, relatively easily document this. Just as they do in china, by the way. The new program in the u. S. Is going to look a lot like what theyve been operating in china very successfully. You raise some very interesting and important points. You mentioned 80 as a number. As part of this settlement, so people understand what youre talking about, and exactly what the ftc itself is talking about, 80 of sales made by distributors now must go to end customers, to actual retail customer, and those distributors are going to have to provide receipts to the company to, in fact, prove that fact. 80 is a very large number. Ive talked to a number of people today who questioned whether herballife can ever reach that kind of number. What would you say to those folks . I think its relatively easy, actually, for them to do it. In the u. S. , the business is largely a he believe an herbalife business and i am an herbalife distributor and will probably get an letter, an email that says were going to convert you to a preferred Customer Service unless you sign a letter of intent saying youre going to try and be a distributor. And obviously, im not a distributor. Im really just a customer. So, you know, theyve always said, 73 of their distributors are just end users like myself that have no down line. So that parts relatively easy. The sticky part has always been you document that . I think they have a tool and solution in ten months from that. And let me ask you this. Listen to what Edythe Ramirez said, chairman of the ftc and we can react on the other side. Edythe ramirez a short time ago. The dream portrayed by herbalife and reinforced in thesed and other testimonials was an illusion. The vast majority of herbalife distributors found they could make little or no money selling herbalife products. Tim, i have the actual press release from the ftc, i think goes a step further. Im going to quote from a and want your reaction. This settlement says, the ftc, will require herbalife to fundamentally restructure its business so that the participating are rewarded for that are what we sell, not how much they recruit. Herbalife will have to start operating legitimately making only truthful claims how much money its members are likely to make. Some might read that and say, boy, sure sounds like bill ackman was actually right in the end about his thoughts on what herbalife was doing. Its just the ftc didnt think it was going to shut the company down as a result. Well, so ive always felt bill ackman was wrong. As he said yesterday on your air, its not an illegal pyramid scheme. You cant find that language anywhere in the complaint or in sure, nor can you find that its not, to be fair. Nor can you find that its not. Fair enough. But, you know, the essence of this is and i guess this is a show about stocks not a show about bill ackman but at the end of the day, this applies to 20 of their business. It is a relatively palatable rule change, one we thought the company would accept and in fact it did, and they put their top distributors in a meeting, had them sign ndas, presented the deal to them and they had tremendous buyin from their top distributors. I dont think this is going to be problematic to them in any meaningful way, but if it is problematic, its problematic on 20 of the business, not 100 . Tim, leave it there. Last word. Youve obviously been right on the money on the stock, and how youve viewed this whole thing as turning out. Appreciate your time today. Thanks, scott. Pivotals tim ramie. Next guest, a longtime supporter of herbalife. Robert chapman, joining us now on the phone. Robert, welcome back. I guess i knew we were always going to get to this day. Just didnt know exactly when it would come. Your reaction to what the ftc and herbalife agreed to . Well, thanks, scott. I have a couple reactions, and i want to be very fair to both the bulls and bears on this. I dont think theres any question that the ftc essentially agreed with persian square and glakman. No punches pulled, and though the pyramid scheme language was not used, i think that was part of a negotiation that the ftc and herbalife probably squabbled over a while whether or not that language should be included and that was left out. It is interesting when you look at the language that they use, where they say herbalife now has to start operating legitimately. What impact is this 80 number going to have on the u. S. Business, and if youre thinking today, we just got the point of view from an analyst whos been bullish throughout. If youre looking at this story, thinking, okay, i was waiting forever for a settlement of some sort, or at least a resolution, what do i do with the stock today . What directionally does todays news mean for investors who may be thinking about this whole deal . Well, first of all, to answer your question, ill tell you why. So i think the stock is fairly priced here. And so i wouldnt come in and buy it and i wouldnt necessarily short it. The only thing i did today was very small, within the low 70s. Actually put them out on the short side, hedging out a long position that i held since the 50s coming into this. So i think its very much so a stock just to be avoided at this price. I wouldnt short it, given all the Short Interest and the fact icahn is threatening to take his position from 25 to 35 . I would not do that and wouldnt go long, because we dont really know two things. Whats going to happen in the u. S. , and the 80 rule is a big one. At the corporate level. At the individual distributor level, a situation basically distributors need to show twothirds of their down line is coming from retail. Also high threshold and on the risk side, secondly, if the International Regulators replicate what the u. S. Has done and, again, the ftc has not come out equivocally, very clear what they think about this business, then you have the rest of the Global Business as well and its not immediate but could come. You look at the long and short of it, i say this more often than not as ive gotten older. Not much to do here. Have you, and lastly, robert have you considered at all, like i have, for the last many months, and, really, since this whole deal started, that its quite possible that at some point herbalife could be taken out . Could be taken private . You already have, because of this deal today, icahn can go up to nearly 35 . And that, that ultimately is the end game here, and that a big hurdle, if you will, the waiting game on Something Like that happening is now over, because herbalife and the ftc were able to come to a settlement . That would have to factor into your thinking if youre a potential investor in the stock as well . Anything can be taken private. I hedged out my long position today and should have been more aggressive, gone short given the stock in the 66s now. Its unlikely. I think theres still serious risk. Bill ackman did an extraordinarily competent job of getting detailed facts in front of the ftc and they came out in their complaint and stipulated order made it clear they think this company is an illegal pyramid scheme, used those words. Seems clear to me thats what came out. If he replicates that internationally, who knows what happens, right . Id be surprised if a private equity firm would want to replicate what Golden Gate Capital did many years when they bought the company for a song, much lower valuation. Very surprised. And i actually would be surprised if icahn increases his position much here in the 60s and 70s. I think he got that capability, the safety net, in case the stock collapsed today. Thats just my opinion. Interesting. An interesting take. Bob, appreciate you calling in. Robert, talk to you soon. Have a good weekend. You do the same. Robert chapman, following tim ramie. You know this company in way back . Yeah. I was part of the team, and threw a lot of stock away when they first went public when the company was founded with a ninth grade education. Called in front of the u. S. Senate subcommittee, same issues back then, concerns, and when they said, how can you disagree with all of these weightloss experts when you have a ninth grade education . His response, if theyre such experts on weight loss, how come theyre so fat . This company has a long, turbulent history with the state of california at one point sub stracting the largest from Health Care Products in history. I wouldnt be surprised if carl put out buy orders because the technical effect of that with a high shortage risk they have to call in shares. Those shorts have to cover whether they want to or not but doubt he stay theres for so long and dont think hed model it out at this point for private equity. So chapman says, nothing to do here. Other ways to make and lose money. Id move on. The takeaway, that the government doesnt bankrupt six, seven, eight billion Dollar Companies just because they dont live their business model. The reason everyone knows Arthur Anders andersen, its only memorable instance Something Like that happened. They closed down a whole company for the actions that one office took in aiding and abetting the enron fraud. This is not something regulators do. It probably is akin to a pyramid scheme. The big risk for ackman and all shorts from day one, they would be right and still wrong on the trade and how the trade gets its the big thing, a Short Interest, 20 , you immediately go to the other side of the trade. Everybody did that. The most interesting part of the way this story has turned out. Herbalife can continue to operate. They have to make significant changes. Pay a 200 million fine, at the same point, read the language in this ftc complaint, you look at the statement the ftc put out today and you heard Edythe Ramirez in her news conference, all that language in total is damning. It is damning to the way that herbalife in many ways did its business. To stephen point and others made as well, the copiy will continue to operate. Big enough to pay a 200 million fine. The difference between this and some other mlm boiler room operating out of someones garage. They can be squashed. A big firm, publicly traded, thousands of employees, can do business in the courtroom outside the courtroom, and keep themselves alive nrchlts two or three quarters, when you short the stock. When theyll guide down and guide down and guide down. Not only ackman watching, i doubt he covers here. Probably stays short. Im going to bet that carl icahn actually exits rather than buy more. Hes made great dough in this and youre not going to have Short Interest. Builds back up, thats when you make the money. 23 million shares traded. Average share volume, 1. 3 million. Smub somebodys conquering today. Look at this. Lod, continuing to drift lower. You do not see a wave of buying coming in on the heels of this news. 70, pivot. Closes above, shot to 89, to 100 maybe. Stay below 70, like chapman said, its a short. How interesting. Interesting the brawl happened while sitting on this desk. Get the settlement and here once again. Big part of your life, scott. I feel that way. All of ours. We should hug and make up once more. Been there done that. Still a lot ahead on the Halftime Report. Huge week for the markets. Record breaker after record breakers. Have the bears capitulated . Early hibernation . Plus, auf wiedersehen and hello usa and beyond. Where theyre flowing and how you can still make money in this market. Youre watching the Halftime Report with scott wapner. [announcer] is it a force of nature . Or a sales event . The summer of audi sales event is here. Get up to a 5,000 bonus on select audi models. We are back at post nine. How the markets look. Pretty much flat. Dow down 14 pints or so. S p down 5, significant here, guy, the s p was going to set a new record high for the fifth consecutive day, or is trying to do that. It hasnt done that since, like, 1998, where it set a new high all five days in a given fiveday stretch. Pretty remarkable. Now, a little muted here. Are we set up, though, jon, to keep going higher . Yeah. I think we are. I think that the last time i was on, in the seventh inning stretch, waiting for brexit, for the fed, waiting for a lot of things and right now a twoyear consolidation period. Tested the 1984 low four times, had a capitulation low over the brexit event, end of june, that washed everybody out again. That low was 150 spx points higher than the last. Right now were breaking ouch this range weve been in two years. I think at the moment the bears should be concerned. I dont think everybody is allin or not even partially in yet. So the market has a ways to go higher. Do you, jimmy, get the feeling, though, as if you may be at that great rotation point . You look at some of the equity inflow data, maybe that makes you more optimistic . If youre bullish the bears are capitulating altogether . What makes me optimistic. Talked about it yesterday. Fundamental support. Larry finks comments. We basically agreed. Confirmed when the earnings particularly in the second half show so. But today youve got a ream of data out, Economic Data, both here and abroad that is quite positive. Industrial production, better than expected. Retail sales, better than expected, and chinas gdp. Havent talked about china in forever. Better than expected as well. That would give the impetus for earnings to go higher. Well always say allegedly. Based against the alleged benchmark of 6. 5 , came in at 6. 7 . All would give impetus for earnings to move higher. Tell you this, i love the debate. Youve got the head of the largest asset manager in the world saying that stocks dont deserve to be at this level, and we have others who are sitting here and believe me, others ive heard from since larry fink said that who said hes wrong. Somebodys going to win out. The problem, on the top side, we dont know what the valuation can go to at a negative rate environment and dont know what the multiple will be or where the markets going to go, because weve never been in this position before. So the fact that, you know, negative yields around the world are so negative, anything with a yield including utilities, right, treasuries down. Tot below 40 yet utilities hold in because. Yield. The new carry is, u. S. Stocks, high yield and good cash flows. Thats where the moneys gravitating. Because the money is coming out there, outflows from eu equities. Where the heck is it going to go . If you want to be invested wheres it going to go . Good old us of a. Major inflows in distracy. One place. Sometimes operates as equity proxies. Larry is, he said yesterday, got the market trading at High Historical levels. Weve had five months of declining earnings. So were in that profit recession, which would only take you have to believe thats ending, though. You do, right. There was a trough, now rebuild that. So not only today the data. Its been a week of great data, even some European Data is looking better and saw a massive stimulus. However, weve also had the ten year back up to where it was a month ago. 1. 35. Now at 1. 57. Who know where is that goes. Look, i think there is no other place to put money and i also think Public Markets both credit and equity are lowreturn markets, but you can wait it out. Selling at 16. 7 times earnings. Lets not act like its 1999. Exactly. Thats in the context of global yields offering nothing, and essentially the stock market thats done nothing in 2. 5 years. And the s p yields bhor than the tenyear treasury . Heres my like 80 points. The number, couldnt remember the number. The s p 57 00 is only half of the Global Equity opportunity set. Selling at 2. 5 times book. I have a portfolio of Global International small cap value, just as one example. Selling at 0. 8 with a 3. 3 yield. I know japan, europe, all the problems. Everyone knows that. If things even just stop getting worse, these stocks are at incred beforably cheap valuations on an absolute historic basis. There are other things beside chasing hershey to 25 times earnings. People need to be aware of that. Well get to you. Get to you. Coming up, Morgan Stanley on the sidelines on chipotle slashing its price target by almost 100. Why its our call of the day, and its coming up next. Welcome back to the Halftime Report. A lot going on outsi