Mall Kiosk Workers From Israel

I first encountered these years ago and always wondered why those working at the kiosks seemed to be foreign.

Then in my day job I got to see the companies behind the kiosks and the shady dealings behind them. Turns out I wasn't the only one to have questions and it turns out that beyond the makeup, skin and hair products being a sham (gold doesn't really help your skin), the whole series of companies behind them was set up to defraud its own employees as well.

I can only speak to what I saw with the "companies" involved and their "owners".  Truth is, most of these kiosks are "owned" by individuals who are cajoled into coming over to the US on tourist visas with the idea that they can earn enough money selling makeup and skincare to establish their life outside of Israel and also to get to of their compulsory military service.  If they don't sell enough product?  Well the real owners of these companies threaten to pull their Visa, send them back to Israel and into the Army.

The real owners are protected largely by the fact that these companies end up being set up as sole-props and if they get in trouble or become financially insolvent (which they do with alarming frequency) they just fold and restart under a slightly different name and tax ID.  They go through this cycle over and over again.  And don't think they live a life of glamour here either...typically they are herded into common apartments to save on costs and move from one kiosk to another.

Oh and did i mention the products suck?  Unsurprisingly massive amounts of the products purchased by consumers under the duress of these high pressure (understandably) sales people end up being returned--or at least are attempted to be returned, because not only are they super expensive but they are all cheap, useless crap...worse than dollar store trash...seriously.  These kiosks and stores have a no return policy however and instead the transactions result in high chargeback rates and then loss of the ability to accept credit cards--a death knell for retail, thus the folding of the business and restart under a different name but same business model...over and over, recycling young Israeli after young Israeli.

So the new time you're in a mall and groups of these individuals try and get your wife to buy some stupid skin cream and curse you out when you ignore their pleas to stop for a second...try not to be mad or take offense...These are early 20 somethings being preyed upon by their elders who have convinced them that the way to a better life and to avoid Israel's military and the Middle East in general is to sell cosmetics under a falsified travel Visa for marginally above minimum wage while living in communal apartments, hoping to save up enough to travel the world or establish a life somewhere else and under constant threat of their real string holders...

Just one example of one of these rings being busted and the Principal going away to prison for 6+ years is found here...but there are rings and rings of these across the US...Just as an FYI...

http://www.jpost.com/Diaspora/Dead-Sea-products-mall-kiosk-owner-sentenced-to-jail-for-illegally-employing-Israelis-471268

https://www.timesofisrael.com/dead-sea-product-hawkers-skirt-law-decency/

Volkswagen Scandal--Buying Opportunity??

Volkswagen got their hand caught in a VERY big cookie jar this weekend.  As the largest automaker in the world, VW certainly has the ability to shake off nearly any bad news or just pay bad news to go away.  It may not be big enough to make this disappear.  We've seen lots of recent bad news for automakers including the near bankruptcy of the entire US based segment, the shortage of production from Japan after the earthquake/tsumani, Toyota's massive recalls, and most recently, GM's coverup of airbag deaths.  All of these have represented buying opportunities for these companies' associated stock.

VW, if you haven't heard, purposefully installed sophisticated software in its US diesel vehicles to detect when emissions evaluating equipment is attached to the vehicle and then modify the data it produces to fool the emissions equipment into thinking it was up to 40 times less polluting than it actually was and then returns to normal data output when the emissions equipment is removed.  The difference between the items mentioned above and VW's case is that all of the above started with a mistake or natural disaster.  Even GM's woes are, at their core, starting with an engineering/design mistake, and by some low level associate at that.  With VW, modifying software to fool testing equipment is not likely to be just the flaw of a single engineer.  More likely is that it was a collaboration between sales, marketing, engineering, management, etc...a far more reaching "scandal" than the others. Mary Barra at GM has been barely touched by the deaths of some 150 people in the airbag issues....With VW, though no one has died (directly, though some might argue for "environment" deaths from additional pollution I suppose) management is unlikely to remain unscathed.

Already today there is talk of outright banning VW sales in the US, direct arrests of VW management, and the potential to fine VW up to $18B for this incident.  VW's stock has been brutalized this morning, falling some 20% and $6B in marketcap.

On a motorsports related item, VW has recently announced its purchase of the Red Bull F1 team in '16.  Given that buying and annual budgets for an F1 team are a multibillion dollar investment, might that end up on the chopping block?  VW has been a big backer and funder of WRC and has taken the championship there (at the cost of hundred of millions) for three years in a row, is it time to bail on that effort??  Might its US oriented support of teams in the Red Bull Global RallyCross series be in question??  When your company loses $6B overnight, its executives are potentially walking away in handcuffs, sales in one of its largest markets are likely to take a major hit and you face billion dollar fines and years of legal costs and wrangling, motorsports kind of fall into an area that is easily cut to focus on core operations.

Lastly, with the stock down 20% and the other companies above all representing great buying opportunities at the lows of their problems, is now the time to buy VW stock in hopes that the story doesn't have as big of a bite as it looks at first?  The stock was already off its recent high of $250 a share as recently as April of this year so this $33 decline to $130 at the moment just continues a recent trend and likely puts the stock into the oversold category.  The risk is that this isn't a localized issue, that these conspiracies have occurred elsewhere in VW's lineup or that the US government takes drastic action against the company or its management.  VW's primary market at this point is China, and China doesn't really care about pollution or what VW does with the US market but China's economy is slowing and won't provide as much support as it otherwise might have.  I'd stay away at this point.  I don't think this issue will be localized or not end up with VW executives on the nightly news doing a perp walk while VW sales in the US were already off more than 2% this year.  I don't think the stock has too much more of a downside but additional bad news is likely to prevent a significant upside.  Stay away.