It was a bravura performance. Mr. Ackman mocked the company’s promises to make its distributors wealthy—“Episodes of MTV Cribs?” he said of a particularly schlocky marketing video—and criticized its efforts to “buy” associations with prominent universities and scientists. That was just for starters. Over the next three hours and 340 slides, he presented his evidence that Herbalife met the Federal Trade Commission’s definition of a pyramid scheme and should be shuttered by the agency.

That Herbalife was the target of a big short shouldn’t have taken investors by surprise. In May, hedge fund manager David Einhorn jumped on an Herbalife conference call and asked a few pointed questions—pointed enough to send share prices into a tailspin. But Mr. Einhorn never disclosed a position in the company. Now Mr. Ackman had. In interviews after his presentation, he said he’d put $1 billion of his investors’ money into the bet, calling Herbalife his “highest conviction” trade ever, and targeting shares to hit the low, low price of zero.

Herbalife’s stock promptly plummeted, then rebounded in the last days of 2012. It wasn’t that investors liked the Herbalife business, exactly, or multilevel marketing schemes in general. Rather, they were betting against the investor’s hubris—doubting that the FTC would really close Herbalife and assuming the company had enough cash on hand to buy back shares and make the short seller’s position a bit uncomfortable.

In light of Mr. Ackman’s presentation, Herbalife has been subject to the media equivalent of a prostate exam. Analysts and armchair stock-pickers critiqued everything from its corporate structure to its revenue model and marketing copy.

But there was one thing nobody really bothered to do, and that was try the product—not just sip at a meager sample, but put its capsules and elixirs to the test, to get to know the company from his insides out.

With Herbalife planning to rebut Mr. Ackman’s arguments at a pre-scheduled investor conference on January 10, and Mr. Ackman brazenly vowing to rebut the rebuttal, it was time for somebody to put his mouth where the money is, and to do so in a way that Wall Street and Main Street could truly understand: an eating challenge. Herewith, the results.

11:09 a.m.: Recalling De Quincey’s opium experiments, mix first Herbalife shake late Monday morning. Two heaping scoops of the company’s Formula 1 to eight ounces of skim milk. Consistency: clumpy. Taste: chalky. “Replace one meal daily with a Formula 1 for healthy nutrition, replace two meals for weight loss.” Pumpkin Spice easy on the palate. Could get used to this!

Herbalife products are not easy to obtain. You can’t buy them in stores. To find our sample, The Observer journeyed deep into the Greenpoint section of Brooklyn, where we met a Herbalife distributor named Adam Guziczek and his wife Elizabeth in their walk-up apartment.

Mr. Guziczek’s involvement with Herbalife began 16 years ago, he said, when a secretary at the construction company he was working for told him she was making more money selling Herbalife during her lunch hour than she was pulling in from her day job. Mr. Guziczek signed up and found he liked the product. He said he worked as a distributor primarily to get the 30 percent discount off the wholesale price. He met his wife when she was buying a weight-loss formula. “She lost 30 pounds, and we got married,” he said.
“I lost the weight, then he married me,” Elizabeth chimed in from the kitchen.

12:18 p.m.: Two shakes down. A full 38 percent of daily protein! Taste bears hints of Cheerios. Feeling of mild euphoria. Or fear? Ask friend on Wall Street how much to consume. “If it’s milk-based, you’re going to have a case of the farts, dude.”

Did we mention that Herbalife was founded in 1980 by Mark R. Hughes, a 24-year-old graduate of a California reform school who decided it was his calling in life to become rich? If you were a regular viewer of 1980s late-night television, you might recall the Herbalife infomercial in which Mr. Hughes delivered a bubbly message of self-empowerment for mass consumption. (If you were a regular reader of circa-2000 gossip rags, you might recall that Mr. Hughes was eventually found in his underwear, dead of an apparent drug overdose.)
Today, Herbalife is run by a trio of former Walt Disney executives. It is especially popular with the Latino community, and markets itself with sponsorships of soccer teams like FC Barcelona and the Los Angeles Galaxy.

Many Herbalife distributors are middle-class strivers seeking their fortune. As a result, some onlookers view Mr. Ackman’s Herbalife short as the story of a big-city financier meddling in the lives of people he doesn’t understand. Others praise him for trying to save Herbalife’s distributors—who are also its chief customers—from themselves.

1:19 p.m.: A giant smoked turkey arrives in the newsroom, a belated holiday gift. Smells delicious. Then again, three shakes equals 57 percent of daily protein. Pass on turkey. Am I glowing?

There’s a small cadre of crusaders against multilevel marketing companies like Herbalife, and once you get them talking, it’s hard to get them to stop. Then again, why should they? It’s not every day that a superstar investor goes public with a billion-dollar short against the industry they despise.

“There’s a certain math paradigm that shows up,” explained Robert FitzPatrick, president of an organization called Pyramid Scheme Alert. “If you can only make money once, you have nine other people below you; it’s generally true that only one out of 10 can ever be profitable.”

Rick Ross, of the Ross Institute Internet Archives for the Study of Destructive Cults, Controversial Groups and Movements, said that he’d been hearing complaints about Herbalife for years. “The subculture around Herbalife is similar to the kind of program that would be considered thought reform,” he said. “You start attending their meetings and trainings, and you wind up in a thought bubble. Anyone who challenges the idea may be characterized as a dream-breaker or a dream-taker, or a slave, in the sense that they’re not a self-employed businessperson.”

2:04 p.m.: Halfway through fourth shake. Jitters starting to set in. Blood pulsing in calves. Detect the onset of promised flatulence. Legs trembling. Observer pantry running out of skim milk. Might have to switch to water. Can you overdose on vitamin D?

The math might be bad, the vibe might be culty, but if Mr. Ackman is really going to short Herbalife all the way to zero, it will only be because the FTC decides Herbalife is a pyramid scheme.

The FTC defines the term “pyramid scheme” in a particular way—essentially, a business in which participants make more money for recruiting other participants than they do by selling products.

In his December presentation, Mr. Ackman hauled out a lawyer and a research analyst to show that Herbalife meets the pyramid scheme criteria.

3:37 p.m.: Mouth full of chalk, pulse back to normal. What is normal? Persistant stomach noises. Will someone put away that damn turkey? Have consumed 100 percent recommended allotment for biotin and molybdenum. Note to self: Don’t Google biotin.

Mr. Ackman isn’t the only money manager to be vocal about his Herbalife position in recent weeks. Robert Chapman is a hedge fund manager who takes positions in companies, then tries to influence management. As he watched Mr. Ackman’s Herbalife presentation, he had two key thoughts. One, despite all those slides, Ackman hadn’t actually delivered any new information about Herbalife. And two, Mr. Chapman didn’t think Mr. Ackman really believed the FTC would shut Herbalife down.

He started buying the stock.

“I believe Ackman already had concluded the FTC wasn’t going to assist his crusade,” he wrote in a letter to investors explaining the decision. “Instead, he realized that he had to focus on existing and prospective distributors, praying the media attention would have a materially deleterious impact on any decision to join or to continue with the [Herbalife] team.”

5:36 p.m.: Have now consumed seven shakes in seven hours. Calves pulsing again. Is that Morse code? One shake an hour may be too much. Hitting a wall or catching second wind? Friends Gchat story about Al Roker “sharting” in the White House. Not funny. Is it cold in here? Definitely a second wind. Could drink these things all night. Somebody bring me some goddamn skim milk.

According to Joe Mariano, the president of the Direct Selling Association, the FTC rules are clear: “A pyramid scheme is an operation that compensates people for the recruitment of people in the plan,” he told us. Herbalife, he said, didn’t fit that mold. (Herbalife general counsel Brett Chapman is chairman of the DSA’s board.)

At any rate, that’s the bottom line for now. Since the late 1970s, when the criteria for pyramid schemes was established, the FTC has proved reluctant to slap the tag on multilevel marketers.

Of course, Mr. Ackman would know all that. In the days leading up to Herbalife’s coming presentation, he has reiterated to reporters that he’s only scratched the surface of his Herbalife research, and that he is in it for the long haul to convince regulators that the company is a pyramid scheme. Those words may mean more coming from Mr. Ackman, who has deep pockets to spend on his Herbalife short, and a track record of biding his time to make investors pay.

For the moment, however, Herbalife will most likely live on.

7:14 p.m.: One more for good luck. Feel strong. Energetic. Could stick with this. Not sure about the Pumpkin Spice. Mr. Guziczek said he prefers Vanilla. Nice guy, that Mr. G. Nice wife. Showed me a photo of himself with Mark Hughes. Herbalife founder looked awkward in photo. Better makeup for TV spots. I could see living in Greenpoint. Good restaurants, nice park. Expensive. Dining out. How to afford? Might need a side gig. Need a way to make real money ...

-pclark@observer.com

Ray Dalio isn't making friends in Stamford, Conn., says The New York Post, reporting that the Bridgewater founder ticked off locals with the surprise demolition of a boatyard to make way for the massive hedge fund's new waterfront headquarters.

Bill Ackman’s position in JCPenney has cost his hedge fund, Pershing Square, $900 million this year as shares fell 18 percent.

The government is investigating possible mortgage fraud at Residential Capital, the mortgage-lending unit of government-owned Ally Financial, Reuters reports. The Securities and Exchange Commission disclosed in court filings Monday that it had issued a formal order of investigation in February to probe ResCap's mortgage-bundling and underwriting practices. Ally, which is 74 percent-owned by the Treasury after a series of bailouts during the financial crisis, placed ResCap into bankruptcy proceedings in an effort to shed bad assets ahead of a potential IPO.

Barclays may face a criminal investigation into whether it properly disclosed details of a deal to raise capital with Qatar sovereign wealth funds during the financial crisis.

Morgan Stanley and Citigroup will allow more time for the appraisal of their joint-venture brokerage, Morgan Stanley Smith Barney. Investment bank Perella Weinberg was set to put a value on the JV this week, but will delay the decision until Sept. 10.

Prosecutors revised the indictment of Level Global Investors co-founder Anthony Chiasson and ex-Diamondback Capital Management portfolio manager Todd Newman, adding new counts of securities fraud pertaining to alleged insider trading in Nvidia Corp.

The Occupy movement isn't over "until the last person calls it quits and goes home, wherever home is," an organizer tells Bloomberg as the movement's Sept. 17 day of action approaches. This is proving to be the case in Hong Kong, where 10 or so protesters continue to hold out in HSBC headquarters.

Can Spain avoid Greece's vicious cycle?

Soft tactics: The Federal Reserve Bank of New York and the Bank of England talked about reforming the process by which Libor and other interbank lending rates are set, but play their hands timidly in recommending action. Lawmakers on both sides of the Atlantic are asking why.

Does anyone want this job? It's a lot easier to say who won't replace Bob Diamond as Barclays CEO than to guess who will. Deputy chairman Michael Rake and the firm's investment banking head Rich Ricci each ruled himself out over the weekend.

If at first you don't succeed...apologize again: Nasdaq announced a new plan to compensate customers for losses suffered due to technical glitches during Facebook's May initial public offering. Among the changes: Nasdaq upped the amount it would refund from $40 to $62 million, agreed to pay refunds in cash, as opposed to with credits on future trades and expanded eligibility for the funds. The expanded plan is unlikely to satisfy all investors. Knight Capital has said lost as much as $35 million on the botched IPO, while reports surfaced last month that UBS might float a much higher number.

Whither Europe: The Spanish government is paying more in borrowing costs than it has at any time since the inception of the euro, and finance minister Luis de Guindos is heading to Berlin tomorrow to talk about it.

Jumping in: Marc Lasry, Avenue Capital hedge fund manager and Democratic Party booster, has finished raising a $3 billion fund to invest in European debt. He joins alternate investment firms such as Blackstone, KKR and Apollo Global Management to seek profit in volatile European markets.

Black list: Zero Hedge reads Italian, spots this list of 10 cities that may default.

Chinese GDP...The new Libor? Investors double-check the math.

Future of futures: The National Futures Association is looking to tighten up its ship after Peregrine Financial Group founder Russell R. Wasendorf misappropriated more than $200 million on the NFA's watch.

Smaller entities slide through loopholes: The largest U.S. lenders have created more than 10,000 subsidiaries in the last two decades in an effort to reduce tax and regulatory exposure.

Ackman acolyte out: Scott Ferguson is leaving Pershing Square to start an activist hedge fund of his own, according to letter obtained by Bloomberg. Mr. Ferguson was the first analyst Mr. Ackman hired at Pershing Square.

Whale mis-marks: When JPMorgan announced second-quarter earnings on Friday, the firm said it would restate the previous period's results to include an additional $459 million in losses after executives discovered that traders in the firm's chief investment office may have intentionally overvalued positions. That explanation doesn't make sense to some former employees of the firm, but it's sure to interest government investigators.

Suing Goldman: A married couple that hired Goldman Sachs to sell its voice recognition software company is suing the firm for more than $1 billion.

Age of activism: Bill Ackman's $2 billion bet on Proctor & Gamble signals a new era in activist investing, says The Wall Street Journal. Evolving corporate governance standards and impatient investors seeking better corporate results have allowed activists such as Mr. Ackman, Carl Icahn, Ralph Whitworth and Nelson Peltz to take aim at bigger companies.

Nearing settlement: Negotiations to settle a Department of Justice investigation into HSBC's anti-money laundering efforts are picking up pace, The Journal reports. Bank executives will appear before the Senate tomorrow to testify on related issues, including how terrorist organizations and drug cartels may have taken advantage of lax compliance policies.

Bush on economy: "We can all agree that excessive risk-taking by financial institutions, irresponsible decisions by lenders and borrowers, and market-distorting government policies all played a role” in the financial crisis of 2008, former President George W. Bush writes in the forward to The 4% Solution: Unleashing the Economic Growth America Needs.

Stamp of approval: Climate certifications are coming to corporate bonds.

Teach-in: Occupy Wall Street, the summer camp.

He had just come from two hours of tennis on Randall's Island, still in his sweat-stained black nylon warm-up pants, for which he apologized on the drive back from the courts. At a restaurant around the corner from his Central Park West home, Mr. Ackman ordered an egg white omelet with spinach and onions, insisting on no cheese even after repeated offers from the waitress. He turned down coffee, as well, but did add a bowl of granola with yogurt and strawberries.

"That's why I have to be healthy," Mr. Ackman continued. "It's not just compounding a high rate; it's living a long time. Buffett has a 55-year-old record. I've got a seven-and-a-half-year-old record. It's going to be 90—I'll be almost 90 by the time I've got a 50-year history." He paused to refine the math. "I'll be 87." (He could shave a few more years off since Pershing is currently returning 24 percent annually compared to the 22 percent of Warren Buffet's storied Berkshire Hathaway.)

Just after a cloudless dawn, Mr. Ackman and his 13-year-old daughter, Eloise, had climbed into one of the family's two Volvos and headed across Manhattan to the East Side to pick up Marius, a junior Pershing Square analyst, and a friend of his from Morgan Stanley. They drove over a fog-shrouded R.F.K. Bridge and pulled into Sportstime, a year-old tennis complex across the road from the Carl Icahn Stadium.

While he prefers to see his seven-year-old fund in the same positive light as many people view the work of Mr. Buffet, comparisons are more often made to Mr. Icahn. Both he and Mr. Ackman are known for their activist investing, taking huge stakes in the bluest of blue-chip companies and then agitating for changes they believe will improve the stock price. Mr. Ackman, who considers his work as benevolent and beneficial--not just to the companies but also to the entire country--hates the comparison to the notorious corporate raider.

While Eloise spent an hour taking lessons from the John McEnroe Tennis Academy, her dad and the two junior bankers, both former semi-pros almost half his 44 years, volleyed back and forth, sometimes two-against-Ackman. Afterward, Mr. Ackman said he had taken it easy on them because Marius had injured his wrist in a snowboarding accident. He also complained of being rusty after a few weeks spent on vacation. Having missed his regular court time might explain the weakness in his forehand that morning. Every time one of Mr. Ackman's shots landed out of bounds, he would bunch up his shoulders, collapsing his trim 6-foot-3 frame in apparent frustration.

After her practice, Eloise crossed the green-and-blue hard court for a round of doubles, joining Morgan Stanley across the net from Mr. Ackman and Marius. Nearly every shot that left Mr. Ackman's racket barreled toward his daughter, many barely missing her as she gamely tried to volley them back. One of his shots did actually connect with its unintended target, causing Ms. Ackman to jump back. Dad rushed over for a quick hug and a peck on the forehead.

In the end, the gimpy Marius and his boss won the set 6-0.

From where The Observer was sitting above the courts--Mr. Ackman had suggested we not sit too close, lest we be on the receiving end of one of his cutthroat volleys--it seemed the hedge fund manager was trying to toughen up his daughter, just as his dad had him, just as he professes to do for the various companies he invests in, just as he does for random people on the street. But it was also clear Mr. Ackman was unwilling to relax even during a casual game on a Saturday morning. "What I love about tennis is that I'm better now than I was when I was 20," he said on the drive home.

He has played against Andre Agassi, and recently warmed him up for a February match against Pete Sampras at Madison Square Garden. (Mr. Agassi lost in straight sets.) "He told me he did pretty well," Marty Peretz said of Mr. Ackman. The Harvard professor and New Republic publisher speaks almost weekly with his former student, now his longtime money manager. Mr. Peretz was the first investor in Mr. Ackman's previous fund, Gotham Partners, which he launched with an M.I.T.-trained engineer named David Berkowitz.

Mr. Peretz was partly responsible for the creation of the fund-he discouraged him from taking a job at a comfortable financial house after Mr. Ackman graduated from Harvard Business School in 1992 (he also went to the college for undergrad). "He would have been miserable there, having to answer to other people," Mr. Peretz said. And so Mr. Ackman turned it down to launch his own hedge fund with almost no experience.

At the very least, a job with a bigger firm would have made it harder for Mr. Ackman to hold most of the records in the office gym, as he does at Pershing's 40-person concern on the 42nd floor of 888 Seventh Avenue. Mr. Ackman has even been known to cross-train to reclaim record times on the treadmill or the rowing machine, according to colleagues.

Sometimes it feels like everything Mr. Ackman does is in the service of his outsize returns. "He is a very smart, very competitive guy, and for guys like him, that is how you keep score," said Mark Axelowitz, a director at Morgan Stanley Private Wealth Management who knows Mr. Ackman socially.

LIKE A HANDFUL of other hedge fund managers, Mr. Ackman's profile exploded at a time when pretty much everything else around him was imploding.

It all began in 2002, when he had made a now-notorious bet against gargantuan muni-bond insurer MBIA. Before that, there had been the occasional headline-grabbing deal, such as when he tried to separately team up with Donald Trump and Jerry Speyer to buy Rockefeller Center from the Japanese in the late 1990s, or when he led the first successful hostile takeover of a real estate investment trust, Cleveland's First Union. But it was not until he got a tip that the federally backed agricultural insurer Farmer Mac was grossly overleveraged that he would hit upon the investment strategy that serves him to this day.

Like its bigger siblings, Fannie and Freddie, Farmer Mac had hordes of unregulated, risky loans sitting on its books, just waiting to default. At the time, though, it had "buy" or "strong buy" recommendations from a number of major banks, another counterintuitive investment for the combative Mr. Ackman. Gotham Partners took a huge short position in the company, then released a report titled "Buying the Farm."

In the meantime, Mr. Ackman reached out to a reporter at The Times, Alison Leigh Cowan, whose brother was a business school classmate of his. When the gambit worked--some said thanks to Ms. Cowan's reports--it made the fund $75 million and sent Mr. Ackman looking for another company to pursue.

Whitney Tilson, a mutual fund manager who has been friends with Mr. Ackman since his undergrad days, suggested investing in MBIA, but the closer Mr. Ackman looked, the worse-or better-things got. The company was mired in the alphabet soup of CDOs and CDSs, with leverage exceeding 100-to-1 in some instances. After reviewing thousands of pages of reports and financial disclosures, Mr. Ackman once again issued a damning report, but not before buying his shares and reaching out to the media.

Except this time, the focus was as much on this bearish outsider as on the companies he pursued. Mr. Ackman, the striking fellow with the steely hair and steelier stare, found himself the subject of a skeptical press. After a livid response from MBIA alleging a conspiracy to drive down its stock price, both the S.E.C. and Attorney General Eliot Spitzer began investigating Gotham Partners in 2003. Yet the firm was already on the way out, having closed its two major funds after a bad investment in a golf course company. Unable to sell off his assets, Mr. Ackman swore he would never invest in privately held companies again.

But first he had to salvage his reputation.

"Not to put it too impolitically, but we put him through the wringer," Mr. Spitzer told The Observer. For six months, Mr. Ackman was under investigation, and while no charges were ever brought, the news leaked out all over the press, nearly ruining him. Given the public nature of his investment strategy, if he bought a stake in a company, even a favorable long position, as he did with McDonald's in 2005 or Sears the following year, it became even more difficult than usual to force management to accept his complicated ideas.

He gets credit for the in-depth research he does into the companies he invests in, but it may just be something as pedestrian as stubbornness that wins him most of his battles. "This is a guy who is incredibly smart and incredibly intense-and this is coming from me," Mr. Spitzer said. "A lot of guys would have thrown in the towel under that kind of scrutiny, but not Bill."

With the near-collapse of MBIA in the aftermath of the credit bubble, Mr. Ackman was finally vindicated-and rewarded handsomely for it, making about $1.3 billion for his fund. Mr. Spitzer even turned to him for advice, meeting him at a diner off the Taconic Parkway, when the governor was returning to the city from Albany and the hedge fund manager was on his way to his home in Columbia County. Mr. Ackman had prepared a long list of suggestions on how to recapitalize MBIA. He had gone from adversary to adviser.

"Bill is a believer," one hedge fund manager said. "He knows he is right, and he almost always is, and he sees it as his job to convince everyone else of that."

For the notoriously blunt Mr. Ackman, it comes down to almost indecorous levels of honesty. "If your wife asks you whether she looks good in a dress, and every time you tell her she looks beautiful, she won't believe you," Mr. Ackman explained. "But if you tell her, 'Well ... ,' and then other times, 'Wow, that's a really beautiful dress,' then she really appreciates it. And it's the same thing with friendships and CEOs."

There have still been a few disasters since then, including a demoralizing proxy fight with Target, where Mr. Ackman had concocted a complex scheme for the company to sell off the land under its stores and its credit card receipts, a decision he still insists is right. (He even bought breakfast with his Target card.) He also made an investment five years ago in Borders that has been almost totally wiped out by the company's recent bankruptcy.

"I've made a lot of mistakes, but the good outweighs the bad," Mr. Ackman said. "This is a business where you don't have to be right every time. People talk about how being right 55 percent of the time is good enough, and we try and be right a lot more than that." Since launching Pershing Square, Mr. Ackman has turned a $54 million initial investment into a $9.3 billion behemoth, according to his March report--conveniently leaked, as it always does, on the rambunctious Wall Street gossip site Dealbreaker.

Following his Target fight, he has found JCPenney to be a willing partner, as well as Fortune Brands, where Mr. Ackman convinced the board to break up the owner of Jim Beam, Titleist golf gear and a home products division that includes MasterLock padlocks and Moen faucets.

His most successful investment to date may be the purchase of General Growth Properties, the mall operator. Mr. Ackman bought at 34 cents a share and led it through bankruptcy, and now it trades in the mid-teens. And he broke even on a brash takeover bid for Stuyvesant Town, the massive middle-income housing complex in Manhattan, where a $45 million investment stood to make him $2 billion. The lenders decided to buy him out rather than force a foreclosure. The plan echoes at least a little bit the disdainful strategies of Mr. Icahn--yet Mr. Ackman insists the tenants, and not his fund, would have been the true beneficiary.

Some people still struggle to understand how Mr. Ackman has not made more mistakes. "I don't think he could make a simple investment if he wanted to," said an analyst who has followed him for years.

Others are waiting for the next misstep. A friend who also works in hedge funds points to how the Target investment, had it not been made in a separate fund, could have dragged under the entirety of Pershing Square. "At least he is learning from his mistakes," the friend said. "But whenever you set out to make more money than anyone else, when that is the very goal from the outset, I think there is an Icarus risk, if you will, of flying too close to the sun."

SINCE HIS CHILDHOOD in the well-off Westchester 'burb of Chappaqua, Mr. Ackman has been competitive and ambitious. He captained the tennis team, but graduated only fourth in his class. That did not stop young Bill a year later from telling his father, a successful real estate broker, that he was going to save the world. "And I think he is more anxious than ever to do that," Larry Ackman said.

Mr. Ackman prides himself on donating to outré philanthropies like the Jewish History Project and the Boys and Girls Harbor in Harlem, where he talks casually about erasing multimillion-dollar debts at each. He and his wife, Karen, a landscape architect who was a grad student in design at Harvard when Mr. Ackman was at business school there, have both got their hands dirty transforming the High Line and the Armory. "Great brands, but underperforming, so we had to fix them," Mr. Ackman said. "Kind of like the companies we invest in."

But also like the companies he invests in, it is another way for him to quietly keep score. Whenever Mr. Ackman's net worth--about $700 million, according to Forbes--comes up, friends and family counter with just how darn philanthropic he is! Yet in the same way he will "sheepishly" bring up a tennis match with Andre Agassi, Mr. Ackman has been known to mention spur-of-the-moment seven-figure donations, say, for Haiti relief. (He also keeps a rarely driven Ferrari he bought on a lark hidden away at his upstate home.)

Mr. Ackman also sees his investments as improving society, which is how he can spend his nonprofit dollars on the Innocence Project, which helps get people out of prison through DNA evidence, at the same time his fund holds a large stake in private prison company Corrections Corp. of America. "It's a necessary evil, prisons, unfortunately," Mr. Ackman said. "We've got a huge overcrowding problem in prison, and I think outsourcing is a good solution. And it's a good business."

"His goal is to gather up as much assets in the world as possible and redeploy them," a friend said. "I've heard him say that a number of times."

But the little things count, too. Almost everyone who has met Mr. Ackman has either been complimented or insulted regarding his or her appearance, and those falling into the latter group usually find themselves with an appointment to see his nutritionist and sometimes his personal trainer, too. He has been known to stop people on the street corner and give them advice or even find them a job in the time it takes for the light to change. Mr. Ackman claims to have yenta'd at least four marriages, though that score is in dispute; and he and Karen host singles parties at their $26 million Beresford apartment to add to that tally. (They are demure, catered affairs with a minimum of alcohol and a maximum of conversation, say former attendees, where 10 married couples bring their 10 most eligible friends.)

"Bill's a fixer," said Christine Richard, a former Bloomberg reporter who wrote a book about his MBIA battle, Confidence Game, and who has known Mr. Ackman for years. "He just looks at everything as how can I sort this out, including people, and it can take some people aback. I guess it's like, does he care, or does it just bug him?"

But his targets aren't limited to acquaintances who need haircuts and weight training, or even underperforming companies. Given enough time, Bill Ackman believes he might just be able to fix the entire country by himself. "My motivation for doing it is making profits for Pershing Square," he said. "But what I like is that my interests are aligned with what's good for the country. We could have had a strategy that was a fabulous, profitable strategy but doesn't do anything for America."

mchaban@observer.com

Editor's note: This story reflects corrections, including to names and figures.

"You can make more money on a single real estate deal than as a REIT," he said at the 16th annual REIT symposium hosted by the N.Y.U. Schack Institute. Mr. Ackman, who made at least some of his many millions by buying stock in General Growth, a once-bankrupt REIT, made an exception for good pal Steven Roth: "Vornado," he said, "is the only REIT that's opportunistic."

In fact, while SL Green, led by Marc Holliday, has been amassing a solid portfolio of Class B assets in New York City, and Boston Properties, led by Mort Zuckerman, has bought up a handful of marquee assets, Vornado Realty Trust, led by Mr. Roth, its chairman, has pursued an enigmatic yet aggressive strategy that has quietly allowed it to become the most widely spread REIT in town.

Vornado now owns or has a stake in 95 properties in New York City, according to data obtained by The Commercial Observer from CoStar. In comparison, SL Green owns or has a stake in 61 properties around the city, and Boston Properties trails distantly at 14.

Mr. Roth almost never gives media interviews and is said to turn in the other direction if he sees a reporter coming, so what we know of his strategy for taking over New York, New Jersey and a small slice of D.C. comes from public appearances and the statements therein, such as one he gave at the Pierre on Thursday. Mr. Roth, with a football coach's build and brusque tones, is, well, bullish. "I've fallen in love with a graph."

"Try a woman," Equity Group Investments' Sam Zell cackled.

But Mr. Roth plunged ahead. The graph, he explained, shows the rental market in New York going back 25 years. Following every recession, office rents have come back at three times the rate of decline. "I keep it under by pillow," he added. "My office buildings are going up in value." 

Mr. Roth painted his strategy as simple and low-risk: Just focus on New York City. But Vornado is playing a more high-stakes game than he let on.

Vornado recently took a 25 percent stake in special servicer LNR Property Corporation, suggesting it plans to become a bigger player in the distressed-assets market. For years, Vornado has owned a substantial stake in McDonald's but has since sworn off similar investments. Still, in Vornado's largest acquisition since 2007, the REIT last year bought a $600 million stake in J.C. Penney. (And, coincidentally, its latest flag-planting came in a joint venture with SL Green to recapitalize 280 Park Avenue in exchange for a stake in the building.)

VORNADO has come a long way since 2007, when it lost out to Blackstone in a bidding war over Mr. Zell's Equity Office Properties. "They didn't have the luxury as a public company of being able to lever up as much as the non-public companies," Larry Longua, the director of the REIT Center at the Schack Institute, told The Commercial Observer.

But suppose, for example, the commercial real estate market turns and Vornado's stock drops dramatically after it's broken ground on what is supposed to be the city's third-tallest tower, 15 Penn Plaza? "That's a big risk and a concern for me that [REITs] are in development," Mr. Longua said. "REITs really did not want to be seen as just baby-sitting an existing portfolio. It became harder and harder for them to create value." 

In 2010, Vornado more than doubled its funds from operations to $1.1 billion, or $6.05 per share, compared to the $583.6 million, or $3.36 per share, in 2009. But for the firm, as with all REITs, the question is how to prolong success once equity becomes easier for private investors to come by. Longer term, the larger question is whether real estate is growing enough to support the ravenous appetite of the public markets for growth. As Mr. Zell asked at the Pierre: "How much real estate does this country really need?" 

Mr. Roth frowned, but did not disagree. "The country has $14 trillion of debt," he said. "Japan has been in a funk for 20 years."

lkusisto@observer.com

On Monday, The Real Deal reported that the long-fabled co-op conversion is on its way, based on a press release by Fitch Ratings.

But wait! The publication later clarified that this doesn't mean the long-awaited conversion has commenced. In fact, it's just more of the same, with rents on nearly 600 vacant units going way up, jumping from an average of $900 a month to $3,000. This brings them almost exactly in line with market-rate rents for similar apartments.

"Basically, they'll be brought up close to what market rate is," Robert Scaglion, a senior managing director with Rose Associates, told The Real Deal. "On a percentage basis there's no rule of thumb. If you could renovate it and get it up to $4,000—well, I don't think the market is going to pay [that] for a one-bedroom in Stuy Town."

So how did the apparent conversion get called off? Because there wasn't any. Fitch had initially referred to a "conversion" when what the company meant was "a rehabilitation" of the 560 apartments. It's all so confusing. Where's Charles Bagli when we need him?

lkusisto@observer.com

Then came the news in October that hedgie and shrewd real estate investor Bill Ackman would be in charge of Howard Hughes Corp, the General Growth spin-off redeveloping the seaport. The Observer has put in numerous calls to Ackman's Pershing Square Capital to try and figure out what exactly is in store, but we've yet to hear back.

Check out SHoP's latest work at Atlantic Yards. >>

Now, one of Pasquarelli's colleagues, Corie Sharples, has told DNAinfo that SHoP has yet to do any new design work, but the firm has been meeting with Howard Hughes about they project. "They're proceeding very, very cautiously," Sharples said. "They're talking with the city before doing anything else."

It should be interesting to see what results from the talks. The city's Landmarks Preservation Commission was lukewarm about the project when it was first presented in 2008, and the community downright hated it. But these are more difficult times to be building in the city.

On the one hand, finding financing could prove difficult. On the other, city officials, developers and construction unions are all desperate for just about anything to get built, which could make it easier to force an ostentatious project through the public review process. (Just ask Steve Roth about that.)

mchaban [at] observer.com | @mc_nyo

By The Wall Street Journal's tally, Mr. Ackman has already gained about $300 million by trading in Fortune shares:

In pre-market trading, Fortune Brands are pointing up about 4.6% to $63.97. At Ackman's rough per-share average purchase price of $45.88 for his Fortune Brands stake, the hedge fund manager has make a paper profit of about $302 million dollars.

The liquor business will stay under the Fortune umbrella, while the "home and securities business" -- Master locks and Moen Faucets, among other things -- will be spun off, tax free, to Fortune shareholders. The company is also contemplating a sale or tax-free spinoff of its golf business -- Titleist golf clubs and FootJoy shoes.

That Ackman was able to score so much loot from what seems obvious -- that all these different weird products probably don't belong all in one company -- is perhaps the most remarkable thing about this news. But perhaps sometimes it takes some forceful "discussion" from an activist investor to shake a company out of its funk.

mtaylor [at] observer.com | @mbrookstaylor

Mr. Ackman's Pershing Square Capital Management said that it would finance an all-cash bid of $16 a share, a 20 percent premium to Barnes & Noble's closing stock price on Friday.

Pershing also disclosed that it had raised its stake in Borders to 37.3 percent from 31.5 percent. Recent share purchases vaulted Pershing past Borders' chairman and chief executive, Bennett LeBow, who owns a 35 percent stake through stock and warrants.

Barnes & Noble earlier this year rebuffed the activist overtures of Ron Burkle and previously counted Mr. Ackman as an investor.

We've been trying to figure out what Ackman's play is here. It's not immediately obvious, as two of the things that make Barnes & Noble famous -- selling actual books and selling e-books -- have posed some problems.

In late November Barnes & Noble reported a second-quarter loss resulting from steep costs to develop its Nook e-reader and weak physical book sales.

Ackman says there are substantial synergies to be accrued from a merger. Is there also maybe some underlying value tied to Barnes & Noble's massive brick-and-mortar real estate presence? With 717 bookstores (and the company owns all the property), the chain has a massive commercial real-estate footprint in all 50 states. Maybe there's some value to unlock there.

mtaylor [at] observer.com | @mbrookstaylor