If Warren Buffett Can Have Secrets, Why Can't I?

Where's Warren?

Warren Buffett recently announced he had amassed 5.4% of IBM — without telling anybody for months. The only hint until recently was an obscure footnote in Berkshire Hathaway‘s Security and Exchange Commission’s form 13(f) “Confidential information has been omitted..and filed separately with the commission”. (International Herald Tribune, 11/16/2011). What! How is that fair?

If you or  I  are institutional investors and start amassing positions over $100M  in IBM, for example,  (Mr. Buffett was  willing to part with roughly$10.7B  at $187/share — close to the 52 week high) we have to regularly disclose our positions in our own 13(f)s . This is to promote market integrity, prevent hostile takeovers and general sneaking around.

But Warren Buffett is different. He, like a few other billionaire investors (including Carl C. Icahn) received a confidentiality pass from the Securities and Exchange Commission, because, like Mohammed, they move mountains.  The SEC’s John Nester says it tries to “balance the benefits of transparency of how large managers invest with the need to temporarily protect the legitimate confidentiality interests of managers in limited circumstances.”

Mr. Buffett argues that normal investors should not necessarily be able to find out what professional investors are doing, especially while they are still busy doing it, reminding me  a lot of the Not in My Back Yard situation. NIMBY comes into focus during discussions of gentrification and immigration. It refers to the all-too-common dynamic of the people who got there first trying to keep the next wave of others (who used to be just like them) far, far away.  

And, given that Warren Buffett is one of the most famous investors of our lifetime, aren’t we entitled? Inquiring Minds do want to know!

Remember  the idea of perfect information? ” In the standard textbook theory of competitive markets we assume that all ‘agents’ in the market enjoy perfect information about the availability of goods and services and also complete information about prices charged by suppliers. (http://tutor2u.net.)

In improv, we also use the rule of perfect information.We are all supposed to know everything. If your scene partner confidently strides in, strokes his chin and says, in a German accent, natch:

“Herr Professor, zee breakthrough formula for curing cancer is at hand!”

I must reply, also in fake German:

“Ach de Lieber, mein colleague. Ze autonomic compounds have indeed achieved stability.”

Source: Forbes.com