Saturday, November 19, 2011

Volume 3 Issue 47: Intelligent Investing

Buffett's Insider Advantage Revisited

I wrote about the special treatment that Warren Buffett was given in the previous issue of the Main Streeter.

Here is more: 
The Securities and Exchange Commission usually doesn’t let investors keep many secrets. Except if you’re a major player like Warren Buffett. 
On Monday, Mr. Buffett disclosed that his company, Berkshire Hathaway, had bought a 5.5 percent stake in International Business Machines, his first big investment in a technology company ever. 
But Mr. Buffett didn’t build his $10 billion-plus stake in I.B.M. overnight. He started buying eight months ago, beginning in March. You wouldn’t have known that if you had been studiously reading Berkshire Hathaway’s filings — known as 13Fs — in which companies must disclose stock holdings. There was no mention of I.B.M. in Berkshire’s quarterly filing in April, nor in August. Instead, if you were looking carefully, you might have found an odd footnote that said: “Confidential information has been omitted from the form 13F and filed separately with the commission.” 
Translation: Mr. Buffett received special permission from the S.E.C. to keep secret his investment in I.B.M. — and possibly keep secret stakes in other companies that he is building positions in that we have yet to learn about.
Over the decades, questions have been raised about the S.E.C.’s confidentiality rule, but have been quickly mooted. Back in 1997, Larry N. Feinberg, the founder of Oracle Partners, memorably told BusinessWeek: “I do not think confidential filings are fair. If I’m going to pull down my pants in public I want everyone to pull down their pants, too.”
Isn't demand and supply what the stock market is about? If Buffett wants to increase the demand of a certain stock, then inevitably, he has to pay a higher price. Why does he get the advantage of getting "insider" prices by having the SEC "hold down" the prices for him?

Source: Dealbook

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