Investing Advice: If you are NOT a billionaire . . .

On lazy Sunday mornings, we like to keep things laid back, slipping in a little education with our snark und drang.

Today is no different. However, as part of our educational process, we also are breaking a minor news flash. Based upon an informal email survey, it turns out that nearly all of the readership of TBP are NOT BILLIONAIRES. Yes, the demographics of our readership is quite impressive — college educated (many graduate degrees) high earners, media savvy readers though the crowd may be, it turns out that less than a dozen of you are actually full blown billionaires.

Shocking though this development may be, it should cause you to reflect upon how and why you invest your hard-earned, rapidly-depreciating dollars.

You see, Billionaires are different from you and me. To begin with, they have more money. But its more than that — they invest differently, because they have very different goals and objectives. And
(shocker thought it may be) they can afford different things than you.

Yet that doesn’t seem to stop people from wanting to "tag along."

Consider Kerkorian’s now abandoned bid for GM. Rather discuss the absurd idea of a a guy who is about to turn 90 taking on the 2nd most dysfunctional big cap company in the S&P (CA being the first), let’s expand our survey. Given’ GM’s half-century long tradition of bad decision making, poor financial judgement, and incompetent management, one wonder’s if Kerkorian really thought he could effect a turnaround in his lifetime. Instead, I suspect he was merely agitating for change, however incremental it may be. 

Let’s be honest: He shouldn’t even be buying green bananas. But rather than delve into GM’s problems, I’d prefer to look at the bigger picture: Why do investors think its to their advantage to invest along side billionaires?

I’ll bet that most investors who did so with piggy backed Kerkorian’s GM bid lost money on it.

Consider a few recent purchases:

• When Michael Dell buys $70 million worth of his own stock, might he have an agenda besides the capital appreciation of what amounts to a pittance to him? Dell is the 4th richest man
in the United States, with net assets of ~$20
billion. His namesake company is under assault — from HP, the financial press, the investment analyst community.

Might he have a different agenda than you or I?

• The aforementioned Kerkorian purchase of GM: He ha s a long and storied history as a corporate raider, greenmailer, etc. When one gets closer tot he long dirt nap, one thinks of their legacy. For all we know, this GM bid was an attempt to improve his reputation.

How does investing alongside him benefit you and your 5 figure IRA?

• Warren Buffett has made numerous advantageous deals, getting all sorts of preferences in the negotiatied  takeover terms that you don’t get.

If you like Buffett, by Berkshire Hathaway — but don’t attempt to piggy back his trades, cause you get very different terms than he does.

There’s many other examples of this, yet surprisingly, investors keep going back to that same well.

The bottom line is this:  Why do billionaires make certain bids afor companies and other specific investments? Is it to save for a house, put together a college fund for their kids, try to outpace inflation, make sure they have a financially secure retirement?

Or, might they have a different agenda entirely, involving propping up a weakened company, creating a personal legacy or, (Dare I even say it?) stroke their own egos a bit?

Unless you can invest on the same terms, for the same reasons, and achieve the same objectives, its foolhardy to try to parallel what the Billionaires do . . .

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  1. Eclectic commented on Mar 25

    Dirt nap… That’s cute.

    I enjoyed your perspective on the billionaires, and you’re right. They have very individualistic motivations that the rest of us generally ignore, except you, Barringo. I suppose you do your best thinking on Sunday mornings.

    …And me, (Eclectic), I look at the other end of the spectrum — and I don’t mean abject poverty here, because the poor are also very individualistic, just about survival — no, I’m speaking about the contentedly successful, the ones all hooked together with rings in their noses and chained to each other like slaves. Nothing indivudualistic about them.

    They’re chained to each other with the peer pressure that is the diametrically opposite force imparted to billionaires. They sink or swim together, just like these handful of cows outside my window march to the step of a bell cow.

    Just like that bell cow rouses her herd, they’ll also rouse themselves from a cool, peaceful and shady cud-chewing session, and rise to the peer pressure that’s written in their souls, and march in line-step through blazing sun, just so as not to be thought of as too independent.

    Whatever the herd does, good or bad, they’ll all do it together.

  2. V L commented on Mar 25

    In addition, it appears that some billionaires have access to information not available to the public. I do not know how else to explain the timing of their entries and exits. For example, Soros shorted a French bank two days before the bank was raided by the Police and completely got out from a biotech company 3 days before that company announced about their failed drug trials.

  3. DavidB commented on Mar 25

    They are part of the elephant herd of the jungle. They are big, slow moving(except when spooked) and visible to every eye that wants to see them. Because of that they need to choose their path carefully. They need stable ground to tread on and a large supply of food to last them a long time.

    If you follow in their path you need to understand their priorities are different. They are usually thinking in a long term visionary way and the majority of their actions are towards stable long term growth with most of it coming in their direction after all the dust has settled.

    Their agenda is usually predictable if you’re the type that likes mysteries and detective stories but because they try to hide their plans in an enigma they are not the easiest to make money from. Studying their movements can be a fun hobby and can help you hone your predictive abilities. Keep in mind also that what they do away from the markets(like in the political arena) is as important to their long term vision as what they do in the markets. It is all leading to a goal

    That being said just remember that elephants in the jungle can leave a nice wide path for you as they pass through. They can also leave a messy trail that you have to walk through….and if they stampede…..your dead so be cautious.

    That’s my opinion and experience

  4. RW commented on Mar 25

    “When elephants fight it is the grass that is wounded.” – Anon (African proverb)

    Years ago I tried using some techniques to track what large investors and commercials were doing but finally figured out it wasn’t just their purposes that were different, their time horizons were different too: Too many unknowns and no way to deduce their value(s) that I could see so I gave up on that approach. Still use large-block transactions now and then when I’m looking for commitment confirmation but that’s about it.

  5. wunsacon commented on Mar 25


    There might be another explanation. How many trades has Soros made in his lifetime? For there not to be coincidences like the ones you mention would be more of an unlikely coincidence.

    I hung on to a 2.5-bagger (over 1 year) and then got out of a stock a few days before it plunged and lost half its value. And I did not have inside information.

    If I’m that fortunate on occasion, I’m sure Soros will have more episodes than me.

    Then again, your point is probably still valid generally.


  6. Adam Kotsko commented on Mar 25

    I’m currently investing in student loans, so that I’ll have leverage to… um…

  7. Michael Schumacher commented on Mar 25

    Excellent read BR… keep getting better and better (not that you were ever bad to begin with).

    Unfortunately with your Kerkorian example he qualifies as the poster child for “how much is enough?”….they all fall under the same category (Buffet notwithstanding)let’s drop our pants and get out the ruler. Oversimplified? Yes….but not to far from reality.

    BTW did anyone really believe that Kerkorian was going to get GM to do anything? I absolutley loved his PR right on the very day of big GM volume that said “Kerkorian looking to add to GM shares” as he was seeling that chunk the very same day (not apparent at the time but when the filings came out it was funnier than hell).

    My wife even saw right through that at the time.


  8. Eric commented on Mar 26

    Brilliant! Thanks very much for that one, I really enjoyed it. It invites a thought-experiment: how would the wide variety of opinions in the comments sort themselves if the billionaire posts had a tag?

  9. fatbear commented on Mar 26

    it turns out that less than a dozen of you are actually full blown billionaires

    Hmmmm, how many less than a dozen?

  10. The Big Picture commented on Feb 17

    Don’t Follow Wealthy Investors, Part 96

    We have time and again counseled readers not to follow in the footsteps of various Billionaires, like Warren Buffett, Michale Dell, Wilbur Ross, or Bill Gates. Their motivations and goals when investing may not be simply straight up, return maximizatio…

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