Investment Advice: Billionaires Have Different Agendas

Based upon an informal email survey, it turns out that nearly all of our readership are NOT BILLIONAIRES. The demographics of our readership are quite impressive, yet aside from being college-educated (many graduate degrees) high-earning media-savvy readers, 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 it's 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 (GM). Rather discuss the absurd idea of 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 judgment, and incompetent management, one wonders 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 it's to their advantage to invest alongside billionaires?

I'll bet that most investors who 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 (DELL) is under assault - from HP (HPQ), the financial press, the investment analyst community.

Might he have a different agenda than you or I?

• The aforementioned Kerkorian purchase of GM: He has a long and storied history as a corporate raider, greenmailer, etc. When one gets closer to the long dirt nap, one thinks of his 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 negotiated takeover terms that you don't get.

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

There are 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 for 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?) stroking their own egos a bit?

Unless you can invest on the same terms, for the same reasons, and achieve the same objectives, it's foolhardy to try to parallel what the billionaires do . . .