The Myth of Transparency

Adam Minter’s piece on Supervalu was very interesting and dramatic, and it got me talking with my broker. There doesn’t really seem to be a way out of this paradox: If investors get more information, they sell in a panic. If they don’t get the information they want, they still sell in a panic. It’s as if the whole context of a panicky marketplace is beyond the control of any particular company in any particular set of circumstances. You certainly cannot blame Supervalu for trying to control the response of the marketplace. From their point of view, it’s the horns of a terrible dilemma. It would be unethical, and so much worse in the long run, to hide any accounting error like this. On the other hand, why make it seem like a big deal by giving every sordid little detail to a public that’s already nerve-jangled about it? There is no such thing as information free of interpretation. The myth of transparency is that the marketplace will respond rationally, given all the information. But there is nothing obviously true or false about, say, an earnings statement. It means nothing until someone interprets the information. Or, to be more accurate, until the marketplace interprets the information. And in the current climate, that almost always means sell. Sell as fast as you can!
Doug Whalen, River Falls