Thursday, 21 June, 2018

Buffett, Dimon say quarterly profit forecasts harming economy

Warren Buffett Warren Buffett on Strong Economy ‘If We’re in the Sixth Inning We Have Our Sluggers Coming to Bat’ AP
Gustavo Carr | 09 June, 2018, 17:29

"Public companies should be managed for long-term prosperity, not to meet the latest forecast".

Dimon said the Business Rountable has been quite clear that it doesn't think tariffs are the way to do it.

In their op-ed piece, Buffett and Dimon argue that "effective long-term strategy drives economic growth and job creation" and that quarterly EPS guidance "often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability".

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Meanwhile, billionaire investor Warren Buffett and Berkshire Hathaway Vice Chairman Charlie Munger told FOX Business' Liz Claman last month that bitcoin was "more expensive rat poison", after previously comparing it to the deadly chemical five years ago.

FILE PHOTO: Jamie Dimon, CEO of JPMorgan Chase, takes part in a panel discussion about investing in Detroit during a panel discussion at the Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., April 11, 2018.

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It is a long-simmering debate but one that has gotten more attention in an era when activist investors are more vocal about pushing companies to deliver on their promises. JPMorgan Chase reported lower fourth-quarter earnings January 12, 2018 on weak trading revenues and one-time costs from USA tax reform, partly offset by gains from higher interest rates.Net income for the quarter ending December 31 was $4.2 billion, down 37 percent from the year-ago period.

The two executives said on CNBC Thursday that companies that focus on hitting their quarterly numbers may do things that hurt them in the future, such as delaying investments or changing when certain gains are recorded.

However, companies that are in favor of issuing guidance say that it improves communications with Wall Street, lowers share price volatility and results in higher valuations.

Buffett and Dimon said they were not opposed to the practice of quarterly and annual reporting that ensures transparency.

Buffett and Dimon also blamed the practice for contributing to the decline in the number of public companies in the US over the past 20 years. "But it would be a step in the right direction", they wrote.