Ending quarterly earnings guidance?

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Ending quarterly earnings guidance?

Post by Farm_or » Mon Jun 11, 2018 7:19 am

This recent suggestions has peaked my interest. It would (in theory) solve a lot of shady accounting practices. Executives "earning" bonuses based upon market price escalation. Short term gimmicks that harm the long term progress of corporations.

But there is always a flip side. Like a reduction of accountability due to the close tabs of information and the scrutiny that goes with that? I think it would only shift the timeframe for short sightedness, but the fundamental problems will remain.

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Re: Ending quarterly earnings guidance?

Post by Riggerjack » Mon Jun 11, 2018 4:07 pm

Yeah, kind of like some of the "solutions" in the 9.9% thread, I think the solution is worse than the problem.

If we wanted to fix the issues you describe, the easy solution is to tie executive compensation to long term goals, rather than short. If CEO stock options don't vest until 5 years after the time they are awarded, the CEO is going to optimize for long term growth, or at least 5 years of growth. But that's in the interests of retail investors, people who are not even aware of a table, let alone represented there. This doesn't take an act of Congress, it could be as simple as a SEC rule change, or a change of the rules by any of the exchanges.

For all the "regulate wall street" chanting, there seems to be no interest in how it should be regulated.

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Re: Ending quarterly earnings guidance?

Post by arcyallen » Sat Jun 16, 2018 8:25 am

It's all noise. Until the actual numbers come out, guidance is practically useless unless you're trying to actively trade and even then it's of minimal utility. The only downside I see is that many companies DO make decisions aimed at the short term because of quarterly guidance. I'm a big fan of companies (and mutual fund managers) that think long term and don't give a crap about the short term :). Berkshire Hathaway and American Funds come to mind.

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