Posts filed under “Earnings”
Every now and then a remarkably bad idea springs to life. It gets debated, ridiculed and eventually discarded. In the marketplace of ideas, free and open debate help to determine which ideas are useful and which wind up in the rubbish heap. (John Stuart Mill was onto something). We tolerate reprehensible ideas because, ultimately, free speech leads society toward a greater truth.
Today’s column is about a concept so misguided and ill-conceived that it cries out for a debunking.
The idea is that publicly traded corporations should stop reporting their quarterly financial results. Moneybeat reported that the idea originated in the U.K., with Legal & General Investment Management, which manages $1.1 trillion in assets. Legal & General, according to the report, “contacted the boards of the largest 350 companies on the London Stock Exchange supporting a move away from quarterly reports.” That idea is now being championed in the U.S. by Martin Lipton and Sebastian Niles, both of the law firm Wachtell Lipton.
Before we dissect the problems with this proposal, let’s acknowledge upfront that there are many legitimate problems related to the quarterly earnings dance. It gives some companies an excessive incentive to disproportionately focus on short-term results. The pressure to game accounting can be overwhelming, and the way many companies use and abuse financial reporting is laughable. Longer-term capital expenditures, research and development, and investing can get neglected for fear it might hurt the quarterly numbers. Ignoring the long term leads to ill-advised acquisitions, needless firings and relentless obsession with cost cutting. Short termism certainly underlies the current practice of borrowing money to buy back shares.
Continues at: Wrong Fix for Short-Term Corporate Thinking
With the stock markets down almost (OMG!) 5 percent from their all-time highs, lots of folks are looking for signs that the bull is dying, if not dead. One of the more portentous omens is the recent decline and volatility of Apple’s stock. Or so it seems. For reasons too numerous to list here, Apple…Read More
I am pleased to introduce to Big Picture readers someone I have known and admired for many years: Bruce Bartlett worked for Congressmen Ron Paul and Jack Kemp, and in the Office of Policy Development in the Reagan White House, and at the Treasury Department for George H.W. Bush. He is now a political independent….Read More
Apple’s first-quarter earnings were blow-out numbers. Far beyond what anyone forecast, the figures show Apple arguably had the single-greatest quarterly performance in U.S. corporate history. A quick overview: Apple’s net profit of $18 billion is an astonishing gain of 38 percent over the already-huge $13.1 billion in the same quarter last year. (So much for…Read More
Markets were under intense pressure earlier today, with the Dow Jones Industrial Average down almost 400 points. Most indexes were down 2 percent or so around the globe before recovering some of the losses. As is often the case during big market swings, numerous narratives attempt to explain the causes of the market turmoil. Consider…Read More