Warren Buffett, Jamie Dimon: Quarterly profit forecasts hurt economy

Warren Buffett, Jamie Dimon: Quarterly profit forecasts hurt economy

Dimon, who also leads the Business Roundtable group, and Buffett co-wrote an article about why they think quarterly profit forecasts are hurting the economy.

Warren Buffett has joined forces with Chairman and CEO of J P Morgan Chase Jamie Dimon to convince chief executive officers to end the practice of quarterly profit forecasts, reported CNBC. "We are encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance".

Dimon said CEOs can influence their quarterly results by not opening branch offices, cutting research and development spending, reducing their marketing and other decisions that could hurt future earnings.

"Public companies should be managed for long-term prosperity, not to meet the latest forecast". That's not too surprising given the Dimon is now the chair of the Business Roundtable.

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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. JPMorgan Chase reported lower fourth-quarter earnings January 12, 2018 on weak trading revenues and one-time costs from U.S. 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.

Although we've seen no immediate opposition to the proposed elimination of quarterly EPS guidance, it's not hard to imagine what at least one argument might be: just because companies don't publish the number does not mean they won't calculate such a number. Missing "the number" can often result in big, short-term stock moves. "Such short-termism is unhealthy for America's public companies and financial markets - which are critical to economic growth and financial prosperity", Business Roundtable said in a statement. Public companies owe it to all of them to get this right, they said.

Those in favor of guidance say it improves communications with Wall Street, reduces share price volatility and boosts a stock's value.

Neither Buffett and Dimon nor the Business Roundtable is arguing against quarterly or annual reports from public companies.

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