Buffett, Dimon say quarterly profit forecasts harming economy

Bad Advice       Quarterly guidance has resulted in bigger earnings surprises since 2016              Source Bloomberg

That's not too surprising given the Dimon is now the chair of the Business Roundtable.

Investor Warren Buffett gestures on stage during a conversation with CNBC's Becky Quick, at a national conference sponsored by the Purpose Built Communities group that Buffett supports, in Omaha, Neb., Tuesday, Oct. 3, 2017, Buffett discussed what philanthropy can do to help fight poverty.

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.

Securities laws require quarterly reports on profits, revenue and other information but do not require quarterly forecasts.

In the op-ed, Dimon and Buffett said the pressure to meet short-term earnings estimates has contributed to a drop in the number of public companies in the United States in the past two decades.

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Dimon said Thursday that about 20 percent of Business Roundtable members still do quarterly guidance and about 60 percent provide annual targets. Without company guidance, analysts' estimates are likely to vary more, making share prices more volatile at the same time that estimates become less valuable to investors and, horror, not worth paying for. Missing "the number" can often result in big, short-term stock moves.

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.

Dimon said that Schultz "would be a great chief executive or governor or senator or mayor or whatever he wants to do", but added that he's not sure that managing a business makes a person suitable for politics.

"When companies get where they're sort of living by so-called making the numbers, they do a lot of things that really are counter to the long-term interests of the business", Buffett told CNBC Thursday. "Short-term-oriented capital markets have discouraged companies with a longer-term view from going public at all, depriving the economy of innovation and opportunity", they said. "But it would be a step in the right direction", they wrote.

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