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Earlier this month, The Wall Street Journal ran an opinion, co-authored by Jamie Dimon, chair and CEO of JPMorgan Chase & Co., and Warren Buffett, chair of Berkshire Hathaway Inc., titled "Short-Termism Is Harming the Economy."
It made quite a splash, with lots of pundits opining that maybe these guys were onto something.
The truth is Buffett and Dimon's opinion is without merit. Worse, it's dangerous.
The "short-termism" they claim is harming the economy manifests itself in earnings guidance from managers of public companies.
As if CEOs' and CFOs' earnings guidance impacts America's $19.4 trillion economy. It doesn't.
The authors state, "Today, together with Business Roundtable, an association of nearly 200 chief executive officers from major U.S. companies, we are encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance. In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth, and sustainability."
It's a bait-and-switch - they want you to "watch the birdie."
Because what the authors really want to do away with isn't just earnings guidance... It's earnings reporting.
That's not my opinion: That's exactly what they've been advocating.
And it's not even close to being in investors' (which is to say our) best interests.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
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