How to Make Less, More (Profitable)

Keith Fitz-Gerald

I am about to tell you something that flies in the face of conventional wisdom. If you believe me, you could make a pile of money in a hurry. If not, I will do my best to change your mind.

Let me explain.

Wall Street and legions of academics, economists, and accountants want you to believe that more information equals better profits.

Not so.

In fact, there's a good argument to be made that less is more when it comes to your money, especially when it comes to quarterly reporting.

Quarterly numbers rob our economy of innovation and opportunity. Worse, they rob YOU of the profits that go with both.

How many times have you seen numbers released that should have made stocks pop, only to watch them head lower? How many times have you seen otherwise terrible information turn into huge gains? And how many times has that worked against you, because you didn't know how to "see through" the shenanigans?

Now – and this is very important – ask yourself how different your profits would be if you had the knowledge to see through this, to correctly anticipate which way company stocks would move, and why.

You could enjoy bigger, faster, and more consistent profit potential, year in, year out, in all sorts of market conditions.

I'll share one of my favorite metrics in a moment – one that will help you see through the quarterly noise in pursuit of life-changing wealth and turn less into more (profitably).

First, though… let's talk about how to…

Protect Your Money – Quarterly Reporting Is Overrated

Quarterly reporting has been with us for 84 years since it was implemented as part of the Securities Exchange Act of 1934. Sections 12(g), 13, and 15(d) require that companies file periodic disclosures intended to keep shareholders, the markets, and the investing public informed on a regular basis.

The intent was transparency, but that's hardly what we have today.

Quarterly reporting institutionalizes "short-termism" in the markets. That, in turn, leads to an unhealthy focus on meaningless results.

You may as well be throwing darts at the wall.

Short-term numbers and quarterly earnings data can – and are – frequently driven by factors beyond any executive team's control. Berkshire Hathaway Inc. (NYSE: BRK.A) CEO Warren Buffett and JPMorgan Chase & Co. (NYSE: JPM) CEO Jamie Dimon both argued as much this past April in a jointly written op-ed that appeared in The Wall Street Journal.

They wrote that, "companies frequently hold back on technology spending, hiring, and research and development to meet quarterly earnings forecasts that may be affected by factors outside the company's control, such as commodity-price fluctuations, stock-market volatility, and even the weather."

That's been my experience, too. And, not surprisingly, I agree.

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The quarterly earnings process is a lot like betting on a horse race after you know the results.

CEOs lay out guidance on sales and profits every 90 days to Wall Street analysts, very few of whom have an intricate understanding of what the numbers actually mean. But that doesn't stop 'em from guessing.

Those same analysts then go on to set "price targets" for specific stocks and make conflict-laden investment recommendations. Much of that is under the guise of "research," but, in reality, it's closely tied to the firms they work for or represent… commissions, trading revenue, and even in-house proprietary funds… those things all stand to benefit from the "right" findings when they're released to the investing public.

Companies that "beat" earnings often see their stock price jump, while those who "miss" often get hit hard. Especially lately.

Keith Fitz-Gerald

About the Author

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Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.

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