Markets

Elliott's Singer agrees with Buffett, Dimon on profit guidance

Elliott's Singer agrees with Buffett, Dimon on profit guidance

Neither Buffett, chairman and CEO of Berkshire Hathaway Inc.in Omaha, or Dimon, chairman and CEO of JPMorgan Chase, predict their profits every three months.

Executives often feel pressure to make quarterly forecasts, but "it can often put a company in a position where management from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done", Dimon said in a rare joint interview with Buffett airing Thursday on CNBC's Squawk Box .

The pressure to meet short-term estimates has contributed to a fall in the number of USA public companies, wrote Buffett, the chairman of Berkshire Hathaway, and Dimon, who is also the chairman of top executives' lobbying group Business Roundtable, in a Wall Street Journal article on Wednesday.

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.

So they should stop the forecasting, the two men said. "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.

Facebook privacy bug 'affects 14 million users'
A Facebook booth is seen at the China International Big Data Industry Expo in Guiyang, Guizhou province, China, on May 27, 2018. That way, users can reset a post that was inadvertently set to public back to being shared just with friends if they would like.

Dimon, Buffett and BlackRock Inc.'s Laurence D. Fink urged companies in 2016 to refrain from short-term earnings forecasts in a letter and report with other financial industry executives. "Let's not forget how we got here: Reg FD was meant to end selective disclosure, the private guidance on future results", Santoli said.

"I've never seen a company whose performance has improved by having some forecast out there by the CEO that we're going to earn X", Buffett said.

Buffett told CNBC on Thursday that the CEO will probably be announced within two weeks. 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.

Quarterly earnings guidance works like this.


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