Wall Street is on “Parade” 4 Time a Year, Is It Time to Change?
As it is now 4X a year there is a “parade” on Wall Street, wherein companies announce their Quarterly earnings, all in a row.
The banks lead, then the tech companies, the retailers bringing up the rear. Stocks can rise or fall based on the results, then 3 months later it happens all over again.
But now the SEC regulators are wondering if it istime for a change.
For 40 years, companies have had to make 4 yearly reports of basic financial information, including how much money they earned or lost, how much revenue they took in and what their expenses were.
This is supposed to help stock market participants make informed decisions.
But Wednesday the US Securities and Exchange Commission (SEC) said that it may change those rules. It noted there are drawbacks to the requirements, like the time and money companies have to spend to prepare the reports, and the possibility that important information gets lost in the flood of stuff companies have to disclose.
The SEC did not propose any specific new rules or commit to making changes.
It is really asking philosophical Big Questions:
- What do investors need to know?
- What’s the balance between transparency, which investors need, and burdening companies with the heavy reporting regulations?
Some observers believe that Quarterly reports are bad for companies.
BlackRock CEO Laurence Fink said in February that the constant reports encourage short-term thinking, and push companies to spend gobs of money on stock repurchases or big dividends, or repeatedly slashing costs instead of making longer-term investments that would help their business or the economy in the years to come.
Quarterly reporting forces short term thinking on the part of investors and on the part of management.
Should the SEC decide to make a change, the simplest option might be making companies report their results 2X a year instead of 4X. That is how the European Union (EU) handles earnings, although some countries within the EU have more stringent requirements. If companies wanted to give Quarterly updates, they can.
Regardless of how many times companies report or what those reports look like, it is Key that investors look at company results closely and be skeptical.
Friday, US major stock market indexes finished at: DJIA +21.23 at 18003.75, NAS Comp -39.66 at 4906.23, S&P 500 +0.10 at 2091.58
Volume: Trade was above average with over 1-B/shares exchanged on the NYSE
- DJIA +3.3% YTD
- S&P 500 +2.3% YTD
- Russell 2000 +0.8% YTD
- NAS Comp-2.0% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Bullish (0.26)||Neutral (0.24)||Bullish (0.27)||Bullish (0.26)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Neutral (0.16)||Neutral (-0.07)||Bullish (0.25)||Bullish (0.31)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Neutral (0.24)||Neutral (0.24)||Neutral (0.14)||Bullish (0.35)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Bearish (-0.47)||Very Bearish (-0.64)||Bearish (-0.27)||Very Bearish (-0.50)|
Have a terrific weekend.
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