Bitcoin sceptic Jamie Dimon tells buyers to 'beware'

Jun 09, 2018, 22:14
Bitcoin sceptic Jamie Dimon tells buyers to 'beware'

Warren Buffett and business friend Jamie Dimon argued Thursday that publicly traded businesses can damage their long-term growth and hurt their shareholders by forecasting their earnings every three months and then making short-term decisions to "make the number".

Dimon said companies might forego investments they should make in their business, such as marketing, hiring or research, in order to hit short-term goals.

Buffett, who is Berkshire Hathaway's chairman, and JPMorgan Chief Executive Jamie Dimon said in the interview that they had selected a person for the healthcare venture's top job.

Buffett, chairman and CEO of Berkshire Hathaway Inc., and Dimon, chairman and CEO of J.P. Morgan Chase & Co., said in a joint Wall Street Journal editorial that they are encouraging all public companies to move away from the practice.

Buffett and Dimon helped produce a set of voluntary governance guidelines two years ago, which was signed by more than one dozen executives.

"I have seen managements. get tempted by the predictions that they've made", Buffett said.

Several big companies like AT&T, Coca Cola, Facebook and UPS have stopped issuing quarterly earnings guidance. Buffett has echoed the idea that guidance can lead to corporate misbehaviour.

"Reducing or even eliminating quarterly earnings guidance won't, by itself, eliminate all short-term performance pressures that USA public companies now face, but it would be a step in the right direction", Dimon and Buffett wrote. "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.

Neither Buffett and Dimon nor the Business Roundtable is arguing against quarterly or annual reports from public companies. Bloomberg LP, the parent of Bloomberg News, is a member of the Boston-based non-profit group.

"It can 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.