The Stock Market is about to NEVER BE THE SAME!
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Today we discuss a big stock market change that Warren Buffett and Jamie Dimon are trying to get done. If they get all Ceo’s on board this may change things in a big way for the stock market.
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Guys, the stock market may be about to change in a massive, massive way. And it has to do with something Warren Buffett and jamie diamond are teaming up to try to do. And this could be a fundamental shift in the way the stock market works.
And this could affect a lot of investors and traders out there guys, this is a pretty big stuff. So what this has to do with let’s think of first second about what affects a stock as far as the stock price going up a ton or downtime on a specific day.
The first thing that comes to my mind when I think about something that would make a stock go up a ton or downtime on a day is earnings. Okay, earnings are the first thing I think about all right, then after that.
I think about probably analyst analyst, you know, when they upgrade or downgrade a stock, you know, sometimes these stocks can move five or 10%, just based upon an analyst coming out and saying, Oh, I like that stock for ABC reason.
I hate that stock, you know, for whatever reason, you know, it deserves to be sold and whatnot, analysts can move the stock in a big in a big way. So after earnings analyst is probably the next biggest thing.
And then after that the next biggest thing is I think is about just like the market trend, like how is the market doing overall, you know, markets going up tons every single day, the good chance, you know, stocks are going up tons every day.
If the markets going down in massive ways, and it’s crashing, good chance those stocks are crashing. Okay. So in that order, those are kind of the biggest things that effect a stock as far as going up a ton or down a ton on a day.
Now, this first one the biggest thing could be affected in a major way based upon what Warren Buffett and jamie diamond are trying to do here guys. And if they get this through, this is going to be definitely a fundamental shift in the stock market.
So Warren Buffett and jamie diamond join forces to convince CEOs to end quarterly profit forecasts. All right, Warren Buffett and jamie diamond have teamed up once again to call for an end to quarterly earnings guidance by companies diamond.
The chairman of business roundtable said the group of CEOs have thrown in support behind companies backing away from the practice, 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 okay basically making short term decisions just to try to hit these numbers whatever is possible diamond.
The chairman CEO of JPMorgan Chase and Buffett, the chairman, CEO of Berkshire Hathaway wrote about the group’s endorsement in an opinion in a column on the wall street journal. It’s a long simmering debate.
But one that has gotten more attention in an era where activist investors are vocal in pushing companies to deliver on their promises, companies forecasted sales and profit numbers to Wall Street analysts who use it to produce research and stock recommendation for investors missing.
The number can often result in a big short term stock moves, making a forecast and then hitting the target are seen as the management’s expectation to eliminate volatility. Buffett’s Berkshire Hathaway doesn’t give guidance.
Which Buffett has said contempt executives to manipulate numbers to meet street expectations. It’s sending the wrong message. Buffett told CNBC is Becky quickie when companies get to where they’re sort of living and dying by the so called numbers.
They do a lot of things that are really counter to the long term interest of the business, Buffett and diamond have helped produce a set of voluntary governance guidance two years ago, which was signed by more than a dozen executives.
One of the principles outlined in the report said companies shouldn’t feel obligated to give quarterly guidance, which for years has been blamed for many executives obsessing with short term results there guys.
So this is a huge, massive move if companies stopped giving, you know, you know, all this quarterly guidance, especially, you know, they’re talking specifically about profit guidance, all right, saying we’re going to hit ETFs number.
Because what will happen so many times, as a company will say, Well, hey, we’re gonna do $1 of epcs, this quarter, and then maybe the company comes in at you know, 98 cents or whatever, and get that stock will move 10 plus percent in a day, and it’s a massive move.
And it’s like, Holy smokes, they barely missed by two cents, but the stock goes down over 10%. They didn’t miss numbers by 10% or 15%. But yet, the stock will move like that, and it just makes earnings days, you know, extremely volatile.
Now, if if they can eliminate this, it doesn’t mean it’s going to eliminate volatility in general from earnings periods, because you’re still going to have these analysts who are going to be making up whatever numbers they want to make, you know.
They think that company is going to hit for that quarter okay. So it’s not going to eliminate the vodien in you know, total for earnings, but it can eliminate Some of that volatility, which would fundamentally change the market.
If say, you go from maybe, you know, stocks moving 1015 20% on earnings, what if the average stock only moves two or 3% earnings or maybe four or 5%. But these analysts are going to be in a situation where their job is going to get a lot harder.
It’s real easy as an analyst, if you’re getting if you’re getting guidance from the company. So a company says, oh, we’re going to do $1 of earnings per share this this coming quarter. Well, guess what, as an analyst, your job is pretty freakin easy, right.
If you’re a little more bullish, maybe you’ll say all they’ll probably do $1 or three, if you’re a little more bearish, you’ll say all they’re gonna do 97 cents, or something like that, and your jobs really easy.
But if this company doesn’t say anything, then I’ll send us a call, what are they gonna do? They’re gonna do 50 cents this quarter. $1 $1.50? We don’t know, because they didn’t give us any guidance for that. Okay.
So I think, in my opinion, I think companies should probably get rid of overall guidance. Okay, as far as quarterly guidance, I think companies should get an annual guidance, which is once a year, once a year, they should give total guidance.
And if they see, you know, if there’s a big move either way, so they see the ball, we’re never going to hit that guidance, you know, throughout the year, you know, as it goes along. If they say, oh, we’re never going to hit these numbers or whatnot that we said we were going to hit.
Then they can update that as the year goes on, or if the things are way better than expected. And they can say, well, we’re actually going to do much better than we had, you know, initially anticipated.
I think one year guidance is good, you get one year guidance for your, you know, your what you expect the revenue, the PS and all those numbers to do. But the fact is, I think, you know, just by doing the little Warren Buffett plan.
Which is just kind of eliminating the profit guidance, I think that’s that’s one, you know, start that can definitely change things. But I think if you eliminate the revenue guidance, and also the gross margin guidance.
I think that’s also a big thing. There’s no reason out there, in my personal opinion, you need any more than one year of guidance, okay, as a long term investor, I don’t care necessarily at the company is going to.
You know, make 95 cents this quarter or 92 cents, or 97 cents, when it cares if that company is going to hit their numbers for the overall year. Okay, I’m a long term investor, I want to know, on a year on year basis, are they hitting their numbers, okay.
I don’t want a management team that feels like if they said we’re going to do 95 cents of you know, epcs and we’re going to do $2 billion of revenue, we got to at least meet that or we got to beat that over a freakin screwed and the stocks gonna tank and all that I don’t want you know.
A management team that makes those type of expectations for themselves, because it just puts so much short term pressure on the company. And what ends up happening is you have these executives start leaving these companies because the pressure is too much or you have people that just you know.
Are very unhappy or just focus short term, and they start making short term decisions hiring and firing decisions based upon short term stuff they start you know, doing whatever it takes just to hit those numbers short term.
When really that could be negatively affecting the company over the long term because if you make a ton of short term decisions, eventually what’s going to end up happening is your long term plan is not going to come to fruition because you made a bunch of negative short term you know decisions in the short term.
Okay, so one year guidance is enough. Now if this all goes through, this could negatively affect a few people Okay, one it could affect day traders this could absolutely affect day traders because day traders they want as much volatility in the market as possible okay.
Someone that’s trading in and out of stocks all the time and just trying to capitalize on stock moving up but you know, a few cents or a few dollars or whatnot, day traders can be affected by this you know, swing traders even, you know.
Someone that maybe goes on on earnings and you know, short stock and maybe that stock only moves 5% so that usually moves 10% or somebody goes long on a stock and you know, let’s say it goes up it only goes up 5% versus 10 or 15%.
So day traders will be affected also brokerages can be affected basically brokerages you know make a ton of money off of Trade Commission’s you know, everybody except pretty much Robin Hood, they charged you know, three 510 dollars per trade.
So brokerages can absolutely be affected negatively by this investment banks, to a certain extent will be affected negatively by this. But the question is, can they get it through? I think there’s a good possibility because.
I think CEOs are just starting to wake up to this quarterly guidance, especially on the profit numbers. That’s just ridiculous, man. It’s so short term and thinking like like it’s it’s just not right. It’s not right.
I think they should do away with all the short term guidance. I think it should be one year guidance on the revenue, the gross margin, you do, you know, the APS expectations, the whole deal, the net income once a year, okay.
And if you feel like you’re gonna be way better than those numbers are way worse than those numbers as the year goes on. You update that a quarterly numbers, is he relevant? Is he relevant to anybody that’s really in the stock market for long term.
You know, perspective, you know, investing in the stock for the long term, which is really what the stock market’s about. It’s about people investing in a stock and holding that stock because they believe in that company over the coming years.
Okay, that’s what stock market investing really is. You know, Been obviously, you know, changed over the past few decades, you know, traders and whatnot have come in, and all this different stuff and as the market has kind of changed forever.
But when you think when you break it down to its simplest thing, the stock market is, you know, a place where companies can raise capital where companies can have great governance and where companies you know.
Can find long term investors in those companies and those people can hopefully reap the benefits of getting dividends and you know, an appreciating share price over time. So anyways, I want to know your guy’s opinion on this subject.
I would love to hear from you guys. As always in that comment section, let me know your opinion on the subject. Thank you for watching. Have a great day.