[HN Gopher] US SEC preparing to scrap quarterly reporting requir...
___________________________________________________________________
US SEC preparing to scrap quarterly reporting requirement
Author : djoldman
Score : 721 points
Date : 2026-03-17 00:02 UTC (22 hours ago)
(HTM) web link (www.reuters.com)
(TXT) w3m dump (www.reuters.com)
| ashraymalhotra wrote:
| It would be interesting to see if reducing reporting requirements
| allows more startups to go public earlier in their journey, hence
| opening up more opportunities for public to participate in the
| upside!
| paxys wrote:
| Just look at the track record of SPACs for a preview of how
| that will turn out.
| sashank_1509 wrote:
| I think it's still fine. I've invested a lot into some
| SPAC's. I'm good on 1, break even on the other. And I'll keep
| holding it, since these companies are still pre-revenue and I
| hope they 100X.
|
| The overall idea of SPAC's is not bad, even if Chamath only
| created them to exit his sh*t investments. There are very few
| other ways for retail investors to invest in potential
| 100-1000X companies (which are generally pre-revenue). Of
| course the flip side, is that most SPAC's might close down
| and cause you to lose money. That is the decision for the
| investor to make, risky opportunities are fine! Sadly
| chamaths shitty tactics to close out his investments have
| tainted a completely fine idea.
| gzread wrote:
| Have you tried reaching out privately to those companies
| you want to invest in? Stock trading doesn't only happen on
| stock markets, and the rationale for publicly traded
| companies being so regulated is because they're so easy to
| invest in.
| sashank_1509 wrote:
| That's much harder. If it's a big private company like
| OpenAI, you need a minimum 50k investment. For smaller
| companies, the number is much higher I assume.
| gzread wrote:
| Yes.
|
| Can you really invest only 50k into OpenAI? That seems
| _low_ to me.
|
| However, some small companies are okay with small
| investments. You have to negotiate privately, that's just
| how it is. If it was a simple, uniform process, they'd be
| on the stock market.
| jordanb wrote:
| > even if Chamath only created them to exit his sh*t
| investments. There are very few other ways for retail
| investors to invest in potential 100-1000X companies
|
| "I have this exciting bag-holding opportunity for you."
| donavanm wrote:
| Dude. SPACs are structurally a _terrible_ idea for any non-
| privileged investor. The sponsors 20-25% comp, the early
| warrants, etc. All of those costs are taken out of the bag-
| holder, sorry "investors", expected value. The entire thing
| is setup to maximise info asymmetry and perverse incentives
| for the sponsors at the cost of bag holders. The "shitty
| tactics" _are why SPACs exist_.
| sashank_1509 wrote:
| Even so, VRT has gone up 2000% since it SPACC'ed. RKLB
| was also a SPAC. A SPAC is a just a way to satisfy
| regulations as a pre-revenue early stage company. Most
| early stage companies fail, and that's fine.
|
| If such a company succeeds and still retail investors,
| don't get paid back, I would consider that fraudulent,
| but that's not the case with SPAC's. I would like to see
| SPAC deals be better to investors as opposed to banning
| them entirely.
| JumpCrisscross wrote:
| > _overall idea of SPAC's is not bad_
|
| It is. It's a workaround.
|
| More directly, SPACs are financially engineered to extract
| wealth from retail. Every weird interest-rate, guaranteed-
| floor and private-placement provision is geared for it. We
| have a crap IPO process, in part due to reporting
| requirements, so sometimes the gamble works out.
| jrochkind1 wrote:
| Can you connect the dots for me, why would reduced reporting
| requirements allow more startups to go public earlier?
| jordanb wrote:
| Combining this with a SPAC a startup would be able to have a
| six month runway as a public company before having to
| disclose finances. I imagine that would be attractive to some
| firms.
| donavanm wrote:
| Weird, why wouldnt this fantastic startup want to report on
| their performance in a standardized and accountable manner
| for six months after collecting public money to pay out
| insiders and "sponsors"?
|
| Surely they wouldnt mind bragging about their fantastic
| GAAP P&L in their filing docs. Maybe its the pesky quiet
| period theyre trying to avoid, so they can be even more
| transparent about finances and equity holders.
| cj wrote:
| Some people argue that the requirements placed on public
| companies (like mandatory quarterly reporting) add
| operational overhead that might cause a company to postpone
| an IPO until they're larger or more established.
|
| In practice, companies like Stripe, OpenAI, etc have stayed
| private because they've been able to access the cash they
| need at valuations they're happy with and because no one
| wants to open their books unless they have to. They aren't
| staying private because being a public company is hard.
| gnulinux996 wrote:
| But mostly downside
| dboreham wrote:
| That was easy.
| mslate wrote:
| This means that employees would only be able to sell their stock
| 2 windows a year where they currently can sell 4 windows a year,
| correct?
| paxys wrote:
| There is no law regarding how and when (non-exec) employees can
| sell company stock. The SEC only restricts insider trading, and
| some companies voluntarily enforce blackout periods to reduce
| the chance of insider trading. Plenty of public companies (e.g.
| Microsoft) let employees trade whenever they want.
| dzonga wrote:
| in the UK this is kinda the policy.
|
| however the bigger issue here - is this is a ruse - there is a
| reason quarterly reporting brought transparency to companies -
| now they can easily hide nasty things.
|
| you as an employee with stock options - yeah those are close to
| worthless since the price hit you can take can vary a lot.
| darth_avocado wrote:
| > now they can easily hide nasty things.
|
| For 6 months instead of 3. One could argue the need to show
| quarterly growth forces companies to do nastier things. Long
| term thinking is definitely needed these days when all
| companies are only focusing on short term gains.
|
| Before 1970, the reporting was twice a year and in the first
| half of the twentieth century it was once a year.
| lambdasquirrel wrote:
| Would _that_ necessarily be a bad thing? I remember how that
| would drive short-termism on the part of regular employees.
| Since stock comp was a major part of many companies ' salaries,
| people would hope for a bump in the earnings report. We
| complain about short-termism in the markets, but you can't say
| one thing and then do something else.
| giwook wrote:
| It would be bad in that it makes employees' stock less
| liquid. Stock-based compensation is a huge part of many
| employees' comp packages.
|
| I think a small subset of people might adopt a short-term
| approach to equity ownership. I think a much larger subset
| would simply be selling to access the money they rightfully
| earned or to diversify their holdings instead of having the
| bulk of their stock portfolio in a single company.
|
| What if someone froze half of your paycheck and said you
| can't touch it except for the two months out of the year that
| they say you can?
| calstad wrote:
| That depends on your company, not the SEC. I work for a
| publicly traded company and have very few blackouts, mostly
| around earnings, for selling.
| technothrasher wrote:
| 10b5-1 plans would presumably still be a thing if you wanted to
| sell more often.
| yoz-y wrote:
| Much larger windows though no? Blackout periods are prior to
| reporting dates.
| tomesco wrote:
| Rather, trading periods are for a limited time after reports
| are released. Before employees accrue too much non public
| information.
| morcus wrote:
| That's not how it works at my company. Trading is only
| blocked around 3 weeks each quarter.
| gleenn wrote:
| I think the effect is actually backwards: there may only be 2
| windows instead of 4 but the total amount of time window per
| year should theoretically go up significantly. The 2 removed
| reports should make both of those quarters less subject to
| insider trading and therefore more tradeable.
| yuliyp wrote:
| In companies I've been in, insider trading windows close
| because there's been a certain amount of time since the last
| report. So less frequent reports = more time for insider to
| know things that aren't public yet = more time unable to
| trade, not less.
| deadbabe wrote:
| If you have earnings too frequently, it encourages companies to
| become hyper focused on earnings and make less long term
| investments. But if there is too much gap in between earnings,
| there is potential for grifting. What to do?
| Gigachad wrote:
| Encourage more smaller privately owned companies rather than
| massive megacorps.
| pixelatedindex wrote:
| They all grow by acquisitions, if you want smaller privately
| owned companies then you also need a strong anti-trust body.
| gzread wrote:
| We could keep making companies they want to acquire until
| they run out of money to acquire them with.
| thayne wrote:
| Yes. That is what I want.
| heliumtera wrote:
| So either big companies would lobby against their interest,
| or SEC would do something independently. Honestly I cannot
| decide which one is more absurd.
| thinkingtoilet wrote:
| I highly doubt semi-annual reporting will shift the focus from
| the short term profits at all costs thinking that prevails
| today.
| Terr_ wrote:
| Report very frequently, then use a moving-window average for
| any sharp questions of tax and legislation?
| jimt1234 wrote:
| Quarterly reporting didn't seem to hurt Amazon.
| senkora wrote:
| > The U.S. Securities and Exchange Commission is preparing a
| proposal to scrap the requirement for companies to report their
| earnings every quarter and giving them the option to share
| results twice a year
|
| So, at least twice a year would still be mandatory until this
| change.
| Gigachad wrote:
| [flagged]
| nevi-me wrote:
| The norm in other countries is 6 months. That's enough time to
| get the mid-year numbers to be reviewed by an auditor.
|
| I don't think malice of the decision.
| Gigachad wrote:
| At least what I saw, which might be inaccurate, is that in
| countries with 6 month mandatory reporting, most companies
| still choose to report quarterly or investors start to get
| nervous.
| ee64a4a wrote:
| Hard to disentangle that from quarterly being the US
| standard, what with it being the most robust capital
| markets and nexus of major financial transactions.
| mrcsharp wrote:
| Please read the article.
|
| > The WSJ report added that the rule is expected to make
| quarterly reporting optional and not eliminate it
| altogether.
|
| So companies can still do their quarterly reporting if they
| and their investors want that.
| motoxpro wrote:
| Thats exactly what they said
| mrcsharp wrote:
| Fair enough. I misunderstood.
| reg_dunlop wrote:
| I don't understand arguments like this.
|
| Universal healthcare? Democratic rule of law? Affordable
| living wage?
|
| Nah, I'll bang the drum of international equality for
| corporate malfeasance.
| jazzpush2 wrote:
| And allow more insider trading.
| ares623 wrote:
| The timing with all the AI IPOs that _really really need_ to
| happen this year or else is very sus
| gucci-on-fleek wrote:
| Does anyone have any guesses about how most companies would react
| to this? Will most keep publishing quarterly reports, will most
| switch to semiannual reports, or will it be a 50/50 split? Or are
| the major stock exchanges likely to continue mandating quarterly
| reports?
| IgorPartola wrote:
| Most large companies will continue quarterly reporting because
| institutional investors will not accept anything else. For a
| company with market cap of $500m spending $1-2m yearly on
| quarterly audits is non-trivial. For a company that's $5b and
| up that's not much at all.
|
| This is also not a done deal and large pension funds will
| oppose this hard during the public comment portion of this
| process.
| RA_Fisher wrote:
| I think they'll keep the status quo of quarterly, bc if any
| announce switching I'd expect their stock value to fall (bc in
| my mind the decision would transmit more bad potential than
| positive potential for future earnings). ie- I don't buy that
| quarterly reporting drives too short-term decision-making (or
| that it's generally too short).
| heliumtera wrote:
| If some random company known to be the biggest money furnace
| that ever existed decides to do an initial Public offering, and
| continues to be the biggest money furnace that ever existed
| with no hopes of revenue...would that hypothetical company
| prefer to report the damages earlier than later?
|
| Nobody knows about most companies, but either a big big public
| company will benefit from this, or a soon to be public company
| will benefit from this.
| readthenotes1 wrote:
| European companies report every 6 months and it doesn't seem to
| do any harm
| Vaslo wrote:
| This is a really key point - it's already working fine
| elsewhere.
| throw0101c wrote:
| The UK went back and forth on it:
|
| > _Beginning in 2007, UK public companies were required to
| issue quarterly, rather than semiannual, financial reports. But
| the UK removed this quarterly reporting requirement in 2014. We
| studied the effects of these regulatory changes on UK public
| companies and found that the frequency of financial reports had
| no material impact on levels of corporate investment. However,
| mandatory quarterly reporting was associated with an increase
| in analyst coverage and an improvement in the accuracy of
| analyst earnings forecasts._
|
| *
| https://rpc.cfainstitute.org/research/foundation/2017/impact...
|
| So it seems that if you want more accurate analysis for
| investors (and current stock holders), more frequent is better.
| kshacker wrote:
| This is an awesome move. They're not saying the reports go away--
| just moving them to every six months. After hating how each
| company runs on an internal quarterly cycle, I have to welcome it
| despite how the change originated. Six months is still short from
| the perspective of perverse incentives, but if you free up one
| week of charade from execs every 13 weeks, maybe they can focus
| better.
|
| And it's not just execs, but the whole corporate machinery that
| takes 3-6 weeks after quarter end to churn out reports. Of
| course, internally executives should be tracking performance
| daily, but the quarter-end panic could lessen. If you have a bad
| quarter, you're not penalized as much if the surrounding months
| are good.
|
| And anyway, if there is a material adverse change the companies
| should be expected to disclose, like they are expected now.
|
| Ps: I posted the same on Reddit a couple of hours back. Not AI
| but if you do find the account don't mention them online in the
| same sentence.
| testbjjl wrote:
| I see how it helps you and the company. What about investors
| who you borrowed money from.
| jmcgough wrote:
| Arguably better for everyone. Too much focus on short-term
| profits can harm long-term growth.
| throw0101c wrote:
| > _Arguably better for everyone. Too much focus on short-
| term profits can harm long-term growth._
|
| If you think quarterly reporting 'season' is crazy now,
| wait until it becomes semi-annual and the pressure is
| _really_ on to hit analyst numbers. It 'll be like New
| Year's Countdown on Results Release Day.
| brendanyounger wrote:
| What will actually happen is that frauds and poorly run
| companies will opt for the 6 month schedule while well run ones
| will keep the 3 month.
|
| To your point that "executives should be tracking performance
| daily", there's an argument that all that data should be
| publicly released daily. It would make it nearly impossible to
| hide mismanagement and actually remove most of the human
| overhead since it would be impossible to spin bad data on a
| daily basis.
| lokar wrote:
| IMO, it would be ok if it was not unconditional.
|
| If you have been public for >N years, and have had >X "clean"
| quarterly reports, no trouble with the SEC, etc, then sure,
| back off to 6mo (or even yearly, if your shareholders are ok
| with that).
|
| But if you have an audit problem, violate SEC rules, get any
| kind of conviction, hell, even an inditement, then back to
| quarterly until you clean it up.
| runako wrote:
| > If you have been public for >N years, and have had >X
| "clean" quarterly reports, no trouble with the SEC, etc
|
| ...staff changes happen, incentives change due to changes
| in business performance. Enron was apparently clean public
| company from 1985 until sometime after Andrew Fastow was
| hired in 1990.
|
| If high-resolution transparency has any value, it doesn't
| make sense to do it a few times and then stop.
| lich_king wrote:
| This is not how corporate fraud usually happens. You don't
| tamper with the quarterly report, especially since it gets
| audited. You tamper with the input data close to the source.
| For example, you record revenue that hasn't happened yet or
| you delay the recording of losses.
| skissane wrote:
| Releasing data at regular intervals gives people time to
| review the data, identify mistakes and rectify them.
| Releasing financial data daily, you are much more likely to
| release incorrect info and then have to go back and correct
| it.
|
| For certain types of firms, daily revenue figures are likely
| to reveal individual deals. Many B2B firms have a modest
| number of high value deals, a daily data feed might show $0
| revenue one day $1.374 million the next, which is more likely
| a single deal of that size than two or more smaller deals-and
| that would reveal a lot to competitors-especially if those
| competitors are in other jurisdictions which haven't mandated
| this form of extreme transparency
| throw0101c wrote:
| > _Releasing financial data daily, you are much more likely
| to release incorrect info and then have to go back and
| correct it._
|
| Why do you need to "go back"? The corrected data would be
| available the very next day (or month (or week or
| fortnight) if you don't want to go to that extreme).
| skissane wrote:
| If you publicly release incorrect financial results,
| there is a formal process you have to follow to notify
| the public that you made an error ("restating results").
| But if you catch the error before you release the
| results, you get to skip all that. Make people release
| results daily, they'd be restating past results all the
| time, because they wouldn't have time to catch errors
| prior to release.
| roxolotl wrote:
| I have the opposite opinion. More information is always better.
| Absolutely the reporting requirements are onerous and there
| already are perverse incentives to chase things quarterly.
| Reducing reporting requirements is only going to make things
| worse though. The only solution I can imagine is to instead
| drop reporting requirements to instant. Make all public
| companies truly public. Reporting information should to be
| accessible via a feed 24/7. There can be no more perverse
| incentives if there's no hiding. Insane and unlikely? Sure yea.
| But let's not pretend that reducing information is going to
| help anything.
| jordanb wrote:
| Or even start with monthly. The problem with quarterly
| reporting is the internal efforts to "game" the quarter. The
| more aggressive disclosures are, the less of a shell game
| people can play to "make the report come out right."
|
| Moving it to bi-yearly does the opposite. CEOs can now do the
| same amount of gaming with half the effort. Or twice the
| gaming with the same effort.
|
| Should be obvious who this change is for.
| jatins wrote:
| Yes, reporting should be a non event. This move will
| encourage bad behavior imo
| carlosjobim wrote:
| And now I know why surgeons spend more time filling out
| paperwork than treating patients.
|
| Now I know why I have to stand for 15 minutes at the hotel
| reception desk to check in to my already paid room, while the
| receptionist is typing away.
|
| Now I know why projects which should take one week to
| complete instead take 5 years.
| throw0101c wrote:
| > _And it's not just execs, but the whole corporate machinery
| that takes 3-6 weeks after quarter end to churn out reports._
|
| Release early, release often.
|
| If you want corporate machinery to run more smoothly with less
| effort, force it to operate _more frequently_ not less: when
| TLS certs had 2-3 year lifespans there was all sorts of manual
| methods that people forgot how to do; then it was maximum one
| year. We then got free certs from LE (using ACME), but they
| were 90 days, so that made automation much more necessary.
|
| Now with certs from _public CAs_ having a max time of 47 days
| soon (not that I 'm necessarily a fan) automation is all but a
| must.
|
| So if you want less onerous effort on corporate reporting, your
| workflows and processes need to be much more automated: that's
| one of the reason why computers were invented after-all, to
| make computations faster.
|
| And one way to _force_ automation is to insist on _more
| frequent_ reporting, not less; Barry Ritholtz:
|
| > _This is exactly backward: More frequent reporting makes the
| data less significant. In the real world, human behavior
| emphasizes what occurs less often--meaning doing something less
| frequently gives it an even greater significance than something
| that becomes routine or common._
|
| > _That is the difference between a New Year's Eve celebration
| and a married couple's weekly date night._
|
| > _Twice-a-year earnings reporting will make the event so
| momentous, with such focus on it, that any company that misses
| analysts' forecasts will find their stock price shellacked. The
| twice-yearly focus on making the per-share number will become
| overwhelmingly intense._
|
| * https://www.fa-mag.com/news/reporting-profits-daily-would-
| en...
|
| Move from quarter / every-3-months to _monthly_ reporting:
| companies will be forced to automate their "corporate
| machinery". And each report will be much less 'momentous'
| because the time between samples will be much less.
| nickff wrote:
| The problem with reporting often is that the reports must
| each be audited (which is time-intensive and expensive), and
| any errors subject the companies to class-action lawsuits
| (which only ever benefit the lawyers, but that is a separate
| matter).
|
| I would also prefer more frequent reports, but only if they
| were less burdensome and risky.
| runako wrote:
| Longer periods between audited (aka "accurate") results
| will lead to compounding errors. Fewer people at the
| company will have a clear idea of how the company is doing.
| Audits are like CI for finances.
| nickff wrote:
| I agree that would be preferable if reporting were less
| expensive and (legally) risky, and what you're describing
| is definitely closer to the original intent of the rule
| (that of giving investors the information available to
| management), but it would make being a public company
| even more burdensome than it already is, and the number
| of public corporations is already in decline.
| HeWhoLurksLate wrote:
| how much of that decline is due to mergers vs failing vs
| new private companies being formed instead?
| runako wrote:
| > it would make being a public company even more
| burdensome than it already is
|
| Every company doesn't have to be public. The US taxpayer
| underwrites US securities markets, and companies that
| trade on our public markets have access to some of the
| deepest pools of low-cost liquidity in the world. But
| companies are obviously free to list elsewhere.
|
| > the number of public corporations is already in
| decline.
|
| Separate problem. IIRC HBS studied this and basically the
| issue is we stopped enforcing our anti-competition laws a
| while back[1]. So we end up with a fraction of firms that
| each sector would financially support. Both because it
| creates giants that are much harder to compete against,
| and because it allows mergers between competing firms
| that AFAIK could be deemed illegal under existing laws.
|
| 1 - See, for example the Robinson-Patman Act, whose
| dormancy allows big box retailers to exist. This law has
| never been repealed.
| Karrot_Kream wrote:
| When companies stay private longer, private capital stays
| tied up for longer, decreasing public liquidity and
| keeping bad private investments afloat for longer. Part
| of the creative destruction of the dot com bust was the
| legion of badly performing companies that went public and
| were thoroughly rejected by public investors, offering an
| exit to later investors and employees. Right now badly
| performing companies can limp along tying up liquidity
| and locking up employee equity only to head to an
| eventual bankruptcy or bad IPO.
| throw0101c wrote:
| > _Part of the creative destruction of the dot com bust
| was the legion of badly performing companies that went
| public and were thoroughly rejected by public investors,
| offering an exit to later investors and employees._
|
| That's not how I remember it. I remember lots of publicly
| traded company shares being gobbled even though their
| business plans[1] were essentially:
|
| 1. Collect underpants
|
| 2. ?
|
| 3. Profit
|
| "Going for marketshare" and not making a profit was still
| popular as recently as Uber/DoorDash/ _etc_. Cisco still
| (AIUI) hasn 't reached back to is DotCom peak.
|
| Are the current multiples of many tech stocks sensible?
|
| [1] https://en.wikipedia.org/wiki/Gnomes_(South_Park)
| Karrot_Kream wrote:
| I'm having a hard time responding to someone who's using
| a South Park episode as a discussion point. Like how can
| I debate a point made by a show that makes content
| reacting to the popular perception of certain ideas?
| That's like 2 levels removed from the actual true
| details.
|
| Anyway the difference now is that those companies still
| exist they just take round after round of private
| investor capital and the employees are offered shares
| that will never be tradable. Were those businesses would
| go bankrupt in a few years before now they can take 5-10
| years. Time value of money being a thing, your money will
| be locked up for longer in a bad investment than it would
| on the public markets.
| throw0101c wrote:
| > _I 'm having a hard time responding to someone who's
| using a South Park episode as a discussion point. Like
| how can I debate a point made by a show that makes
| content reacting to the popular perception of certain
| ideas?_
|
| The South Park episode came out in 1998, when the
| profitability of tech companies was... questionable, but
| their _popularity_ was very high. It was social
| commentary on the zeitgeist and group think of the time.
| And it turned out the irrational exuberance was not
| justified for the valuations, as everyone learned
| post-2000.
|
| And have we learned anything since then? What are
| valuations and P/E multiples now? And it goes back
| centuries in the past as well, so 'modern tech' is hardly
| the driving force:
|
| * https://en.wikipedia.org/wiki/Technological_Revolutions
| _and_...
|
| Your original post stated "the legion of badly performing
| companies that went public and were thoroughly rejected
| by public investors". The historical record shows that
| these companies going public _were not_ "thoroughly
| rejected".
| Karrot_Kream wrote:
| If you're using South Park and "social commentary on the
| zeitgeist" as a way to think about markets, I think we're
| not going to have a productive conversation. A public
| equity market in the US has a technical definition that
| I'm using here. You're constructing a narrative out of
| these things that really makes no sense. When one said
| that public investors reject an investment, that means
| they mark the price of the equity down by selling shares
| for a lower level.
| runako wrote:
| > badly performing companies can limp along tying up
| liquidity and locking up employee equity
|
| "Just raised a Series E/F/G/H/I" companies
| throw0101c wrote:
| Perhaps the auditing needs to be done on the workflow
| process and once the automated code is in place there needs
| to be a traceable chain of modifications to it that need to
| be justified.
|
| The "audit" certifies a certain hash of a repo that
| produces known-good results, and if you use a different
| commit in that repo you have explain in an SEC filing why
| you modified things.
|
| Basically reproducible builds for financial results:
|
| * https://en.wikipedia.org/wiki/Reproducible_builds
| 3eb7988a1663 wrote:
| I know a few accountants, and I do not think this is
| possible. There is an incredible amount of manual
| adjustments that have to occur to get the books in order.
| I suspect the official process is 100% GAAP approved and
| great, but the messy reality has thousands of tweaks that
| were massaged all over the place to correct for one thing
| or another.
| throw0101c wrote:
| Yes, I know some accountants as well, as well as
| bookkeepers who have to do adjustments for things like
| 'timecards' and punching-in and -out: there's all sorts
| of adjusting that needs to be made.
|
| But any "mistakes" that are made are simply corrected the
| next reporting period (whether that's monthly,
| fortnightly, weekly, or daily) in this more-frequent
| proposal.
|
| The 'crunches' that occur at quarter/period-end are there
| because there is so much attention put on those reports
| because they're so infrequent. If the sampling rate is
| higher then errors are corrected that much sooner.
|
| The reports are generated on the books _in the state that
| they currently are in_ on a monthly
| /fortnightly/weekly/daily basis, and any adjustments will
| be "fixed" in the next reporting period. The reason why
| there's so much pressure to get them "correct" now is
| because of the (relatively) _infrequent reporting_. If
| you know that things will be 'sorted out' in a fortnight
| (two weeks), or whatever, there's less pressure _now_ to
| get them "right".
|
| There will be an expectation of less perfecttion and more
| corrections and better 'smoothing' due to the higher
| 'sampling rate'.
| sowbug wrote:
| Isn't that the kind of toil that tends to get automated
| away with CI/CD?
| hatsix wrote:
| The reports don't have to each be audited... reduce the
| auditing to twice a year, increase reporting to monthly...
| if your report requires remediation, you her bumped to
| quarterly audits
| nickff wrote:
| The company would probably be sued if there were any
| issues in one of the monthly reports; the money for the
| plaintiff lawyers is just too appealing. I think monthly
| 'informal' reports with some legal protections to allow
| for inaccuracies and inconsistencies, with biennial
| 'formal' reports would be wonderful. That said, I think
| allowing companies to select an appropriate reporting
| interval might be best.
| runarberg wrote:
| Feels like a first world problem. If your company cannot
| afford to output accurate reports every month, maybe it
| shouldn't be a company at all.
| nickff wrote:
| Do you have any sources to back up your feelings? I'm
| basing my comments on what I've read about the matter
| from a variety of former public company CEOs, CFOs, and
| COOs.
| runarberg wrote:
| I am coming to this from a perspective of a worker who
| used to get quarterly options of the public company I
| worked for, and I just cannot for the life of me
| sympathize with a company complaining that it can only
| afford to gather the information to calculate the worth
| of the stocks they are paying me in two times a year. I
| don't care how much it costs them. If you are gonna be
| paying and trading in stocks, I expect you to do the work
| required.
| nickff wrote:
| I understand your view, and agree that transparency is
| good, but "the work required" is largely preventing and
| defending against lawsuits by plaintiff lawyers, and
| those lawsuits cannot possibly benefit the shareholders
| (because whether the suit is won, lost, or settled, the
| money all goes from one pocket to another, with a cut
| going to the lawyers).
| runarberg wrote:
| This may sound rough, but I don't care about
| shareholders. In fact I consider them my enemy, or at
| least my class-enemy. Whenever they make money off of the
| shares of the company I work for, I consider that
| exploitation, and I want them to stop doing that. I also
| want them to stop paying me in stocks, and I want my--and
| my fellow worker's--pension funds to stop trading in
| stocks. My shareholders are my exploiters and my enemy
| and my pension fund should not be my exploiter nor my
| enemy.
|
| But while we live in this system which forces stocks onto
| me, and I have no say in the matter, I want it as
| transparent as possible, and I don't care how much it
| costs my enemies.
| chermi wrote:
| Ahhh yes. As we all know regulations and requirements and
| bureaucracy never have unintended consequences,
| especially on the little guy. All that matters is intent,
| right?
| Uvix wrote:
| The "little guy" isn't a publicly listed company issuing
| reports. By the time you have an IPO, you're no longer
| little.
| gzread wrote:
| Shouldn't be a public company, at least. You can squander
| your _own_ money as you like.
| irjustin wrote:
| I'm generally with the report often camp. It forces
| automation all the way down even the auditing.
| DesaiAshu wrote:
| You could report every month and audit every 6 months
| otterley wrote:
| The reason for strong auditing and personal attestation is
| because left to their own devices, some companies will
| produce bullshit and hoodwink investors. Blame Enron.
|
| https://www.britannica.com/topic/Sarbanes-Oxley-Act
|
| Like the building and electrical code, these regulations
| were written in blood.
| throw0101c wrote:
| > _The reason for strong auditing and personal
| attestation is because left to their own devices, some
| companies will produce bullshit and hoodwink investors.
| Blame Enron._
|
| Except Enron's results _were audited_. By (now defunct)
| Arthur Anderson:
|
| * https://en.wikipedia.org/wiki/Enron_scandal
|
| * https://en.wikipedia.org/wiki/Arthur_Andersen#Collapse
|
| The auditing _already existed_ and didn 't stop Enron (or
| WorldCom; see also the silliness of GE under Jack Welch).
|
| Sure SOx added more rules, but it's not like folks were
| flying without a net before.
| 9cb14c1ec0 wrote:
| Technically the auditing already existed, but
| functionally it didn't because Enron could bully Arthur
| Andersen into getting the results they wanted, or just
| ignore results they didn't like.
| balderdash wrote:
| In the us, quarterly financials are not audited, only
| annual financials
| ezfe wrote:
| Wouldn't the auditing be proportionally easier with less
| data in each report?
| jimmygrapes wrote:
| https://www.acquisition.gov/gsam/552.216-75
|
| I get where you're coming from but this is a rough transition
| for some. Ideally we would hope that more frequent reporting
| would necessitate development of more seamless systems... but
| we ain't there yet. There's a lot of flexibility in some
| systems but they allow that flexibility so that it can be
| tightened as needed. Be careful.
| DANmode wrote:
| ...huh?
|
| What does any of this have to do with too-soon reports poorly
| representing positive trends that can't be tracked in 1-3
| month timelines?
| sheepscreek wrote:
| This sounds great on paper till you realize the amount of
| time and effort that goes into coordinating so many humans is
| significant. Also quarterly reporting and TLS certs are
| worlds apart. There are things like SOX compliance in public
| companies. It is a mandatory requirement that necessitates so
| much ceremony surrounding how information is captured and
| decisions signed off. Then for the execs themselves, it is at
| least a week of effort easy leading up to the quarterly
| result call. Prepping for the investor deck, QnAs, being open
| to more frequent regulator scrutiny. Doing this every month
| would have diminishing returns for everyone involved.
|
| Source: worked at public companies, helped executives prepare
| for said calls.
| etempleton wrote:
| I think it shifts the skillset of executives a little bit.
| At publicly traded companies the quarterly shareholder
| meetings and the preparation that goes into it becomes such
| an outsized portion of the job that being good at that one
| thing is highly valued. I don't think moving quarterly to
| bi-annually changes that much besides making the CEO and
| CFOs and some other folks jobs a bit easier.
| JumpCrisscross wrote:
| > _Release early, release often_
|
| Release unrequired. This is the purpose of an 8-K. We don't
| need every public firm to constantly release quarterly.
|
| These rules arose in 1970. Granting more flexibility, now,
| makes sense. (Post SOX, earnings require senior management.)
| fnordpiglet wrote:
| I up you to continuous reporting. Audit should be inherent to
| the system, not a process after the fact. As a public company
| all owners should have access to daily closed books, and all
| companies should be able to close their books daily in 2026.
|
| Every six months being the cadence we learn how our companies
| we own are doing is absurd. It leads to really long dark
| periods. Also for employees it means we can only divest in a
| semi annual window. Our carry risk is extensive and
| expanding.
|
| This is about hiding truth longer, which is the MO of this
| administration top to bottom.
| jandrewrogers wrote:
| That is an absurd cadence. It is extremely expensive to do
| this reporting; an an enormous amount of useless activity
| is slaved to providing it in companies that need to. This
| is literally a call for more bureaucracy theater.
|
| The obvious net effect is that companies would structure
| themselves to no longer have the reporting requirement, as
| the cost of reporting exceeds the benefits. That would not
| benefit society at large.
| mixdup wrote:
| The reason quarters take so long to close is because the
| numbers are being fiddled with. There's no reason someone
| shouldn't be able to close a quarter and report the
| numbers with the automation we have today in technology,
| meaning without some magic AI/LLM, other than people are
| constantly trying to reclassify expenses or income in a
| way that saves the quarter
|
| Why, after 30-40 years of modern computing in accounting
| does it still take a month to close the books? I worked
| at a public company that was $100m revenue yearly and it
| took a whole month to close the books. Absolute insanity.
| Even AT&T or Verizon or GM should be able to report at
| least weekly.
| jandrewrogers wrote:
| This is a naive view of what reporting entails and the
| difficulty of coalescing a report that meets the
| requirements of the audience the report is for. It isn't
| a numbers dump from a database, it requires substantial
| interpretation of things that the database does not and
| cannot contain. It isn't fiddling with the numbers, it is
| that the numbers can't contain things relevant to their
| representation for external parties as a legal matter.
|
| When I have been in positions where reporting was a
| necessary part of my job, reporting related activity
| probably consumed 1/3 of my time. Even in highly
| optimized contexts, it consumes a stupid amount of time
| and the impact on the consumers of those reports is often
| quite low. It is almost a total waste of time.
|
| There should be _some_ reporting but the current cadence
| and requirements is way too high for many large
| companies. Reporting doesn 't have infinite ROI.
| Dylan16807 wrote:
| Why can't that interpretation be done earlier in the
| process and then put into the database?
|
| Isn't it the same amount of transactions to be
| interpreted no matter what the reporting period is?
| jandrewrogers wrote:
| Do you understand that as a legal matter these must be
| good faith representations of the current state to the
| best of your knowledge? You can't serve up intentionally
| stale information without inviting legal repercussions.
| The preparation process takes weeks. This is a very
| serious legal matter.
|
| These are being revised and updated right up until the
| point they are released to provide the most accurate
| reporting possible.
|
| You gravely underestimate the legal seriousness of these
| reports.
| Dylan16807 wrote:
| The category changes over time?
|
| So let's try to think of solutions instead of giving up.
| A law that requires daily disclosure can _change how the
| reporting works_ so you don 't need to update those
| category decisions 200 times.
| davorak wrote:
| > You can't serve up intentionally stale information
| without inviting legal repercussions.
|
| > These are being revised and updated right up until the
| point they are released to provide the most accurate
| reporting possible.
|
| > You gravely underestimate the legal seriousness of
| these reports.
|
| All of these seem look like an argument for additional
| automation.
| Esophagus4 wrote:
| It is not a technology problem.
| davorak wrote:
| Does the technology already exist? Things are almost
| never only a tech issue alone. That does not mean tech
| can not help, even if the tech that would help is
| currently impractical. What is impractical now though may
| not be in 10, 20, 50 years.
|
| Going over what I quoted:
|
| > You can't serve up intentionally stale information
| without inviting legal repercussions.
|
| Keeping information fresh and up to date is something
| technology has helped with in many areas. If there is a
| reasons why it can not help here then I an interested in
| why or that the current tech already does a good enough
| job in this area.
|
| > These are being revised and updated right up until the
| point they are released to provide the most accurate
| reporting possible.
|
| Technology can help verify last minute changes, running a
| test suite for example or similar. How hard that is to
| make or maintain though may make impractical.
|
| > You gravely underestimate the legal seriousness of
| these reports.
|
| Having an audit trail and known processes may be helpful
| here too if the current tooling is not adequate.
|
| I quoted parts of the comment that looked like areas
| where tech has already helped in other areas. What I want
| to find out are details about what exists, why people
| think it can not be better, or why pervious attempts have
| failed, or why things are currently optimal.
| davorak wrote:
| > it requires substantial interpretation of things that
| the database does not and cannot contain.
|
| Do you have examples? This seems like something that is a
| solvable problem, and from the outside it can seem like
| it is only about not being willing to switch to a new
| paradigm. That unwilling ness can come from avoiding real
| consequences like loosing a competitive edge due to
| allocation of resources to the switchover.
| CSMastermind wrote:
| When people think of automation I'm assuming their
| thinking of the financial statements (balance sheet,
| income, cash flows, equity).
|
| Reporting also contains narrative explanations by
| management of: the company's financial health, updates on
| any new or existing market risks and the company's
| strategy to deal with them, any changes to controls or
| accounting procedures, updates on any new or existing
| litigation, and more.
|
| These reports need to be certified for truth by the CEO,
| CFO, and relevant officers under penalty of 10+ years in
| jail and millions of dollars in fines personally.
|
| It's also common to do a press release, earnings call,
| and investor presentation but those aren't required.
| mixdup wrote:
| I meant just closing the financial records, not coming up
| with the shareholder marketing. It can take a month just
| to find out if you "made" the quarter or not, mostly
| because accounting and finance is combing through every
| line item to see if they can recategorize it in a way
| that makes the numbers look better but doesn't result in
| them going to jail
|
| In what should be a very black and white line of work
| there is a ton of judgement and negotiation involved
| FireBeyond wrote:
| My fiancee is the accounting manager at a university.
| Why? Because people don't submit expenses on time,
| invoices are delayed or some still done manually, and all
| manner of things. Even for them it can take a couple of
| weeks.
|
| While there may be some "hijinks" (in their case,
| institutional advancement likes to steadily rearrange
| endowments or donations to take advantage of offers to
| match donations, etc., but that's not really a delay, as
| accounting basically says things like "No, that gift has
| already been spent"). Even with things like Concur or
| Expensify, expenses aren't classified on time, submitted
| for reimbursement, etc.
| gzread wrote:
| That was the point - it's absurd as a manual process, and
| forces automation.
| joquarky wrote:
| > an an enormous amount of useless activity is slaved to
| providing it in companies that need to
|
| Curious why the word "slaved" was used here instead of
| the much more nominal "employed".
| array_key_first wrote:
| The argument is that the reason quarterly earnings take
| so long to report is that they're done quarterly.
|
| If there were done daily, they would take no time at all,
| and would be close to free.
| testrun wrote:
| You don't have all the relevant invoices etc at on time.
| Some of that takes quite awhile. Especially inter country
| purchases and sale transaction information.
| jandrewrogers wrote:
| Reporting is onerous as fuck. You end up with entire
| bureaucracies dedicated to the theater of reporting. The
| tighter the turnaround the dicier it becomes because
| certainty that anything you are reporting is true decreases,
| which increases liability.
|
| This is one of those ideas that sounds amazing to people have
| never operated a real business with reporting requirements.
| In practice it turns into a classic case of Goodhart's Law.
| It drives insane incentives. Reducing reporting intervals
| would seriously reduce overheads and inefficiency in
| business.
|
| This is 100% a good change.
| clickety_clack wrote:
| TLS certs are a single certificate. Corporate reporting is an
| aggregate of different types of numbers in disparate systems
| summed up through divisions that might as well be different
| companies.
|
| Although... if there was a software engineering union,
| swinging a mandate for live public financial reporting is the
| type of non productive work that would keep everyone in a
| job.
| btown wrote:
| There's also just a mathematical way to look at volatility
| here, which is that if you look at (say) the average monthly
| result as a statistic for the reporting period, longer
| reporting periods have lower variance than shorter reporting
| periods.
|
| It's something of a diversification benefit - when you're able
| to smooth over months, as long as they're not all perfectly
| correlated (your shock just keeps hitting over and over and you
| can't stop it) - your results will have lower variance once
| normalized for elapsed time.
|
| What I can't speak to is whether this is a benefit to economic
| stability. Say an industry is shifting rapidly in a certain
| direction. Companies less able to adapt would be less quickly
| "punished" for that lack of adaptation.
|
| The question is whether that adaptation curve is "a company may
| need extra time and upfront investment in transformation, but
| can get back on the curve, so giving them grace helps to
| stabilize jobs and markets..." vs. "a company that falls off
| the curve will continue to fall behind, so faster reporting
| incentivizes companies to innovate and not get into an
| irrecoverable state that destroys value."
|
| And I think this question varies so widely between situations
| that it's difficult to standardize. Perhaps economists have
| looked at this more thoughtfully. Either way, this is an
| incredibly significant change - how so is a much more difficult
| question.
| runako wrote:
| > If you have a bad quarter, you're not penalized as much if
| the surrounding months are good.
|
| GE used to smooth their earnings to accomplish exactly what you
| describe here. This was not good for investors, or
| transparency, or ultimately GE itself[1].
|
| There's ample reason to want more frequent, not less frequent,
| results from companies.
|
| > the whole corporate machinery that takes 3-6 weeks after
| quarter end to churn out reports
|
| > internally executives should be tracking performance daily
|
| Executives would also be better served by having more timely
| access to the same data they will eventually disclose. Why
| would executives want to drive blind for more of the time?
|
| 1 - https://markets.businessinsider.com/news/stocks/warren-
| buffe...
| zzzeek wrote:
| this is an incompetent, corrupt change that will be reversed
| when Trump leaves office in 2029. Companies should likely not
| change their quarterly reporting since it will only be
| temporary.
| vmbm wrote:
| Hard disagree. These are public markets we are talking about,
| which give companies access to financing from mom and pop
| investors. No one is forcing these companies to be public, they
| chose to be public because they wanted access to the liquidity
| provided by public markets. That liquidity is coming from folks
| retirement savings.
|
| I was following a company that did an ATM offering in January.
| By June, less than six months later, they had entered Chapter
| 11. Things can move fast in the business world. A financing
| deal falling through at the wrong time can be the difference
| between business as usual and bankruptcy.
|
| This change would largely benefit insiders and deep pocketed
| investors/funds that can afford bespoke data sources to fill in
| the gaps. And it feels like just another attempt by Wall street
| to force mom and pop investors into the role of dumb exit
| liquidity.
| m463 wrote:
| I can't help but think of friends of mine that always
| complained about their quarterly OKR reports.
| themafia wrote:
| > After hating how each company runs on an internal quarterly
| cycle
|
| In 25 years of working professionally I've never felt this or
| heard this even once.
|
| > execs every 13 weeks, maybe they can focus better.
|
| I don't care about the struggles of executives. I'm entirely
| unconvinced that an additional two weeks a year will afford
| them enough "focus" to make any appreciable difference.
|
| > that takes 3-6 weeks after quarter end to churn out reports.
|
| We run a sales heavy organization. No one "churns" out reports
| and hasn't for decades. The biggest struggle is getting
| engineering to finalize their existing capital project reports.
| Everything else is automated to such an extent that I can't
| even fathom this scenario still existing.
| Esophagus4 wrote:
| Absolutely. Quarterly reporting is enormously expensive.
|
| The average Nasdaq firm spend 850 hours per quarter purely on
| earnings. It's absurdly burdensome.
|
| It is part of the reason companies don't want to go public
| (it's not the only reason, obviously). But the harder you make
| it for companies to go public, the more will stay in private
| markets.
|
| Then the only companies going public are going to be the ones
| that aren't hot enough to stay private. _Then_ retail will lose
| out on a lot of good growth companies.
|
| And you could say, "well let retail invest in private
| companies" but that makes the information asymmetry problem
| even worse. Because now instead of investing in companies with
| biannual reporting, retail is investing in companies with no
| reporting at all. I guess you could say "well make private
| companies have to report more" and now you've just created a
| public market again.
|
| https://www.businessinsider.com/quarterly-earnings-proposal-...
| kshacker wrote:
| Reply to myself: This has been one of my more viral comments.
| Or controversial. Although I am not a karma farming kind, it
| was funny to see it get rated high, and then pull back more
| than half way. Yes it is controversial. I guess I was early,
| having written the same stuff at reddit an hour or 2 before it
| got posted here. I am not here to argue with anyone, just add a
| couple of comments.
|
| 1. I have heard people complain about quarterly mindset, I have
| started to believe into it too. Moving to 6 months does not
| change short term thinking, but it does change at the margins.
| Gives you breathing space.
|
| 2. Just because a pied piper is pushing for the change does not
| make it bad. At least for me. How it is executed of course will
| be a concern, but not who is doing it. If I supported this
| change yesterday, why would I flip now?
|
| 3. I am in the SRE world. I see countless people burning
| midnight oil generating reports ... like why is it important
| for yesterdays data to be available by 5 AM pacific when by the
| law of temporal physics, it does not arrive before midnight. 5
| hours is all you get why? I know execs may be in NYC, but still
| ... why is it not a P2? Why is there a fire every day? The same
| SLA mentality carries over to quarterly reports.
|
| Maybe it is our well engineered just in time inventory mindset.
| You do not have data by this time, you lose a day here, then
| someone else loses a day, and pretty soon you need 2 more weeks
| in your supply chain, or in your financial reporting chain.
|
| 4. Yes the daily numbers should roll up into financial reports.
| But ... we also add all the compliance and make CEO and CFO
| liable for mis-reporting. Which means they need to look at the
| numbers, ask questions, get the gaps fixed. And not just them,
| they will have proxies of accountants doing this work. If you
| have legal liability, dont we think it costs exec (and
| subordinate) time? How can we say just roll the database data
| into financial reports? Has our group of hackers never had a
| bug or data corruption or system crash?
| gamblor956 wrote:
| While this will hopefully stop incentivizing companies to focus
| on super short term results its also going to increase the amount
| of financial reporting fraud because the remaining reports will
| become even more important.
| p-o wrote:
| I could give the benefit of the doubt to any other administration
| doing it.
|
| This one? I really have a hard time thinking it's nothing else
| then another grifting scheme.
| welcome_dragon wrote:
| Sadly same.
| ralph84 wrote:
| If you want to discourage short-term thinking, make the vesting
| period longer on executive stock grants. Making companies'
| performance less transparent just opens up more opportunities for
| insider trading.
| cheriot wrote:
| Agree and make it two years for long term capital gains.
| hammock wrote:
| Harder to attract talent though (not saying you're wrong)
| DesaiAshu wrote:
| Could also price in negative externalities of short term
| trading with higher taxes for that behavior, nudging the
| markets to focus on value driving investments rather than
| speculation
| duskdozer wrote:
| Like short term vs long term capital gains tax rates?
| DesaiAshu wrote:
| Either that or implement it at the exchange level. Eg. if
| accredited investors sell a stock in <3 months, you pay X%
| as a tax at the moment of sale - or maybe different fees
| for <1 hour, <1 month, <1 year
| busterarm wrote:
| The problem isn't the executives, it's the boards.
|
| But board members are largely just a proxy for the large
| shareholders anyway. E.g., short-term investment strategies are
| not going away.
|
| Working C-levels would almost always much rather take the
| longer view against the wishes of their boards.
| JumpCrisscross wrote:
| > _If you want to discourage short-term thinking, make the
| vesting period longer on executive stock_
|
| It's 3 to 4 years on average. This isn't relevant to quarterly
| filing requirements.
| blitzar wrote:
| > If you want to discourage short-term thinking, make the
| vesting period longer on executive stock
|
| Give them no stock, pay them 100k a year and if they fuck up
| fire them rather than saying they left to "spend more time with
| their family" - kinda like the rest of the working joes out
| there.
|
| Pay me 100mil this year and I might as well spend the rest of
| my time on the job gambling with shareholders money or trying
| to shag everyone in HR, there are no longer any consequences to
| my actions.
| notepad0x90 wrote:
| You get paid for what it costs to keep you in the seat and
| valuable. They get paid $100M because they're making
| decisions affecting >$1B.
|
| The exec's bosses are the board, the people who represent the
| stock holders, so the exec's compensation is a direct
| reflection of the incentive the board is giving them. Stock
| options ensure they look out for that ticker. If the board
| didn't want short term gains they can always change their
| mind on the structure of exec compensations.
| BJones12 wrote:
| > Give them no stock, pay them 100k a year
|
| That used to be the case, though more like millions a year.
| Clinton ended it.
| throw0101c wrote:
| This idea goes back several years, and Barry Ritholtz had
| thoughts on it back in 2015:
|
| > _Back to quarterly earnings. Why do we even require them in the
| first place? The answer is that thanks to the transparency
| provided by regularly reported earnings and profits, investors
| can make informed decisions about which stocks to own or avoid.
| Owners of public companies have hired managers to run the
| businesses for them, and they want to see with some consistency
| how healthy the companies that they own actually are. If there
| are issues with how the business is being managed by the hired
| corporate executives, the owners want to know sooner rather than
| later -- and to have a chance to make course corrections.
| Quarterly numbers allow that to happen._
|
| * https://web.archive.org/web/20151008083649/http://www.bloomb...
|
| * Via: https://ritholtz.com/2015/08/worst-idea-ever/
|
| And in 2018 he suggested going in the opposite direction--more
| frequent--to even daily reporting:
|
| > _This is exactly backward: More frequent reporting makes the
| data less significant. In the real world, human behavior
| emphasizes what occurs less often--meaning doing something less
| frequently gives it an even greater significance than something
| that becomes routine or common._
|
| > _That is the difference between a New Year's Eve celebration
| and a married couple's weekly date night._
|
| > _Twice-a-year earnings reporting will make the event so
| momentous, with such focus on it, that any company that misses
| analysts' forecasts will find their stock price shellacked. The
| twice-yearly focus on making the per-share number will become
| overwhelmingly intense._
|
| > _This is counterproductive._
|
| > _My proposal: Report earnings monthly, with the goal of
| eventually moving to a near real-time, daily, fundamental update.
| Technology is improving to the point where business intelligence
| software and big data analyses will make this automated. Indeed,
| some companies already do much of this internally._
|
| > _Once financial reporting becomes daily, the short-term
| earnings obsession will all but disappear. In its place will be a
| focus on broader profit trends and deeper analytics._
|
| [...]
|
| > _The bottom line is so obvious: To make quarterly earnings less
| important, we should be exploring ways to report results more
| often, not less._
|
| * https://www.fa-mag.com/news/reporting-profits-daily-would-en...
| theLiminator wrote:
| Imo, this makes much more sense...
| danny_codes wrote:
| But this is Trump's SEC.. so expect backwards progress like
| with everything else.
| heliumtera wrote:
| Would this benefit the big companies lobbying? No? Well, then
| it makes negative sense.
| hammock wrote:
| I have worked in an industry (QSR) where it is commonplace that
| damn near the entire company is copied on a DAILY email of
| system-wide sales reports, and let me tell you you, it was NOT
| A GOOD THING.
| jordanb wrote:
| I assume you mean that employees had daily goals? This is
| both not unusual and unrelated to investor reporting
| requirements.
| hammock wrote:
| No, I mean I as a relatively junior employee literally got
| a daily email with nationwide same store sales (dollar
| amounts , aggregated region, and corporate, franchise, etc)
| vs prior day, week, month, year and if it was ever down on
| even day 1 or 2 of a promo like "LTO spicy chicken funbox"
| or whatever you can guarantee the CEO would be calling and
| trying to upend and reverse the 3+ months of work you put
| into that product, campaign, etc because a single day of
| sales was down. No matter if it might have been down
| because of a cold front or literal noise in the data rather
| than a bad product. Everyone's head was on a swivel and I
| can't think of many more stressful environments
|
| I personally witnessed this, at more than one of the top 5
| qsr chains
| nairboon wrote:
| That sounds more like a CEO issue than a reporting
| frequency issue.
| iamtheworstdev wrote:
| That's a textbook example of Goodhart's Law isn't it?
| vessenes wrote:
| And yet, some very, very good public company CEOs like Buffet
| have carved out worlds where they report thinly and publicly
| claim they do not manage to quarterly earnings.
| mattclarkdotnet wrote:
| Exactly! Continuous reporting reduces the stupid gaming of
| quarterly results. Weekly would be best as anything longer
| still gives sales teams enough time to rig the game as they do
| currently. I'd also get rid of fixed year ends for tax purposes
| and replace them with continuous trailing 12-month assessments.
| cheriot wrote:
| Congratulations to the CEOs of fraudulent companies.
|
| > Trump, who first floated the idea in his first term as
| president, has argued the change in requirements would discourage
| shortsightedness from public companies while cutting costs.
|
| Having less information does not change one's time horizon. It
| just means large investors paying for proprietary data will have
| more edge.
| _--__--__ wrote:
| so all EDGAR APIs need to be updated to support either 10-Q or
| 10-H per firm?
| consumer451 wrote:
| Lol. This is the correct take.
| MattCruikshank wrote:
| I hear there's no legislation called "Protecting Unified Monetary
| Products & Distributing Usury Monetary Profits."
|
| In this new legislation, some stocks will not be associated with
| any corporations. There will be no reporting requirements. The
| stock will move as the market dictates.
|
| And people who have more money than you can buy access to trade
| it seconds faster than you can.
|
| Good luck everyone! I hope the PUMP & DUMP bill works out!
| alexpotato wrote:
| One of my favorite stories about logistics and quarterly earnings
| deadlines (from when I worked at a pharmaceutical company:
|
| "In our business, a truckload of various drugs can easily reach
| $10-$15 million. Now, if that truck arrives at the depot at
| 11:59pm March 31st then it's first quarter earnings. If it
| arrives at 12:01am April 1st then it's second quarter earnings.
|
| $15 million is a BIG shortfall, even for us, so you better
| believe those truck drivers will roll the stop signs, blow red
| lights etc to make sure that truck arrives before 11:59pm"
| donavanm wrote:
| I worked at a previous listed company where a single $6MM order
| of hardware being pushed out a week made quarterly p&l
| positive. Im absolutely sure the same situation occurred every
| other quarter as well in some part of the business I didnt see.
| foolfoolz wrote:
| this kind of deal timeline management happens at all
| companies. this is why contracts get structured in
| complicated pricing structures to make it easier for revenue
| recognition to occur in the quarter it's supposed to. the
| timeline can move from 3 months to 6 it's still going to be a
| huge focus area for a lot of people at every company
| cortesoft wrote:
| This is why Netflix broke up the final season of Stranger
| Things in such a weird way... they wanted new episodes at
| the end of quarters, to have good subscriber numbers for
| the quarter report
| barbazoo wrote:
| Sounds more realistic than a low level truck driver running
| stop signs.
| golfer wrote:
| Early in my career I worked at a place where the sales people
| would half-joke about signing deals on December 40th -- to
| claim it in the previous quarter/year.
| saaaaaam wrote:
| December 40th is last day of Q5.
| randerson wrote:
| Likewise, if you know you've already got the current quarter in
| the bag, but the next quarter is looking soft, you tell that
| truck driver to slow down!
| themafia wrote:
| "We risk everyones lives in order to have a barely just-in-time
| warehouse on shipments in the low 8 figures."
|
| Cool.
|
| What company is this?
| hspmn wrote:
| It's very clearly an analogy.
| fourseventy wrote:
| That doesn't make any sense because the revenue is already
| booked for the sale which has nothing to do with when the
| delivery truck actually arrives.
| storyinmemo wrote:
| It's got to be one of these:
|
| FOB Shipping Point (or Origin): Responsibility transfers to
| the buyer as soon as the goods leave the seller's premises.
| You book it when it leaves your loading dock.
|
| FOB Destination: The seller retains risk and costs until the
| goods reach the buyer's location.
|
| The sale doesn't happen until the asset transfer occurs.
| Before that any cash you get from the sale is balanced by the
| liability to actually produce the good or refund the money.
| Or more likely you don't get any cash but can't record the
| bill as accounts receivable. It's not receivable until the
| transfer point is crossed.
| gzread wrote:
| You can account a transaction that's been placed but not
| fulfilled. I think when someone orders $15m of goods, you
| can immediately book $15m accounts receivable (asset) and
| $15m goods owed (liability) as soon as you have the
| expectation it will happen. If the transaction falls
| through, you delete them.
| vasco wrote:
| There's no deleting anything in accounting.
| datsci_est_2015 wrote:
| As someone with a partner who's an accountant, I love
| seeing technologists be confidently wrong about
| accounting fundamentals vs. the type of technicalities
| that she has to deal with. Your comment highlights the
| absurdity of their confidence; kudos.
| jeremyjh wrote:
| Under GAAP you cannot recognize revenue before the
| service is delivered or product is shipped. You can
| accrue revenue that is earned but not yet paid (if you
| are paid on Net 30, for example), but even if pre-paid
| you have to book that as deferred revenue, which is a
| liability (until you ship).
| egl2020 wrote:
| Accounts receivable, revenue, and cash are related, but
| separate, accounting items.
| dragonwriter wrote:
| If it is cash based accounting, revenue and expenses are
| booked when the _money_ changes hands.
|
| If it is accrual-based acocunting, it takes place when the
| event legal triggering the change of ownership of goods in
| the transaction takes place, which depends on the shipping
| terms, which could be anywhere from when it is available for
| the buyer's transport agent to pick up at the seller's
| facility (EXW) to when it is delivered, unloaded, and at the
| buyers door (DDP) or any of a variety of places in between
| (FOB Origin, FOB Destination, and a bunch of other potential
| shipping terms with their own rules on when ownership--and
| responsibility--transfer from seller to buyer.)
| kaiwenwang wrote:
| Yes, to add on -
|
| - incoterms
| (https://www.dhl.com/content/dam/dhl/global/dhl-global-
| forwar...)
|
| - cash flow statement v. income statement (accurals)
| lelandfe wrote:
| Those diagrams of risk vs cost bared are helpful.
| anxman wrote:
| Cash vs Accrual
| cestith wrote:
| How many F500 companies use cash accounting? How many
| public companies altogether?
| carabiner wrote:
| Ya but op's anecdote is cute and funny.
| jefftk wrote:
| This is not correct. A business this big would definitely be
| using accrual accounting (not cash) which generally means you
| count the revenue when the actual ownerships transfers to the
| buyer. Since the truck was operated by the seller, the
| transfer of ownership is almost certainly counted as when the
| buyer receives the goods.
| FateOfNations wrote:
| Rewrite the anecdote with the truck racing to the supplier
| to make the pickup on time.
| deadbabe wrote:
| That's not why it doesn't make sense. It doesn't make sense
| because in the forward guidance you'd be able to say you
| expect the $15 million coming in.
| b40d-48b2-979e wrote:
| Okay, what's that to say it won't be the same but even worse on
| a 6mo reporting schedule?
| ghufran_syed wrote:
| as the time period gets longer, the the more likely it is
| that the numbers represent the true performance of the
| business rather than randomness. That has to be balanced
| against the fact that investors get less frequent updates
| i.e. the information is now potentially 6 months out of date
| rather than 3 months at worst. But then its just a judgment
| call of the relative benefit of each - you could argue that
| with modern accounting systems, modern companies could
| deliver weekly or even daily earnings , which would give
| investors much more timely information, and the high
| frequency would probably mean it wouldn't be worth making the
| effort for management to fudge the numbers to bring forward
| or delay revenue one day or one week. There would be a lot
| more variance in the numbers if they were daily, but thats a
| good thing - it would just reflect the underlying randomness,
| and then the _investors_ could decide when the accumulated
| trend over a period of time is meaningful or not, instead of
| management wasting time massaging numbers into a fairy tale
| of steady growth.
| mattclarkdotnet wrote:
| In every sales-led company quarter end is a shitshow. It'll
| be even worse if there's only one chance to bring the
| numbers back in instead of 2 or 3. It's used to put
| pressure on sales teams, but the net result over the year
| is never good because it sours relationships and reduces
| overall deal value.
|
| The best thing would be continuous daily or weekly
| reporting with no defined year end. Unfortunately the
| entire global system of tax and accounting is set up around
| annual reporting, so change is impossible.
| vasco wrote:
| How is 2 data points a year "representing the true
| performance of the business" but 4 data points a year is
| randomness?
|
| You also get less frequent CPU usage % datapoints when you
| want to be sure about usage? That makes no sense at all.
| drewda wrote:
| General Electric has a history of using that exact trick...
| just with jet engines and power generators and medical devices
| that can represent much larger amounts of revenue.
| vessenes wrote:
| Not just - Welch pioneered using GE Capital to "smooth"
| earnings - lots of judgment calls in those finance companies
| in the early 90s.
| hattmall wrote:
| GE's latest trick is to roll long term maintenance
| contracts into the price of the product and then sell off
| the unit holding the bag on the maintenance contract. Very
| shady but very clever.
| jbrozena22 wrote:
| Over the long run, companies that spend resources on this
| micromanagement of earnings probably are not seeing the forest
| for the trees. I cringe thinking about how much time and top
| talent at a company is spent preparing for earnings rather than
| spending those hours improving the business itself.
| mock-possum wrote:
| I don't get it, why not just say "oh we were 15 million short
| that quarter and 15 million ahead this one so it's all good"
|
| Like why get hung up on these arbitrary cutoffs
| rpicard wrote:
| This is what confuses me about tech sales too. Why do I
| always get a discount for buying right at the end of the
| quarter? Seems like you could just get ahead on the next one.
| gowld wrote:
| Because many people are lazy and need deadlines or else
| they won't work.
| rdtsc wrote:
| Because of how performance targets are defined. If sales
| figures "fell" or didn't grow at the expected rate it can
| be worse than having a few more points over next quarter.
| mock-possum wrote:
| Why do they define performance targets that way then? Are
| they making it hard on purpose for some reason?
| xxpor wrote:
| You have to set a deadline at some point. Now, I think
| any rational manager would agree if the sale shows up on
| April 1 instead of March 31st, that's totally fine. But
| HR/Finance systems aren't always rational.
| nitwit005 wrote:
| It, unfortunately, always comes down to people being dumb. I
| wish there was an another answer, but that's always the
| essence of the issue.
|
| I've seen someone trying to explain to an investor that the
| numeric change between quarters wasn't meaningful. Investor
| seemed to understand explanation, but was clearly deeply
| unhappy about the chart not being tidy. People respond to
| that by trying to make the chart tidy, even if it means
| losing the company money at times.
| aucisson_masque wrote:
| If you can't be arsed to ship it before the last day of the
| report, it's your fault and asking the truck driver to drive
| like a maniac to compensate is amateurish, dangerous.
|
| That's not something I'd be proud of.
| hannasanarion wrote:
| It's an extreme example that shortens the time frame and
| shrinks the cast of characters to illustrate the point.
|
| Substitute "telling the truck driver to run stop signs" with
| "order the factory to increase production", it's the same
| thing.
| rogerrogerr wrote:
| Or, sometimes, you order the factory to _reduce_ output to
| 50% of what it can do for the last week of Q1 so you don't
| have excess unsold inventory on the books.
|
| Then in Q2, you panic because you don't have enough
| inventory, so you order the factory to produce at 150% to
| catch up. Both 50% and 150% are inefficient factory states;
| if you weren't thinking about snapshot reporting you'd have
| just let it run at 100% and your Q1+Q2 results would be
| overall better.
|
| I have personally seen this happen at a household-name
| Fortune 50 company. It's insane and causes real damage to
| the business in many ways.
| snowwrestler wrote:
| To be fair, this is a side effect of financial deadlines in
| general. A business reporting annually will still try to beat
| that deadline right up to the last second.
|
| In this particular example a single truckload would be less
| significant annually than quarterly though.
| ginkoleaf wrote:
| This seems like bad news for regular investors, and good news for
| insiders.
|
| Reporting is burdensome, sure, but being listed on public
| exchanges is not a requirement.
| nonethewiser wrote:
| Makes companies short-sighted though. I wouldn't say that's
| necessarily good for regular investors.
| Salgat wrote:
| I wonder if requiring it twice a month would fix both issues,
| since it's too frequent to plan around (versus quarterly),
| while frequent enough to allow transparency (versus
| annually).
| lotsofpulp wrote:
| Where is the proof? All the businesses with the highest
| demand for their shares are clearly not short-sighted.
|
| Share buyers are clearly rewarding investing for the long
| term, even with quarterly reporting.
| epolanski wrote:
| > All the businesses with the highest demand for their
| shares are clearly not short-sighted.
|
| Where is the proof?
|
| As long as CEOs and executives compensation is tied to
| stock performance, which is highly tied to news and short
| term results, basic economics and game theory suggests that
| short-sightedness is indeed encouraged.
|
| This is especially problematic for businesses where
| plannings have to be done 4/5/6+ years in advance like auto
| industry, aircrafts or semi conductors.
|
| It takes an awful lot of time and money to plan a new
| processor architecture and build an ecosystem around it,
| from chip manufacturing to packaging.
| lotsofpulp wrote:
| https://companiesmarketcap.com/
|
| Go down that list and you can see almost all those
| businesses are ones that plowed and continue to plow
| billions of dollars into investments that will not pan
| out for many years.
|
| I don't think any of the top ones got to where they were
| with quarter to quarter goals.
| epolanski wrote:
| That's not proof of anything and most of the companies
| you find there are cashing on decades old businesses
| whether it's oil, ads or iPhones.
| lotsofpulp wrote:
| "Cashing in" is on bets made many years ago is making my
| point. Amazon didn't stop once it had the book market or
| even the online retail market (see AWS), Apple didn't
| stop with ipod or iphone (see M
| processors/Airpods/Watch/etc), Meta didn't stop with
| Facebook (see instagram/whatsapp/VR), Alphabet didn't
| stop with Google (Waymo, Gmail, Drive), Eli Lilly with
| GLP-1 trials, etc.
|
| They could stop, and switch to quarter to quarter
| decision making and juice their numbers even more. Maybe
| they will, and then eventually those businesses will drop
| in the rankings (IBM/GE/etc).
|
| But the idea that quarterly reporting makes businesses
| short sighted is clearly false.
|
| Leaders with short term motivations makes businesses
| short sighted (obviously). Sometimes, that's justified
| because the business sector is winding down, sometimes
| it's due to incompetence, and sometimes it's due to
| greed.
| epolanski wrote:
| You know I can easily give you plenty of counter examples
| of decisions made for short term gains and stock pumping,
| right?
|
| At the end of the day most of these CEOs are valued by
| the stock price and they need to follow investors
| expectations which are very often short sighted.
|
| Intel, Boeing and countless others are obvious examples.
|
| All the companies you listed went the "let's cut
| personnel or bets even if we're making gazzilions to
| appease the stock market".
| lotsofpulp wrote:
| > You know I can easily give you plenty of counter
| examples of decisions made for short term gains and stock
| pumping, right?
|
| nonethewiser made the claim that if quarterly financials
| are required, then businesses will make short term
| decisions.
|
| Disproving this only requires me to provide 1 example,
| although I provided quite a few examples of businesses
| that provided quarterly financials and still made long
| term decisions.
|
| I never claimed that quarterly financials prevent short
| term decisions, so your counterexamples are disproving a
| claim I did not make.
|
| > All the companies you listed went the "let's cut
| personnel or bets even if we're making gazzilions to
| appease the stock market".
|
| It is possible for businesses to change from making long
| term decisions to short term decisions (and back), and it
| is also possible that cutting personnel was not done
| solely to appease the stock market due to fluctuations in
| demand for labor.
| arduanika wrote:
| Listing on a public exchange is not a requirement, but it is
| generally a boon to the public interest. The theory is that if
| we close the gap in regulatory burden between public companies
| and large private companies, then maybe we'll see more IPOs
| like back in the 90's, before Sarbanes-Oxley and other new
| laws.
|
| Now, with an admin that's disposed to deregulation, the usual
| approach to closing that gap is to loosen requirements on
| public companies. You don't see a lot of people advocating for
| closing the other half of the gap, where we increase the
| reporting requirements on private companies. Stricter
| requirements there seem justified if you look with a bit of
| realism at how many consumer-facing funds are holding little
| pieces of unicorns. A lot of people have a stake in SpaceX or
| Stripe, one way or another. I'd like to see at least a few
| proposals that make it less comfortable to stay private for so
| long.
| doom2 wrote:
| > The theory is that if we close the gap in regulatory burden
| between public companies and large private companies, then
| maybe we'll see more IPOs like back in the 90's, before
| Sarbanes-Oxley and other new laws.
|
| And maybe more Enrons?
| arduanika wrote:
| Yes, maybe. The optimal number of scandals is sadly not
| zero, and any given piece of legislation tends to
| overreact, fighting the last battle without seeing all the
| potential second-order consequences. Even the most
| carefully-crafted laws are worth giving another look,
| periodically.
|
| Note that FTX, for example, was privately held. If it had
| been born in the nineties, the norm would be for it to go
| public, and have at least a modicum of disclosure; staying
| private would have been weird, a red flag. Instead, "our
| generation's Enron" had no public markets oversight
| whatsoever, SOX or otherwise.
|
| So yeah, it's necessary to find a balance. You are choosing
| between a little regulation on a lot of companies, or a lot
| of regulation on a smaller and smaller chunk of the economy
| each year.
| riffraff wrote:
| But Enron's bankruptcy affected people who could invest
| on the public market while FTX affected more directly
| "qualified investors" didn't it?
|
| It seems the private/public split along the lines of
| "public companies should be more scrutinized" worked as
| intended.
| arduanika wrote:
| Not quite, but only because the FTX case was weird. Many
| individuals from around the world were _users_. They didn
| 't sign up to be investors, or even to be depositors in a
| banking sense, and so not all of them were
| qualified/accredited investors. However, SBF unilaterally
| and secretly _treated them_ like investors, borrowing
| from them to finance various schemes. So no, FTX 's
| fallout was not limited in that way.
|
| The people and venture funds that officially owned FTX
| were a narrower group, and I assume they were all
| qualified investors. But the thing about our disclosure
| regime is that protecting the official owners of the
| company is only one goal, the one that serves as the
| pretext. Informally, various regs on public companies are
| designed to bring sunlight more generally, and to prevent
| a wider array of crimes and shenanigans than just
| defrauding the company's owners. Public companies also
| have rules and norms around governance which, had FTX
| been been subject to them, would have made a difference.
|
| > It seems the private/public split along the lines of
| "public companies should be more scrutinized" worked as
| intended.
|
| Only if the intention was also, "...and public companies
| should be an ever-shrinking share of the economy". There
| are a number of reasons why one might not have intended
| that. Ordinary investors miss out on early growth, and
| the good side-effect of general sunshine and governance
| norms only covers a sliver of the economy, missing many
| of the most dynamic firms that could use some scrutiny.
| paganel wrote:
| Not directly related to FTX, but to the public vs.
| private discourse, if I'm not mistaken there are now a
| lot of pension funds and related financial institutions
| which have redirected a big part of their funds towards
| privately-owned unicorns/big companies through indirect
| means, and if those privately-owned unicorns/big
| companies were to do some shady things those pension
| funds would be much less in the know compared to if
| they'd invested their money in public companies.
|
| One could make the valid point that those pension funds
| shouldn't have been (indirectly) invested in those
| privately-owned unicorns to begin with, but doing that
| would have most probably come with opportunity costs for
| those pension funds (as for some reason or another
| private big companies have been seen as bringing in more
| money for each dollar spent compared to big public
| companies, at least when it comes to the last 8-10
| years).
|
| As the OP implies, there needs to be some sort of balance
| between public and private companies, each of them need
| to be, in effect, more like the other in the eyes of the
| State/taxman, State-run regulators and the like.
| cucumber3732842 wrote:
| > fighting the last battle without seeing all the
| potential second-order consequences. Even the most
| carefully-crafted laws are worth giving another look,
| periodically.
|
| Dare I say the special interests that ghost write the
| bulk of the text of any given legislation are
| specifically banking on those second and Nth order
| consequences.
| Karrot_Kream wrote:
| FWIW even if we weren't in this admin, I think it would be a
| harder sell to increase reporting requirements on private
| companies. The whole point of private capital and private
| companies is that LPs (edit: liquidity providers) are
| required to have some form of accreditation to prove that
| they aren't dumb money and that they have the capital to
| weather large drawdowns.
|
| The problem of growing private capital markets and liquidity
| has been an issue for ~20 years now.
| arduanika wrote:
| Yeah. It's not obvious how to do it. I just wish that
| policy people would do some thinking in this direction.
|
| (Nit: I believe that in venture contexts, LP = "limited
| partners". A "liquidity provider" usually means the same
| thing as a market maker, at which point you're talking
| about the secondary / listed / public markets.)
| Karrot_Kream wrote:
| (re Nit: depending on your terminology, liquidity
| provider can be many things and in modern markets one can
| argue that the concept of a "market maker" isn't a
| practical reality if how liquidity flows, but that's also
| why I wrote the edit to clarify which LP I was talking
| about)
| arduanika wrote:
| (Oh, I see now what you meant. Cool.)
| criddell wrote:
| > being listed on public exchanges is not a requirement
|
| Aren't there some factors that require a company to go public?
| For example, I think there's a limit on the number of investors
| (1000?).
| nemo44x wrote:
| It's in the best interest for companies to list publicly
| though. We want as many people in the country invested in as
| many good companies. Equity in the country is mutual self
| interest. Similar to why we want a nation of home owners, not
| renters.
| anonu wrote:
| > being listed on public exchanges is not a requirement
|
| it used to be raise money. now that money is done privately.
| the result exacerbates the gap between private and public
| markets and ultimately between rich and poor. Private market
| participation is usually for accredited investors where you
| need $1m net worth.
|
| Public markets are one of the best ways to create wealth in the
| US, if the historical record is any hint about the future.
| Fewer public companies gives regular investors less choice. So
| if you're a private company and you have 1/2 as many reports to
| file each year, well now you have a slightly less onerous
| reporting regime and slightly tilts in favor of going public.
| epolanski wrote:
| > it used to be raise money. now that money is done
| privately.
|
| Not anymore, private markets are quite illiquid right now.
| KK7NIL wrote:
| > it used to be raise money.
|
| What in heavens gave you that idea? A well developed public
| stock market is such a new (and American thing) and it still
| makes up a small amount of the capital raised by businesses.
|
| Even within large public companies, there's significant use
| of bank/private debt.
| vicchenai wrote:
| Interesting timing given the SEC is also considering changes to
| 13F disclosure windows. Less frequent earnings could mean more
| information asymmetry for retail investors - institutions with
| proprietary data will have even more edge.
| CamelCaseName wrote:
| Why yes, I love having less information to critical financial
| decisions on.
|
| I wonder who this benefits, the people with non public
| information, or the every day person?
| georgeecollins wrote:
| The SEC is not the only one who gets a say. Their are rules that
| SEC does not require that have been required for certain
| exchanges or indices. For example, no dual class shareholders or
| certain board compositione have been required for listing.
|
| Let's have an exchange or heck , even an ETF require quarterly
| reporting. I would invest in that and I am sure many wouldn't. It
| will trade at a premium or it won't.
| balderdash wrote:
| What company doesn't produce monthly financial statements, let
| alone quarterly. I could understand this for small caps.
|
| I also don't see how less granularity in financials is a good
| thing, yes if you have bad quarter that bad (but at least you can
| make it up the next quarter vs a bad six months likely introduces
| more volatility (I think?). Also I think one of the biggest
| complaint is "short termism" in markets, but I hardly think that
| will make much of a difference.
| JumpCrisscross wrote:
| > _don't see how less granularity in financials is a good
| thing_
|
| Transaction costs. Preparing this transparency costs money and
| attention.
| sneak wrote:
| Having to do it more and more frequently means more and more
| of it gets automated.
| Esophagus4 wrote:
| It is not a technology problem.
|
| The data generation is mostly automated.
| balderdash wrote:
| As i mentioned those cost are real for small public
| companies, and while potentially tens of millions a year for
| large ones its a rounding error for them (e.g. MSFT spent
| ~$80m/yr on Deloitte the past couple of years for audit work,
| let's assume it also cost MSFT another $80m/yr on internal
| support for an annual cost of $160m) that would 0.15% of
| their net income and meaningless number in relation to the
| liquidity provided to the ~$3t worth of equity holders by
| being public. Also I'm not sure going to half year would
| meaning fully change that number a lot, $130m? the audit is
| annual with limited review of quarterly financials so there
| is not a ton of savings
| divbzero wrote:
| Twice a year is the current requirement in the UK and still
| provides a regular cadence.
| mcoliver wrote:
| Simultaneously they are opening up 0DTE options on certain stocks
| starting with large market caps but don't be surprised when this
| expands. Currently this was limited to large etfs like SPX. They
| are also extending trading hours towards 24/7 and eventually 365.
|
| How they square increasing liquidity with delaying information is
| insane.
|
| I know there is a lot of manipulation to make quarterly numbers
| and the tax code is convoluted but if companies reported dollars
| in and dollars out live to shareholders at least we would have an
| idea of how the company is doing in a general sense. And over
| time would learn the flow of the company and be able to make
| informed predictions on the overall health of the company. More
| information is usually better than less with very few exceptions.
|
| If they want to delay the earnings call to every 6 months to talk
| about the business I have no problems with that.
| bizzletk wrote:
| Can you enumerate some examples of when it having less
| information is better than having more?
| baby wrote:
| For the company it doesnt work well, you're leaking too much
| info to competitors
| mcoliver wrote:
| Maybe. I'l am also not saying they need to say where the
| dollars came from, went to, or what they were for.
| Aggregate daily flows. Could you do some deductive
| reasoning to make an informed guess especially when large
| sums are involved? Perhaps.
|
| I am also of the (perhaps wrong) opinion that the majority
| of the important stuff leaks anyways, just not on a level
| playing field.
| fc417fc802 wrote:
| If everyone is legally required to share it then we're all
| in the same boat.
| hannasanarion wrote:
| Financials aren't like technology or IP where having the
| information open to all (perhaps with limited monopolies
| on usage a la patents) is essentially for the betterment
| of all mankind, they can be more like order of battle in
| a war zone.
|
| If your competitors know that your Florida subsidiary is
| running inefficiently and being subsidized by your
| successful business elsewhere, they can target their own
| operations in Florida, undercut you more than you can
| possibly sustain, force you to exit that market entirely,
| so that they can monopolize there.
| fc417fc802 wrote:
| Sure, but others can also do that to your competitor.
| Hence my comment that everyone's in the same boat. The
| playing field would be level and the players would adapt
| to the new environment.
|
| Of course I realize it's possible it might introduce
| systemic problems that I'm unaware of.
| larkost wrote:
| Isn't this exactly what we should want from a market
| system? If your division in Florida is inefficient, then
| from the market perspective we should absolutely want
| competitors to enter the market and crush them.
|
| I think the problem is that people have gotten so used to
| seeing capitalism from the companies' perspective (i.e.:
| profits good), and forgot that it is supposed to be all
| about the collective good. So if you think sustained high
| profits are good... then you have missed the whole point
| (the market should always be driving them towards near-
| zero).
| shermantanktop wrote:
| When your decisions are driven by fear, anxiety and FOMO,
| knowing less can lead to fewer irrational reactions.
|
| That's why people hide information from bad bosses.
| vessenes wrote:
| It's a common complaint of value investors that boards
| (especially in this post-Sarbox world) are solely focused on
| quarterly earnings reports, to the detriment of long term
| strategy. One way to talk about the added and persistent
| value of some companies is to note that many of them have
| powerful, recalcitrant, or somehow anti-quarterly-cadence
| founders: buffet, zuck, you could make a list.
| cosmicgadget wrote:
| I mean those personalities are also hyperfocused on share
| price.
| rogerrogerr wrote:
| Yes, but focused on it being the highest it possibly can
| _tomorrow_ or the highest it possibly can be in ten years
| is a huge difference. Only some executives have the
| ability to take actions based on a long view without
| being replaced by the board. Usually founders and near-
| founders.
| vessenes wrote:
| I wouldn't say so - the ones I mentioned seem to be
| focused on long term _value_ -- big difference.
| freetanga wrote:
| Delisting and going private is always an option if you want
| to go at your own pace and talk to your investors 1:1.
| kolinko wrote:
| They would not be allowed to do so - too many
| shareholders. That's why e.g. SpaceX will be going public
| even though Elon Musk would want to keep it private
| potatototoo99 wrote:
| Musk absolutely does not want SpaceX to stay private
| vessenes wrote:
| Musk wants liquidity. And SpaceX wants more cash right
| now than can be raised privately. Which is a pretty
| shocking amount of cash.
| chrisBob wrote:
| So, the answer to "when having less information is better"
| is "when YOU have less information".
| bluecalm wrote:
| There are multiples examples that are easy to see once you
| realise presenting information has a cost.
|
| For example having daily morning 2 hour long stand ups
| provide more information for everyone involved. It's also
| worse for productivity and work atmosphere.
| ethbr1 wrote:
| From a company perspective, compiling a quarterly report is a
| non-trivial amount of effort.
|
| The company is employing additional resources (accountants)
| and distracting leadership (prepping talking points).
|
| I'm not firmly in one camp or the other, but it is a
| substantial amount of effort to release on whatever cadence
| the SEC mandates.
| SilasX wrote:
| Well, that's a whole area of active research, referred to as
| "info hazards":
|
| https://www.lesswrong.com/w/information-hazards
| user3939382 wrote:
| No legitimate business needs to settle trades more than once a
| day.
| SilverElfin wrote:
| This is a manipulation enabler. I'm surprised no one is
| mentioning this, but it'll allow companies like SpaceX and
| Tesla to avoid scrutiny. The other changes the SEC and NASDAQ
| are rushing all have donors behind them. That's how this openly
| corrupt administration works but it's also how America has
| generally operated in the past, only to a smaller degree.
| mmooss wrote:
| > it's also how America has generally operated in the past
|
| It's not. That's why we have the rules that they are
| recinding, and why the US has long had among the the most
| transparent, safest, and liquid markets in the world.
|
| Saying that 'it's always been this way' is a really concerted
| effort to bury one's head in the sand.
| SilverElfin wrote:
| I was talking about the broader way things work, not
| necessarily for the SEC specifically - although they're
| also subject to this phenomenon. Lobbying in America, and
| the revolving door between industry and government
| agencies, is a core part of American politics and
| economics. Long before the Trump administration.
| mmooss wrote:
| Again, it was not always this way. It's like saying
| drownings happened before the tidal wave, so it's always
| been this way.
|
| People will put up any defense against facing and acting
| on the reality of their situation.
| GolfPopper wrote:
| > _This is a manipulation enabler._
|
| One facet of the Trump administration that still manages to
| surprise me is now some action that is nakedly corrupt, or
| stupid, or destructive will be undertaken, and people will
| scramble to come up with explanations for why it _might_ be
| done in good faith, or as part of some clever plan. We 've
| been watching Donald Trump operate in national politics for
| over a decade (and seen him in business for far longer). Why
| on Earth would anyone ever give him the benefit of the doubt
| at this point?
| red-iron-pine wrote:
| rubes gonna rube
| munificent wrote:
| _> if companies reported dollars in and dollars out live to
| shareholders at least we would have an idea of how the company
| is doing in a general sense._
|
| Goodhart's law is knocking on your door right now.
| mcoliver wrote:
| Help me understand what you are saying here. For those that
| don't know this one is "a measure becomes a target, it ceases
| to be a good measure".
|
| I'm not advocating for a single metric that can be gamed. A
| business is fundamentally about dollars in and dollars out.
| Maybe add receivables in there and a few other metrics from
| the P&L. I'm not trying to be prescriptive here on purely
| cash in and out.
|
| I do think there is a low friction way that companies could
| report daily certain metrics that over time would give their
| shareholders a sense of the company's health and trajectory.
| ang_cire wrote:
| Dollars/receivables in and dollars/deliverables out is just
| a question of rate, unless I'm missing something.
|
| If a 10 billion dollar company has a per-second dollar
| out/in rate of $1,000,000 due to actual organic business, a
| company with $2,000,000 can set up an LLC it buys and sells
| from, and legally 'swap' $1,000,000 a second back and forth
| in services "bought and sold" to mimic the appearance of
| the $10B company, to generate business
| interest/confidence/investment.
|
| That's an extreme example, but the point is that real-time
| money flow has nothing to do with the actual 'health' of a
| company.
| fc417fc802 wrote:
| I'm fairly certain you're describing fraud.
| jongjong wrote:
| I'm fairly certain he's describing the economy.
|
| There are so many companies like this which are just
| moving money around rapidly in and out with little to no
| actual profit. Finance sector is easily gamed.
|
| For example, anyone can become a billionaire; just start
| a company, issue 1 billion shares at slightly above $1
| each, keep most of them for yourself; release just 10K
| shares to the market and then let traders trade those
| same shares back and forth among themselves at high
| frequency... With just over $10k each, they can keep
| moving 10k shares back and forth 10k times per day...
| They call it "High frequency trading."
|
| There you have it; now you have a billion dollar company
| with a healthy trade volume of $100 million per day...
| Your stock is in-demand! And you just needed to find two
| traders with just $10k in the bank and a trading platform
| with low fees... Becoming a billionaire is not that
| difficult.
|
| You can apply the same principle to revenue... Just
| increase the velocity of money in and out of your company
| and you can hit any financial target you want.
|
| Doesn't mean it's a solid scheme but everyone likes the
| numbers they're seeing. Nobody is paying attention to
| actual buying power.
| philipallstar wrote:
| While I agree that "billionaire" is a stupid word that
| 99% of the population don't understand, but can be
| manipulated with, it is not true that investors only look
| at market cap. Lots of analysis goes into IPOs.
| wbl wrote:
| That's what all these accounting rules exist to stop. No,
| you can't pretend that equipment breaking doesn't happen.
| No, you need to account for fixing the roof etc.
| ang_cire wrote:
| It's not actually fraud if there is some ostensible
| service they're performing. Business units within
| businesses 'pay' each other for 'services' all the time.
| Ditto for subsidiaries. Whether something is fraud might
| come down to intent alone.
|
| The line between legal and illegal business transactions
| can be murky as hell.
| fc417fc802 wrote:
| For it to not be fraud you'd have to actually exchange
| services proportional to the line items. That isn't what
| was described. Falsifying line items to juice your
| numbers is fraud plain and simple.
| kakacik wrote:
| Yet we see it happening all the time with various AI
| deals.
| fc417fc802 wrote:
| I thought in that case nvidia was (approximately)
| purchasing stock in exchange for hardware? Which AFAIK is
| the entire point of stock - selling it to raise needed
| capital.
| vannevar wrote:
| And if they actually constructed the deal that way, it
| would be fine. But by essentially creating a sham sale
| where they return the cash back to the customer in return
| for equity, Nvidia can book revenue and claim non-
| existent cash flow. The key is that the sale _would not
| have happened_ without the corresponding equity deal.
| Nvidia had no discretion to use that cash any other way,
| so the "cash flow" in that case is illusory.
| fc417fc802 wrote:
| I don't see the issue. Goods valued at that amount
| changed hands. Why shouldn't bartering be booked as cash
| flow? The regulator is going to require you to value it
| for them regardless.
| hannasanarion wrote:
| How? "AI fincancing bad" is starting to seem like a new
| non sequitur meme. There's no imaginary thing being
| traded for indefensible valuations in AI dealings. Stock
| units at a certain valuation exchanged for an equivalant
| value in hardware is just a standard payment-in-kind
| transaction.
|
| If the valuation turns out to change in the future,
| that's the hardware seller's risk.
|
| It's not the same thing as buying a $20 million banana
| from a bahamian llc secretly owned by yourself, which is
| fraud.
| kortilla wrote:
| No, there is no proportionality aspect to the law. Once
| you're in the support and software subscription realm,
| quite vast amount of "value" can be charged for with
| nothing being done.
| fc417fc802 wrote:
| Only if you ignore the concept of fair market value.
| There are going rates for these things. If what you said
| is true you could trivially launder money by selling a
| single copy of an arbitrarily expensive piece of software
| that did nothing more than print "hello world". In
| practice that's not how the law works. Regulators and
| judges aren't drooling idiots.
|
| Sure, you could inflate your numbers _a bit_ and likely
| get away with it. But it 's still fraud (getting away
| with it doesn't make it not a crime) and you will likely
| be caught if you overdo it.
| withinboredom wrote:
| The company I'm a director for licenses IP from my
| company. The company wouldn't exist without my IP (I'm
| one of the founders). Yet, I'm also a customer of the
| same. Dollars in/out, we're all kosher. This isn't fraud,
| it's just how companies work.
| fc417fc802 wrote:
| So long as the prices are fair and reasonable, sure. But
| that doesn't enable you to run up an arbitrarily large
| bill without either doing an arbitrary amount of actual
| work or committing fraud.
| withinboredom wrote:
| Yes. This is called "transfer pricing" and is tightly
| regulated in almost every country.
| baq wrote:
| it's only fraud if somebody finds out
| dessimus wrote:
| It's only fraud if one doesn't keep enough cash on hand
| to buy a pardon make a campaign contribution.
| datsci_est_2015 wrote:
| The difference between fraud and not fraud is if you can
| reach an agreement with auditors that it's not fraud.
| PowerElectronix wrote:
| Extreme? Almost every AI related stock is investing in
| companies that then buy their product, efectively just
| giving stuff for free in exchange for better quarterly
| numbers.
| kakacik wrote:
| And thus we keep talking about AI bubble and _when_ it
| bursts, not _if_ it bursts
| mschuster91 wrote:
| ... and how much of the stonk market and the actually
| legitimate economy it will take down with it.
|
| My personal opinion? The bubble burst will make 2007ff
| look harmless in comparison.
| oleganza wrote:
| Correct. These kind of metrics invite fraud exactly
| because they are not rooted in reality. "Money
| circulation" is a bad metaphor.
| https://oleganza.com/all/money-does-not-circulate/
| xtiansimon wrote:
| Isn't the 'circulation' or 'rate' question a
| misinterpretation of the model of P&L analysis the OP was
| suggesting...?
| zie wrote:
| When you realize companies can borrow against receivables
| and payables also....
|
| But it eventually comes out, so while you can do it
| short-term, it's a terrible long-term strategy. Your
| stock will eventually crash and burn if you do too much
| of it.
| munificent wrote:
| All data that is externally visible about a public company
| will be consumed by traders and used to inform their market
| behavior.
|
| Companies know this, thus every action they perform that
| affects an externally visible number is calculated both for
| the actual intent of the action, _and_ how that action
| effects the number and the consequent market behavior.
|
| This is why you see all sorts of moves that aren't strictly
| helpful for the business itself like being overly picky
| about which fiscal quarter certain expenses are taken in,
| etc. The more numbers about a company that are publicly
| visible, the more the company has to play this game.
|
| Of course, visibility for traders is important for market
| efficiency too. But there is a balance there where you
| don't want to turn the functioning of a business too much
| into a perceived popularity game where it spends too much
| of its effort just making the numbers "look right"
| orthogonal to what's best for the business's functioning.
| red-iron-pine wrote:
| in other words, they know how data impacts stock price
| and do their best to game the data.
| CyberDildonics wrote:
| The data is how much money do you make in profit,
| companies try to game that already.
| casey2 wrote:
| You can't just handwave assume a mechanism that games a
| real time system. Your 3rd paragraph explains how the
| current system adds another layer for gaming. Management
| can't predict what real time traders want to see, they
| can predict that less earnings this quarter are better
| than more earnings next. Your "balance" creates the
| problem in the first place.
|
| Companies can already make press releases whenever they
| want yet non fraudulent ones fail to move the market in a
| predicable way. If someone is committing fraud I want to
| know about it instantly not in 3 or 6 months. This is
| just a gimme to Elon's scam empire from an organization
| he "has no respect for".
| gotwaz wrote:
| Homework - What does Shannon Information Theory say about too
| much info beyond channel capacity?
| JSR_FDED wrote:
| I give up, what does it say?
| mcoliver wrote:
| Sure but I should add I'm not saying this should be done in
| place of current reporting. It should be done in addition to.
| I'm advocating for more transparency augmented with periodic
| storytelling. Over time that noise becomes the pulse of the
| company.
|
| Wrt Shannon, the channel capacity today vastly exceeds that
| of 1934 when quarterly reporting became standard. Give me
| more data and a filter any day over a once every 6 month
| black box. 6 month reporting is undersampling.
| gotwaz wrote:
| How do we discuss Shannon if you dont tell us what your
| channel capacity is and how you compute it?
| fractorial wrote:
| SPY is an ETF and SPX is an index. The distinction is material.
|
| /ES does not trade between 5pm and 6pm ET. SPX options aren't
| marked until 8:15 PM ET.
|
| It's more plausible that large caps see MWF, then MTWHF
| possibly.
| mcoliver wrote:
| Good additional info. I used a shortcut I figured most people
| would understand without getting into the weeds.
| namtab00 wrote:
| [flagged]
| tomhow wrote:
| Please don't post snarky comments like this on HN. We're
| here for curious conversation. If you don't fully
| understand someone's comment, politely ask them to clarify.
|
| https://news.ycombinator.com/newsguidelines.html
| avadodin wrote:
| Thanks.
|
| T+0 all-year-round trading is good in many ways bad in others
| --like losing the real investor liquidity spawning window at
| 09:30 EST as opposed to pure market making.
|
| Quarterly earnings were already a bad fit for many businesses
| so I agree with the measure to do away with them in
| principle. Someone proposed real-time and I think that would
| be a net positive if not very feasible. Yearly is a good
| compromise.
|
| Companies that are not profitable YoY usually have a story so
| they probably can avoid having to rob Peter to pay Paul.
|
| Then again, maybe everyone adapts and yearlies turn into the
| next quarterlies.
| pbreit wrote:
| Maybe just allow "insider trading".
| giancarlostoro wrote:
| > if companies reported dollars in and dollars out live to
| shareholders at least we would have an idea of how the company
| is doing in a general sense.
|
| A former manager used to run his own company, it was a
| satellite internet company sometime in the 2000s, they were
| going into the negative, so they had a big TV in the office,
| showing everyday what was coming in, and how much they made vs
| how much they owed. They did it to motivate everyone to go back
| into the green. Really interesting approach. Might not work at
| larger companies, but in a small shop where everyone knows
| everyone, it makes sense.
| bushbaba wrote:
| Can motivate the employees to jump ship. Often time as an
| employee you are impacted dis proportionately on the downside
| than the upside.
| lumost wrote:
| Smart employees understand this dynamic. When leadership
| hides information - it always means its bad. The first
| thing I noticed when I had a bout of bad employers was that
| they claimed "we can't share financial information because
| of XYZ investor/legal reason."
|
| Those startups all had major financial problems within 6
| months to 2 years. Management has strong incentives to hide
| bad information from employees.
| robocat wrote:
| Most startups fail - it's almost definitional.
|
| Trying to connect the dots like you are attempting to, is
| a foolish game.
| lumost wrote:
| ehh there is a common thread that when management becomes
| convinced either of falsehoods or that lying to employees
| is the best strategy, the business outcomes won't be the
| best either.
| cjrp wrote:
| Yep, I've worked at two startups which started to really
| emphasise The Numbers in weekly all-hands meetings, and how
| we're all in it together to improve them, etc. Both of
| those jobs ended in redundancy.
| paulsutter wrote:
| Don't invest in companies that disclose enough information.
|
| They aren't banning quarterly reporting, they'd just no longer
| require it.
| red-iron-pine wrote:
| there is no F500 company that likes quarterly filing.
|
| this is why they've been lobbying for it, and with Trump in
| power they pushed and got it.
|
| once it is gone none of them will do it, or at best will do
| it half-heartedly for a while.
|
| 5 years after its repeal there will be no large company doing
| it regularly
| paulsutter wrote:
| I'm definitely curious to see what happens
|
| My guess is that most report quarterly, my question is what
| they report. But we will see.
| heliumtera wrote:
| This certainly has nothing to do with money furnace AI companies
| incoming IPO and iminent private credit crash.
| munk-a wrote:
| Isn't the quarterly report one of the specific things that AI was
| sold as making much easier to compile and distribute? I have a
| strong concern about this happening under the current admin.
| mindcrime wrote:
| _... has argued the change in requirements would discourage
| shortsightedness from public companies while cutting costs.
| Skeptics, however, caution delaying disclosures could reduce
| transparency and heighten market volatility._
|
| It's a conundrum, for sure. But as much as it pains me to agree
| with Donald Trump on anything, I think this may be the right
| thing to do. Something that could help reduce the short-term
| thinking that is so prevalent in American business today sounds
| like a win to me. But I won't deny that there are tradeoffs.
| clickety_clack wrote:
| 24/7 trading sounds like a nightmare. "Your retirement savings
| crashed 30% because there wasn't enough liquidity to cover a 3am
| panic over non-news".
| gottorf wrote:
| Honestly, stocks should trade for three hours a day. 24/7
| trading sounds like a win for exchange operators and a loss for
| anyone else.
| clickety_clack wrote:
| Maybe even just a single auction in the afternoon.
| logicallee wrote:
| one per week should do it.
| wholinator2 wrote:
| Honestly what would happen if the stock market didn't
| exist. It seems like these days the price of stock is so
| disconnected from lived reality that genuinely confused
| if it would be all that catastrophic
| stogot wrote:
| I hypothesize all dividends, no share value. How would
| that world look
| fsckboy wrote:
| that makes no sense. companies need capital, that's why
| there is a stock market. dividends are paid from past
| earnings, never capital (earnings are only a %age of the
| value of the capital) and not from higher expectations of
| the future.
| cluckindan wrote:
| In a perfect world... reality is different, however.
|
| Plenty of companies take on debt to pay dividends, e.g.
| just before going public.
| nightski wrote:
| Well we'd go back to an era where private capital owns
| the world. The public would not be able to participate or
| benefit from the ownership of companies and share in the
| prosperity.
| idiotsecant wrote:
| Yes, hard to imagine this crazy timeline where private
| capital rules the world. Totally inconceivable.
| vasco wrote:
| "It's not good so let's make it worse"
| cluckindan wrote:
| Cryptocurrencies everywhere.
| bmitc wrote:
| Private capital doesn't own the U.S.?
| michaelsshaw wrote:
| BREAKING: Countries other than "U.S." found to be members
| of so-called "world"
|
| Although I'm not sure what he's on either. Capitalists
| definitely own and exploit pretty much the entire world,
| with few exceptions.
| nightski wrote:
| I should of used the term "equity" instead of "capital".
| I meant that the worlds largest companies would no longer
| be able to be owned by public equity and would only be
| available to those in the exclusive club of private
| equity.
| AngryData wrote:
| I mean the average person already barely has any
| participation at all, and certainly doesn't benefit from
| it when their money gets dumped down the toilet because
| of some widespread financial scams and grifts that
| repeatedly happen over and over again.
| refurb wrote:
| 62% of adult Americans own stock.
| AngryData wrote:
| And how many of those people are actively making
| decisions about what companies they are investing in
| instead of blindly putting money into a black box 401k
| account because they are financially punished for not
| doing so?
| refurb wrote:
| Does it matter? They could blindly buy an SP500 index and
| benefit greatly (as most Americans do).
| bluecalm wrote:
| It's not disconnected from reality. You just don't
| understand it.
|
| If the stock market didn't exist you would have less
| opportunities to invest in well priced companies and
| people would be manipulated in investing in opaque, often
| ridden with accounting shenanigans things like private
| equity.
|
| The more companies are public and subject to price
| discovery done by sophisticated players the better it is
| for uninformed players like normal investors but also
| less sophisticated informed players like pension funds.
| bmitc wrote:
| > people would be manipulated in investing in opaque,
| often ridden with accounting shenanigans things
|
| This happens even with the stock market. See every
| financial crisis.
| bluecalm wrote:
| Like which one? 2008 crisis was caused by reckless
| lending by banks as a result of silly regulation
| (government guaranteeing loans), implicit promise of
| bailouts and you could argue corruption. What does it
| have to do with the stock market?
|
| It's a nice dismissing soundbite but you're just missing
| the broader point and real issues coming with people's
| money being invested in non public entities.
|
| Besides, just because some problems also happen with
| solution A doesn't mean they wouldn't be worse with
| solution B. You are not really making a point just
| dismissing the idea of a public market without
| understanding the value of it.
| colechristensen wrote:
| I'd settle for once per second. There's a lot of very
| fast trading nonsense which I've only heard defended with
| the "liquidity" bogeyman.
|
| A sealed-bid uniform-price batch auction seems like the
| right action.
| jjmarr wrote:
| It's your God-given right as an American to get
| millisecond level price discovery. Trading delays sounds
| like Communist bureaucracy.
| fc417fc802 wrote:
| Even once per second seems like overkill. That interval
| would still largely just facilitate the weaponization of
| exceedingly low information latency.
|
| 30 seconds seems reasonable, 1 minute better, and 5
| minutes still better. In all honesty even going as long
| as 30 minutes should still facilitate all legitimate
| purposes.
| gzread wrote:
| I saw this as a serious proposal somewhere but I can't
| remember where.
|
| There are exchanges out there that run continuously but
| with delayed information feeds.
| clickety_clack wrote:
| It feels like something Matt Levine would have talked
| about.
| chucksmash wrote:
| He has
| bmitc wrote:
| Any references you know about?
| bostik wrote:
| One easy pick: https://www.bloomberg.com/opinion/articles
| /2024-02-28/tradin...
|
| Note that his half-jokey proposal for a total of 30
| minutes of trading time a day is at this point a running
| theme. If my memory serves me correctly, he started
| talking about this phenomenon in the pre-plague years.
| mlyle wrote:
| Run continuously, non-delayed, but only sweep the order
| book at a random time every [1,2) seconds. Run for
| something like our current extended market hours.
|
| Everyone gets the benefit of fast-enough execution and
| strong liquidity.
|
| Crazy high-frequency gamesmanship goes away. Smart
| quantitative plays are still possible.
| bostik wrote:
| The best known (at least in the tech circles - in good
| part thanks to HN and Matt Levine) is probably IEX. The
| exchange guarantees that every participant is behind the
| exact same time delay. And they do that by having a
| sufficiently long spool of optic fibre between the
| exchange "broadcast switch" and the market maker
| computers.
|
| Simple and effective. Relies only on laws of physics to
| create the delay.
|
| There are also exchanges that run with "frequent batch
| auction" principles.[0]
|
| 0: https://econpapers.repec.org/article/oupqjecon/v_3a130
| _3ay_3...
| philipwhiuk wrote:
| More than tech circles - it's one of the key parts of
| Flash Boys (by Michael Lewis [of Big Short, Liar's Poker,
| etc])
| terminalshort wrote:
| If that were true then nobody would show up to trade during
| the extended hours and therefore absolutely nothing will
| change.
| AngryData wrote:
| And even that seems kind of generous to me. I see absolutely
| zero value in stock trading continuously for any length of
| time. Businesses don't make purchasing or investment
| decisions in that time span, nothing of significant value can
| even be created or sold or shipped in those time spans.
| jandrewrogers wrote:
| The beauty of it, though, is that it would recover almost
| immediately as systems arbitrage an obviously stupid situation.
| plussed_reader wrote:
| But on what time scale? Before a few connected entities make
| a profit or after?
| colechristensen wrote:
| If you're not trading overnight and there's a flash crash
| that corrects itself overnight... it's the people who are
| trading overnight taking money from each other.
| bastawhiz wrote:
| Most Americans who invest money don't trade at all. They
| pay some guy at a bank to do it, and the guy at the bank
| is exactly the kind of guy who is trading at 3am.
| anon291 wrote:
| Financial illiteracy will be the end of democracy
| bastawhiz wrote:
| There's nothing wrong with not retail trading. In fact,
| most people shouldn't be doing it.
| kortilla wrote:
| You missed the point of that comment. Nobody at your bank
| is trading for you or themselves at 3am.
| anon291 wrote:
| That's the point.
|
| You think some guy at a bank is trading for you.
|
| In a hedge fund sure
|
| Most people are in simple retirement year funds which
| have a set algorithm which decides by simply rebalancing
| to follow an index and appropriately mitigating risk by
| shifting some assets towards bonds.
|
| There is no one trading on a whimsy. The mutual fund
| founding documents specify an exact time of day (or
| times) at which the fund gets rebalanced and it simply
| follows the algorithm..
|
| The price shocks discussed here will not affect that
| gizajob wrote:
| It's easy to forget that "overnight" trading is the
| middle of someone's day, somewhere. Generally Asia.
| Dylan16807 wrote:
| The time scale is at least a thousand times faster than
| necessary for your retirement savings to be safe.
|
| The problem of investment companies selling stupidly at 3am
| solves itself as they either learn or go bankrupt. And the
| counterparties making money off those dumb moves don't need
| to be 'connected'.
| titanomachy wrote:
| Not if I retire 300 times per minute
| terminalshort wrote:
| Makes no difference unless you are a daytrader
| pembrook wrote:
| Milliseconds?
|
| Any overnight mispricing is going to become an arbitrage
| opportunity for market makers, hedge funds, and HFT
| firms...whom will then compete with each other to mine that
| arbitrage opportunity until profits go to zero, solving the
| market inefficiency and mispricing problem over time (and
| by over time, I mean like probably the first few nights and
| then it stops being an issue forever).
|
| In other words, a liquidity-based mispricing that happens
| consistently every night is going to quickly stop being
| mispriced since its so predictable.
| mtsr wrote:
| Extracting value from the market as they do it and
| leaving everyone operating at normal time/capital scales
| with less. Or isn't that what you meant?
| pembrook wrote:
| Yes, when you correct a mispricing in markets that is a
| valuable service and you tend to get paid in proportion
| to the mispricing you correct (this is why markets work
| so well, they provide dynamic incentives in a
| decentralized way).
|
| In case you aren't aware, a world outside the US exists
| on different time zones and also invests in US capital
| markets.
|
| Having 24/7 trading a massive value-add for the entire
| world who also invests in US companies, which benefits US
| companies tremendously given they will continue sucking
| up the world's capital.
|
| This is yet another reason why global companies will
| continue going public in US markets instead of their own.
| Meanwhile Europe will continue struggling to form a
| capital markets union over the next 50 years while they
| slowly translate legal documents back and forth to each
| other in 42 languages, growing the fine dining economy of
| Brussels more than their domestic economies.
| cucumber3732842 wrote:
| That's one way to think of it.
|
| The other way to think of it is that these parties are
| essentially middle men who make a cut of the difference
| whenever someone buys/sells far from market price.
|
| Basically if you mis price something they screw you
| rather than the counter party who would be interested in
| taking the other side at market.
|
| I think this is stupid and does not add value, but I
| don't think it's harmful. It's like the stocks equivalent
| of a junk flipper.
| kortilla wrote:
| But that doesn't matter to your retirement. Don't sell your
| retirement at 3am and the liquidity at 3am isn't your
| problem.
| plussed_reader wrote:
| Do you actively trade on a 401k or other savings
| instrument or do you leave it up to the bank/brokerage?
| mmooss wrote:
| In the past, stupid situations on Wall Street have not
| resolved that way; they've resulted in disasters that cause
| economic harm to many people in the country and the world.
| Though sometimes people on Wall Street do make money from
| those situations.
| anon291 wrote:
| Of course they have... There have been multiple 'flash
| crashes' which corrected in seconds.
| svnt wrote:
| No, they stop hunt their way to depressed prices where they
| then buy anticipating the recovery while you closed out your
| "safe" retirement positions at -15%.
| thfuran wrote:
| >while you closed out your "safe" retirement positions at
| -15%
|
| User error
| kortilla wrote:
| You don't put stop losses on retirement positions. That's
| an incredibly dumb thing to do for long term investors.
|
| It's literally a "sell low" policy.
| svnt wrote:
| You use a trailing stop loss. You get closed out 15% down
| from the top, not 15% down from purchase. The alternative
| in a 24 hour market is worse -- the news of a real event
| hits and by the time you wake up and respond you're down
| 50% or more and the stock isn't coming back.
|
| This policy change is to hunt profit from a safety
| mechanism used by retail traders.
|
| It is something that should yield a lot of profit for 24
| hour trading systems during a downturn.
| dlenski wrote:
| I'm extremely skeptical about this.
|
| 24/7 trading will _definitely_ burn a lot of extra energy in
| datacenters, make some speculators a little richer, and make
| a _LOT_ of retail investors nervous...
|
| But what _actual real-world problem_ will it _solve_?
|
| I for one am skeptical that more liquidity is _always_ good.
| I think that having achieved $0.01 spreads, we 're well-past
| the point of diminishing returns with high-frequency trading.
| elil17 wrote:
| Right? Why do we even need all-day trading?
|
| I have seen a once-daily auction proposed, which seems like
| a sensible approach to me.
| jedberg wrote:
| That wouldn't be enough liquidity, and also wouldn't
| solve the problem if the auction happened at a specific
| time. Day traders would all put in their bid at the last
| possible moment.
|
| What solves the day trading problem is doing chunked
| actions at random small intervals (like between 2-7
| seconds). Then you can't put your bid in at the last
| moment because you won't know when it is. So your best
| bet is to put in your bid when you've chosen a price,
| knowing that it will resolve within seven seconds or
| less.
| pembrook wrote:
| > _But what actual real-world problem will it solve?_
|
| I know most Americans don't travel, but are you aware that
| timezones exist and there's an entire world outside the US
| that also invests in US companies?
|
| Why do you think global companies want to list in US
| capital markets instead of their own? Being the world's
| most desirable capital markets is a massive boon for the US
| economy and 24/7 trading will only accelerate this trend.
| dlenski wrote:
| _> I know most Americans don 't travel, but are you aware
| that timezones exist and there's an entire world outside
| the US that also invests in US companies?_
|
| Not only am I dimly aware of the existence of these not-
| the-US places, but I actually _live_ in not-the-US.
|
| I believe I'm dimly aware of the concept of a timezone
| too, yeah. https://bugs.python.org/issue35829#msg385309
|
| _> Being the world 's most desirable capital markets is
| a massive boon for the US economy and 24/7 trading will
| only accelerate this trend._
|
| So, no downsides or diminishing returns to offering 24/7
| trading?
| cucumber3732842 wrote:
| >But what actual real-world problem will it solve?
|
| Having US markets open during the rest of the world's
| business day.
| dlenski wrote:
| Okay, what problem does _that_ solve?
| koliber wrote:
| Most of the time things will work as they are supposed to and
| arbitrage will work as a damper. Every once in a while you'll
| get a self-reinforcing loop and then it will work as an a
| run-away amplifier.
| sumedh wrote:
| Or the govt steps in and cancels trades like what happened in
| the flash crash.
| gzread wrote:
| but you just don't sell and wait until the liquidity comes in
| and prices return to normal at 9am, no?
| dragonwriter wrote:
| Significantly large fluctuations, even if largely irrational
| themselves, can cause effects which have durable impacts on
| value.
| vasco wrote:
| Give an example don't leave us hanging. I'm really curious
| how you can find an example of a temporary market liquidity
| move turning somehow into a long term adverse event for a
| company. Never heard of it
| prodigycorp wrote:
| There's already a huge futures market Liquidity will just
| migrate.
| yareally wrote:
| We already have 23/6 trading with index futures. The S&P500
| (ES), NASDAQ 100 (NQ), DOW (YM) will sometimes gap up or down
| on open just to match overnight trading.
| barbazoo wrote:
| > "Your retirement savings crashed 30% because there wasn't
| enough liquidity to cover a 3am panic over non-news"
|
| I don't understand what that means so I'm guessing it doesn't
| apply to retirement savings in general. Does "liquidity to
| cover" imply that one made a bet that didn't work out?
| elAhmo wrote:
| It seems like people in power in the US are competing to make as
| much damage as possible to systems that brought them so much
| wealth.
| 20after4 wrote:
| It's almost as if they aren't considering the best interests of
| the public or the government/economy that they are dismantling.
| rjbwork wrote:
| They are the winners. They want to stay the winners. So they
| are incentivized make sure that nobody else can climb up to
| challenge them.
| joquarky wrote:
| Something is coming so it's all smash and grab.
| t0lo wrote:
| What something?
| GolfPopper wrote:
| Look at the factors in play:
|
| -8 billion human beings
|
| -the continuing health impacts of COVID
|
| -increased frequency and magnitude of destructive weather
| events
|
| -global weather pattern shifts
|
| -increasingly dysfunctional governments in previously
| stable nations
|
| -markets dominated by players decoupled from reality
|
| -a stock market bubble of immense proportions
|
| -the end of the post-WWII order
|
| -an interlinked global economy with very little resilience
|
| -an increasing amount of war
|
| I have no idea what shape the world that emerges from all
| the above is going to be, but I strongly doubt it will be
| better than it was. The obvious analogs seem to be the
| Great Depression and the World Wars.
|
| I don't know exactly what will start the dominoes falling,
| but the current war in Persian Gulf has a lot of potential
| to do so.
| t0lo wrote:
| My main concern isn't how or if we survive, but who we
| survive as- the rewriting of what the context of being
| human is the biggest threat to me- imagine social media
| but spreading increasingly depressive and depraved social
| attitudes. We need social buffer- and contentment and
| contextualising media to see us through this, alongside
| everything else.
|
| (A luxury i know as it shows i have a comfortable and
| stable existence)
| resters wrote:
| ultimately supply and demand should result in less demand for the
| stock of companies that do not provide adequate transparency
| about results.
|
| Supporters of the idea would likely say: "But considering that
| stock price crashes result in government bailouts, why bother
| reporting bad news since it just panics everyone and necessitates
| a bailout that shouldn't have been necessary."
| smeggysmeg wrote:
| Rational market theory is dead. Markets are not rational and do
| not respond to situations in rational fashions like you
| suggest. People operate on hype, fear, and insider trading.
| westurner wrote:
| That's disrespectful to investors.
|
| Persons affected by the market deserve quarterly earnings
| reports; which should be trivial given sufficient accounting
| systems.
| westurner wrote:
| Less accounting accountability -> Greater liability
|
| Other international markets under consideration for investment
| are expected to retain their sub-annual reporting requirements.
|
| Does this policy provide for allowing firms to optionally
| continue to disclose their financial status to all investors
| quarterly using the existing guidelines for scheduled
| disclosure?
|
| Firms could instead instruct their CAO Chief Accounting Officer
| to continue to prepare quarterly reports and work on being able
| to prepare automated monthly reports.
|
| Markets with a no-fee CBDC have the advantage on transactional
| accountability. If all transactions were in CBDCs, the treasury
| report for quarterly or monthly statements of accounting
| accountability would be easy.
|
| Investors have for quite awhile operated with legally mandatory
| quarterly accounting reports and explanations of the nature of
| the costs and returns.
|
| You do the now-annual earnings report webcast
|
| Sort of like when you put off working on a paper until the last
| minute
| bandrami wrote:
| Oh things must be about to get _bad_
| philipdavis wrote:
| When you wonder how much damage one person can do in 4 years...
| tso wrote:
| "The President in particular is very much a figurehead -- he
| wields no real power whatsoever. He is apparently chosen by the
| government, but the qualities he is required to display are not
| those of leadership but those of finely judged outrage. For
| this reason the President is always a controversial choice,
| always an infuriating but fascinating character. His job is not
| to wield power but to draw attention away from it. On those
| criteria Zaphod Beeblebrox is one of the most successful
| Presidents the Galaxy has ever had -- he has already spent two
| of his ten presidential years in prison for fraud."
| blobbers wrote:
| Well, this is going to make insider information a lot more
| powerful...
|
| You've got 364 days in between the truth, and if you think a
| company is fudging it's numbers you've got to wait another 365
| before anything else comes out.
| niij wrote:
| The proposal is to change to bi-annual. Not annual.
| blobbers wrote:
| Okay, I mean /2, but you get what I mean.
|
| Personally I think it might be better to be longer term
| oriented, but audit teams will lose revenue... Or just have a
| harder time reconciling longer time periods.
| sulam wrote:
| The fact that this is optional means it will still happen, simply
| because of the signaling doing it quarterly will provide.
| sambull wrote:
| The rug pull on our 401ks has begun
| gethly wrote:
| Last year, I heard about this maybe coming, and here it is.
|
| On the positive side, it removes a lot of burden from the
| companies as making those earnings reports 4 times per year is no
| joke. A lot of effort goes into it.
|
| On the other hand, earnings reports are the only times, 4 times
| per year to be specific, where we can clearly see real numbers
| and how the company is doing vs what the company is "selling" to
| the public. So this inherently damages transparency, no doubt
| about that.
|
| Also, rememebr all those insider trades the politicians love to
| do? Well, now it will be even harder to monitor.
| tormeh wrote:
| Isn't the solution to a rare task being painful to make the task
| frequent? What if we required daily/weekly fiscal reporting?
| Would that even be feasible? I guess it would force complete
| automation, which might make it much more difficult to change
| things and reduce company agility. Would be fun to hear the
| opinion of someone actually involved with the process.
| Esophagus4 wrote:
| Tricky part is it's not actually a technology problem.
| Generating the numbers is already automated.
|
| It's "pay [external] auditors and legal to review to make sure
| all of this won't get us thrown in jail"
|
| If those processes are automated because the law, accounting,
| and audit professions innovate, then I would suspect you'd
| utopiah wrote:
| Finally, free market. /$
| vicchenai wrote:
| curious what happens to 13F filings if quarterly earnings reports
| go away. the 45-day window post quarter-end is baked into the
| same reporting cycle. seems like SEC would have to rethink that
| too, or we lose a big chunk of the institutional transparency
| picture
| nodesocket wrote:
| There is a great book called "The Number: How the Drive for
| Quarterly Earnings Corrupted Wall Street and Corporate America"
| by Alex Berenson. In it he outlines various frauds and market
| calamities: WorldCom, Enron, 2008. He makes the point that
| earnings per share often times comes down to cents and a single
| cent of earnings can make a stock rocket or plummet. Thus there
| is often complicated and opaque financial gymnastics to adjust
| EPS to meet expectations. It's a great read.
| DocTomoe wrote:
| The optimist in me wants to believe the lack of a quarterly
| report requirement will increase decision-making timeframes and
| will give industry leaders more time to plan long-term.
|
| But I also like to believe that Santa is, in fact, real.
| freediddy wrote:
| Most countries in the world only report every 6 months.
| yalogin wrote:
| Why do we want to make the stock market mimic the crypto market?
| What need is the 24/7 trading solving? Just for hft companies to
| make more money? Seems like a genuine reason to diversify to
| Europe and Asian markets
| KK7NIL wrote:
| > What need is the 24/7 trading solving?
|
| There's a reason the Black-Scholes model assumes market prices
| are continuous. The discontinuity of the market makes hedging
| options a lot more complex and expensive.
|
| 24/7 trading doesn't completely fix that, but it does help.
| xxpor wrote:
| As a practical matter as a "normal person" who just wants to
| rebalance/do a deposit/withdraw every so often, the market only
| being open 6:30 AM-1 PM on the west coast is very annoying.
|
| 6:30 AM to say 10 PM would solve a lot of those issues though
| without needing to go 24/7 (unless you work night shift...)
| giantg2 wrote:
| The article is sparse on details. I think large companies should
| continue to report quarterly. I think semi-annual reporting for
| small caps could be a good thing since it would reduce the costs
| associated with preparing the reports. Some states allow for this
| type of lower frequency reporting for taxes based on the size of
| the obligation.
| Havoc wrote:
| The chances of this actually changing anything is quite low. All
| our quarterly reporting is legally locked in. It's getting done
| regardless of what the SEC says
| diebeforei485 wrote:
| I think this is OK. It allows for more long-term planning. 6
| months will fly by.
| 6thbit wrote:
| So the first earnings report of an IPO wouldn't come until 6
| months later? potentially already indexed everywhere?
| 6thbit wrote:
| > the rule is expected to make quarterly reporting optional and
| not eliminate it altogether.
|
| Would there be any incentive for companies to still report
| quarterly? would reporting make them appear more transparent than
| 6month reporter competitors in their space?
___________________________________________________________________
(page generated 2026-03-17 23:01 UTC)