Why Trump’s push to scrap quarterly earnings caused Wall Street to ‘freak out’

President Trump wants to go back in time with how companies give updates on the health of the

business. Would shifting quarterly reports to semi-annual checkups up in the financial system

or would it be business as usual? Last week, President Trump took to Truth Social to proclaim, subject to SEC approval

companies and corporations should no longer be forced to report on a quarterly basis

but rather to report on a six-month basis. Trump added the new rule would save money

and allow managers to focus on properly running their companies. I applaud this

It certainly did freak out Wall Street because there's an entire media machine

that runs every three months on its earnings season. It's like, oh, baseball season

It's open. Play ball. What say you? And what other company in the world is going to give you $46 billion in quarterly revenue

I am Danielle DiMartino Booth. I have been running QI Research, a research boutique

I am also a former Fed insider and a Wall Street veteran. So I think that this is a very rare instance, if I had to guess, of Warren Buffett agreeing with the president

In June of 2018, JPMorgan Chase CEO Jamie Dimon and Warren Buffett penned an op-ed for The Wall Street Journal

encouraging all public companies to consider moving away from providing quarterly earnings per share guidance

They wrote the practice often leads to an unhealthy focus on short-term profit

at the expense of long-term strategy, growth and sustainability. Just two months after that, Trump took to the social media service then known as Twitter to post

In speaking with some of the world's top business leaders, I asked what it is that would make business even better in the U.S

Stop quarterly reporting and go to a six-month system, said one, that would allow greater flexibility and save money

At that time President Trump called on the Securities and Exchange Commission to study the issue Okay for those that aren exactly up on all of the latest in securities regulation every publicly traded company is required by the SEC

to publish earnings reports. These reports break down a company's performance, including data like revenue, expenses, profit, et cetera

They do so four times a year, consisting of one annual report and three quarterly reports

As part of their quarterly reports, many firms hold investor calls where ysts can ask questions

Now, what Diamond and Buffett were concerned about was earnings guidance. While earnings reports give a snapshot of past performance

guidance gives an estimate of future revenue, expenses, and profit. And providing guidance isn't required by law

But according to the two, it can play into prioritizing short-term over long-term goals

Quarterly earnings haven't always been required. Stock markets and trading securities have been a part of the U.S. economic system since just after the country's founding

But the SEC wasn't created until 1934 at the height of the Great Depression

It's tasked with protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation

As part of the Securities Exchange Act of 1934, the agency was given the power to require reports for publicly traded companies

But there weren't set intervals at the time. In 1955, the SEC began requiring semiannual reporting to increase transparency

and somewhat leveled the playing field between the investing public and people within the company

They took it a step further in 1970 when the SEC required quarterly earnings reports

It was transparency that the quarterly number is relevant and material to investors

It's a good measuring stick, if you will, on company performance. Charles Elson, Founding Director, Weinberg Center for Corporate Governance at the University of Delaware

And my area is everything from corporate governance to securities law etc You not going to get rid of the problem by simply skipping two reporting periods

I think the reason we have those reporting periods is that companies operate on quarterly basis

The board is reported to with quarterly numbers. The board generally meets quarterly

And the quarterly numbers are a way to evaluate how the company is doing

Changing SEC rules isn't an overnight affair. First, commissioners have to vote to issue a notice of proposed rulemaking

They would then open a public comment period to gain insight on the proposed change

That information would then be reviewed. If commissioners decide to move forward, they would hold a vote on the issue

SAN asked the SEC how far the process got when President Trump proposed it in 2018

They pointed us to a request for comment on the subject issued in December of that year

In response to the latest call from the president, an SEC spokesperson told S.A.N.

at President Trump's request, Chairman Atkins and the SEC are prioritizing this proposal

to further eliminate unnecessary regulatory burdens on companies. Trump's assertion that CEOs aren't huge fans of the rigmarole of reporting every quarter

has some credence. The Business Roundtable represents over 200 of the country's biggest companies and writes

the current obsession with short-term forecasts can cause companies to sacrifice long-term

performance by holding back value-creating expenditures such as marketing and capital improvements in order to meet short-term forecasts. As an individual who sits in the C-suite or as a

board of directors member, you're not able to plan for the longer term. You're not able to make

investments in product productive endeavors going forward because you're so concerned about what your earnings per share are going to be every three months, which happens to, oh, I don't know, determine the size of your bonus

Despite the concerns that companies might be putting too much focus on the short term a keen eye can take a lot away from quarterly reports It may signal trouble in the organization going forward or an

early sign that something is going to be very, very helpful to the company. And I think investors

need to understand that. The danger of quote unquote managing to quarters isn't going to be

fixed by simply eliminating the quarter. It's kind of like saying, if I want to get rid of a head cold

I'll just chop off my head or my nose. It doesn't solve the problem

While some believe eliminating quarterly reports could lead to transparency issues, others say it won't change all that much

I think it's kind of an inconsequential idea. Mark Higgins, I'm a senior vice president

at Index Fund Advisors. I'm also the author of Investing in U.S. Financial History

which is a 230-year financial history of the United States. At the end of the day

I think the demand for quarterly earnings reports comes more from Wall Street than it does from the SEC

So I think relieving that burden practically is probably not going to make that much difference

In theory, I don't think it's a bad idea. But reducing the regulatory burden could ease some aspects of doing business

Right now, one of the challenges in the investing world is there's a pretty big burden to go public

not only regulatory, but reporting earnings to the street on a quarterly basis

If the hope is to reduce wild swings on Wall Street in response to earnings, that may not happen

The best laid plans often don't end too well, so sometimes that might be a matter of watch what you ask for

because if we did go into an information vacuum, that could backfire mightily and allow for markets to be more and not less volatile

In a note Monday, TD Cohen yst Jared Seberg said there is a 60 percent probability that the SEC switches to semi-annual from quarterly reporting

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