Warren Buffett, Jamie Dimon: Quarterly profit forecasts hurt economy

Warren Buffett

Warren Buffett

The two men are among the financial industry's most powerful leaders.

Neither Buffett, chairman and CEO of Berkshire Hathaway Inc.in Omaha, or Dimon, chairman and CEO of JPMorgan Chase, predict their profits every three months.

Dimon, chairman of the Business Roundtable, noted that the group of CEOs also support companies moving away from the practice and instead, focus on long-term value creation.

Dimon, is chairman of the Business Roundtable, an association of almost 200 CEOs that is also backing the push to eliminate so-called short-termism. They have said the practice of telling Wall Street what to expect from earnings can distort management's priorities.

Executives often feel pressure to make quarterly forecasts, but "it can often put a company in a position where management from the CEO down feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done", Dimon said in a rare joint interview with Buffett airing Thursday on CNBC's Squawk Box . "Their ego gets involved". "You're not going to be ordained to be the president of the United States. Business just doesn't work that way".

In the latest appeal, they said companies often hesitate to spend on technology, hiring, and research and development to meet quarterly earnings forecasts that can be affected by seasonal factors beyond their control.

Minnesotans Played Role in Capitals' Stanley Cup Title
However, they weren't a Cinderella team that rode good fortune to a Stanley Cup - they outplayed their opponents in every series. Had they lost in double overtime in Game 3 to the Blue Jackets, that was the story.

Dimon said Thursday that about 20 percent of Business Roundtable members still do quarterly guidance and about 60 percent provide annual targets.

"Sometimes you're a cork in the ocean", he said.

Wall Street traders seek the quarterly predictions as benchmarks of a company's performance.

Stock trades generate fees for financial managers, so there's opposition to nearly anything that can lead to less trading.

Amazon's size and reputation as a disruptor prompted investors to sell shares of companies that might be hurt by the venture when it was announced in January.

Buffett said most CEOs are good at making the right decisions for their companies' long-term future, but ending the forecasts would be one way to improve.

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