Not content to revolutionize health care, Warren Buffett (Trades, Portfolio) and Jamie Dimon are also taking on the cause of ending quarterly earnings guidance, they said in an interview with CNBC Thursday.
The two business magnates opined about the short-term thinking plaguing corporations and markets due to quarterly forecasts in a wide-ranging interview that included their thoughts on bitcoin, jobs and the economy.
“Becky, I’ve been on 20 boards of publicly owned companies not counting Berkshire’s, and I have seen managements that I really think well of personally … but they get tempted by this predictions that have been made, their ego gets involved,” Buffett, chairman and CEO of Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) said.
“When they find they can’t make the numbers, sometimes they make up the numbers. It’s a bad – it’s a very, very bad practice and once it gets going it feeds on itself because if your investor relations department tells you you put out you’re going to put out $1.08 and you get this reputation for making your numbers or beating your numbers, you’re going to do some very stupid things at some point, because business just doesn’t work that way.”
As a replacement, Buffett said he wants to hear what they would tell him if he were their sole partner in a business but did not spend his days there. Insurance companies in particular can come up with any numbers they want for each quarter, he said.
On the economy, Dimon said we are only “in the sixth inning,” and that he sees “no potholes.”
“It may very well be that it’s just a very long, kind of delayed cycle,” Dimon, CEO of JPMorgan (JPM, Financial) said. “Sentiment grows, recovery from the great recession. You may very well have years of growth. And I hate to forecast the future, because I don’t know, but it seems to me that’s a logical possibility. As a matter of fact, I think growth is getting stronger today, not weaker.”
Buffett agreed that “business is good,” but said people should not base their stock-picking decisions on the positive climate.
“The decision on the stock market should be made independent of the current business outlook,” Buffett said. “When you should buy stocks is when you think you’re getting a lot for your money, not necessarily when you think business is going got be good next year. The time to buy stocks in America generally has been always with a few exceptions because the long-term outlook is exceptionally good.”
Buffett said he is a net buyer, but has been all his life.
Dimon said he disagrees with President Trump’s tariffs, which he believes could harm the economy and have other poor outcomes, such as inciting nationalism, harming allies and causing retaliation.
Buffett, Dimon and Amazon CEO Jeff Bezos have also selected "the right CEO" to oversee the health care company they want to create to lower costs for consumers and companies. The idea for the company is to expand on what Dimon already does annually for employees – using companies to help with claims, choice and wellness.
“We’re just going to try to do it better,” Dimon said. “You should expect that we’re going to do it the right way with the same kind of heart we’ve had before which will improve your lives, improve your wellness, improve the outcomes, give you more choice, which I believe if you do all those things that it will effectively be cheaper, and you’ll have much healthier employees.”
Neither Buffett nor Dimon will run for president, they confirmed.
Watch CNBC's full interview with Warren Buffett and Jamie Dimon from CNBC.
