Warren Buffett Joins Call to Target "Short-Termism" In Financial Markets

[link01]

http://www.cnbc.com/id/32745449/site/14081545?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo

 

snip

 

<<The statement argues that a "healthy society requires healthy and responsible companies" working to achieve long-term goals.

 

Instead, "boards, managers, shareholders with varying agendas, and regulators ... have allowed short-term considerations to overwhelm the desirable long-term growth and sustainable profit objectives of the corporation."

 

The statement recommends:

 

"Market incentives to encourage patient capital," such as lower capital gains tax rates for longer holding periods.

Closer alignment of the interests of financial intermediaries, like mutual funds, and their investors.

"Greater transparency in investor disclosures" to make it harder for activists and other investors to "use their influence to achieve short-term gains at the expense of long-term value creation."

 

The Aspen statement calls for boards, managers, and "most particularly, shareholders" ... institutional investors .. to shift their focus to long-term goals and not push for "high-leverage and high-risk corporate strategies designed to produce high short-term returns."

 

Not everyone will agree, of course.  Activists like billionaire Carl Icahn believe incompetent or entrenched managements often cite the pursuit of "long-term goals" as a crutch to avoid making difficult changes that would help the company, shareholders, and everyone else.

 

A few years ago, he told Business Week, "My critics say I am short-term-oriented .. My point is that a lot of times assets can be better utilized and enhance society when you put them in better hands than the current management." >>

 

well, just as there are oft worlds of difference between so called "value investors" like buffett & bill miller for example, so too are there huge diffferences btween investors labeled "activists". sardar & carl icahn couldnt be more different, imo.

 

 

 

 

 

[Partner24]

100% agree with these propositions.

[Guest longinvestor]

If you add up WEB's call here of returning to long termism and his comments about how the markets was (& still is) overvalued, the broader market has still ways to go in reverting to the mean. Why WEB is spot on saying that broader market returns should be in the 4-5% range over the next decade. Anyone expecting more (like 10+%) is simply smokin'

 

Of course there are/were nuggets of value out there, why value investing reigns supreme now more than ever before. It is the day of  Warren, Prem et al. Make no mistake about that.   

[ragnarisapirate]

here is something to stir up the pot:

 

Why would we not want to have activists do their bidding and have Mr. Market be as manic-depressive/short termed as possible? It seems to me that this is a great deal of what makes there be pricing inefficiencies, for us, the few value investors in the world to come in and buy everything up on the cheap.

 

Short termism made the market tank over the past year- creating the opportunity for us all to buy things on the cheap; ORH, FFH, SNS, BRK, and ZINC are just a few of the businesses that come to mind.

 

Certainly, I understand that there is a 'bigger picture' for macro-economic growth, which is contrary to short term performance; though, historically, I don't see how we can ever do away with that type of thinking-only hinder it a little (at best).