A Short Sighted Stock Market Leads to Poverty

I have always been bothered by the current U.S. equity markets. The emphasis on quarter to quarter performance does nothing to encourage the long term viability of any company--unless a company wants to be far sighted enough and overlook the need to produce profits now. The fact is the quarterly reporting requirements for U.S. corporations results in "long term" being define as three months hence. With such an imposition of outlook, companies are rewarded for short term hacks and not truly long term solutions that promote the longevity of the company.

As a straw man example: it may be cheaper to the bottom line for the current quarter to fire a number of employees working on R&D because they contribute nothing to profitability, but without R&D, a company may run out of products to sell in two years or so. You make $5 today, but won't make $50 tomorrow.

There was some discussion in the past that Japanese firms, freed from a quarter to quarter accounting because they work on an annual accounting period are more free to take losses for a given period (one year) in order to recieve longer term benefits. A company has to make the decision whether quarter over quarter performance is more important than sustaining performance in the long run.

Unfortunately, there is little value in patience when it comes to wealth building.