Why are companies pleased to announce crappy earnings?

This is a guest post on trading from Tusk Trader (check out the newly launched site: www.TuskFund.com), an experienced Bay Street trader who will be writing here until Tusk’s own blog is set up. Tusk had a front row seat to the twists, turns, and almost collapse of our capital market systems a few years ago and provides a unique perspective you won’t find anywhere else. For most people, financial literacy is the elephant in the room. Let Tusk Trader help change that. If you are on twitter, make sure to follow Tusk at @TuskTrader

I am very pleased to announce my blog for this week.

As earnings continue to be announced this week, I am reminded of a funny small item that makes me laugh during this common quarterly routine. I always have a little chuckle when reading the first paragraph of earnings reports. Every company starts off with the same line, “We at ABC corp, are pleased to announce our 1st quarter results”. It always brings a smile to my face the fact that every company is pleased announce their earnings.

The report can go on to say that the firm is almost bankrupt and has no chance for a future or that pigs will fly before they can meet their debt obligations; it matters not. Every firm is pleased to announce regardless of what they are announcing. Being pleased to announce a wonderful takeover offer makes it appropriate to use ‘pleased to announce’. When the news is grim or negatively revealing, it is still used. The firm could be reporting deep internal struggles that make RIM look like a walk in the park. It never seems to matter as everyone is apparently pleased (except the shareholders they are reporting to). When the earnings are bad, just once I want the report to start off with, “Terribly sorry. We have finished the calculations and we see that we suck. Here is the math behind the fact we suck.”

They can still finish it off with a plan to do better next quarter. I am all for being pleased to announce positive future plans. But when the quarter sucks, start off with something more creative.
Many of these firms should be embarrassed, upset or at least hesitant. Alas, that is never the case, they are always pleased. Maybe some people are just pleased the quarter is over?

Thanks Tusk. Make sure to check out the site: www.TuskFund.com or follow Tusk Trader on twitter: @tusktrader

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