Wall Street incentives are all jacked up, and after 25 years of experience poring through countless financial statements, David Trainer has an easy and automated solution for improving the transparency of the capital markets.
The problem with financial statements today are that the details are in the footnotes, and these details are not captured in earnings reports or price earnings ratios. Investors who don’t read the footnotes and aren’t always getting the complete picture of a company's story, and corporate America is incentivized to continue to obfuscate it.
The fact of the matter is that too little attention is being paid to whether companies are creating or destroying value with their growth and it’s leading to too many investors losing money by speculating on bad businesses. If more investors took the time to fully understand and analyze ROIC and economic earnings, they would be better able to allocate capital towards businesses that actually have the best long-term prospects.
If things change with the new administration and the speculative excesses of the last few years start to dissipate, then we could see a reset in the capital markets-- with the return of undervalued and profitable businesses generating better returns than speculative growth ones.
This episode is jampacked with many of David Trainer's personal stories and insights, including why he founded New Constructs and the purpose behind it, which is to Improve the Integrity of the Capital Markets.
It’s a mission that’s sorely needed and that we fully stand behind. Share this episode with others so this movement can spread.
00:00 Introduction and Guest Welcome
00:33 Earnings Season Insights
02:31 Understanding Economic Earnings
05:21 The Importance of Return on Invested Capital
08:04 Market Speculation and Liquidity
19:36 Footnotes and Financial Obfuscation
26:07 Emergency Brake Protocols and Missing Disclosures
26:34 Challenges with Operating Leases
27:41 The Role of Estimator Code
27:56 Regulatory Bodies and Enforcement Issues
31:39 Conflicts of Interest on Wall Street
35:32 The Birth of New Constructs
40:23 Technological Advancements in Data Collection
46:52 Upcoming Live Stream and Platform Demo
50:36 Conclusion and Final Thoughts
Timestamps are generated by artificial intelligence, and are not 100% accurate depending on the platform used for listening.
Today's show is sponsored by:
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The Investing for Beginners Podcast - Your Path to Financial Freedom