The Investing for Beginners Podcast - Your Path to Financial Freedom

Why is the SEC Letting Companies Get Away with This?

Feb 17, 2025

David Trainer, founder of New Constructs, sheds light on today’s flawed capital markets shaped by opaque financial statements. He reveals how critical details often hide in footnotes, jeopardizing investor insights. Trainer emphasizes the importance of discerning economic earnings over superficial accounting metrics, urging a shift in investment strategy. With a focus on improving transparency through innovative technology, he discusses the potential for better-aligned capital allocation and the resurgence of undervalued, profitable companies.

01:00:13

Episode guests

David Trainer

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Episode notes

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Quick takeaways

Investors need to thoroughly analyze financial statements, particularly the footnotes, to gain a complete understanding of a company's value creation or destruction.

David Treanor advocates for transparency in corporate finance, highlighting the necessity of accurate earnings analysis to make informed investment decisions.

The podcast suggests that a shift in administration could lead to a reset in capital markets favoring undervalued and profitable businesses over speculative growth.

Deep dives

The Role of Trusted Partners

Successful entrepreneurs often credit their achievements to having trusted partners by their side. This collaboration can span various aspects of business, from strategy to execution and scaling operations. Trusted partners not only provide emotional support but also enhance business credibility, which is fundamental for attracting customers and investors. In the world of entrepreneurship, surrounding oneself with reliable partners can create a robust foundation for growth and innovation.

Intro

5min

Understanding Economic Earnings

16min

Safeguarding Your Assets and Securing Your Future

3min

Unveiling Financial Obscurities

14min

Evolving Investment Practices on Wall Street

8min

Revolutionizing Financial Data Analysis

8min

Examining the Valuation Expectations of High-Flying Stocks

2min

Unlocking Stock Valuations: Reverse DCF Insights

5min

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:

Go to SHOPIFY.COM/beginners to start selling with Shopify today.

Go to shipsticks.com and use the code INVESTING for 20% off.

Go to get.stash.com/INVESTING to see how you can receive $25 towards your first stock purchase and to view important disclosures

This episode is sponsored by BetterHelp. Give online therapy a try at betterhelp.com/INVESTING and get on your way to being your best self.

What do Dave and Andrew recommend? Our free ebook and email series, at stockmarketpdf.com.

Find great investments & Connect, Learn and Grow at Value Spotlight

Have questions? Send them to newsletter@einvestingforbeginners.com

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