Here’s an excerpt: forward-looking statements include “terminology such as "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," "may," "will," "should," "can," the negatives thereof, variations thereon, similar expressions, or discussions of strategy. All forward-looking statements are based upon management's current expectations and various assumptions, but they are inherently uncertain, and the Company may not realize its expectations and the underlying assumptions may not prove correct.”
This guidance, courtesy of regulations issued by the federal Securities & Exchange Commission (SEC), seeks to warn potential investors that anything can – and often does – happen in the stock market. It’s a laudable goal, but like everything else a government agency gets its hands on, it becomes a thicket of twisted phrases and legalisms that obscure rather than clarify the message. Investment-related documents are filled with pages of verbal jungles and swamps that make bleary the eyes and stupefy the mind. In the end, the exact opposite of the SEC intent occurs. Investors are less informed because they don’t read the warnings.
Can we simplify things? Let’s try. If a company says a new product line “should” significantly increase revenue, that means it may happen – or it might not. Or to use “the negative thereof,” if a company says a product recall “should not” materially affect its current earnings, don’t be surprised when those earning nosedive as the recall expands. If an investor is not literate enough to understand that “should” doesn’t mean “will,” he shouldn’t be in the market. In other words, there are no guarantees. Caveat emptor. Use a dictionary. What could be simpler? Forward-looking statements won’t prevent backward-looking regrets.
Disclaimer: The foregoing discussion is posted in the earnest hope that the folks at the SEC have a sense of humor.