Atkins' folly

"Oh, when will they ever learn?" is the refrain from a long-ago folk song that came to my mind when I received news that Securities and Exchange Commission Chair Paul Atkins put himself on the CAFFF list, which stands for "Corporate Advocates For Financial Foolishness." 

I'm referring to his floating the tired and ignorant proposition that reducing the frequency of interim reports is a good way to reduce costs. His advocacy may have been imposed from above his pay grade, but it reveals an astounding, even dumbfounding, ignorance of how financial markets work. It suggests that he should step aside at once so someone who knows better can be in charge of regulating the public securities industry. 

Here's the analysis: Less information from a public company increases the markets' uncertainty about its future prospects; more uncertainty increases the risk associated with its securities; more risk causes the markets to demand a higher rate of return; and that higher return causes the company's securities to be devalued. The new uncertainty also brings more volatility. 

This idea is a guaranteed self-inflicted disaster, like using a knife while gripping the blade instead of the handle.

The rationale of reducing costs is nothing short of ignorant — the data is already on hand for internal purposes, so all that's needed is putting it in a usable format. The savings are minuscule compared to millions of dollars in lost market value for shareholders.

It's pure Financial Foolishness.