Lesson 6 of 6
The schedule and the silence
What happens after the document is written, which is mostly nothing. Four dates a year, one email when a reason breaks, and why silence is the working state.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- The document is written once. After that there are four known dates a year and nothing to do in between.
- One email arrives when a condition stops being true, once, and never again about the same episode.
- Silence means those conditions did not break. It does not mean nothing changed, and the difference is the last thing this academy teaches.
Seventy-two courses end here, on the least dramatic page in the academy. What happens after the work is done is mostly nothing, and that is the design rather than a disappointment.
A year, after the document is written
Four dates, and nothing in between
The filing calendar is the schedule. Three quarterly filings and one annual one, and the fourth quarter has no filing of its own because its figures are the year minus the three filed quarters.
Between those dates there is no new filed evidence about the business, which means there is nothing for a reader to do. The credit conditions course measured why: an annual figure describes a period whose midpoint is roughly a year before the filing is readable, and nothing in between changes it.
What arrives without being asked
One email, when a condition that was holding stops holding. Once. While it stays broken nothing further is sent, and if it recovers that is recorded without an email and the condition is re-armed.
What it means is narrow: one filed figure crossed a level you set, so the reason you attached to that figure needs re-reading. What it does not mean is that anything should be sold, that the information is new, or that something is wrong with the company.
The manual conditions are yours alone
Some conditions cannot be automated, and both capstone documents contain one. Nothing will remind you about those. They are checked at the annual review, by you, or they are not checked.
That is the cost of writing a condition on a maturity schedule or on a covenant, and it is worth paying, because those are often the conditions that decide. What makes it work is writing the review date on the document rather than intending to remember.
What the whole thing was for
Not to predict anything. Not to rank anything. Not to produce a view about credit, an economy or a price.
To make it possible, in two years, for a person to read a page they wrote, check every figure on it against a named filing, and say whether the reasons they held for still hold. That is a small claim and it is the one the evidence supports.
The academy ends here because there is nothing after it. The rest is doing it.
Check yourself
How many dates a year carry new filed evidence?
- Twelve
- Four: three quarterly filings and one annual one
- Two
Show the answer
Answer: B.
The fourth quarter has no filing of its own; its figures are the year minus the three filed quarters. Between those dates there is nothing to do.A condition breaks and stays broken for a year. How many emails arrive?
- Four, one at each filing
- One, at the moment it breaks
- None, since it is already known
Show the answer
Answer: B.
While it stays broken nothing further is sent. A recovery is recorded without an email and the condition is re-armed.Three conditions produced silence over a year. What distinguishes them?
- Nothing; silence is silence
- The document, which records which conditions are automated and which are not
- The date each was last evaluated
Show the answer
Answer: B.
One held, one could never be evaluated and one was never checked. All three produce an empty inbox, which is why the document says which is which.Sources
- Form 10-K, General Instruction A(2), and Form 10-Q, General Instruction A(1), for the filing deadlines the review calendar is built on.
- The product's own methodology page, for the states a condition can be in and for what is sent in each.
What this leaves out
- The filing deadlines are outer bounds in the general instructions to the forms. A company may file earlier, which moves the dates forward but does not add any.
- The three-row table is illustrative of the three kinds of silence rather than a report about any company's conditions.
- Nothing here is a view on any security, and none of it is advice.