Tag Archives: Commentary

stock_market_scam

Has the business news pendulum swung?

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Josh Brown, who writes The Reformed Broker blog, wonders whether the business news media is now too much on the lookout for a scandal.

Brown writes, “The premise is that with more middle class investors crowding into the stock markets during the 90′s and an explosion in demand for investing stories, the types of investigative journalism that might have stopped the credit bubble in its tracks simply disappeared. It’s an interesting point.

“It should be noted that non-investors probably can’t be bothered to consume business media regularly, in most cases, so of course the tendency to cater to those who will read you is going to be hard to fight.

“The other counterpoint you could make is that, in the wake of the crash, the media pendulum has probably swung all the way in the other direction. From 2010 on, it’s begun to seem as though EVERYONE wants to talk systemic risk, bubbles, the malfeasance of the banks, etc. The press’s default setting is now “Scandal!” and on Twitter – the financial media’s faculty lounge – we do a public hanging roughly once a week these days the moment there’s even a hint of impropriety alleged.

“There’s even been quite a bit of Zero Hedge emulation in the mainstream press and some of the top financial journalists of the current era are closeted Marxists. There are also, it seems, more outlets for reporters to write at than ever, most of which are simply dying for a juicy story about some potential market scam or shock to the financial system.

“So maybe the problem Starkman describes is, to some extent, already correcting itself.”

Read more here.

economic data

The need for better local economic news

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David Lieberman, the executive editor for Deadline.com, writes about the need for local media to improve their business and economics coverage.

His essay won the American Institute for Economic Research’s Women’s Economic Roundtable (WERT) Business Journalism Prize. The prize awards $2,000 to the best essay on an economic or financial topic written by a current or past recipient of the Columbia Journalism School’s Knight-Bagehot Fellowship in Economics and Business Journalism.

Lieberman writes, “Some news providers are trying to improve things. A University of Missouri School of Journalism professor recently launched Missouri Business Alert to fill the gap in local economic news. Digital First Media’s Connecticut Newsroom, which serves local newspapers and sites across the state, just assigned a reporter to cover poverty full time. A few years ago the Pocono Record assigned staffers to cover high-impact topics such as development and growth, traffic, and infrastructure—and let stringers cover town council and school board meetings. And the Institute for Policy Studies launched the Economic Hardship Reporting Project in 2011 to help bring stories about poverty and economic insecurity ‘to the center of the national conversation.’

“It’s too early to say whether these initiatives or others will unearth a business model to pay for serious local economic news. In the meantime, the press and its allies should encourage it in other ways. Colleges and universities can offer additional seminars to help journalists become financially literate. Many have to learn the basics: the difference between a deficit and a debt, how the bond market works, what’s meant by concepts such as the ‘multiplier effect’ —as well as how to find, and interpret, key reports and documents. The profession also needs programs outside of the major cities that can train reporters to deal with local needs. A community built on agriculture has different priorities than other areas that depend on manufacturing, technology, tourism, finance, oil production, or trade.

“Universities and professional associations also must reconsider their concept of prestige to give reporters who do superior work each day covering local business and economic issues a fighting chance to be recognized. Sponsors of journalism prizes should start by changing the way they’re judged to mimic Most Valuable Player awards in sports. Experts follow athletes’ day-to-day contributions and then pro-actively choose the winners. But in journalism, judges typically aren’t expected to know anything about the candidates. Applicants bear the burden of impressing them with samples of their work. The arrangement stacks the deck in favor of reporters who produce a few high-impact stories and against those who cover demanding beats well every day.”

Read more here.

The Watchdog That Didn't Bark

What has become of business journalism?

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Hamza Shaban reviews for The New Yorker the book “The Watchdog That Didn’t Bark” by Columbia Journalism Review‘s Dean Starkman.

Shaban writes, “Business reporters are supposed to make the complex worlds of finance and commerce intelligible to non-experts. But business journalism generally failed to predict the looming credit collapse, although a few reporters warned of its arrival. Critical stories by Michael Hudson, of the Roanoke Times and the Wall Street Journal, and Gillian Tett, of the Financial Times, drowned in a vat of glimmering C.E.O. profiles and analyst chatter. Business reporters missed opportunities to investigate abusive lending, negligent rating agencies, and dodgy derivatives trading. To critics, they were complicit in the financial crisis and the recession that followed.

One of these critics, Dean Starkman, is the author of a new book, ‘The Watchdog That Didn’t Bark.’ In his history of business news, Starkman describes how reporters, dependent on insider sources to inform an élite audience of investors, practice a kind of journalism that is defined by access. News becomes a guide to investing, more concerned with explaining business strategies to consumers than with examining broader political or social issues to the public. Access reporting is friendly to executives because it relies on their candor. Starkman writes that during the crucial lead-up to the financial crisis, from 2004 to 2006, this news culture crowded out the kind of investigative journalism that might have inspired reform. Andrew Ross Sorkin’s ‘Too Big to Fail,’ a book that paints culpable Wall Street kingpins as weary heroes, is, to Starkman, the definitive account of the crash—and wrongly so.

“Starkman tells his story partly by reaching back into the past. In 1904, Ida Tarbell penned ‘The History of the Standard Oil Company,’ a damning critique of the oil monopoly and its baron, John D. Rockefeller, and pioneered what Starkman calls ‘accountability journalism.’ But, even then, business journalism still functioned mainly as a messaging service between merchants and financiers. Starkman sketches the origins of the Wall Street Journal (founded in 1889) and Forbes (1917). In the early years of these publications, reporters who were cozy with board members were rewarded with scoops about acquisitions and other little-known developments.”

Read more here.

David Jackson

Why Seeking Alpha is great for investors but uncomfortable for PR people

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Editor’s note: We asked David Jackson, the founder and CEO of SeekingAlpha.com, to respond to a post last month from our PR curmudgeon Frankie Flack. Here is his response.

Investor relations and corporate public relations used to be straightforward, because companies could largely manage their own news coverage.

The recipe: (1) build relationships with analysts and the journalists who cover your industry, (2) issue frequent press releases, (3) alert the journalists and analysts to the latest press releases, (4) call them to add color and extra detail, (5) if the journalists and analysts are hostile or sloppy, educate them or cut them off from the information flow.

Seeking Alpha has changed that. Seeking Alpha is the dominant platform for crowd-sourced equity research, with more investors reading articles about stocks in real-time than any other website or platform, and more contributors than there are sell-side analysts. Because Seeking Alpha’s contributors are opportunity-driven investors, any of them could take an interest in your stock and write about it. And even if an article about your stock is positive, you can’t control what comments Seeking Alpha’s readers will write in response to it.

So if you’re the CEO or investor relations officer of a publicly traded company, it’s now harder to control the coverage of your company.

But if you’re an investor, Seeking Alpha is great news, for three reasons:

First, Seeking Alpha provides coverage of stocks that nobody else covers. Seeking Alpha covers about 2,000 small caps each quarter, about 750 of which have little or no sell-side coverage. Sell-side analysts and journalists have never done a great job at covering small cap companies, because their business model doesn’t support it. In contrast, Seeking Alpha’s investor-contributors love to find profit opportunities where there’s less coverage.

Second, Seeking Alpha articles have proven predictive value. A December 2013 study by a group of academics found that Seeking Alpha articles predict future stock returns and earnings surprises over all time frames studied: one month, three months, six months, one year and three years. Seeking Alpha articles predict stock returns even excluding the initial impact. (Our Top Ideas, for example, move their stocks by an average of 2.9 percent in the first 24 hours.) And the predictive value rises with longer time frames, so Seeking Alpha is for investors, not day traders. Overall, Seeking Alpha articles have higher predictive value than sell-side research and stories from newswires.

Third, Seeking Alpha’s community is highly intelligent. Active debate and even disagreement cause more information to come to light. The study’s findings in this area were remarkable: The Seeking Alpha comment community serves as a self-policing safety net. Comments on Seeking Alpha have strong predictive value. Contributors whose articles generate acrimonious comments underperform the market. And when comments conflict with articles, the comments have higher predictive value. (This is in contrast to stock message boards and stock tweets, which academic studies have found to have no predictive value.

Serious investors recognize the importance of Seeking Alpha, and are making it part of their investment process. Our SA PRO product (which is too expensive to disclose pricing here) gives investment professionals research access to the full library of Seeking Alpha articles and a one day early look at our Top Ideas and small cap coverage. A rapidly growing number of portfolio managers and analysts at hedge funds and mutual funds are signing up

PR and IR people will eventually embrace this reality. They’ll learn to participate in discussions of their stock while not violating RegFD. They’ll learn to build relationships with the Seeking Alpha contributors who write about their stock and the stocks in their industry, just as they built relationships in the past with sell-side analysts and business journalists. And they’ll understand that Seeking Alpha’s crowd-sourcing with strong editorial controls is the future of equity research.

frankieflack

Frankie Flack: Pack journalism invades business journalism

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So last month, I was taking a short mental health break (flacking, believe it or not, can be draining at times), and I ran across a weird little story at Gizmodo about a company that will take your ultrasound and, using 3-D printing, create a life-size replica of your fetus. The story wasn’t, strictly speaking, “news” (CNet wrote on a related effort 18 months ago). And it wasn’t, strictly speaking, “important.”

Readable? Yes. Strange. Yes? Critical information that would allow me to better understand the world? No.

My beef isn’t that some digital journalist, somewhere, saw the 3-D fetus story decided it was worth a writeup. Hell, Gizmodo got my eyeballs. My beef is how widespread this stupid little story was. The Gizmodo story I read gave credit to Fast Company’s Co.Design for the story. Co.Design noted that it saw the news first on some site called WebProNews, which also covered the story. WebProNews got the start on the fetus piece from a post on PopSugar. Business Insider also wrote the story, also crediting PopSugar.

To recap: some of the nations largest and quickest-growing business and technology sites all wrote essentially the same, carbon-copy story based on one ur-post from a fashion-and-celebrity blog. A large number of real journalists, getting paid real money, took time out of their day to make sure that this particular meaningless story made it on their site.

Now, pack journalism has always been a problem. During the 1996 Olympics, I took a drive through the neighborhood where falsely suspected bomber Richard Jewell lived, and it was a circus: a hundred cameras, a thousand people, just waiting to report the same marginal set of facts. And that’s a moment that is re-played, with a different cast and a different location, with great frequency. But the Internet has compounded the problem: in the pursuit of the viral, you now have more people chasing less important things.

This isn’t just sour grapes. Once, in the past year, I had a client that was able to capture the zeitgeist. Reporters were crawling out of the woodwork to talk to us. As a flack, I should have been in my glory. Except that all but maybe a half-dozen of the stories followed the same cookie-cutter script. Sure, the bolus of coverage was great, but if I could have siphoned some of that off, given it to some deserving but under-covered story, I would have

That’s my real complaint: no matter how quickly a writer can bang out a re-write of the story of the day, there is still an opportunity cost. Those are minutes not writing about something else that might be equally cool. Minutes not spent finding that exclusive. The reality is that I — and pretty much all flacks — have at least one interesting, stupid-simple story that hasn’t been told yet. We’ve love to share it with you.

So before you go and write the eight-hundredth piece about 3-D printing or the new iPhone or the Bud Light Super Bowl commercial, ring up your favorite flack and give him 60 seconds. We’ll all be better off for it.

WSJ editorial board

Subtle change at WSJ editorial board

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David Warsh of Economic Principals writes about what he perceives to be a subtle change on The Wall Street Journal‘s editorial board.

Warsh writes, “I mention it here because a change took place last week in the WSJ department in which Murdoch may have an interest in changing things somewhat in the orientation of  its editorial board.  I refer to the departure of Stephen Moore to the Heritage Foundation.

“Moore was the board’s chief economic commentator, a founder of the Club for Growth, enthusiast of Tea Party ideals, possessor of a master’s degree from George Mason University and a disciple of Arthur Laffer and Julian Simon.

“Alex Nowrasteh, of the Cato Institute, writing on the Forbes website, is probably right when he ascribes Moore’s choice of think-tank as a way of signaling a shift in the previously strong Heritage opposition to immigration reform.

“But what about the reasons he left? The WSJ editorial page is a position of enormous influence, thanks in large part to its devotion to sound microeconomics – no one has a better eye for governmental foibles. Depending on how Moore is replaced, the opportunity exists for Murdoch’s paper to play a constructive role in fiscal policy, too  – perhaps even to modulate the  spirit of intransigence that dates back to 1972, when editor Robert Bartley and Jude Wanniski initiated a new era of political economic discourse in US politics. (The mutual contempt of the news staff and editorialists that arose in those days apparently continues unabated.)”

Read more here.

bubble

Easier to fawn over tech CEOs than write hard news

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Eric Bovim writes for Salon about why we’re seeing the beginnings of another tech bubble and how financial journalists are contributing to the problem.

Bovim writes, “Many in today’s financial press are doing a fine job as present-day pasticheurs of dot-com era vanity. But why? Why their reluctance to deliver real, incisive business journalism? Why give a free ride to the Mark Zuckerbergs and Marissa Mayers of the Valley? Well, to put it simply: For these journalists, it’s simply more fun to write ‘features’ rather than do the hard work of writing hard news.

“I could, if necessary, refer to the Vogue spread on Mayer in August; the juicy bits about how she made excel sheets to document her favorite cupcake recipes, or how she slips quietly upstairs mid-party, her ‘CEO exit’; the 3-foot tall frog statues in her backyard (‘sprinkled,’ the piece goes, with Mozart concertos). Of course, Vogue could have nested this trivia within a candid portrait of  Mayer’s  Yahoo tenure, major accomplishments being: redesigning the corporate logo; overseeing the development of what Vogue calls ‘a gorgeous new weather App’; and the $1 billion acquisition of Tumblr — yet another Web platform without a revenue stream and a vaporous business model, which, in Yahoo’s earnings statements, was revealed to have been valued at around $750 million in goodwill. (In other words: Mayer assessed its potential value at nearly $1 billion.) Unfortunately, goodwill does not sustain jobs. Then again, bad press does not sell fashion magazines.

“I could likewise refer to Forbes’ feature on Elon Musk last spring. An ideal way to ensure that you gain entrée for future interview requests with a billionaire is to do a piece that fawns.”

Read more here.

Dean Starkman book

Why we need muckrakers today

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Michael Calderone of The Huffington Post writes about the need of muckraking journalism today to let the world know about income inequality.

Calderone writes, “Starkman gives high marks to Michael Hudson, now a senior editor at the International Consortium of Investigative Journalists, and The Financial Times’ Gillian Tett, for raising concerns about the subprime market and collateralized debt obligations before they were headlines and hashed out on cable chat shows.

“Starkman, who edits Columbia Journalism Review’s “The Audit” blog, has written about the similarities between investigative reporters of the early 21st century and their forbearers a century earlier.

“‘What industry concentration was to the muckrakers’ era, financialization is to ours,’ he wrote. ‘Both phenomena were equally baffling to the literate citizen. Both demanded an explanation. Both had been brewing for decades. Both were marked by institutionalized lawlessness perpetrated by increasingly brazen brand-names. Both were widely known among legislators, clerks, cops, bartenders, and prostitutes — just not the public.’”

Read more here.

frankieflack

Frankie Flack: Why commentary is killing business journalism

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So last week, the Washington Post’s Ezra Klein, wunderkid (apparently, when writing about Ezra, there is a rule you must use the term “wunderkid”), walked away from the newspaper to create his own digital property. But Ezra is hardly an original; his departure lagged that of Walter Mossberg‘s decision to flee the confines of The Wall Street Journal for a brand-new outpost on the web: Re/code.

You might think that’s great news for flacks: new, high-profile outlets to pitch, billions of pixels worth of online real-estate to be filled. And that is good news, in the short term. I have a list of clients that I can’t wait to get Mossberg to write about. (Walt: give me a call. Lots to discuss.)

But over the long term, this trend is going to make my life more difficult. Ezra and Walt’s decisions to walk away from stable, well-financed journalistic institutions speaks to the power of their personal brands. And it’s not just those guys. Bill Simmons leveraged his everyman sports columns into Grantland, a standalone (though Disney-owned) sports-and-pop-culture site. It’s hip to be a digital pioneer.

But let’s be honest for a second here: neither Ezra nor Walt (nor Bill, for that matter) earned his kingdom based on good, old-fashioned journalism. They all created empires based on the way that they married their knowledge with commentary that clearly belies some opinions. Walt loves Apple. Bill loves the Celtics. Ezra wants nationalized health care. And those guys are all smart enough that we — as readers — are better off for their freedom to editorialize a bit.

Here’s where the problem comes in. Most of the folks covering business today, especially the young guns who see a role model in 29-year-old Ezra, aren’t experienced enough to pull off commentary. Especially in business coverage, which requires in-depth industry knowledge and more than a smattering of accounting know-how, taking sides is a dangerous endeavor. Hell, even the professionals do a crappy job of picking winners.

So God forbid some 25-year-old reporter decides that his route to fame and fortune requires providing snark along with the numbers. I have my hands full just getting the facts out there in a way that folks can understand. If I have to contend with a new army of kids who think they need to smack a “good” or “bad” label on company they cover, I’m going to have to go looking for my bottle of gin.

This isn’t a product of my fevered mind, either. I was lunching with an erstwhile business journalist the other day, a guy who is now up in the ivory tower, teaching college kids the magic of the inverted pyramid and the danger of the anonymous source. I asked him what today’s generation of j-school students expected to do with themselves, given that the job outlook ain’t exactly what it used to be.

“Blogging,” he tells me, with just the slightest hint of an eye roll. “They all think they’ll be bloggers.”

And what Walt and Ezra and Bill have taught these kids about blogging is that you have to take sides, make your best argument, collect the eyeballs. The alternative? Building sources and trust and getting out there in your local community, really knowing the beat? That’s a great approach, and it’s lead to some wonderful, ground-level business journalism, especially in the past few years. A lot of that journalism has come from the network of Patch sites.

Of course, about a week ago, Patch’s longtime patron, AOL, foisted operations of the troubled network off on some other corporate entity, a huge vote of no-confidence. So it’s hard to blame any kid, looking to make a name and a paycheck, that concludes that Walt had it right and Patch had it wrong.

If that’s the case, well: I’d better figuring out where that gin is at.

bubble

The financial media and the stock bubble

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Dwight Cass writes on Fortune.com about how the financial news media are currently analyzing the stock market’s current conditions.

Cass writes, “Skepticism about the sustainability of the remarkable 2013 bull run even has made a welcome appearance in the mainstream business press’s financial blogs. But to give investors the tools they need to understand the market’s current behavior, the press needs to make a far greater effort to bring the debate to a broad audience in a sophisticated yet accessible way.

“Concerns over asset prices could fade if today’s rebound continues. That would be a shame. A public dialogue open to non-specialists, with both sides adequately represented, would be a healthy development.

“There are some moves in that direction. The Wall Street Journal is the finance business’s traditional mouthpiece. But its bloggers occasionally slip the leash. Yesterday’s column by Jason Zweig, ‘When Does A Bubble Spell Trouble?’ is a good example.

“Zweig says, essentially, that individuals who invest based on the belief that rising stock prices are justified become increasingly intolerant of those who argue that valuations are too high, and that their intolerance grows as prices continue to rise above historic norms. This infects the media, and harsh criticism of skeptics keeps commentators from throwing the word ‘bubble’ around too freely. So the current broad debate about whether stocks are in bubble territory means they’re probably not.”

Read more here.