Financial "Press" What do they do?

Great Debates
1

Given the Claude Rains - like reaction of the likes of the Wall Street Journal and CNBC to the recent disclosures of fraud in large companies (We’re shocked! Shocked! to find out this is going on!) such as Enron, WorldCom, Global Crossing, Qwest, etc., it makes me wonder what it is they really do. They claim to report on issues that move the markets, but how is it that they all missed the biggest stories of the decade?

It seems that the reporters have to wait until a company 'fesses up in a press release before they start looking into said company in any depth. Did nobody know what WorldCom was doing? I have worked for a company that went bankrupt and EVERYONE knew what was happening months in advance. So did their spouses and SO’s, and yet there was no reporting in the papers until the announcement came. Why don’t financial reporters do investigative work? Is there some unwritten rule that you don’t say a company stinks and is possibly commiting fraud? Seriously. Is it that they are too friendly with the CEO’s and Wall Street types and they won’t get information or invites to the parties in the Hamptons?

Why was it that it was never reported that analyst recommendations were largely crap? That “buy” means “sell” when a stock is downgraded from a “strong buy”? Isn’t it about time for a complete expose on the interrelationships between the companies, the Wal Street firms, the auditors, and the financial press?

I didn’t put this in the Pit because I know there are several newspaper folks here and I really want to know some answers.

P.S. Did anyone see the interview on CNBC with Jack Grubman (analyst who finally got around to downgrading WCOM on Monday…hmmmm)? What a classic! “Why are you harassing me!?” Maybe because you were telling your firms customers to buy the wothless stock right up until the end? Maybe because you are freinds with the CEO?

2

Most of what the magazines I used to work for reported on were on SEC compliance, how legislation was going to change the way they work, or trends in the industry. A lot of the contact with the companies is through these interviews and at conventions. There usually is very little investigative reporting to find the dirty laundry of a company, or seeking exposes. You don’t honestly think these guys are being let into the board room to find out the manuvering the companies’ are doing?

Sometimes it’s a fine line between reporting on what a company allegedly did vs. losing an advertiser. As you may know in the last few years especially, there have been a ton of consolidations i.e. less advertisers, so you want to keep all the ones you have.

As for the ‘everyone knows’ bit I doubt that’s the case in every situation. In fact I can think of two instances where someone in our company came in holding The Post and then the WSJ and demanded to know what was going on. Once when they put a bunch of publications up on the block, and the other was when it was announced that we’d be moving to new digs and consolidating the corporation into one building. In those two cases the newspapers scooped the employees. we were none too happy to say the least.

3

Thanks for your post on this issue Lamar. miamouse, your reply is disturbing but not at all surprising. I wonder what you think of the NYT’s coverage of these issues just lately. To me it seems very good, but I’m not an expert either on journalism or the stock market.

Just in general I’m surprised at how muted the response to the scandals are. That’s true on these boards–where there is usually more sensitivity to issues than in the public at large. Are people just tapped out by Enron? Are they confused by the technical questions of accounting procedures and so forth?

Just thinking aloud (and hoping for some good discussion.)

4

They do three things.

Before news is announced, they speculate about it.

After news is announced, they report it (= recycle the press handout) and then ‘comment’ on it. If their speculation was near-accurate, they mention it, and not otherwise.

When really bad doo-doo rains down, they feast on it while ignoring any why-didn’t-you-know-in-advance questions.

5

First off, you need to look at some “real” financial press. www.bloomberg.com is the free site, but as a subscriber this is what just about every investment banker in the world uses. Look at International Financing Review. also the Wall Street Journal and Financial Times.

with all due respect, watching priceline on CNN or reading the biz section of USAToday et al are not financial news.

A major problem is that most financial journalists are journalists and have no real experience in the financial or accounting industry. Ditto the SEC. The Wall Street Journal is very upfront with it’s hires that they want good writers and can teach them about financial reporting. Small wonder that there is little in the financial press that really explains derivatives and the risks associated with them.

Most reporters regurgitate the press releases and wire reports. Most copy word for word. Very few have any kind of investigative scope. Even fewer have real experience in what they are trying to uncover. Small wonder they can’t uncover jack.

BTW, I wrote a lot for the 8 years I worked as an investment banker. I still write financial pieces today on a free lance basis. If you really want some quality, then you’ve got to pay me to dig deep and perform real due diligence. Otherwise, caveat emptor.

I thought it was pretty common knowledge that anything except a “raging buy” meant sell. Downgraded to “Buy” from “Super Buy” means a sell. Prior to what a year ago or so, select clients got to hear the downgrade first before the information is publicly disseminated. Thankfully, that practice is going away.

My own view is that the market needs independant research houses divorced from both the corporate clients and investment banks. However, it will be difficult for such independant research houses to get paid. among others places, I occaisionally write for an independant research firm and they are barely breaking even.

6

So, what’s the implication here? That if you don’t get heaps of money, you’ll knowingly put together a half-assed, poor quality piece and pass it off as journalism? Wouldn’t it show more integrity to reject the assignment if you felt that you could not do it justice on the budget you were given?

With regards to the OP, it seems to me that much investigative journalism nowdays essentially means looking for big, juicy stories of illegality and fraud. That’s why, apart from its size and scope, the Enron scandal made such big news. What is lacking in investigative journalism is the willingness to get down and do the often tiresome and unglamorous research that is necessary to put together stories about the everyday procedural flaws, structural inequalities etc. that contribute so much to economic, political and social problems.

Some media historians (e.g. Robert Donovan and Ray Scherer, Unsilent Revolution: Television News and American Public Life) put this down to a post-Watergate obsession with being the one to uncover the BIG SCANDAL. In their focus on the cloak-and-dagger stuff and their search for big cases of fraud or illegality, many reporters simply have little time or patience for true investigative research that would uncover underlying problems with the system itself.

Interestingly, despite its poor performance on recent corporate failures, the financial press is still the best source for a bunch of issues, because it often tells the unvarnished truth about issues that the regular media gloss over. This is especially true in areas such as labor relations, corporate lobbying for legislative change, etc. Because the owners and editors of the financial press assume (rightly, most of the time) that much of their audience comes from the business world and wants to know what’s really going on, they are less likely to mouth the platitudes about caring for the little guy etc, that are often found in the regular media. If there’s going to be 10,000 layoffs at GM, they say so without apology or false cries of sympathy. By the same token, if a company is lobbying for legislative change that will benefit its bottom line but would be opposed by many Americans, the financial press still report what’s going on.

This is not altruistic service to the masses, you understand. Rather, it arises out of the belief that the financial press is largely talking to it own kind of people. Add that to the fact that some excellent journalists work for these publications, and you have a recipe for many good, straightforward news stories. If i want to find out about corporate iniquity, i’m much more likely to turn to the Wall Street Journal, the Financial Times, or Fortune, than to the New York Times, the Washington Post, or Time magazine.

7

What China Guy is saying is that it takes a lot of labor, that is research, to truly delve into say an Enron issue.

It also takes knowing the subject matter well, not superficially.

That time and effort is not sufficiently compensated for in most journalistic contexts. The demand is not there, as shown in what folks are willing to pay for. Except, as you note, in places like FT etc. But then you note a Bloomberg sub, an FT sub, a WSJ sub ain’t cheap.

Far too many people want to hear happy talk. Look at motherfucking US news channels. The pseudo-financial news found in most distribution channels is nothing but an extension of the happy talk.

Why the hell should someone like CG kill themselves for peanuts? Why would CG go full at it in the research if the customer is not going to pay for his time and expertise?

If the fucking morons want to lap up happy talk, fuck em.

8

Collounsbury has already touched on this.

For example, I get paid $600 for an 1,800 word piece on some financial subject. Well, depending on how busy I am, I’ll put in 1-2 days work on it. Maybe in one chunk, maybe spread out over a week. That means some phone calls, statistical work, some research, at most one in person interview, and a write up. I’m not going to discover Enron. It will be as professional as allowed by the time constraints. As for integrity, I do not write things that are to my knowledge untrue.

If I get $5,000 for a non-financial due diligence project, then I’m going to dig deep, spread around the cash, burn favors, get inside information, work with the competitors, etc. The financial press doesn’t pay $5000, you’re lucky if it’s $500. So, they get $500 worth of research.

9

And here I thought the “Financial Press” was what the Bureau of Printing and Engraving used for making paper money…