| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
But the complaints also raise expectations that are unrealistic, and that indulge in a sort of wishful thinking, often with a political spin. Still, it's worth chewing over issues raised by various critics, not only to examine what financial journalism can and cannot do, but also to get some sense of the limits of economic analysis, including investment research and regulation.
So what are we really talking about when we say that financial journalism utterly failed? Better yet, whom are we talking about? Are we blaming local newspapers; big papers like The New York Times, the Financial Times and Wall Street Journal; the news magazines; CNBC and Fox; the B2Bs; the wires; the personal finance press; the blogosphere; the schools of journalism? The fact is, someone, somewhere covered many aspects of this disaster. Local papers in California and Florida wrote about local real estate bubbles; and the personal finance media -- not usually known for stepping out of the way of a boom -- warned about price bubbles. The Economist described Goldman, Sachs & Co. and other Wall Street firms as overleveraged hedge funds years ago. BusinessWeek screamed about private equity. A number of B2Bs, the WSJ and New York Times wrote about concerns over credit default swaps. Barron's famously took a shot at Bernie Madoff. Here at The Deal we worried about low bankruptcy rates, covenant-lite financing and evanescent liquidity. James Grant regularly warned about nearly everything. Even the Columbia Journalism Review's Audit, which loves to consign financial journalists to a kind of populist hell, admits that a few early stories were written about subprime, but then rails that none of the big boys followed up. The Audit, in fact, effectively captures the spirit of the second-order complaint: OK, some stories (even books) were written, but they didn't get play or traction! We were ignored! That, in turn, tends to be followed by The Critique: Newsroom budgets have been cut, investigative reporters can't investigate anymore, and everyone is more or less dumb, lazy or has sold out to The Man. How hard was it to see coming the greatest meltdown since the Great Depression? There's a lot here to consider. Some of it even approaches the truth. It's been a lousy decade or so for print publishing, and it's getting worse. Budgets have been cut, newsrooms slashed. Business reporting in most cities is pretty bad, often an adjunct of local chambers of commerce. In other media, there's been a turmoil of business models, as the Web crowded in, bringing with it a different style and lots of new bodies. Roles have changed. Anyone with a clue (many without) now writes a column or a blog. The business seems full of younger folks (a function of advancing age perhaps); the era when every newsroom had a cranky wise man with a cigar that had seen it all is sadly over. This is particularly a problem in financial journalism, which demands historical perspective and expertise. To make matters worse, finance has grown dramatically more complex, opaque, global over the past few decades. And despite that complexity, the rise of financial television and financial blogging has simplified coverage to an equity horse race, with an omnipresent pressure to predict. Besides, since when has most journalism at any given time been all that stellar? Who correctly called the Great Depression anyway? Many of the most sweeping criticisms also come from folks who are the furthest from the action. A number of the loudest critics, from the Audit to The Washington Post's Howard Kurtz to any number of bloggers to "The Daily Show," which this week thrashed CNBC, with the help of the Times' Joe Nocera, to (for comic relief) Ben Affleck, who recently blamed Newsweek for the mess because it was nice to Henry Paulson, should ask themselves the following question: What were you up to when the disaster was building? Why didn't you ring the alarm bell? Their answer is usually, well, it wasn't my job or no one would listen to me. These turn out to be not unlike excuses proffered by many financial journalists -- to wit, I was covering my beat, which didn't extend into every toxic nook and cranny of finance. (OK, not Affleck, Kurtz or Jon Stewart: Their answer is that they were busy making lots of money in show biz.) It's true: There was not enough connecting of dots. But saying that, and executing on that, are two different things. There are many dots out there, and only some of them get connected by the cosmic dot connecter. Stories on real estate in Tampa, Fla., from the St. Petersburg Times did not regularly make the WSJ. Not enough subprime stories got written, and if they were, subprime was usually viewed as a niche in a $12 trillion mortgage market. The folks who understood securitization tended not to ponder larger issues of leverage or to grasp it at a deeper level. Reporters who covered investing may not have had a clue about credit default swaps. (Derivatives remain a black hole of knowledge and understanding.) Retail ignored institutional; institutional avoided retail. Hedge fund coverage and private equity reporting occurred in separate silos. Few heard of auction rate securities until they blew up. The number of folks who had a clue about how Wall Street financed itself, or that understood banking and how it was changing, was (and is) tiny. Insurance always tends to be under-covered. Most importantly, political and financial reporters talked entirely different languages. In particular, the political crowd looked on economics and finance with a kind of horror, even as they tried to simplify it, which usually meant defaulting to predicting the Dow. Moreover, even when these stories were written, did anyone read them or act on them? Practitioners, journalists, politicians and a general readership were bathing in the warm waters of good times. Barron's and Harry Markopolos had no effect on Bernie Madoff's operation. In fact, apocalypse stories that were written -- and, given the many souls who now insist they called the disaster, there were some -- tended to tumble into the public's memory hole. Nouriel Roubini did not shove Warren Buffett, who tossed off some stern warnings himself, off the cover of Fortune, although Nassim Taleb did sell books. There's a chicken-and-egg problem here that's very difficult to resolve: If you write stories predicting the apocalypse, your apocalypse better happen on time, and your readers better care, or you'll be covering the garden club next week. Hell, many newspapers around the country have killed off business coverage entirely because they felt no one cared. Boring. Too complicated. And look at the pathetic way network TV news covers business and finance. If they thought the audience cared as much about subprime as about Madonna, they'd trouble themselves to go beyond the Dow. But they didn't. And at the time they weren't wrong. The more difficult issue here involves financial publications, from the WSJ to the FT to The Economist to the likes of The Deal. Certainly, we all felt the pressures of good times; and it is always a struggle to separate yourself from your constituencies, which have so much at stake in urging on the bull. In this we're no different from analysts or regulators, which is no excuse. But there is a tendency to argue, armed with clear-eyed hindsight that predicting the future is easy, if only you have a head, a heart and an encouraging editor. One manifestation of this is the tendency to confuse that kind of predictive story with investigative journalism. Now investigative journalism gets wheeled out whenever there's a perceived journalistic failure (then it gets wheeled back in again when budgets are prepared). But investigative journalism presupposes the existence of a crime or scandal -- narrow and well defined -- like Enron or WorldCom, which, in fact, nearly everyone missed. Many of the folks who argue that financial journalism "failed" believe in some sort of single trigger or cause for the meltdown. They focus on personalities and explicable, if often fantastic, conspiracies. They see in black and white. And they read history, and the markets, backwards. The fundamental relativism of the markets unsettles them, even if they reject free-market politics. If we could just have investigated adequately, we could have ferreted out that cabal (of evil bankers, traders, lenders) that brought the innocents down. If we could have stamped out subprime, the rest of the system would have been fine. How could we miss American International Group Inc. (NYSE:AIG), which was "clearly" a scam? If there was massive malfeasance, if mistakes were in fact criminal and bankers knew full well what was going to happen, as some argue, then financial journalism is at fault. But it's a little hard even now to track the mess back to individual criminality, which certainly did exist, or to understand the psychology of the they-knew-it-would-come-to-a-bad-end-and-did-it-anyway school. What was innovation in a bull market looks desperately stupid, reckless or fraudulent in a bear market. We had a foreshadowing of this issue in the Wall Street research scandal of 2001. Analysts who were bullish and wrong in 2001 came under suspicion after the Henry Blodget "lipstick on a pig" e-mails surfaced and their errors of prediction were ascribed to conflicts. Were there conflicts? In some cases, though hardly all. Did analyst conflicts explain the dot-com bubble? Hardly. The mania would undoubtedly have occurred if no analyst ever wrote about a dot-com. Bullish analysts were right until they were wrong, and woke up to discover that misplaced bullishness was edging ever-closer to criminality. And, of course, one of the real consequences of the affair was to leave investors with less guidance, not more. Research was too risky and not profitable enough. In fact, this crisis appears to be broader, deeper and more complex than simple malfeasance. The blame, as the president said, is widespread (which doesn't, by the way, mean that the blame is spread evenly). After all, some of the greatest minds out there -- and some of the most prescient -- argue that the crisis was born not from predatory lending, which was symptomatic not causative, but from massive trends like global imbalances, excessive liquidity or deregulation that are light years away from single cause, single culprit theories. In fact, it's really a matter of both: large trends meet dodgy practices. The size and bureaucratic nature of these banks gets some blame; the lack of accountability; the compensation schemes; the culture; yes, the greed. Excessive leverage seeped throughout the economy. And then there's probability: Sometimes all the lemons line up on the slot machine. All of which leads to the central question of prediction. Why, among all other journalists, are financial reporters expected to accurately predict the future? Investigative reporters, after all, report the past -- the crime, the scandal, the failure. AIG might have been doing dodgy things -- Maurice Greenberg got booted in 2005 -- but credit default swaps, one of the systemic bombs, was not one of the issues. Besides, the problem with bubbles always lies in the future. Again, it's not as if many reporters did not sense we were in a bubble, and that we would pay a price at some point (as we had so many times in the past and will in the future). What no one, even those that predicted disaster, got perfectly right was the timing and the complex chain of events once subprime blew up. And if someone had laid it all out, a task analogous to calling the weather and temperature on, say, a Tuesday six months in the future, you would have had to ascribe that prescience to sheer luck. And, again, who would believe you? Who would act on that prediction? Journalists, regulators and bankers have very different responsibilities when confronted by what appears to be a bubble. Journalists should be wary of trying to predict the course of radically uncertain systems because they will come across as damn fools, as "The Daily Show" effectively demonstrated with CNBC; even Keynes had no confidence in his own ability to see the long term. Regulators and bankers have a higher responsibility: to act before they have certainty, even if they appear to have acted too soon. It's why they get the power and the bucks. Today, many critics ignore the inherent limitations of prediction. They want prediction, from stock picking to bubble prognostication, but it has to be the "right" prediction. They pick and choose, depending on their politics and self-interest. In a sense, that mentality is part of the problem, part of a culture that believes mere mortals can foresee, forecast and control the endlessly ricocheting billiard balls of the markets. Finance is a complex, nonlinear system, full of noise, chaos, complexity and ambiguity. It's defined by all the waywardness of human psychology. That's what makes it such a fascinating phenomenon to observe and to write about (and also why risk management may be an oxymoron). But if investment professionals and regulators fail again and again to master its perturbations, as academic studies have always shown, then why on this green earth would a financial journalist succeed at predicting the future? Not to understand that suggests either a utopian naiveté about journalism and the markets or an agenda that has nothing to do with either one of them. It also suggests the kind of wishful thinking that will lead to the next inflation of overheated expectations. - Robert Teitelman See video of Jon Stewart's CNBC rant on Dealscape Robert Teitelman is the editor in chief of The Deal. CategoriesComments
From: Tom Lamont,
I'm a cranky old wise man running a news room, complete with cigar, and I didn't see this coming either...at least not to this extent!
Posted on:
March 5, 2009 2:57 PM
From: Tom Traubert,
Okay, fine. You're saying that business journalism shouldn't be expected to see or write about the big picture, or to inform readers. Too complex! What are you supposed to be doing then? Entertaining us? You are all just a bunch of Cramers and Santellis in it for the guffaws? Nice to know. How does it feel to be a billionaire?
Posted on:
March 5, 2009 6:28 PM
From: The Epicurean Dealmaker,
I do not think that Stewart, for example, made vicious (and highly entertaining) fun of CNBC primarily because he faulted the network for making incorrect predictions. He showed so many of these because it helped drive home his comedic intent to show the network as foolish and biased. And this is a valid point, which you allude to above: business journalism, if it is to be taken seriously, must do more to separate itself from the clutches and biases of its (mostly) bullish objects of reportage. Stewart started his rant, if you remember, by roasting Santelli for making a stink about a relatively small bailout of homeowners after making lots and lots of no stinks about much larger bailouts of banks and other large financial companies. I do not expect business journalists to predict the future. Let the economists make fools of themselves in that way: they have more practice. However, I would appreciate less intrinsic boosterism and credulous parroting of received business wisdom by the financial press, as I believe would many of us both inside and outside the financial world. The Wall Street Journal, for example, is an excellent newspaper marred by a strident, simplistic editorial page. Why? I guess it's their right. (I don't read it.) CNBC, however, has virtually no redeeming journalistic features, notwithstanding its apparent pretensions. But boosterism sells--and attracts ad dollars--so I am afraid we are stuck with it. As for your piece, it was nicely done. But then again, I have always enjoyed your editorials.
Posted on:
March 5, 2009 6:32 PM
From: bohwalker@yahoo.com,
Possibly the most lucid article I've read in many months.
Posted on:
March 5, 2009 6:40 PM
From: nick dupont,
Well, being in the old aged newsroom (but cigarless) category: I was trying hard to get a handle on the mortgage issue. It was clear there was a disconnect between the credit and its balance sheet risk. But almost impossible to see where the wholesale/CDO side was going. Did anyone know much about AIG's credit risk "underwriting insurance"? Or how it played to ratings? And how that mushroomed the credit? So my reporters came back with half answers. When I queried bank CEOs they'd say: Sure, But not my bank.
Posted on:
March 5, 2009 7:45 PM
From: lc,
OK, you can't predict the future, but shouldn't business journalists have some expertise when it comes to bubbles? Wouldn't a little "connect the dots" have been possible? My pet peeve: I'm not a homeowner and knew from reading and watching TV that the new-style mortgages were risky for home buyers. Fine. I wasn't going to get one. But it never occurred to me that the people making those loans had no skin in the game and would not bear the burden if they failed. I assumed that banks did the lending and had standards. Then it turned out that these things were packaged and sliced and diced and etc. So, what could I reasonably have expected from a business journalist? Maybe just taking that one extra step after warning individual consumers about the risks of an ARM to researching and reporting on who the people making the loans were, what criteria they were using, etc. Maybe I would still have had an unreasonable faith in the financial industry - but at least I'd have been on alert that John Doe's risk-taking down the block wasn't limited to him. LC
Posted on:
March 5, 2009 8:28 PM
From: Carl409,
The problem is that financial journalism got caught up in the web of greed fostered by the Greenspan easy money policies and by tax cuts to the rich. It may not be directly responsible for the mess we're in, but it certainly played a role in promoting the culture of avarice that caused Wall Street to get out of control.
Posted on:
March 5, 2009 9:03 PM
From: Mark Wolfinger,
I look at 'failure' of the financial press very differently. To me the newspaper and magazine writers take a very conservative, 'do no harm' approach to writing. For example, I often see them quoting financial planners and financial advisors who recite the same old fluff they have always recited. We all recognize that buy and hold is no longer viable, but the financial press frequently reminds readers to buy and hold and not to panic. That's pretty poor advice - but the journalists are safe because it's not their own advice. They are offering it as the wise advice from a professional financial advisor. Why are they not seeking out new voices to interview? Why is there no effort made to present the truth: financial planners have no clue how to guide investors. Their job was easy during the bull market, but now, when help is urgently needed, the planners cannot help. And the journalists who quote them are not helping either. I know that investors can be well-served by adopting conservative, risk-reducing option strategies. But try to get the press interested in discussing the topic of options and they run away screaming. This is the time for finacial writers to provide useful information to their readers, not the old stuff that may be comfortable to write about, but which is anything but useful. How do we get the financial press to step into the 21st century? Mark Wolfinger
Posted on:
March 5, 2009 9:57 PM
From: Robert Young,
A few numbers, readily available and sometimes reported, predicted this event. And so did I, if I may say so. I don't have a newspaper, but I do write on blogs, and talk to real humans. Here are the numbers: 2000 -> 2008 : median income either fell or stayed constant, depending on data source 2000 -> 2007.5 : consumption grew 2000 -> 2007.5 : home equity loans grew 2000 -> 2007.5 : median home prices grew most of those trends were apparent as early as 2003. Since, at the median, mortgage payment is a stable (even fixed, more or less) fraction of median income, how to reconcile these data? - consumption growth with stagnant income growth was paid for with unearned home equity - rising home prices were driven by fiddling with mortgage terms since the ratio of median mortgage payment to median income is (more or less) fixed Could the collapse be predicted in a timely fashion? I did and so did others. By 2005, it was crystal clear that the median mortgage/income ratio was up the pipe. That was the smoking gun. The Subprime, Alt-A, and such were known to reset starting in 2006. Since these were the basis of the mortgage payment fiddle, it was absolutely clear that this would start the ball rolling or dominoes falling. And that's precisely what happened. It wasn't a surprise to anyone familiar with standard economic/business data. The collateral damage was also obvious: if 3 of 10 homes in a neighborhood drop in value, that lowers the value of all other homes. In 1975 Fairfax County Virginia was already using sale data to move appraisals in nearly real time. This practice is now widespread. If a couple of geeks on NPR ("The Global Pool of Money") could find the dots, the Business Press sure ought to.
Posted on:
March 5, 2009 10:03 PM
From: Edward ,
This sort of revision is dangerous and creating another Big Lie. For every 600 word story on the real estate bubble, there are sections on sections of real estate pages telling readers that houses were a bargain, and that buying into the price now protected you from price increases coming next year. Remember the stories about how real estate prices had never gone down since World War II, and house prices defied recessions because prices were "sticky" and people didn't sell their houses at reduced prices in tough times? I don't blame corporate executives for promoting their stocks, but I do blame reporters for buying into this boosterism, and for not properly warning ordinary people that their 401K investments were pure speculation. Nor do I sense any contrition here, or acknowledgement that we will do better next time. Local finance pages are still filled with stories boostering stocks (see recent financial stories on sythetic fuels and alternative fuel stocks), and until reporters acknowledge their role in this economic disaster, I see no reform.
Posted on:
March 6, 2009 9:02 AM
From: M. Schulze,
Most seem to forget about the role of government, all the way from the Community Reinvestment Act,up through Fannie Mae/Freddie Mac and instance that banks make more mortgage money available, along with repeated assurances by key members of Congress that all was OK. This all helped to discourage honest reporting by media were management had a liberal bias.
Posted on:
March 6, 2009 11:50 AM
From: James Kardon,
Note the coincidence between the beginning of the all the sensational financial news of 2008 and the takeover of the Wall Street Journal by Rupert Murdoch. Murdoch felt he needed to spice up the newspaper.
Posted on:
March 6, 2009 11:58 AM
From: Richard,
Thanks for a thoughtful piece. But at least in the context of the current crisis, which is not merely behavioral but massively structural, I think it is mostly irrelevant. Two points. First, as Robert Young points out, there was more than adequate data available to predict the approaching tsunami, and in fact many people did predict it, though perhaps not its size. Few listened because timing was uncertain, and who wants to get off the gravy train early? Second, and even more fundamentally from a societal (though perhaps not from an individual standpoint), predicting this mess in 2003-2007 could not have prevented it -- billions of dollars in bad mortgages had already been made, securitized, leveraged and dispersed, and housing prices were so out of whack that they simply had to fall. Blaming financial journalists for this mess is like blaming the lighthouse for the tsunami -- yes they could have done a better job of seeing it coming, but it really didn't matter. If you need someone to blame, blame Chris Cox, Alan Greenspan, and other gov't regulators whose apparently boundless faith in the wisdom and self-restraint of investment bankers led them to abandon their responsibility to regulate the system.
Posted on:
March 6, 2009 12:08 PM
From: Jennifer,
I predicted this meltdown--at least the subprime meltdown and housing meltdown--in 2003. Prices were peaking in california, and everyone was high off the fact that their house was "now worth twice, three times what they bought it for in 2000". I said it was all gonna burst, and that when it did it would be worse then ever. I am no financial journalist. Mostly I've written for fashion and teen magazines. I pitched these articles to editors, warning this, they ignored my pitches and the editors I worked with rolled their eyes when I talked about what a bad idea it was to use your house like an ATM machine.
Posted on:
March 6, 2009 2:44 PM
From: eightnine2718281828mu5,
Maria Bartiromo, Larry Kudlow, Melissa Francis, Michelle Caruso-Cabrera and the other Randites are hired for their ideological bent; the true horror is not that characters like this are wrong; given their prejudices it's inevitable. The most troubling thing is that cnbc actively obscures and air-brushes their track records. You'd think that after the tech bubble they might have become a bit more circumspect and allowed some semblance of balance into its lineup. Instead these 'reporters' are encouraged by their management to screech over anyone who offers so much as a mildly dissenting opinion. Melissa Francis offered up an opinion today that the market turned negative because Obama was giving an 'attaboy' speech to some firefighters in Ohio; this is what passes for enlightened analysis on our airwaves.
Posted on:
March 6, 2009 7:52 PM
From: The Skeptical Cynic,
Has anyone given any thought whatsoever that perhaps it is the whole economic system of capitalism that is fault ridden - that economics is not the dismal science but no science at all? Thought of as "science' only in the abstract. The laws of science are immutable. The same cannot be said the same for the "science" of economics. Economic laws are as "mutable" as the vicissitudes of every emotion or motivation as can be conjured in the human mind whether benevolent or malevolent. All seven deadly sins have come into play in the meltdown of America's capitalist system. Anyone observe anything even remotely virtuous in the run up in the bull market or in the continuing melt down? I'm just sayin, know what I mean?
Posted on:
March 7, 2009 12:13 AM
From: mls,
Jeez, one wonders who owns these media outlets ...
Posted on:
March 7, 2009 12:24 PM
From: bhouston,
From: bhouston The one journalistic source that I did hear predicting the economic meltdown--you'll hate to hear this--it was Glenn Beck! More than a year ago he was sending a steady drumbeat, trying to get guests on his program from the halls of Congress to speak to the economy and its woes on his show, but he was pooh-poohed (No, IGNORED!)and labeled a doomsayer. Credit where credit is due, folks.
Posted on:
March 7, 2009 12:58 PM
From: dr tom bradley,
The blame game ignores two facts. These are that if you believe in supply side econ then your view of what is going on is distorted and secondly that demand side people are shut out of the discussion. The media is ideological and thus does not present news but tries to support a viewpoint. Kudlow is the worst example as he continues to rant and rave using lies of history. No one ever asks for the data to support the lie. The reason is simple, they are lazy to go out and look up the data so when the FDR era lies are told, they can see it. It is like the blind trying to cross the street without anyone telling them if cars are coming. I watch CNBC every day as I write and it is amazing how lie after lie are told and never challenged. The blame is always on demand side economics, Democratic era legislation that is appears took 30 years to create the problem and a host of other falsehoods and lies.
Posted on:
March 7, 2009 1:31 PM
From: bill jones,
A real clue that seemed to go unnoticed was that the percentage of GDP relating to "financial services" basically doubled in 15 years
Posted on:
March 7, 2009 5:31 PM
From: The Dark Avenger,
I knew that things would go downhill in the housing market when the SF Chronicle reported in March of 2005 people were unable to flip houses they bought for investment purposes In Las Vegas, NV. That the public couldn't see what was happening doesn't excuse the fact that there were perhaps many journalists who could but for one reason or another couldn't/wouldn't write a story on the subject.
Posted on:
March 8, 2009 10:57 AM
From: finreporter,
There are a few basic things a financial reporter should have seen happening. First, unsophisticated borrowers should not be getting loans that included interest-only or anything with the word "balloon" in it. Thinking of balloons, did anybody not see housing prices inflating at such a rapid pace? Did they really think that was going to continue? Then, borrowers tapping out on home equity loans, credit cards, etc. until eventually there would be no consumer spending at all. That translates to recession. Not too hard to predict. However, the combination of investment banker with subprime mortgage lender takes a very, very experienced financial reporter to figure out the tie and, quite frankly, business men and women working in the financial sector for the past 25 years still don't understand derivatives and how they work. How can you ask any financial reporter to forecast this economic disaster when nobody even knows with certainty how to get us out of it? No way. These extraordinary complex investment vehicles (i.e. derivatives, credit default swaps, etc.) tied to subprime mortgages is way out of the league for any financial reporter. Maybe you could find that prediction in a dissertation from the Wharton School of Economics.
Posted on:
March 9, 2009 4:11 PM
From: Adam Gordon,
Crunch not predicted? Many did predict the financial crisis (as many predicted 9/11 in various ways). See The Times October 12, 2008 piece: “10 People Who Predicted the Financial Meltdown”. Allowing for a fairly loose definition of “predicted,” the article shows that among those who foresaw the crunch were: Vince Cable, deputy leader of the Liberal Democrats (2003); US congressman Ron Paul (2003); Stephen Roach, senior executive at Morgan Stanley (2004); Christopher Wood – chief strategist of a broking firm in the Asia-Pacific Market (2005); and Nouriel Roubini, economics professor at NYU (2006)… and there were many others. So this reframes the problem entirely. It’s not that the predictions were not there. It was that not enough people believed them and, particularly, important decision-makers didn’t believe them or didn’t have the institutional capacity to respond. So there are two halves to the problem: the ability to see the full spectrum of what may happen, including unexpected outcomes; and the ability to act on what we see. Raising quality in foresight work - the raison d’etre of Future Savvy (Amacom Press, 2009) - makes it possible to see more outcomes more clearly, and to act with more confidence in choosing what to prepare for. (In the real world we can’t prepare for every outcome.)
Posted on:
March 11, 2009 8:32 AM
From: Dean Sperantsas,
As an investment professional and educator of financial professionals, including writers and journalists, in the Chartered Financial Analyst program since 2000, I note that financial writers are often trained in areas outside finance. The onus of "prediction" of the future is too great. Economics is capable of anticipating fiscal and monetary events. It is less capable of anticipating the timing of events. Journalists cannot overcome economics. Trained journalists, however, can be asked to use finance and economics to give voice to credible sources who warn of specific risks. Journalists need not predict to be of service, if only they help to prevent. http://www.ft.com/cms/s/0/9ee47102-338c-11de-8f1b-00144feabdc0.html
Posted on:
June 27, 2009 11:24 PM
 Deal Video
    Community
 Elsewhere on The Deal.comDealwatch
The Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||||
Over the past few months, there's been a steady yammering about failures of financial journalism to predict the current mess. Mostly, that's fine. We enjoy as much as the next guy bitching and moaning about financial journalism, so why whine when others do it? Besides, only a fool denies that improvements can, and should be made. There's no doubt that whatever we're going through now has tossed up lessons about how we report on complexity, systemic risk, liquidity, leverage and contagion. 
|
|
|
|
|
No one of good sense expects journalists to be able to correctly predict. We do expect objectivity. To claim that missing the underlying fraud and bad practices of both the dotcom and real estate & credit bubbles was due to inadequate resources or optimism, while having ample resources to support the ramp up "good time" events of those bubbles, is transparently self-forgiving and intellectually dishonest. Face it: you're missing the big stories, you fucked up.
But your readers will forgive and support you if you apologize, promised to do the right thing, and then actually put aside your air-headed, subjective cheerleading and objectively look at WHY any particular company or market sector is doing inexplicably well or badly. You might want to start afresh by taking a hard look at Hank Paulson, what data he was looking at that caused him to panic, why HE panicked, whether - in hindsight - that panic was necessary or simply a product of him being a TRADER and having huge interests in GS and Wall Street; whether a BANKER would have panicked at looking at the same figures; and whether allowing AIG, Bear, Lehman and Citi to have failed - and not panicking about it, but publicly saying "those companies will fail but the financial sector and economy will NOT because the problems are contained in those companies and their shareholders". In short, for example, what would have happened if AIG had not respected the CDOs they insured? How about this: the insured would have lost the fees paid to AIG and then would found CDO insurance coverage elsewhere? Maybe this panic is simply due to Paulson's panic? Is "TheDeal" up to this kind of investigative journalism?
Could be Paulson caused the panic.