How business reporters blow it

Nice article on MotherJones.com by former Wall Street Journal reporter Dean Starkman about the inward state of business journalism.

Increasingly, business coverage has addressed its audience as investors rather than citizens, a subtle but powerful shift in perspective that has led to some curious choices. The Journal, for example, at times seemed to strain to find someone other than Wall Street to blame for the mortgage mess: A December 2007 story announced that borrower fraud “goes a long way toward explaining why mortgage defaults and foreclosures are rocking financial institutions,” though no such evidence exists.

There is another trend too. Business coverage tends address its audience as consumers more than citizens. The market for business-news-for-citizens has dried up a while ago and consumer-oriented news coverage (product reviews, marketing news, personal finance advice, …) caters to a larger (read: less financially literate) and thus easier to reach audience.

Matthew Fraser on financial journalism

Cash, Crises and Journalism was the title of a session at last week’s Journalism in Crisis conference at the University of Westminster. One of the participants was Matthew Fraser and he had this to say about financial journalism.

1 – Competitive pressures for scoops. In the modern media environment, journalists are just too busy to do off diary features like the potential state of the economy.
2 – Lack of professional training among business journalists, with most of them coming from Oxbridge but not having any financial experience.
3 – Business journalists simply have short memories, like everybody else, and failed to see the signs of the oncoming crisis.
4 – “Implicitly, everybody in the industry knows that business journalists don’t rock the boat of the audience with their careers”.
5 – Finally, many journalists were cheerleaders for the businesses, were having a great time in the club and simply had no interest in raising the alarm.

source: Westminster News Online

In a world of cold harsh truths…

Parodies of journalism require talent, time and money. Just ask “Raoul Djukanovic” and “Philip Challinor”, two financial journalists who caught London commuters off guard last week by handing out a free, spoof edition of the Financial Times (FT). According to the Guardian, Raoul and Philip

put thousands of pounds of their own money into the publication. … It took the pair “about a month” to write about 150,000 words at the same time as working full time and they say the publication, called Not The Financial Times, was partly designed to show other journalists that they seldom write objectively.

The fantasy edition headlines and articles a joy to read (BBC ‘swear quota’ gets journalists cursing, G5 unveil new oligarchitecture, World survives Equal Rights Day) and remind me of the fake news genre that The Onion has down pat. The bulk of the content however, criticizes the practice, role and responsibility of news media. A lengthy analysis of news making practices, written by the Why do they hate us correspondent, articulates churnalism commonalities and offers this biting critique of the news industry and its truth claims:

Freedom from corporate culture doesn’t abolish groupthink, nor guarantee insight, entertainment or basic accuracy. So if churnalism’s the norm wherever you turn, is reframing a solution, or part of the problem?

The investigative track record of FiJo

Financial journalism (FiJo) – coverage of financial markets and corporate finance – remains a largely unexamined field of professional journalism, despite its prestige (cf. the cricital acclaim of The Financial Times or The Wall Street Journal), widespread concerns about its role and responsibility and a weak investigative track record. For example, no reporter uncovered the Enron collapse a few years ago. And also, how did we miss the 2008 credit crisis?

This question will be addressed during a POLISmedia panel discussion on Feb. 23 at LSE, entitled: “Why did nobody tell us? Reporting the Global Crash of ‘08”.

NBA to borrow $175M in “illiquid market”

In the well-oiled PR behemoth that the National Basketball Association is, you don’t often learn about its financial struggles. This report however, breaks the news that the league is set to borrow $175 million to cover “operating losses” among 15 teams. This should come as no surprise; the league is low on star-quality (Kobe Bryant, Dwayne Wade, Dwight Howard, LeBron James), high on overpaid ‘franchise’ players (Stephon Marbury anyone?) and the cost of running an NBA franchise in the current economic climate is no small-piece meal:

The NBA was not looking to borrow at this time, Benjamin said, but JPMorgan and Bank of America came to the league several weeks ago to say there was an opportunity to do so. The league, after polling its teams and finding a need, agreed to the deal in part because of the lack of borrowing opportunities since the fall.

Source: Street & Smith’s Sports Business Journal

Money As Debt by Paul Grignon

Basic monetary theory in 47 minutes (via Paul Huybrechts). Loans do not come out of deposits and other lil’ nuggets of monetary insight, as animated by Paul Grignon. I’m bringing sexy back, alright.

On the role and responsibility of FiJo

In a timely and lucid report, LSE’s Damian Tambini describes the role and responsibility of UK financial journalism (FiJo). Cast as a “a branch of the [journalistic] profession which faces unique ethical dilemmas” (p5),  FiJo is seen as (p6):

based on a ‘social compact’ of rights and responsibilities. Rights and privileges have been afforded to journalists in return for commitments to responsible journalism.

Through interviews with journalists, financiers and regulators, the report provides empirical evidence for professional, technological and editorial challenges facing FiJo, including the critique that FiJo exacerbates “capital markets dysfunctionality” (p9), that it spreads market  “doom and gloom” (p12), that it reports on an increasingly more complex domain (p19) and that it is being colonized by “sanitized” financial PR (p22). These observations lead the author to conclude that (p29):

UK Financial Journalism is at a crossroads. Over the years, it has established a range of professional practices, rules and codes that together amount to a public compact of privileges (rights of access and a range of other freedoms) which have been granted in the light of the particular function that financial journalism plays. But due to change in the practices of journalism, and challenges to the accepted notion of who is a member of the profession, this established compact is likely to be increasingly challenged. There is a choice: either the informal institutions that police and guarantee ethical behaviour (such as the PCC and the codes enforced by individual outlets) will be shored up and law and policy will clarify to whom privileges such as source protection should be granted; or those privileges will be watered down. Standards will be compared and compete with standards of other countries and other media, and the extent to which the ethics of professional financial journalism remain the most appropriate will continue to be debated.

The 38-page report is accessible as a pdf document.

As seen on South Bank: subprime lending

Currently making the blogosphere worthwhile (heads up to discoursology) is a brilliant satire on the subprime implosion by John Bird and John Fortune. Having explained the intricacies of market sentiment, they show how lending money to ‘an unemployed black man in a string vest’ becomes a ‘structured investment vehicle’. This sketch first aired in 2007, but remains topical.

Not so Fortis: share price falls to €1.2

After a weeklong suspension and the release of “non-audited pro-forma figures“, Fortis trading resumed on Tuesday, sparking a massacre: Fortis Euronext shares fell a whopping 77% to €1.2 euro. At the investment club conference last week – after the BeNeLux nationalization but before the BNP Paribas takeover – Fortis shares were estimated at a value between €3 to €4. In its “new constellation”, Fortis plans to focus on global insurance.

Fortis also announced that it was planning to call a shareholder meeting in eight weeks. I would give good money to attend this meeting because investors are outraged over what they see as “mismanagement” and “misinformation”. Lobbygroup Fortisaction.com argues that shareholders are left with:

• a marginalised company with a 66% stake in a structured products portfolio (worth 6,8 billion euro)
• a small insurance business that could not be sold directly (Insurance International) worth between 1,5 and 2,0 billion euro.
• no dividend
• a 90 percent decline in the shareprice.

“Some easing of global monetary conditions is therefore warranted”

The US Federal Reserve, the European Central Bank and the Banks of England, Canada, Switzerland and Sweden have announced an interest rate reduction by 0.5%. This coordinated measure is as uncommon as a presidential candidate referring to his opponent in a national debate as “that one“.