Debits and Credits

Nonsense from Forbes's publisher; an all-wet WSJ "ahed"; McClatchy's overdue writedown, etc.

Debit to Forbes publisher Rich Karlgaard for his sunny-yet-dyspeptic column last week headlined “Four Wrong Reasons for Pessimism.”

If you think a U.S. recession is here or imminent, you’re in good company. Most Intrade bettors believe this and probably 99% of journalists and all Democratic office seekers do, too. We’ll soon see. For now, I still say the 2008 U.S. recession is oversold. Why the widespread recession fear when unemployment is low, interest rates are low and the Fed is on the case?

His reasons:
1) Americans don’t like Bush’s presidency, so they’re over-reporting their economic fears
2) Democrats are busy telling everyone how bad the economy is to win elections
3) The business press is incompetent and biased because the newspaper industry is in a depression
4) People don’t know numbers like Karlgaard knows numbers

All of these are problematic, but being business-press critics, we’ll focus on number three.

Think about what it takes to be a first-rate business journalist. One must be facile with numbers and financial statements and have the confidence to talk to CEOs, high-level executives, board members, analysts and so forth. One must delve deeply into the industry one writes about—what is the competitive landscape, what are the technological disruptions on the road ahead? It is also critical that one have a coherent global economic view to be able to put a story into context. And one must be a good storyteller.

Now, if one possesses all of these talents, what are the chances one goes into the low-paying field of journalism? Not great. One instead becomes a Wall Street analyst, a Booz Allen consultant or just goes into business, perhaps to raise money and start a company. Low-paying journalism can’t compete for pick of the litter. (Unless it’s Forbes, where journalists flock to a higher moral purpose!)

The thin talent pool in business journalism combines with two other forces: Journalism is populated by left-of-center people, many of whom are hostile to business; and traditional journalism itself faces threats of disruption from the Internet, leaving business journalists in a fearful mood, which gets projected into their stories.

So that’s why Fortune, The Wall Street Journal, Bloomberg and the rest read so much like the Daily Worker on Prozac, with spelling errors. We always wondered.

Karlgaard, we see, is a pretty tough talker—just not tough enough apparently to name any of those left-of-center failures-in-the-game-of-life (is there any other kind?) that he believes are so abundant on business desks. We’ll look for that in his next column.

We also find Karlgaad’s jokey attempt to exempt Forbes staffers from this loser class to be a bit gutless. Why not just make your argument—business reporters are losers—and accept the consequences during those long, awkward moments fumbling for change at the Forbes vending machines? Maybe because he doesn’t believe it, either.

Indeed, a generalized sliming of business journalism seems strange coming from a senior business-news executive. What does that say—that in this sorry circus, he’s top clown?

But then, this is a man who sees being a Booz Allen consultant or, get this, Wall Street analyst, as a dream job. Wow. Talk about a loser.

There is no need to dwell on this nonsense except to point out that it is another dent in our already degraded public discourse. It is provocation for its own sake, the kind of sweeping, ideologically driven name-calling that helped pave the way for our current economic mess, and our other messes as well.
That Forbes’s publisher employs such a tired and unhelpful trope says more about the magazine’s leadership—it is still living in 2004—than it ever will about business journalists, including those at Forbes.

Continuing our jihad against “populism,” we give debits to the Washington Post, The Wall Street Journal and the Los Angeles Times for misusing the term.

The LAT is the worst here:

Economic populism was a key plank of Bill Clinton’s 1992 presidential win, stamped in the reminder that was always on display in the candidate’s Little Rock, Ark., war room: “It’s the economy, stupid.”

To say that talking about the economy from a pro-middle-class point of view is “populist” is ridiculous. The word is loaded with negative associations, many of which basically imply unsophisticated government giveaways. The appeals Democrats are making are typical left-of-center approaches. They’re liberal, not populist.

And a credit to the NYT for avoiding the populist sandtrap lately.

A credit to the several outlets who wrote this week about the latest hairball the financial industry is burping up: something called variable-interest entities, or VIEs.

A Financial Times story with the cheeky headline “Latest acronym VIEs for Wall St notoriety” explains what these buggers are.

The latest source of concern is variable interest entities (VIEs), another three-letter acronym that now holds toxic properties. This follows the failure of municipal auctions, known as auction rate securities (ARS) in recent weeks, while collateralised debt obligations and (CDOs) collateralised loan obligations (CLOs) continue to loom over the balance sheets of banks and investors.

VIE is an accounting term that covers a multitude of activities in almost any kind of special purpose vehicle—from conduits and structured investment vehicles (SIVs) to individual CDOs themselves. The term VIE refers to the way in which a bank’s economic exposure to a vehicle can change, which is key to whether it can be kept off-balance sheet.

We’d also like to point out this Bloomberg story on VIE’s, which appeared on Tuesday.

We really like this quote:

“The disclosure on VIEs is hopeless,” Azarchs said. “You have no idea of the structure or how that structure works. Until you know that you don’t know anything. It’s like every day you come into the office and another alphabet soup has run off the rails.”

Uh-oh. It’s definitely no good when the alphabet soup runs off the rails.

A follow-up debit to McClatchy Company for releasing its earnings before they were ready. We wrote about this a couple of weeks ago when McClatchy issued a “preliminary” earnings statement that showed a profit but didn’t include what it knew would be a massive writedown.

Now that the company has its accounting done and that “preliminary” $30 million profit turned into a $1.43 billion loss for the quarter.

A debit to the WSJ for a misleading page-one story on Thursday.

The headline says “Ahoy, Billionaires: The Royal Navy Is at Your Service Skippers of the Rich Get U.K. Training; A Baffling Fire Drill.”

But something’s amiss. It turns out that Steve Mackay, the retired Royal Navy commander who runs a program where skippers and stewards work on yachts, is a contractor.

Suggesting as the headline does that it’s the British Royal Navy training skippers on pleasure craft is plain misleading.

Finally, something dropped into our inbox this week that we think is juvenile-but-funny and actually helpful in understanding the mortgage crisis. (It’s part of a larger

We don’t know from whence it came, but a credit to Whoever You Are wherever you are.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Anna Bahney is a Fellow and staff writer for The Audit