Debits and Credits

Two cheers for Newsweek; Portfolio's foresight; FT, eh; etc

The unfolding financial crisis puts the general-interest press in a tough spot.

It’s not easy to explain a sprawling and often complex story to an audience unfamiliar with the background, not to mention the arcane terminology (commercial mortgage-backed securities, collateralized debt obligations, etc.) that has flummoxed writers throughout this story.

We give Newsweek half a credit for putting the crisis on its cover. But we’re keeping the other half because the story is unnecessarily disjointed and contains some silly errors.

The newsweekly makes a factual error in the second sentence of its 3,500-word cover story, never a good thing. The market swung 600 points on January 22, but it was never down that much that day, as Newsweek says it was. And what can one say about sentences that collapse on themselves, like this one?

The current troubles were years in the making, and in retrospect, easy to see coming.

But the bigger problem is that Newsweek needlessly complicates an already difficult story by weaving the American economic crisis and faltering economy into a larger one about whether the world has “decoupled”from—i.e. has become less dependent on— the free-spending American consumer (and it’s even freer-spending government). It is as though Newsweek decided its readers would read only one business story, so all issues must be included.

We got a little bit dizzy from all the bouncing around. One paragraph tells us China will thrive (an unlikely proposition) despite a U.S. downturn, while the next tells us manufacturers of toy cars may be hurt but real-car manufacturers could be ok. Huh? And we lost count of the number of times Newsweek inserted the ol’ But-what-we-said-in-the-previous-sentence-might-not-be-so-because… hedge.

Still, we applaud the effort and the real estate Newsweek devoted to the story. We haven’t seen a Time cover like that.

The New York Times gets a credit for owning the Wal-Mart beat. Michael Barbaro had a nice scoop on Thursday, though the paper buried it on C2.

The Times got hold of a memo that said Wal-Mart’s restructuring of its apparel unit will mean layoffs at the company’s headquarters for the first time in years. The company is reversing an effort to hawk more fashionable attire by returning to a focus on “key items” like basic T-shirts.

The shift effectively overturns the strategy and structure put in place by Ms. Watts. In an internal announcement Tuesday, the company said it would close its product development and sourcing divisions, a company spokeswoman, Linda Blakley, confirmed.

As a result, dozens of positions will be eliminated, Ms. Blakley said. The company would not specify how many, and other details remained sketchy Tuesday.

”We will do everything we can to minimize the impact” of the job eliminations, Ms. Blakley said, like offering workers different jobs within Wal-Mart.

In other Wal-Mart related news, the Times was also first among the national press to report that Wal-Mart was caught off guard when Check-Ups, the operator of the walk-in clinics in some of its Florida stores, closed suddenly. The news percolated up from reports in the News-Press in Fort Myers, Florida.

A debit to The Financial Times for its front-page story on companies in the United States preparing for a recession, as revealed by a survey of chief financial officers.

Putting the story, headlined “Corporate America braced for recession,” above the fold on page one, seems awfully big for a story based on a survey, especially one of the “no duh” variety.

Being on the news, ahead of the news, and even a catalyst for the news isn’t easy in this up-to-the-second era of journalism. Try doing all that for a monthly magazine.

That’s what Portfolio’s Jesse Eisinger’s did with his nice “Marriage From Hell” piece about the Kmart/Sears merger and the beleaguered hedge fund manager Eddie Lampert, who owns the retailers.

The problems at Sears and Kmart have also been costly for Lampert’s hedge fund and for his status as a canny financier. His main $15 billion fund—made up substantially of Sears stock—was down a stunning 25.7 percent through November, according to a person privy to the results. Once hailed as the Warren Buffett of his generation, Lampert, at 45, now has another turnaround job on his hands: his own reputation.

On Monday Lampert announced that he had ousted the CEO of Sears Holdings, and on Thursday Lampert said that he should have gotten more involved earlier.

In another area of that Portfolio, the cover, we were not so impressed with the timeliness of the story “How Fat Won.” The debit goes to a fun but ultimately unconvincing story on fast-food fat.

It’s a counter-intuitive story by Joe Keohane about fast food chains pushing high-calorie, mega-fat monster burgers.

During the past few years, CKE Restaurants, the parent company of Carl’s Jr. and Hardee’s, has employed an audacious go-for-bloat approach that defies just about everything you’ve come to assume about the business of modern fast food. (See nutrition data for CKE franchises and other fast-food chains.) In an age when other chains have been forced to at least pretend that they care about the health of their customers and have started offering packets of apples and things sprinkled with walnuts and yogurt, Hardee’s and Carl’s Jr. are purposely running in the opposite direction, unapologetically creating an arsenal of higher-priced, high-fat, high-calorie monstrosities—pioneering avant-garde concepts such as “meat as a condiment” and “fast-food porn”—and putting the message out to increasingly receptive consumers with ads that are often as controversial as the burgers themselves.

Our trouble is, we’re not convinced fat’s actually won. While Portfolio cleverly sidesteps the social costs involved in a fat-first strategy (a dubious editorial accomplishment), the magazine fails to demonstrate that this mid-2000’s bid for guilt-free eating is anything more than a boomlet or nice little niche market for a mid-cap company rather than the cultural turning point (“How Fat Won”) the magazine trumpets.

Credit the Los Angeles Times for an interesting story on the changing soap-opera industry.

Faced with dwindling audiences for daytime dramas, soaps are cutting costs and upgrading their half-century old template by using hand-held cameras and more-varied sets.

Lots of good detail here, but one tidbit really caught our eye: Who knew that Procter & Gamble still owns soap operas?

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Anna Bahney is a Fellow and staff writer for The Audit