Why Are Journalists So Rich?

Some people say journalists don't know how to handle money, but it simply isn't true. And while our own wealth-building skills are formidable, the folks at BusinessWeek put us to shame.

Some people say that journalists don’t know how to handle money, but this simply isn’t true. I, for one, save a lot of money by asking my mother to buy my clothes. I also sleep on a floor in the back room of an auto body garage, which is quite cheap, and I regularly stuff my pockets with buffet food at corporate events to which I have not been invited. As a result of these cost-cutting measures, my net worth has grown to $10.87 and two slightly crumpled banknotes from Mobutu-era Zaire.

So, how about it? Do you want investment advice from me? I bet you do. But before I sell my secrets (hint: V.E.G.A.S., baby!), I should disclose that there are many journalists whose wealth-building skills very nearly equal my own. These include my friends at BusinessWeek, which recently published its annual special issue revealing the investment schemes that are sure to make you big bucks in the coming year, according to analysts, who caution that there are a number of reasons why these investments might, in fact, make you exceptionally poor.

BusinessWeek’s advice for 2006 is as follows: Invest in the stock market and “you have a good shot of earning total returns of 9 percent to 10 percent.” Why is this so? Because (this will flabbergast you) … “the bulls” are optimistic. Unlike those grumpy bears, these bulls say that the economy will grow “at a robust clip,” “corporate profits are rising,” the “Fed’s long series of interest rate hikes is over” and oil prices “will ebb.”

BusinessWeek promises that all of these things will occur barring “certain developments.” For example, the Fed’s long series of interest hikes might not be over. Oil prices might not ebb. And the economy might not grow at a robust clip. BusinessWeek also notes that “most ordinary investors” think the investment outlook is not very bright at all. But, as a rule, the bulls should be right as long as the bears are wrong.

Incidentally, BusinessWeek reports that it has identified a group of people called the “inflation worryworts.” We are tersely informed that these individuals “will be silenced.” No further information about their whereabouts or opinions is available — not in this magazine, anyway.

You might also be wondering about the fate of the BusinessWeek reporters who wrote all those nerve-wracking stories in 2003 … and 2004 … and 2005 … predicting that the housing “bubble” is going to pop. Well, we are pleased to report that these people, too, seem to have been silenced.

In their stead, the magazine has employed a new line of cost-efficient, short-term-profit-boosting robotic information dispensers that never waste time drinking, smoking, cultivating sources, or even thinking. They just automatically spew out the sorts of endearingly simple-minded, marvelously vague and absolutely definitive pronouncements (wholly uncluttered by supporting evidence) that have become the mainstays of our nation’s most powerful media syndicates.

In the most recent issue, we get this one-liner: “Oh, and the bottom won’t fall out of the housing market, either.”

The precise computations that sparked this particular revelation are not made clear, but BusinessWeek does tell us how it formulated some of its other predictions. For example, it figured out the prognosis for corporate profits by asking 54 forecasters how much they think corporate profits will increase. The guesses ranged from 0.9 percent to 17.2 percent, which was hardly helpful, so BusinessWeek averaged them all together. The result was 7.3 percent; hence the magazine’s conclusion that “profit growth will slow to a pace of 7.3 percent.”

The beauty of this method is that BusinessWeek didn’t have to crunch any complicated numbers by itself or evaluate the forecasters’ relative qualifications and backgrounds. One analyst says the stock market index will hit 6,800. Another says it will reach 14,150. One of these individuals might be the next Warren Buffet. The other might be a BusinessWeek editor’s former neighbor at the sanatorium. But it doesn’t matter. They are both wrong. The average (or “the consensus,” as the magazine calls it) says the index will hit 11,556. And so it must.

This explains why BusinessWeek does not provide its readers with any information about this year’s pool of forecasters, other than their places of employment. As individuals, they are irrelevant. The magazine does, however, profile William Greiner of Kansas City, Mo. He was one of BusinessWeek’s “Fearless Forecasters” last year, and he came closest to predicting where the stock market would finish in 2005, which is sort of like trying to guess how many gumballs are in that giant glass jar at FAO Schwarz.

BusinessWeek reports that Greiner credits his winning prediction to “colleagues who assist him in crunching the data.” He also “attributes some of his smarts to his hobby — riding motorcycles. ‘When I’m on the bike, I’ll ride aggressively and have to focus,’ he says. ‘It cleanses the system.’” We at The Audit actually tried this once, cranking a Vespa scooter up to 35 mph with a leather-clad woman on the back. It proved to be a significant money-loser.

Fortunately, BusinessWeek turns to other analysts for help identifying specific stocks to invest in this year. Here the averaging method would not work, because if half the analysts were to pick Google and the other half were to pick Yahoo, we would have to invest in GooHoo, which does not yet exist.

So, instead, BusinessWeek singles out a few stocks and advises readers to invest in them because one analyst or another believes it’s a good idea. Reporter Timothy Mullaney, for example, writes that Google might be a safe bet because Mark Mahaney says so. What we know about Mark Mahaney is that he works at Citigroup Smith Barney. He is also “influential.”

Mullaney doesn’t provide further information about this analyst, and why should he? The truth is, Mullaney is being modest, cloaking his own reporter-wisdom behind the quoted words of some faceless investment banker. There are surely other suits who told Mullaney that Google’s stock will lose value, but he probably didn’t even have to consult a balance sheet to know that those who presume to disparage the almighty Google deserve no hearing on the pages of BusinessWeek.

How does he know? Well, because he is a journalist and we journalists get “hunches” — you know, the sort of deep transcendental insights that blossom from the belly as one zooms across the desert on a 100cc moped, wind blowing through the hair, mother riding pillion, destination anywhere … anywhere that has a big discount on clean underpants.

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Mark R. Mitchell wrote the The Audit column in 2006.