Business Media

The Krugman Economy?

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krugmanthecontraryindicator.jpgShould the New York Stock Exchange put Paul Krugman on retainer? That’s the conclusion of Paul Greenberg writing in today’s Washington Times.

Surely another dip in the market is bound to come — so long as there’s a business cycle — but Paul Krugman’s magic touch keeps delaying it, turning every down into still another unstoppable up. It’s positively unnatural. The man is a kind of walking, talking, and, best of all, writing version of Al Capp’s poor little jinx of a character, Joe Btfsplk — only in reverse, leaving not disaster but good fortune wherever he goes. The New York Stock Exchange ought to put him on retainer. If only Paul Krugman would just keep writing about the coming End of It All, prosperity might be assured.

But it isn’t just Krugman as a contrary indicator of the direction of the financial markets that has caught Greenberg’s attention.

Then there’s the language in which Mr. Krugman sends out his jeremiads. It is, in a word, hilarious — if unintentionally so. He has to be the country’s leading practitioner of purple-as-a-bad-bruise prose. Mrs. Malaprop might have spoken like that if only she’d had a Ph.D. in the dismal science.
I’ve saved my favorite Krugmanism of all time for those occasions when I may need a bit of cheering up: “And when the chickens that didn’t hatch come home to roost, we will rue the days when, misled by sloppy accounting and rosy scenarios, we gave away the national nest egg.”
As prose, that’s a lot of poultry. Try to visualize those chickens that didn’t hatch coming home to roost, if you can stop laughing. Why, that’s almost Zen, like the sound of one hand clapping. His reference to the national nest egg is just lagniappe.

One note to Greenberg: if you are going to criticize the writings of others, avoid the word “lagniappe.” We have no idea what that word means and no intention of looking it up. In fact, we couldn’t read any further after we saw that word because it made us feel nauseated. It sounds like something we drank at Mardi Gras once and we’re afraid to find out what they put in it.
Sound of one man weeping [Washington Times]

    Reuters Reads Reuters So You Don’t Have To

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    You know how there are some people in the DealBreaker audience who like to leave comments about how media people know nothing about finance and we should go back to where we came from and, “Hey, at what address can I send my underwear to for Keith Hahn?” A lot of those readers will probably be somewhat ticked off to hear that a bevy of financial journalists will now not only make your blood pressure raise with “how frighteningly little [they] know about how things work on Wall Street” but actually affect things that happen on Wall Street. Still with us? Reuters introduced a new “sentiment analysis” feature today in which computers will read their articles, decided whether they are positive or negative and then trigger trades based on those results. FINalternatives reports that the new service “allows the machines to interpret the sentiment of news stories as they are published,” i.e. faster than your average trader.
    Numerical “sentiment scores” are assigned to the words and phrases in the article and then totaled to give a positive, negative or neutral report card to the company in question. Does anyone else find it a bit disconcerting that Bess Levin or her counterpart at Reuters could be triggering hedge fund trades, based on the fact that she chose to write a scathing article about Apple, after her brand new Mac Book crashed for the third time in six weeks?

    Reuters Gets Sentimental     [FINalternatives]

      • 26 Apr 2007 at 10:36 AM
      • Apollo

      Does DealBook Owe CNBC An Apology?

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      At the beginning of the month a dispute broke out between CNBC’s Charlie Gasparino and DealBook’s Andrew Ross Sorkin. Gasparino had reported that Apollo was considering going public, following the footsteps of the Blackstone Group and the map laid out by Fortress Investment Group into the public markets. Sorkin declared that CNBC had simply got the story wrong. “It’s not true. Apollo is not going public next month, nor the month after that — and probably not the month after that either,” Sorkin wrote.
      As the story progressed it seemed that Sorkin was at least half-right. Reports were published indicating that Apollo was not yet getting ready for a public offering of shares. It was said to be considering a private offering of equity instead. Since these privately sold shares would probably come complete with registration rights that would allow them to be sold on the public markets eventually, the CNBC story didn’t look quite as far off as Sorkin’s item made it seem.
      But the reports coming out from the Milken Institute’s annual Global Conference indicate that Sorkin may have overshot in his takedown of Gasparino’s report. Apollo founder Leon Black stopped short of commenting on his firm’s plans for an equity offering, but it seems clear they are at least considering a public offering.
      Here’s how Business Week describes Black’s remarks at the conference:

      But Black did build his case for public ownership of the businesses. He said publicly traded shares would allow him to retain top managers and recruit new ones by offering them stock in the firm. He also said such an offering would give him currency to acquire other, smaller firms. One of the ways Black said he’s been able to achieve superior returns was by hiring investment managers with experience in specific industries. He said he’d like to expand that expertise, noting that health care and energy were two areas in which his firm was weak.

      Does that sound like someone who isn’t considering a public offering?

      The Predator’s New Ball       [Business Week]

        A Pulitzer For the Perfect Executive Pay Story

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        As a way of saying thank you for the Pulitzer, the Journal has opened up its backdating archives. You can read all about the scandal, starting from the very first story published thirteen months ago. (Has it only been 13-months? It seems like we’ve been writing about backdating forever. Oh, right. That’s because DealBreaker started just eleven days later.)
        This video–which we found thanks to Barry Ritholtz–is actually a good introduction to backdating, and good background on how the Journal discovered the story and pursued it. In many ways, it is superb journalism, and congratulations are due to the reporters who performed it. Rather than purely old-school investigative journalism—the kind that relies on leaks, anonymous sources and (possibly) manipulation by government agents—the Journal’s backdating coverage was a new style of investigative journalism. They took the work of academics and applied it to the real world of business and individual corporations and corporate leaders. As academics increasingly note the costs of Sarbanes-Oxley and the dangers of criminalizing agency-costs, there might be hope that this kind of investigating the arguments of academic reporting may help enlighten the public rather than add more confusion and ignorance.
        And there is little doubt that a lot of the reporting on backdating was poorly reasoned and misleading. The worst of it came not from the Journal but from reporters and editorialists who tried to make up for what they lacked in original findings by adding more outrage and inferring even more criminality. There still are many out there who believe that backdating somehow proves that corporate is under-criminalized.
        “Much reporting has made it sound like backdating was the equivalent of executives taking erasers and white-out to their paychecks to add a couple of zeroes — and public understanding still suffers from this bum steer. But all that backdating comes down to is a nonmaterial accounting irregularity (yes, readers, accounting rules should be obeyed!) involving a defective judgment about whether ‘in the money’ options needed to undergo expensing,” Holman Jenkins wrote in an article that all but indicted his own paper’s coverage.
        Why did the backdating story get reported like this? The outcome was probably over-determined. Scandal sells papers whereas reports about nonmaterial accounting defects do not. It also wins prizes. But something more than that was in play, as well. And that something is a political agenda. It is clear from the video is that the Journal reporters see the backdating story as just a smaller part of the struggle for truth, justice and reducing executive compensation.
        But don’t take our word for it. Listen to leading Wall Street Journal backdating reporter Charles Forelle.
        “Besides the individual who may face jail sentences or SEC sanctions, there’s the broader issue of executive compensation being thrown into the limelight again,” Forelle says around the five minute mark in the video. “Companies are starting to show at least a glimmer of thinking more carefully and more intelligently about how they give options to CEOs since options are by far the instrument that’s caused the majority of the rise in CEO pay over the last couple decades.”
        A Pulitzer for A Perfect Payday [Wall Street Journal]

          The Wall Street Journal’s Team Backdating Wins the Pulitzer!

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          insider_trading graphic.jpgDon’t say we didn’t warn you. After it’s relentless and breathless coverage of corporate stock option backdating, the Wall Street Journal has reaped the ultimate reward in journalism—a Pulitzer Prize.
          We’ve been one of the unfortunately rare sources of criticism of the Journal’s coverage of backdating. (Larry Ribstein and the Journal’s own Holman Jenkins are also among the thin ranks of critics.) It always stuck us as unduly scandalized, uncritically assuming that it was all a day of executive greed and theivery and misleading about the nature backdating. But like the Spartans at Thermopylae, it seems we’ve been overcome.
          It was obvious that the Journal’s editors were gunning big-time for the prize. They released a front-page story on backdating on the last day the nominating juries were meeting at Columbia. But there’s no denying the reporting has had a major impact on the public discussion, as well as on corporate America, where chiefs have been toppled, prosecuted and, in one case, forced to flee the country.
          It all started with a very simple idea—get some reporters to start digging into the findings of a few Midwest academics who had observed that many stock options grant dates were improbable. They seemed to have fallen on a perfect day for granting options—when the stock price was at an annual low. The academics concluded that it was more likely that the grant dates had been manipulated. The Journal simply followed up on this conclusion by naming names of the probable manipulators. It was classic muck-raking journalism that has succeeded beyond the dreams of most muck-rakers—and, in the process, has thrown a lot of muck into the public’s eyes.
          And yet. And yet. We find ourselves still able to hope that this might lead to something that would be even more valuable than the Pulitzer Prize: a reconsideration of the criminalization of corporate governance. With so many c-level executives now former executives, the stocks of so many companies besmirched by the taint of scandal, some of those formers paying heavy fines and possibly facing serious prison time, the public might start to wonder whether we’ve pushed the Rudy Giuliani model of treating corporations like criminal families too far. A rollback of our rogue regulators might still be in the cards.
          We apologize for our unusual optimism today. But as the champagne corks pop over at the Journal’s headquarters in One World Financial Center, we’ll comfort ourselves with the notion that the fall-out from the Journal’s backdating reporting could ultimately result in Jeff Skilling seeing freedom sometime before the twenty-plus years he was sentenced to by a federal judge.
          Journal Wins Pulitzers For Options Probe, China [Wall Street Journal]

            Reading Portfolio: A Round-Up of First Reactors

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            portfoliomaycover.jpgThe earliest reviews of Conde-Nast’s Portfolio are coming in. We probably should be doing things like reading the actual magazine. And we’re planning on getting to that as soon as we get up the courage to lift its 300-plus pages from the place where we dropped it. (Bess Levin’s desk, with a note: “Summarize all relevant data—Thks-JC.”)
            But fortunately lots of other people are reading Portfolio so we don’t have to. Here’s a quick round-up of the early reactions.
            Portfolio arrives to a somewhat testy Going Private, who thinks the magazine gets it wrong even before the first page. Even the cover is wrong, the acid penned mistress of the private equity world says. What’s wrong with the cover? According to Going Private it depicts “a bunch of hideous downtown rooftops bathed in the caustic acid of sodium lights on a business magazine cover that doesn’t even have a feature article on the financial performance of local roofing contractors or sodium light distributors.”
            DealBook comes in with two items today on Portfolio. The first notes that the magazine wants to bring some glamour to world of business magazines.” And by glamour you get feeling that what they really mean is “women.” Indeed, as we noted a long, long time ago, Portfolio is aiming at being something of a business magazine for women. Most business magazines have readerships heavily tilted toward the male. Portfolio predicts that it will have a much more balanced readership. And apparently it hopes to achieve this by re-imagining corporate board rooms as a sort of red carpet or awards show where “business executives treated like celebrities,” according to DealBook.
            After the jump we give Portfolio‘s readers the full treatment.

            Continue reading »

              Portfolio Lands On The Streets With A Loud Yet Tastefully Businesslike…Thunk!

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              portfoliomaycover.jpgIt’s finally here. The business magazine that will change the way you spell Portfolio—it’s now spelled with some silly foreign currency symbol instead of an “f”—hits the newsstands today. The first issue of Conde Nast’s Portfolio is enormous—332 pages.
              The table of contents of the first issue reads a bit like it was written by DealBreaker readers: lots and lots of stuff about hedge funds and private equity firms. Ken Griffin? Check! T. Boone Pickens? Check! Money culture? Double check with Tom Wolfe on top! Attempts to broaden the discussion with talk about automotive and newspaper sectors? Check and check.
              We’re just tearing into the first issue and it’s full and frothy website. We’ll keep updating you on what we find throughout the day.
              Portfolio’s Website [Conde Nast's Porfolio]
              In a Troubled Time, a New Business Magazine [New York Times]
              Eventually All We Will Be Writing About Is ‘Portfolio’ [Gawker]