Re: 9/6/00 - ABC News: A Chat With Howard Kurtz; Inside the Wall Street Media Machine
A Chat With Howard Kurtz
Inside the Wall Street Media Machine
Sept. 6 — “Financial journalism is the only part of the business I’ve ever seen where it’s considered okay ? to report rumors — even bogus rumors — because they move the market,” says media writer Howard Kurtz.
For eighteen months, Kurtz shadowed the most influential people in business and journalism. In his new book, The Fortune Tellers, he exposes the inside stories of the highly paid financial players whose words provide huge windfalls for some investors and crushing losses for others.
Who among “the fortune tellers” can investors really trust? And how can investors find out about the conflicts of interest “hidden in broad daylight?”
Kurtz joined a live chat today on ABCNEWS.com. Look below for a transcript of the chat.
--------------------------------------------------------------------------------
Moderator at 12:01pm ET
Welcome to ABCNEWS.com's live chat with
Washington Post reporter Howard Kurtz. In his new book, The Fortune Tellers, Kurtz raises disturbing questions about America's most prominent financial reporters and analysts. He joins us now.
--------------------------------------------------------------------------------
Moderator at 12:01pm ET
Howard, who are "the fortune tellers?"
--------------------------------------------------------------------------------
Howard Kurtz at 12:01pm ET
The fortune tellers are the money managers, highly-paid Wall Street analysts, media commentators, prognosticators and other all-knowing gurus who parade their opinions on television and the Internet, and are selling the notion that you too can get rich if you only listen to their sage advice. Unfortunately, much of this advice turns out to be wrong, contradictory, or biased, in part because some of these analysts have hidden agendas that are not always made apparent to readers and viewers.
--------------------------------------------------------------------------------
Moderator at 12:01pm ET
Just how powerful are reporters like Maria Bartiromo — inevitably referred to in the tabloids as "The Money Honey?"
--------------------------------------------------------------------------------
Howard Kurtz at 12:03pm ET
Maria Bartiromo is a stunning example of the clout of financial journalists in this real-time manic stock market culture in which we now live. As money manager Jim Cramer told me of Maria, "She can make stocks dance." Far more than in any other realm of the news business, financial journalists have immense clout to boost or bash a stock in a matter of minutes, and that creates intense competition and incredible pressure because their words are so influential.
--------------------------------------------------------------------------------
Bobvestor from eds.com at 12:03pm ET
Does Maria Bartiromo know when an analyst is trying to manipulate a stock price through her? Or, does she simply report every tip she gets?
--------------------------------------------------------------------------------
Howard Kurtz at 12:06pm ET
Maria's actually very savvy about the varying agendas of the people who feed her scoops. I've watched her work the phones in her little booth above the floor of the Stock Exchange, and no one is better at vacuuming up the daily upgrades and downgrades of these Wall Street brokerages. But Bartiromo doesn't see it as her place to tell CNBC's viewers when the analysts she so frequently quotes turn out to be wrong, or whether, as is often the case, their firms have investment banking relationships with the very companies whose stocks the analysts are talking about to her, and that often leaves viewers without a scorecard or any way of evaluating the accuracy or the agendas of these Wall Street hot shots.
--------------------------------------------------------------------------------
Mike Adams from dialup.mindspring.com at 12:06pm ET
You have made the point that there are conflicts of interests among analysts and the companies they cover. Can't a similar case be made with the national media and advertisers? After all, what media organization is going to do a harsh story on a major advertiser?
--------------------------------------------------------------------------------
Howard Kurtz at 12:08pm ET
Good question. There are in fact plenty of news organizations that have done exposes on the local supermarket chain or car dealer, although some do shy away from that sort of hard-hitting material. But it's much less likely that a major department store, for example, is going to pull its advertising from the local paper over one unfavorable article. But big corporations can and do threaten to yank their investment banking business from firms that they believe are being too critical. There are case studies in The Fortune Tellers of analysts being pressured or even fired by their own Wall Street firms for being too critical — which is to say too honest — about the company's clients, and that is a harsh reality that gets too little media attention.
--------------------------------------------------------------------------------
Moderator at 12:09pm ET
Why do consumers of financial news tolerate this potential for conflict of interest, when we would not stand for it in other reporters? Why the different standard?
--------------------------------------------------------------------------------
Howard Kurtz at 12:12pm ET
I think lots of people watching the tube or reading Web sites simply don't know of the hidden agendas of some of these fortune tellers. Journalists also protect these sources who feed them anonymous stories on companies on which they'll make a bundle if the stock suddenly jumps or dives. Overall, there are lots of things that seem acceptable in this high-stakes world of financial journalism that are rarely allowed in other parts of the news business. It's considered OK for business reporters to talk about rumors, even bogus rumors, on the rather self-justifying theory that rumors move the market. This opens the door for all kinds of less-than-informed speculation about possible mergers or earnings shortfalls that can have a billion-dollar impact on a company's stock, but which sometimes turn out not to be true. There are a dizzying number of examples in the book of supposed merger discussions between big-name companies that get breathlessly touted by the media, but often fail to materialize.
--------------------------------------------------------------------------------
emma02 at 12:12pm ET
Mr. Kurtz, As a college journalist (who follows your media Notes and Reliable Sources), I know that as covering breaking news becomes more competitive, fact-checking falls to the wayside. So how can financial news outlets avoid the gaffes like Emulex and remain competitive? Do you think recent mistakes *will* make the CNBC's, Dow Jones' and Bridge News' step back, or do you they will continue feeding rumors and expecting viewers to be the filters? Do you know if Dow Jones believes the Emulex debacle to have hurt its credibility, or is credibility not an issue in financial journalism?
--------------------------------------------------------------------------------
Howard Kurtz at 12:16pm ET
First of all, thanks for the nice comments. There's no question that Bloomberg News and Dow Jones took a hit to their credibility by rushing into print with the fraudulent press release about Emulex, a California company whose stock plummeted by 60 per cent in 15 minutes based on the terrible news contained in the fake release. What's telling here is that both news organizations and several Web sites, as they now regret, trumpeted this "news" without confirming with Emulex that it had actually made this damaging announcement. CNBC, on the other hand, held back details of the bogus release because, as anchor Joe Kernen told me, "it just didn't smell right." So the most rudimentary step taught in any journalism school — double-checking the facts with a phone call — would have prevented this huge embarrassment and saved plenty of investors a huge pile of cash. News organizations understand that if they don't learn to exercise some restraint and more of these incidents occur, their credibility is going to take a severe hit.
--------------------------------------------------------------------------------
Steve K. at 12:18pm ET
Right after your appearance on Nightline, ABC here in LA showed not one but *two* commercials for Oppenheimer Mutual Funds, all before Chris Bury could even make it back for his wrap-up. I believe both were national and not just local ads, so everyone viewing Nightline would have seen them. Doesn't this represent a conflict of interest for ABC's news division, especially since the segment right before yours was largely about whether the cable channel CNBC (and others) are often just cheerleaders for the financial industry? Should you have been briefed on the commercials that were about to follow you *before* you went on the air? And should Nightline have aired these financial ads at all on this particular evening with this particular topic being discussed?
--------------------------------------------------------------------------------
Howard Kurtz at 12:20pm ET
Terrific question. I believe they were local ads because, watching rather bleary-eyed in New York, I did not see any brokerage ads on the ABC station there. But if you watch CNBC or CNNfn or read TheStreet.com or CBSMarketWatch.com, you will see virtually nothing but ads for online trading firms and high-powered brokerages. The real test of a news organization is whether it can take money from these sorts of advertisers and then report aggressively on the companies. I haven't seen any evidence that these outlets are pulling their punches because of advertising; the larger problem, it seems to me, has to do with the tendency to allow rumors, misinformation and biased opinions to pollute the news product.
--------------------------------------------------------------------------------
John at 12:21pm ET
Mr. Kurtz, you said on Nightline that very few people predicted the NASDAQ collapse. ABC Radio's Bob Brinker had expressed strong concerns about the NASDAQ in January and February. Also what about call-in Radio shows? Did you look at them as well?
--------------------------------------------------------------------------------
Howard Kurtz at 12:24pm ET
The Fortune Tellers looks at everything from The Wall Street Journal to magazines like Fortune and Money to non-stop television coverage to the Internet to online chat groups, but call-in radio shows are one area I did not examine, although I think the increasingly influential chat rooms are sort of the 21st century equivalent of these radio programs. While some commentators had been warning for months that the NASDAQ was overvalued and due for a fall, that certainly wasn't the impression left by most of the Wall Street gurus who were flogging tech stocks day after day during their dizzying ride up. And that's the inherent danger of playing this high-stakes game: You never quite know when the party is going to very abruptly end.
--------------------------------------------------------------------------------
Jennifer from ttc.com at 12:24pm ET
What, if anything, is being done to protect companies from what is often slander? It's scary to think that the words of one reporter could topple your company's financial stability.
--------------------------------------------------------------------------------
Howard Kurtz at 12:27pm ET
Some companies have moved very aggressively against people they think are posting slanderous comments about them on the Internet, and they can yell rather loudly when they feel that financial journalists have either exaggerated something or gotten it wrong. In one incident in my book, CNBC's David Faber reported that Rupert Murdoch's News Corporation was weighing a possible bid for General Motors. Murdoch's man rushed out a denial within minutes saying that News Corporation was not making a bid for GM, even though Faber had not said that it was, and the two men quickly got into an obscenity-laced shouting match on the phone. But Faber's caveats were lost when other media picked up the story, and, despite the denial, GM stock got a nice pop that day -- proving once again the power of financial journalists even when their caveats and qualifications are ignored by the media echo chamber.
--------------------------------------------------------------------------------
DA at 12:27pm ET
Hello Mr. Kurtz, What about the flip side? The quality of financial reporting by companies is sometimes suspect as well. Take the cases of Sunbeam Corp., Waste Management, Cendant, etc. in recent years. It was the analysts who cut through the bogus data on the financial statements and made it aware to the investing public. Aren't analysts the "watchdogs" or "policemen" against fraudulent information?
--------------------------------------------------------------------------------
Howard Kurtz at 12:29pm ET
Analysts used to play a certain watchdog role, but increasingly, even some of them acknowledge they are more in the business of selling banking research than cutting through the corporate fog. I'm familiar with many more cases in which corporate statements that turned out to be grossly inaccurate were not challenged by Wall Street analysts until either the government or some news organization exposed the faulty accounting. One classic example involves MicroStrategy, whose stock plunged more than 50 per cent a few months ago after it was forced to acknowledge that the profits it had claimed in previous years were in fact losses. Forbes magazine was the first to question MicroStrategy's accounting, as opposed to any Wall Street brokerage.
--------------------------------------------------------------------------------
Moderator at 12:30pm ET
So what needs to be done to get the business media to clean up its act?
--------------------------------------------------------------------------------
Howard Kurtz at 12:31pm ET
The more sophisticated consumers become about hyped or breathless or exaggerated reporting, the more those news outlets that are more careful and cautious — even at the risk of getting beat by a few minutes on a story — are going to win respect and credibility. In every field of journalism, self-restraint in an increasingly competitive environment is often the toughest thing to do. It's even more difficult in financial journalism, where so many billions of dollars are potentially riding on each story. None of this, however, is going to happen overnight.
--------------------------------------------------------------------------------
Moderator at 12:32pm ET
Several chat participants ask: What's the best place for investors to get reliable, unbiased financial information?
--------------------------------------------------------------------------------
Howard Kurtz at 12:34pm ET
There's no one fount of all financial wisdom, and I think savvy consumers would best be advised to consult multiple sources and learn to take some of the proffered wisdom of the fortune tellers with a bag full of salt. In general, The Wall Street Journal and Fortune are among the publications that do a very good job, but since we increasingly live in a real-time world, there's no escaping the influence of television and the Internet, and it's there that folks are going to have to exercise some healthy skepticism if they are going to play this particular game.
--------------------------------------------------------------------------------
Moderator at 12:34pm ET
Since we only have a few minutes left, do you have any additional comments or thoughts that you'd like to share with our audience?
--------------------------------------------------------------------------------
Howard Kurtz at 12:36pm ET
For all the talk about standards of journalism and smart investment, what was most fascinating to me in writing this book were the wonderfully compelling characters, from Jim Cramer to Ron Insana to Christopher Byron to the "Squawk Box" gang, how they operate and occasionally have fun under grueling pressure, and the dirty little secret I discovered about this very incestuous world: half the people on Wall Street can't stand the other half. And it's only by grasping the personalities and the feuds and the alliances that you begin to understand how the financial sausage gets made in the media business.
--------------------------------------------------------------------------------
Moderator at 12:36pm ET
Thanks very much for your time, and thanks to our audience for sending questions. If you would like to check out recent ABCNEWS.com chat transcripts, please click here.
--------------------------------------------------------------------------------
abcnews.go.com |
