Why You Shouldn't Trust Journalists As Analysts

Paul Ingrassia, the former Wall Street Journal reporter, senior executive and Pulitzer Prize winner, wrote a candid review last week of Alex Taylor III's "Sixty to Zero," a tale of GM's demise.

Ingrassia's opening sentences say it all,

"Many of the journalists who covered the long decline of General Motors that led to last year's bankruptcy were, in their hearts, rooting for the company. Such reporters- I among them- would seize on the occasional piece of good news about GM to write something upbeat. It would be a journalistic coup, after all, to be the first writer to call the company's turnaround. In any case, no one who grew up during GM's heyday, in the 1950s and 1960s, wanted to see an American icon self-destruct."

There's no reason for me to go further in relating Ingrassia's well-written review. He details various pieces Taylor wrote in his effort to tout the ailing firm, and concludes with this quote from Taylor,

"The United States needs a domestic auto industry for its jobs, technology, wealth creation, trading balances and prestige."

Together, Ingrassia's inclusion of these passages tells us a lot about why we should simply not trust most beat reporting on US companies and industries.

Reporters are not sell-side analysts. And, for that matter, we know from the last decade's dot-com bubble that sell-side analysts are, in reality, marketers for the equities which their firms underwrite and in which they make a market.

You'd ordinarily think that a reporter was more objective than an analyst whose firm clearly has conflicts of interest.

Ingrassia's review tells you different. I am not sure Paul meant to open the media kimono quite so widely, but there it is.

It validates one of my very first posts on this blog, from 2005. In that post, entitled Speaking Truth To Power- the GM Situation, I wrote,

"Truly, as I have written in a prior post, this is simply not the company’s salient problem. GM cannot and does not design and produce vehicles which sufficient numbers of people will buy at prices which will sustain the company’s financial health.

You would not know any of this, to judge from the press’ reaction to the agreement. Or Wall Street’s reaction, for that matter.

I now wonder if GM, even in its last acts as a sustainably profitable enterprise, wields enough financial leverage to silence any significant, honest appraisal of its situation.

Do analysts worry that they will be shut out of conference calls if they point to GM’s revenue problems as insoluble? Do the various media outlets worry that they will have seen the last GM ads in/on their medium, should they report candidly about the company’s prospects?

It’s now beginning to seem to me that all these parties, “stakeholders,” if you will, literally have more to gain from a fatally bleeding GM than they do from a merged/acquired/failed GM."

How can we take seriously the supposedly-objective articles we read in the Journal, Forbes, Fortune, et.al., if their reporters later admit they were rooting for their subjects the whole time? Not just biased, but actually choosing stories to paint better pictures of bad situations?

Could this, in addition to a faster news cycle and internet advertising, be a key reason that old media is dying?

How about CNBC, which so clearly tries to cheerlead the equities market? Such as when idiotic NYSE floor reporter Bob Pisani speaks so emotionally about what 'we' want in the market to see it go higher? As if reality is unimportant, and reporting the likely real trend is less crucial than spending on air time boosting any faint reason for viewers and other investors to buy equities?

Ingrassia's and Taylor's admissions prove my point that it certainly makes all business media coverage suspect.