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Scathing critique of investment coverage


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January 05, 2006

Scathing critique of investment coverage

Stephen Baker

The blog on the Columbia Journalism Review lambastes BusinessWeek for its 2006 Investment Outlook. Maybe I'm a tad defensive, but I think the misdeeds we're being charged with are common to most journalism that dares to predict market behavior. Basically, you have to hedge. This is true when writing about any markets, whether it's the dollar, interest rates, housing or oil. When we're dealing with unknowns like this, should journalists make calls, or simply provide the facts on both sides and leave it at that?

12:25 PM

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Don't shoot the messengers if you don't like the message. All of a sudden what Howard Stern says is worth hundreds of millions of dollars and the the thoughts of the financial writers are nearly worthless. Maybe the problem is that BusinessWeek writers leave too much of the thinking up to the readers. Don't make anybody think too much and you'll do great.

Posted by: Jim Dermitt at January 5, 2006 04:43 PM

This is an ongoing problem in most of BW's articles, and not just those about investment opportunities. Without fail, the penultimate and antepenultimate paragraphs of a one-pager hedge, backpedal, and offer various reasons why you shouldn't have bothered to read the first two columns. Stories in the Times don't do that.

It's not leaving the thinking up to the readership. It's being lazy and sloppy and somehow it's become part of the stylebook (or perhaps even worse, the atmosphere). Give me better facts or some more insightful analysis and I might subscribe again. Sure, it's hard to get scoops when you're a weekly, but you do it once in a while. And insight is quite possible -- though in the business media, I think something like Grant's Interest Rate Observer does a better job than most of the big weeklies.

Posted by: A reader at January 7, 2006 09:18 AM

Steve-

Consider the facts and trust your sense, then write the piece factually but with a point of view. Don't miss the key pieces of information, and don't bomb us with marginally valuable flotsam. Don't worry, if we disagree, we'll think on our own and disagree. Someone is always going to be hating but don't let that stop you. We're counting on you to do a professional job.

Pete Zievers

Posted by: Pete Zievers at January 8, 2006 04:56 PM

Hi Steve:

I have to admit I was more amused than amazed by CJR's pseudo-analysis of my work. I found it funny, first of all, to be lambasted for under-reporting by someone who didn't call me. But the CJR post fails on the merits as well. The blogger simply has no idea what he's talking about.

* First, it is not true that the Investment Guide's Google recommendation "hid" behind the opinion of Citigroup analyst Mark Mahaney. We said Google is conservatively priced, all things considered, at 47 times 2006 estimates. (Conservative, obviously is a matter of opinion. What?'s indisputable is that this P/E is a fraction of bubble-era peaks like eBay's 2000 P/E peak of 750 and Yahoo's of 1900-plus.). We based that on a study by Piper Jaffray that projects the search market will keep growing strongly. We also base it on our year-long reporting on the industry, which convinces me that the growth of local online advertising means Google's core market is nowhere near saturated. Mahaney was quoted only to note that he had just substantially raised his 2006 estimate. Since the stock's up $50 since, I suspect I got that one right.

The blogger's belief that I should have offset this with a "he-said, she-said" colloquy with a bear shows he doesn't understand what BW does. We're an analytical magazine -- we analyze, we take a stand. Both you and I have done that many times...In 2003, I did the tech picks for the Year-End Investment Guide; over the next year or so they rose 60%, versus 10% for Nasdaq. Last year, you did the article and tabbed aQuantive, which actually beat Google's performance in 2005, as well as big winners ValueClick and iVillage, offset only by a misstep on Infospace. People who bet on us made a lot of money last year and the year before.

I find it remarkable that CJR thinks we would have served readers better by following the example of the New York Times, which has consistently been wrong about Google and the Internet generally. Before Google's IPO, the Times was highlighting people who believed brilliant ideas like the notion that Google was worth $30 a share and those who thought it would become like Boston Chicken or Krispy Kreme, onetime hot IPOs that were laden with accounting problems and arguably fraud. Both were ridiculous ideas. A smart journalist looks straight through nonsense like that -- the job is not to be skeptical, the job is to be right.

Since blogs believe we MSM should eschew "stenographic" journalism and use our own brains and our own analysis, we'd think CJR would welcome my piece.

This doesn't mean we can't be tough. Lots of people at Orbitz will tell you I killed their 2003 IPO with reporting that, like the December piece, relied mostly on my own instincts and my own analysis. Same with Buy.com last month -- the deal was postponed two days after my BW Online dissection, and eventually shelved.

But the fact is, the Internet sector is healthy, making money and throwing off tremendous stock gains rooted in growing earnings, much more than rising multiples. The BW Web 20 portfolio, which I began when analysts hated Internet stocks in mid-02, is up 30% since the last revision in August. That's four times the market. And our picks have crushed the market since I began the Web 20 in August 2002, less than two months before Nasdaq bottomed.

So excuse me, but I feel fine defending myself against some intern at a journalism school. Or at least someone whose regard for the facts of the piece I wrote, and ignorance of what we do here, bespeak someone who at least ought to be an intern still.

Posted by: Tim Mullaney at January 9, 2006 04:29 PM

Tim, this is a BusinessWeek blog. In the future, all shrill and unsubstantiated personal attacks should be posted on The Street.com.

I am not an intern. Nor am I usually one to flaunt my achievements. But since you brought it up, allow me to state for the record that I have more than a decade of experience working as a high-level journalist for such publications as the Wall Street Journal, the Far Eastern Economic Review, and Time magazine. I also have significant business experience and a Kellogg MBA.

As for your defense, we could obviously engage in endless debate about the merits of Google as an investment. This, however, would not speak to the point of our critique, which was that you presented an opinion without any supporting logic or evidence. You may well have spent most of your adult life sitting in a cubicle, huddled over Google spreadsheets. But if you then proceed to write an article that advises us to buy Google, but does not provide an ounce of explanation or any attempt to pick apart the bears' arguments, then you have not only failed as a reporter, but you have also violated the most basic rule of expository writing. We certainly did not ask for a "he-said, she-said" colloquy (we regularly deplore this brand of journalism on our site), but it would have been at least a slight improvement over your "he-said" colloquy.

We are (really, we swear!) very impressed that your razor-sharp instincts have produced so many spot-on stock picks. In fact, one of our complaints was that you reached the conclusions in your cover story by averaging the opinions of 50 outside analysts, rather than using your razor-sharp instincts to judge whether some of those opinions might deserve more weight than others.

We did not contact you for our piece because it was not a news report. It was a critique. If we had been writing, say, an investigative report on journalists working in cahoots with crooked hedge funds, then we would certainly have called you for comment. But just as a book review writer does not normally contact an author to ask whether he'd mind reading a negative appraisal of his work, so too are we unlikely to contact a journalist before pointing out the obvious inadequacies of his work.

In any case, don't take any of this too seriously. A lot my articles have sucked too. We're all just trying to do our jobs as best we can. Deep down, we really do love you.

Mark Mitchell

Assistant Managing Editor

CJR Daily

Visit Us at cjrdaily.org

Posted by: Mark Mitchell at January 19, 2006 10:20 PM

Hi Heather and Steve:

Re the CJR piece and resulting commentary...

I made no personal attacks, and did not mention Mark by name. I'm not even upset about it, Mark, though you flatter yourself that I am. My dog remains yet unkicked, and I didn't even mention your article to my wife or son because it was forgotten before I got home. I'm not mad, I just really do talk this way. Ask Heather and Steve.

The facts remain: My judgments were my own, not the result of stenography or of averaging other people's opinions or hiding behind other people's analyses. And Mark said they weren't. That's not an opinion, not a critique. That's an assertion of fact. A fact Mark got wrong because he didn't check it. Period.

A separate issue: My judgments were valid. My judgments have been quantitatively validated for several years. So too, Steve, were your judgments when you did the 2004 version of the year-end investment guide technolgy story. For that matter, the stocks highlighted in Dean Foust's 2002 investment-guide piece on tech stocks way outperformed the 2003 Nasdaq rally too. Knowing that we've made people money threee straight years, beating the market by wide margins, is essential context to form an intelligent critique of how we at BW do the investment guide. And that's even granting Mark his implied premise that opinion journalism doesn't require any real work, or allows for opinions that ignore knowable facts. If he thinks my piece was just bad work, he's entitled to his opinion. But how would he know?

And Mark, dude. If you think the notion that you're writing opinion gets you a pass, to a degree of course you're right. I'm not going to suppress you or try to censor you. I'm just going to add more speech to the mix so readers can get it right.

In that spirit, I'll take back my "some intern" crack, which was not meant literally but reads as if it was, despite the caveat in the next sentence. That was just obnoxious. Your response made me see that.

Re Jim Dermitt's comment. Jim, babe, my opinions were always nearly worthless, at least financially. :) I'm used to it. And "a reader" is right that we often hedge ourselves too much. The right approach is to be careful about facts and bold about analysis. Pete Sievers' comment is a fair summary of what I try to do. Some days I'm better at it than others.

Posted by: Tim Mullaney at January 20, 2006 11:50 AM


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