D.C. Dispatch - 2000.06.07

Recent commentary from National Journal:

Political Pulse: Al's Campaign Can Be Born Again, by William Schneider (June 7, 2000)
Gore's Los Angeles convention speech this summer will be the defining moment of his political career.

Legal Affairs: Gore and the Buddhist Temple -- a Phony Scandal?, by Stuart Taylor Jr. (June 7, 2000)
The charge that Gore knowingly went to the temple to shake down monks and nuns is demonstrably false.

Media: Style as Substance, by William Powers (May 31, 2000)
China trade debate coverage has been dominated by lumbering masters of the Henry Kissinger school of prose.

Political Pulse: Can Rick Beat Hillary? Maybe, by William Schneider (May 31, 2000)
Democrats want to nationalize the New York Senate race; the GOP wants to personalize it.

Social Studies: Two Cheers for the Clinton Doctrine. (OK, Maybe Just One), by Jonathan Rauch (May 31, 2000)
The people want humanitarianism on the cheap, and that is what the Clinton Doctrine gives them.

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Media:
Off the Money

Those performing stock analysts who can rattle markets everywhere sometimes have dirty little secrets
by William Powers

June 7, 2000

When our extremely intelligent media people stumble on a subject that's a tad beyond their training or experience -- something technical and abstruse like high finance -- they never get flustered; they don't even break a sweat. What they do is locate the place where the appallingly dull topic connects to their own inherently fascinating lives. Suddenly, what was pale and uninteresting takes on that old newsy sparkle and, voila, we have a story.

This is why so much of the personal-finance journalism that you see in newspapers and general-interest magazines isn't really about the stock market; it's about journalists and the stock market. Did you notice, for instance, that the stampede -- which has been under way since the mid-1990s -- of young, well-educated business types into risky dot-com start-ups became really big news about a year ago, when a lot of middle-aged journalists starting fleeing the old media for the new?

Has it struck you that while there are countless money managers trading stocks and bonds in enormous quantities every weekday, an inordinate amount of media attention is paid to one man in particular, a Wall Street hedge-fund manager named Jim Cramer? Is this because Cramer is the most experienced or the most successful of all fund managers, or because his fund's record is more richly interesting than those of other funds? No, it's because Cramer is not just another boring Wall Street guy with a wine collection and a place in Southampton. He's a journalist, a regular contributor to every English-language publication on earth, or so it seems, and the lead commentator on TheStreet.com, an online financial site of which he is a founder.

Among Cramer's pals are a lot of extremely intelligent media people who don't know many actual businesspersons. Oh, an elite journalist may have a stray sibling who's a CPA or a college bud who went into insurance, but it's hard to talk to these people about their professional lives, which are so devoid of real content that the pathos is overwhelming, and honestly, you just want to curl up and go to sleep. For media hotties, "Wall Street" is synonymous with "Jim Cramer," a thrilling media person who simply bristles with content, and thus he's the story. Indeed, Cramer's media connections have so raised his profile that his utterances now move markets, domestic and foreign, and he has become more important in fact than most other Wall Streeters. Extremely intelligent media people are aces at making reality conform to their perception of it.

This all comes to mind because of a nifty little piece in the current issue of SmartMoney magazine, a personal-finance monthly. Writer Tom Lauricella follows around Carolyn Luther Trabuco, a stock analyst for First Union Corp., one of the larger banking and securities companies. Trabuco is one of those analysts whose ratings -- buy, hold, sell, etc. -- can have a huge impact on the prices of the stocks they cover. Sometimes a single analyst's upgrade of a stock (say, from "buy" to "strong buy") can send it soaring; a downgrade can send it tanking. Analyst ratings appear as straight news on the personal-finance pages of America Online, Yahoo!, and other sites. To the untutored investor, they have the ring of objectivity, as in: Wow, First Union thinks that stock is a strong buy, so it really must be a good company. Benighted individual investors start scooping up a stock that has been stamped A+, without realizing that there's sometimes more to the analyst's rating than meets the eye.

SmartMoney shows Trabuco serving as a kind of one-woman pep rally for certain risky Internet stocks that have lately been tanking (e.g., Ask Jeeves and Salon.com). She does this in part, Lauricella reports, because she wants First Union's investment bankers to win business from those companies, particularly the lucrative underwriting of new stock offerings. The SmartMoney piece has the feel of a rare peek under the financiers' private tent, where we see the suits momentarily buck naked. First Union spokeswoman Danielle Dietz told me that SmartMoney's story "makes a number of grossly inaccurate statements" and "is totally misrepresentative of how we do our business." When I asked Dietz for specifics, she declined to give any. SmartMoney editor Peter Finch said the story was carefully fact-checked and he is "very confident in its accuracy." He also said that, to date, he hadn't heard anything from First Union about alleged inaccuracies.

But the point isn't this specific report. It's well-known that some stock analysts are less than objective; regulators at the Securities and Exchange Commission have been worrying about this for years. The point is that the objectivity question receives so much less coverage than similar concerns about stock analyses by ... journalists. Indeed, the media's big stock scandal of the moment involves comments made on Fox News Network by one Jim Cramer, who touted the stock of his own company, TheStreet.com, on the air and fell into a huge quarrel about it with Fox that is now headed for the courts. Of course, any investor who catches one of the owners of TheStreet.com pushing his own stock on the tube isn't about to mistake this for objective information. But the Cramer story plays huge, as do most other tales of journalists accused of crossing ethical lines.

And what about stories like SmartMoney's crack piece on the far more insidious deeds of securities analysts pumping stocks for their private purposes? The little exposés dribble out now and then, but they don't get the same kind of attention or pickup from us journalists. We just don't see ourselves in them.

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William Powers is media columnist for National Journal. He recently spent three months in Japan as a Japan Society Fellow, studying the role of reading in Japanese life. This column appears every week in National Journal, a weekly magazine covering politics and government published in Washington, D.C.

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