Main Stream Media Bias as Yellow Journalism and reinvention of Muckrakers

I know I wrote about this "bias" and lack of objectivity in the main stream media few weeks back.

As Herb Greenberg would say, "the drumbeat continues..."

Today's headline on marketwatch.com reads: "Stocks seen posting modest rises next week: Edgy investors to watch Fed meeting, housing data and earnings". This media double speak has me troubled because it continues to give readers optimisim. In a sense, when things look bleak, I guess everyone needs some infusion of hope. But when it comes to dealing with personal finance and wealth accumulation, it would be more helpful if the main stream media and all those that comprise the financial market community were brutally honest about the current market situation. Going back to the marketwatch.com's double speak, it would be easy to get that the writers are confident about the markets recovering next week. Read a bit further even within the headlines and you will see that the word "edgy" investors await Fed meeting, housing data and earnings. Edgy people are generally waiting for something bad to possibly happen. Instead, wouldn't it be great if the headlines instead read "Investors wait anxiously for economic data to see if recent weakness in the stock markets will continue". Isn't that title more telling of the truth? That our markets are in fact in a down trend and that economic data is being looked at to see if further weakness will continue?

Having said that, why is it such a problem with the main stream media with objectivity? When you look at the reportings from the war on Iraq to the current market weakness, it is very difficult to get the objective "jist" of what is going on. It further complicates things because "news" only sells on sensationalism. I see our country's journalistic integrity on par with yellow journalism, and for that matter, the world journalism is also like that. The "Muck-Rakers" were coined by Theodore Roosevelt to describe those who sought to expose injustices and criminal activities during the early 1900's. A muckraker is an American English term for one who investigates and exposes issues of corruption that violate widely held values, such as political corruption, corporate crime, child labor, conditions in slums and prisons, unsanitary conditions in food processing plants (such as meat), fraudulent claims by manufacturers of patent medicines, labor racketeering, and similar topics. In British English however the term is applied to sensationalist scandal-mongering journalist, not driven by any social principles.

The term muckraker is most usually associated in America with a group of American investigative reporters, novelists and critics in the Progressive Era from the 1890s to the 1920s. It also applies to post 1960 journalists who follow in the tradition of those from that period. Muckrakers have most often sought, in the past, to serve the public interest by uncovering crime, corruption, waste, fraud and abuse in both the public and private sectors. In the early 1900s, muckrakers shed light on such issues by writing books and articles for popular magazines and newspapers such as Cosmopolitan, The Independent, Collier's Weekly and McClure's. Some of the most famous of the early muckrakers are Ida Tarbell, Lincoln Steffens, and Ray Stannard Baker.

An example of a contemporary muckraker work is Ralph Nader's Unsafe at Any Speed (1965) which led to reforms in automotive manufacturing in the United States. Nader's publication led to a stop in the production of the Chevrolet Corvair, one of the first rear-engine American cars. The discontinuation of the Corvair was controversial because many believed the innovative style could have been altered for safety and could have spurred the American automobile industry. The rise of muckraking in the late 19th and early 20th centuries corresponded with the advent of Progressivism yet, while temporally correlated, the two are not intrinsically linked.

Thus efforts of many including Herb Greenberg and many anonymous bloggers whose sole purpose is to expose the corruption, disingenuity, and other unsrupulous practices of the US finanial markets tries to bridge that gap between "yellow" truth and "muckraker" truth. The point in my rantings about the lack of objectivity and truth in the main stream media can be seen with the above example of Ralph Nader's expose on Chevrolet Corvair and eventual rise of safety in American automobile industry. It was widely believed in the 1960' before the muckraker Nader exposed the truth that in fact the American automobile industry was acting in the best interest of the public safety and not in the interest of corporate profit. I am sure that the main stream media was clueless and misled the general public.

In the same way, our financial industry, while it has come a long way in terms of fairness, is still wrought with corruption, deceit, and greed. One needs to only consider just the past 10 years with the Enron, Tyco, Lucent, Cendant, and many other publicly traded companies that misled the investors in the interest of corporate greed. In most of these cases, judgements and indictments did not come after the main share holders were "screwed" out of their money and sometimes their life savings. Yet, the main stream financial media including CNBC, Bloomberg, marketwatch.com, and others continue to fail the general populous that it professes to serve by buying into the propaganda of the corporate deceit and in fact then becomes the very instrument of corporate greed.

The current issue with the subprime mortgage crisis is just gaining wide spread exposure from the main stream media. But I am appalled at the junk and deceit that is being propagated through these channels. Just 6 months ago, this issue was hardly even a small print story in many of the major main stream media. It was an after thought. It misled investors to become complacent and not factor in the ramifications of this crisis. Even now, as evidence clearly points to ominous fall out and future consequences, the main stream media still sides in majority of cases with propaganda campaign by the major investment banks, mutual fund companies, the mortgage companies, and government officials (Fed Chief and Treasury Secretary- who by the way was the head of Goldman Sachs prior to this job). So it now graces head lines of every major main stream media outlet. Yet objectivity is far less evident as it was 6 months ago.

Subprime mortgage fall out has far more integration to the economy than the main stream media and establishment will lead us to believe. Take the next target in question, which is the prime mortgage loans and companies that do business in this sector. Many of the prime mortgages were originated with ALT-A loans which hides behind the word "prime" but beneath that muck, more ominous picture exists. ALT-A option ARMS were given to good credit applicants to be able to "extend" their means and buy the house or properties that they otherwise couldn't afford. I see major fall out from this segment of the mortgage as rising inflation will force the FED to raise interest rates not lower them in the future. Sadly, I believe that the damage has been done and we are waiting for the next shoe to drop and the sad agonizing reality to be felt when it is too late for anyone to do anything about the situation. The prime mortgage being insulated from the subprime mortgage fallout is a facade. It has not yet reached the level of sensationalism for the mainstream media to take notice and "spin" it. In America, he who controls the money, controls the information. The domino effect is clear, and I won't go into much depth here as it is beyond the scope of this blog, but clearly it will affect negatively economic growth, consumer spending, and inflation.

Take for example, the favorable treatment of Countrywide (I know it is getting old) by the media and financial establishments. Many pundits see this outfit surviving the subprime fallout and in some cases thriving in this business. There are 9 analysts covering this company and only one analyst has a negative rating. How can this be? One needs to only consider that analysts are generally wrong during market extremes. Many analysts will have a favorable rating on stocks at market tops and negative ratings on stocks at the market bottoms. I consider this current market to be the inflection point of market top. Historically that is true and one needs to only consider 2000 to 2001 market melt down and the ratings on such names as Broadwing, Ciena, JDSU, Nortel, Global Crossing, and many other high fliers. On the painful death march down in equity prices, the mainstream media and its experts urged retail investors to buy due to favorable valuations while the corporate insiders sold. I believe that is what is going on at Countrywide Financial (CFC). They have launched a major campaign to obtain damage control via CNBC interviews, news paper articles, to mold retail investor's confidence. They also have the financial institutions on their side as they continue to assert that CFC is a buy at these low levels, and that 6 to 12 months out, these stock prices for CFC will "seem" like bargains. I beg to differ on that as the retail investors will again get screwed. Ominous evidence is there. There has been increased insider selling even as the company's prospects are declining. A clear affirmation of their "insider knowledge" while channeling a contrary message to retail investors. When the dust settles we will know only then, if any criminal activities were present. I think so.

So as I part on this pontification today. Please be careful. Please consider only objective facts. Leave out emotions and do not heed the market pundits. For those who closely follow Jim Cramer on CNBC or on thestreet.com, please know this. Cramer has gotten his readers out at the market bottoms and urged his readers to buy on the way down from the 2001 market debacle. If you don't believe me, just Google or read the three months archive of Cramer's recommendations. Thank you.