Bipolar Media
Last night on the NBC Nightly News, one of the lead stories was of a homeless encampment in Sacramento, California–complete with archival images of depression era shantytowns. This morning the stock market is up 300 points and GE, which some pundits claimed was roadkill last week, is up 16% in one day. A year ago, I could have guided an enterprising reporter to numerous homeless encampments around LA, but they were too busy chasing Paris Hilton going commando.
I teach at USC’s Anneberg School for Communication, so I am well acquainted with the “if it bleeds it leads” impulses of the media, but why don’t we all just take a breath here. America, you are getting played. So much of the information coursing through our fire hose of a media system is coming from people with an agenda. Nouriel Roubini is making a fortune telling people we are going into the Second Great Depression. The hedge funds that encouraged every institution to lever up are now profiting by shorting the very banks that were their enablers. Rush Limbaugh and the Wall Street Journal editorial board are creating a “self-fulfilling prophecy” by saying that investors are voting against President Obama’s recovery plans by selling their stocks. And don’t get me started on the idiots like Jim Cramer and Larry Kudlow on CNBC.
The world is in the process of a massive restructuring in which the two claims on corporate assets–debt and equity–are going to be swapped on a level not seen since the 1930’s. The Vikram Pandit memo that sparked the rally this morning cites just such a swap of preferred (debt) for common (equity) as the source of their new capital strength. This is the same process that will have to take place at GM and Chrysler. At the present moment, it does not appear that the debt holders in these two companies are willing to do this except under the gun of a bankruptcy. If that’s what it takes, so be it. This is not rocket science.
The process of creative destruction is brutal. In three years there will be fewer malls and car dealerships, but there will be more solar energy installation companies and some of the malls might become community retraining centers for the jobs of the 21st Century. The collective massive impatience of both the media and the twittering public for instant solutions is both childish and self destructive.
America, get a grip.
Roubini’s been spot on for the last few years. Don’t blame the messenger when he says something you don’t want to hear; that’s exactly what America has been doing.
Roubini’s been spot on for the last few years. Don’t blame the messenger when he says something you don’t want to hear; that’s exactly what America has been doing.
Well said, Jon. Spot on.
I wonder how it would play out if news organizations were not longer profit centers and the pay for being a talking head were cut in half. Frankly, since the election, I watch the top of the news and read your blog and otherwise, my head is in the sand. When there is so much signal and no clear way to select, my feeling is the best thing is to tend the local reality and let the Grand Scheme of Things sort it’s own laundry. Bad plan but whaddaya gonna do…
Well said, Jon. Spot on.
I wonder how it would play out if news organizations were not longer profit centers and the pay for being a talking head were cut in half. Frankly, since the election, I watch the top of the news and read your blog and otherwise, my head is in the sand. When there is so much signal and no clear way to select, my feeling is the best thing is to tend the local reality and let the Grand Scheme of Things sort it’s own laundry. Bad plan but whaddaya gonna do…
Jon,
“America, you are getting played.”
Yes, the country is being played. But by whom? You never answer forthrightly, but rather obtusely by referring to economists, entertainers, and commentators. Are the hucksters making a buck off others misery? Are they filling the “direction and comfort” void? Absolutely. But that’s not the story.
The real story is “where’s Obama?” Many are wondering when the President and his administration will fill the “direction and comfort” void. When will he step to the microphone and say “Enough is enough”. Where’s the line on unemployment, foreclosures and homelessness? When will the Great Recession end?
As noted here several weeks ago, “it won’t end” until the point of complete capitulation. Are we there yet? No. IMHO, we’ve settled into a long period of “uncomfortableness”; capitulation is still a ways off (1 – 3 yrs). What about the stock market’s miraculous recovery? The stock market isn’t the real economy; it’s actually no different from the other hucksters, it’s just trying to make a buck.
Jon,
“America, you are getting played.”
Yes, the country is being played. But by whom? You never answer forthrightly, but rather obtusely by referring to economists, entertainers, and commentators. Are the hucksters making a buck off others misery? Are they filling the “direction and comfort” void? Absolutely. But that’s not the story.
The real story is “where’s Obama?” Many are wondering when the President and his administration will fill the “direction and comfort” void. When will he step to the microphone and say “Enough is enough”. Where’s the line on unemployment, foreclosures and homelessness? When will the Great Recession end?
As noted here several weeks ago, “it won’t end” until the point of complete capitulation. Are we there yet? No. IMHO, we’ve settled into a long period of “uncomfortableness”; capitulation is still a ways off (1 – 3 yrs). What about the stock market’s miraculous recovery? The stock market isn’t the real economy; it’s actually no different from the other hucksters, it’s just trying to make a buck.
brav-fucking-oh
That is the most succinct analysis of where we are that I’ve seen yet.
brav-fucking-oh
That is the most succinct analysis of where we are that I’ve seen yet.
brav-fucking-oh
That is the most succinct analysis of where we are that I’ve seen yet.
Thanks a load, Jon.
Writing stuff like this is going to KILL my new startup company “bindlesticks.com”. Where all your hobo dreams come true!
Thanks a load, Jon.
Writing stuff like this is going to KILL my new startup company “bindlesticks.com”. Where all your hobo dreams come true!
Thanks a load, Jon.
Writing stuff like this is going to KILL my new startup company “bindlesticks.com”. Where all your hobo dreams come true!
I don’t pretend to understand the debt and equity stuff, preferred and common. It’s over my head. I do appreciate your explanation of what’s going on. You are one voice I trust to explain what’s going on.
I’m afraid you’re spot on about the media, especially CNBC. Those financial wizards at CNBC are shameless cheerleaders for the wealthy, and insensitive to the middle and the poor. It’s not a “war against wealth,” as they comment repeatedly. We are in a malestorm of worldwide CHANGE.
I don’t pretend to understand the debt and equity stuff, preferred and common. It’s over my head. I do appreciate your explanation of what’s going on. You are one voice I trust to explain what’s going on.
I’m afraid you’re spot on about the media, especially CNBC. Those financial wizards at CNBC are shameless cheerleaders for the wealthy, and insensitive to the middle and the poor. It’s not a “war against wealth,” as they comment repeatedly. We are in a malestorm of worldwide CHANGE.
Or maybe it is.
http://en.wikipedia.org/wiki/Kleptocracy
Or maybe it is.
http://en.wikipedia.org/wiki/Kleptocracy
Chris, as a guy who was early as a messenger of gloom-and-doom until I was literally laughed off the stage — and as I emailed Jon: My view of the world (and I’ve been absolutely silent, because I am no longer employed by the media) is that what we witnessed last week was irrational hysteria.
Much of it has been politically driven and has been feeding on itself with much of the same momentum and irrational exuberance that the very same crowd used to create the bubble. Will the economy get worse? You bet! The stock market? No doubts in my mind.
But if I’ve learned nothing else it’s that nobody can see the future, especially forecasts of civil unrest, class warfare, etc. We’re going through a much needed structural change in the economy. It’s a cleansing process that will cause great pain and take time.
This too shall pass, and we’ll all be better for it.
The media is the media; I was proudly part of it for more than 30 years. It has its flaws, but don’t we all? I understand Jon’s frustration. Ain’t the media’s fault, though. They’re just doing what they always did, except this time, because the events are so profound, we all want to sometimes just say: Stop!
At least NBC, starting this week, is trying to counter the bad with the good. I never thought I’d hear myself say it but: The glass really is half full. And I just looked outside here in San Diego: It’s partly sunny.
Cheers,
Herb Greenberg
Chris, as a guy who was early as a messenger of gloom-and-doom until I was literally laughed off the stage — and as I emailed Jon: My view of the world (and I’ve been absolutely silent, because I am no longer employed by the media) is that what we witnessed last week was irrational hysteria.
Much of it has been politically driven and has been feeding on itself with much of the same momentum and irrational exuberance that the very same crowd used to create the bubble. Will the economy get worse? You bet! The stock market? No doubts in my mind.
But if I’ve learned nothing else it’s that nobody can see the future, especially forecasts of civil unrest, class warfare, etc. We’re going through a much needed structural change in the economy. It’s a cleansing process that will cause great pain and take time.
This too shall pass, and we’ll all be better for it.
The media is the media; I was proudly part of it for more than 30 years. It has its flaws, but don’t we all? I understand Jon’s frustration. Ain’t the media’s fault, though. They’re just doing what they always did, except this time, because the events are so profound, we all want to sometimes just say: Stop!
At least NBC, starting this week, is trying to counter the bad with the good. I never thought I’d hear myself say it but: The glass really is half full. And I just looked outside here in San Diego: It’s partly sunny.
Cheers,
Herb Greenberg
Yes, the stock market is just another bubble. Overvalued,like the real estate house you have to give up to foreclosure because no sane buyer would actually pay what it originally cost. Incredibly useless as a measuring stick since it is really just one big lottery fix. And meaningless as a way to understand what any company is really doing with its income since the stock price income isn’t the company’s earnings it’s a bet made against the company’s mark to market value.
Yes, the stock market is just another bubble. Overvalued,like the real estate house you have to give up to foreclosure because no sane buyer would actually pay what it originally cost. Incredibly useless as a measuring stick since it is really just one big lottery fix. And meaningless as a way to understand what any company is really doing with its income since the stock price income isn’t the company’s earnings it’s a bet made against the company’s mark to market value.
Yes, the stock market is just another bubble. Overvalued,like the real estate house you have to give up to foreclosure because no sane buyer would actually pay what it originally cost. Incredibly useless as a measuring stick since it is really just one big lottery fix. And meaningless as a way to understand what any company is really doing with its income since the stock price income isn’t the company’s earnings it’s a bet made against the company’s mark to market value.
Len, I’ve been doing a little of the head in the sand thing myself lately. But the problem with that is that it justs make it easier for the world to kick my butt around. Meanwhile, we are seeing white guys on the corners with the immigrants looking for work and the school budgets, which I thought the stimulus package was supposed to help, showing shortfalls and layoffs and rising class sizes. Of course, this could be good since it might mean real old time “home schooling”.
Len, I’ve been doing a little of the head in the sand thing myself lately. But the problem with that is that it justs make it easier for the world to kick my butt around. Meanwhile, we are seeing white guys on the corners with the immigrants looking for work and the school budgets, which I thought the stimulus package was supposed to help, showing shortfalls and layoffs and rising class sizes. Of course, this could be good since it might mean real old time “home schooling”.
Herb-You always were never afraid to speak truth to power. I’m glad you have the time to even walk on the beach in San Diego instead pounding the pavement on Wall Street freezing your ass off.
Len and Rhbee-I’ve been having the same emotion. I stopped watching Oberman and Maddow. I stopped listening to the radio. I just teach and work on the book and occasionally talk to you guys and girls.
Roman-The process of getting smaller is on going. No one can stop that. Citigroup already shrunk by 70%. But the point I’m making is that we are buying into the self-fulfilling prophecy racket, pushed by a bunch of hedge funds heavily shorting financial stocks. That’s being played. As herb Greenberg, who should Know, points out further down in this thread-last we was pure irrational fear.
Thanks, Jon. The beach? Ah, that’s four miles west. Never get there. (Ah, but for the vistas!) Too busy working! Keep up the great blog.
Amen, one of your better posts.
Hope you all have been catching Jon Stewart’s gloves off treatment of Cramer et. al. over at CNBC. It started out as a one off, then Cramer did some public denials, and that evoked a major wood shedding.
Freudenschade comes from fools taking on wit, talent and video tape.
Opps, that didn’t hood to the right thread. Oh well it’s obvious which one it belongs with.
That’s bizarre. First pass it was rendered two comments down, now it’s in the right spot. I really like the threaded comments Jon, but will be interesting to see if there is a wee bug in the works.
From a stranger, thanks for standing up to the SEC, Mr. Greenberg. It’s good to know some people will look out for the health of things over going with the flow while it plunges into the abyss.
Jon,
Good Call. I’ve been following your premise elsewhere; the media beats the financials down while the hedgies short them into financial oblivion. Although this story has been circulating for some time, the administration’s conspicuous silence on it has been troubling.
Then I read last week about the proposed revamping of TALF (term asset-backed securities loan facilities) to facilitate the formation of a “private-public” alliance to purchase toxic bank assets (the “consumer credit revival program”). Guess who are the targeted “private” investors? Hedge funds and private-equity firms. (“US to Invite the Wealthy to Invest in the Bailout”, David Cho, The Wash Post, 3/6/09).
Do you think it’s possible the hedgies were given license to raid financials and then use those proceeds to purchase their bad paper? I know, I know, it’s insane. Besides who would put their capital at risk in this environment, even if the capital were ill-gotten. Well, that’s the beauty of the “private-public” alliance. The private investor’s risk is limited to their original equity.
The article cites an example where an investor puts up $1-million and borrows $9-million from the Fed (which doesn’t need to be repaid for 3-years). The investor then purchases $10-million of distressed ABS. If the ABS increases in value to $11-million, the investor retains the $1-million profit. If the ABS falls in value to $8-million, the investor’s risk is limited to their original $1-million investment; the Treasury and Fed absorb all additional losses.
Yes, the country is being played.
The LA Times today gave a lame excuse for not covering the tax protest last weekend in Fullerton. http://latimesblogs.latimes.com/readers/2009/03/covering-taxes.html
Yet today in the Business section on B2 they cover an Edison protest in a picture with all of FIVE people. Can anyone explain this blatant hypocrisy?
The LA Times today gave a lame excuse for not covering the tax protest last weekend in Fullerton. http://latimesblogs.latimes.com/readers/2009/03/covering-taxes.html
Yet today in the Business section on B2 they cover an Edison protest in a picture with all of FIVE people. Can anyone explain this blatant hypocrisy?
The LA Times today gave a lame excuse for not covering the tax protest last weekend in Fullerton. http://latimesblogs.latimes.com/readers/2009/03/covering-taxes.html
Yet today in the Business section on B2 they cover an Edison protest in a picture with all of FIVE people. Can anyone explain this blatant hypocrisy?
Ok, Tom, but you’ll have to send some royalties to Goebel Reeves.
Ok, Tom, but you’ll have to send some royalties to Goebel Reeves.
Ok, Tom, but you’ll have to send some royalties to Goebel Reeves.
Ok, Tom, but you’ll have to send some royalties to Goebel Reeves.