Charlie Gasparino has been in touch regarding something I wrote
about him this weekend, and it’s obvious that I wasn’t making myself completely
clear. I did not mean to criticize his reporting, and in fact I’m quite happy
to say that he has been out in front in terms of breaking news about what’s
going on with the troubled Bear Stearns hedge funds. Here’s what I wrote:
In the case of the Bear Stearns situation, the rush to be first has also
meant that CNBC’s Charlie Gasparino, especially, seems to be reporting as
news things which are really just informed speculation. (JP Morgan is liquidating
its collateral! Barclays stands to lose hundreds of millions of dollars!).
If these things appeared in a blog entry, it would be easier to take them
with the requisite pinch of salt.
It’s worth expanding on this. Gasparino is a highly competitive reporter, who
prides himself, quite justifiably, on being first with many big stories. And
when JP Morgan decided, internally, that they were going to liquidate the collateral
seized from Bear’s hedge funds, that was undoubtedly news.
Now there’s a difference between a decision to liquidate and an actual liquidation.
In the case of illiquid securities such as CDO tranches, that difference can
be measured in days or even weeks. The decision to liquidate did not mean that
any collateral was actually sold. Rather, JP Morgan, and others, started showing
the Bear portfolio to the market, looking for bids. As it turns out, those bids
either didn’t come at all, or if they did come they came in at unacceptably
low levels. So the collateral was never sold in the market, and a large chunk
of it was eventually bought back by Bear Stearns itself.
Similarly, in the case of Barclays, there’s no doubt that the UK bank does
have a large exposure to the Bear Stearns funds. If either one of the Bear funds
goes bust and the investors in that fund are left with zero, then at that point
losses start to be borne by the fund’s lenders, as well. As a major lender to
the funds, Barclays certainly has a contingent liability. Thus far, however,
it has not lost any money, and any future losses will depend on whether, when
and how the newer and more highly levered of the two funds is liquidated.
Gasparino was the first to report JP Morgan’s decision to liquidate, and he
was also the first to report Barclays’ exposure. That’s good reporting, and
there’s nothing to criticize there. But in the overheated atmosphere of CNBC,
it’s easy to get confused between facts and informed speculation on those facts.
A decision to liquidate becomes a liquidation, and an exposure becomes a loss.
Dealbreaker’s John Carney was on CNBC
CNBC’s Charlie Gasparino is reporting that JP
Morgan and Deutsche Bank have already begun selling collateral they seized
from the hedge fund.
Hahn took over on Friday:
One of the hardest hit banks could be Barclays. Several sources are reporting
that Barclays committed $1.2bn linked to the highest risk “sludge”
tier of subprime loans, which is way more than the $300mm or so in exposure
originally reported. Barclays could lose almost $500mm in all, CNBC’s
Charlie Gasparino reports.
Again, nothing against Gasparino, who was just doing his job and doing it well.
But this kind of reporting does start to mix news and speculation in –
yes – a rather bloggy way. News: Barclays has a large exposure. Speculation:
It could lose as much as half a billion dollars. And in the case of the liquidation,
there are all manner of nuances to the word "selling" which really
can’t be teased out adequately in the rapid-fire context of live TV.
I’m not saying that Gasparino got anything wrong. But those of us who rely
on CNBC and the WSJ and Bloomberg for our news place a lot of value on being
able to tell what bits of the news are facts on the ground, and what bits are
speculation about what might happen in the future. And making that distinction
is becoming increasingly difficult as news organizations move towards bundled
news and analysis.
Charlie Gasparino is a very experienced and intelligent chap, and it would
be silly for CNBC not to leverage his experience and intelligence by getting
his instant analysis of the news that he’s breaking. So I’m not saying he should
do anything differently to what he’s doing now. I just wish, sometimes, that
it was easier to get access to the raw facts, so that it’s easier to separate
them from the analysis.
There’s nothing wrong with combining news and analysis in a bloggy way. I wouldn’t
have a job if there were. But what you gain in insight by doing so you lose,
to a certain degree, in authority. We bloggers, who like to provide our own
analysis, are often looking not for the most insightful news source, but rather
for the most authoritative. And for me, for what it’s worth, the most authoritative
financial news source is not CNBC but Bloomberg.