On News, Analysis, and Charlie Gasparino

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

duty Wednesday:

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.

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