Financial commentary is parasitical on financial news: we pundits can’t have
opinions on what’s going on if no one tells us what’s going on. In the case
of Bear Stearns bailing out one of its troubled hedge funds, this is a big problem.
There’s some reasonably good commentary out there, from the likes of Tanta
Smith, but all of it is hamstrung by a dearth of hard facts. To make matters
worse, the news coverage often includes commentary masquerading as news, which
can make it even harder to work out what’s true and what’s speculation. (See
Tanta for much more on this.)
In the case of the Bear Stearns situation, the rush to be first has also meant
that CNBC’s Charlie Gasparino, especialy, 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
Finally, there’s the problem that a lot of the financial journalists reporting
on the Bear Stearns funds don’t seem to fully grasp what’s going on, either
because they lack the facts or because they lack the requisite financial sophistication.
It’s at times like this, then, that I start really wishing for some disintermediation
of the financial press. I don’t know who the reporters at CNBC and Bloomberg
and the WSJ and the NYT are talking to in order to get their facts, but it’s
likely to be the same small group of individuals. The need to talk to all those
different reporters is a pain for the individuals concerned, which is exacerbated
by the fact that they then need to see their information presented to the public
in ways they might never have intended.
What I’d love to see would be a lot more transparency from Bear Stearns, its
prime brokers, and anybody else involved in this and other messes. Take the
facts you’re giving to a few chosen journalists, and instead put them up on
a public website for the world to see. That way all of us can draw our own conclusions
should we be so inclined – and the chosen journalists can still write
the exact same stories, based on the exact same facts.
This is the tack
taken by John Mackey of Whole Foods, who blogged
everything in order to get out his side of the story, rather than relying
on the press to get everything right.
Now that the public gets its financial information from an incredibly wide
range of sources, it’s becoming less and less useful for banks and other financial
entities to talk only to a small number of media sources. And they don’t have
the time to talk to every blogger or interested party who has questions. So
they should start to publish stuff themselves. Then we could all have a much
better take on questions such as whether the prime brokers lending to the Bear
funds really do stand to lose any money.
It stands to reason that they would: after all, in the younger, more leveraged
fund there does seem to be a high likelihood that total losses will exceed the
total amount of equity in the fund. In that case, lenders are going to have
to bear some of the brunt. But as of right now, it’s almost impossible to tell
who those lenders might be, and how much they might be on the hook for.