Remora

In my last post, LI proposed awarding a Glassman to the worst business reporter -- the one that swallowed the most garbage, left uninvestigated the most shady sources of information, etc. After all, one of the reasons investors are leaving the market is that the press has proven to be as intellectually corrupt as the accounting firms or the upper, overpaid management of the various scam corps. To actually survey the business press over the last five years is a daunting proposition, given that LI has, uh, let's say a limited group of researchers to work with. Luckily, cyberspace gives us a vast trove of material with which to enthrall our lucky readers.

So, just at random, we chose to examine articles from Nelson Schwartz.

Schwartz, as you will doubtless not remember, was the man who wrote the article about the Enron bust last December that was entitled, Enron Fall out, wide but not deep. Ah, my cringing readers say, you are dancing on a grave there -- but sometimes I just get all jiggly when I go through the uplift and scam of biz reporting. I really do.

Schwartz, of course, was very busy during the high nineties. He dished out his "investigative" scoops, and they were indeed spectacular. As in spectacularly dumb. Here's a typical article from the May 4, 2000 issue. Entitled B2B Boom, this is what Mr. Schwartz tells us:



"Even after factoring out the hype, it's clear that e-business offers huge opportunities for the select group of companies that do manage to thrive over the long term. Banc of America Securities analyst Bob Austrian estimates that worldwide B2B electronic commerce will grow from less than $20 billion in 2000 to roughly $13 trillion in 2004--a 650-fold increase. That's an incredible growth rate, but the cost savings inherent in B2B transactions explains why it may not be far off. On average, corporations spend $100 on paperwork alone each time they make a purchase, Austrian says. Moving those transactions to the Web could slash costs by 90%, saving billions in overhead each year. Not surprisingly, traditional firms are investing heavily in hardware and software so they can do more buying and selling via the Net. A recent Goldman Sachs survey of 42 fortune 1,000 companies reveals that more than 40% plan to spend at least $500,000 each on new B2B software this year."

Now, let's contrast this with the latest figures on B2B, shall we? Here's Cyber-atlas, as of this month:

"Worldwide B2B e-commerce will total $823.4 billion by the end of 2002, eMarketer found, and the strong growth will continue through 2004.
According to eMarketer's "E-Commerce Trade and B2B Exchanges" report, Internet-based B2B trade will reach nearly $2.4 trillion by 2004. "

Mr. Nelson's source only mistook his market by, oh, 11 trillion dollars. To put Bob Austrian in perspective, perhaps Schwartz could have asked him questions like, hey, do you think it is healthy to do massive doses of LSD every day? But he didn't. Instead, he took at face value the idea -- or is it an idea? -- the fantasy that there was a 100 dollar savings in paperwork each time a business transaction was made. Hmm. So, each biz transaction that is made is equal to +100 dollars in cost? Schwartz has some story here, if this is true. The story would go something like: Capitalism is more than doomed! Marx didn't know the half of it! More at 11...

But why think, really, if you can write such pap for the nation's leading biz mag and get away with it?

Schwartz, actually, became a New Economy pentiti. He confessed, in an article published a year after his B2B extravaganza, that he might have been a wee bit credulous.


"Although I was always careful to warn readers, as well as Mom, of the risks of investing--even saying that certain stocks could lose all of their value--I too believed in the promise of the new economy. I wanted a piece of the action. And as hard as it might be to remember now, it actually seemed as if the Internet were going to change everything. So if that meant selling blue chips to buy names that could double in weeks or months, well, that was a heck of a lot more exciting than sitting on dead money. Besides, the people behind these Silicon Valley companies were a lot more exciting, even sexier, than the old economy's gray suits. Wouldn't you rather have dinner with HP's Carly Fiorina than with Phil Condit of Boeing?

As it turned out, what I thought of as dead money wasn't so bad. At least those stocks, when they go down, don't drop 80% or more like PMC-Sierra or Kana. There's something to be said for boring old blue chips that actually pay dividends, earn real profits, and maybe rise only 5% or 10% a year. And keeping cash in a money-market account may not be just for wimps and nervous Nellies."

Get the coyness of that confession -- yeah, he's bowled over by how sexy Carly Fiorina is, heh heh. When, of course, the question is making an elementary, an elementary, analysis of what you are being told. In other words, being able to smell bs. That is what journalists are supposed to do, right?
But not if their purpose is simply to pump the market. Like Bourbon Street shills, all that noise is just supposed to attract the gawkers, and strip them of their ready cash.
Oh, and now they wonder why the rubes aren't lifting the market when it has "bottomed'? Search me.