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The Unholy Alliance Continues
Between Advertisers and Our Free Press

by Robert B. Gordon, Sc. D.
January 15, 2003

There has been a lot of news lately about corporate money flowing to Congress to influence their votes. I have yet to read a single word about the muzzling of our press, either overt or covert, arising from their dependence on advertising revenues.  The bullish Wall Street slant on news coverage is still continuing as we finish the third year of this vicious bear market. American investors are being very badly served by both the print and broadcast media.

Since I have been getting all my expert advice from the Internet, I have formed the habit of scanning our two local newspapers rather quickly, rarely reading much beyond the headlines. Our major source of news is the Arizona Republic, the main Phoenix paper and part of the large Gannett chain. It has a sizable business section with two writers sharing the job of keeping readers abreast the news. Our local Sun Cities community is served by the Daily News-Sun, published 6 days a week. It carries reports from the news services and on Saturdays carries a 3 page supplement with the title, The Wall Street Journal Sunday.

For the last few years, I have been sending e-mails to the Arizona Republic business reporters in an effort to "build a fire" under them, to get them to tell things as they are, not as dictated by Wall Street and the business community. I have sent them my own essays and those of others in an attempt to wake them up, all to no avail. I can only conclude that they work in an atmosphere that is not interested in the truth but in delivering the current bullish slant on current events. I suspect that a "don’t rock the boat" mentality is firmly in place.

I have had considerably greater success with the much smaller Daily News Sun due to the cooperation of an Editorial page editor who is trying to inform her readers.  Over recent years, I have probably had at least a dozen letters printed on the economy and stock market. My words were not censored or edited and included some pretty scary stuff. But my warnings mostly went in to the scrap heap since my reader response by phone was very minimal - a far cry from the e-mail response to my essays on the Internet.

I recently read an enlightening piece about the mental process of news editors deciding what to print and what to exclude. To preserve their job and move up the promotional ladder, their greatest fear is that of approving any piece that could raise the ire of their boss. That would mean printing any story that was flawed for any reason or from a source that turned out to be questionable. So they proceed to reject any submittal that could cause any criticism of their work. It sounds like a small part of a huge problem.  This "play safe" type of action perpetuates the process of the "blind leading the blind" and prevents much new and important information from being printed.

DAILY NEWS-SUN PRESENTS THE WSJ SUNDAY

We will summarize and comment on the last 5 weeks of news from The Wall Street Journal supplement that is probably distributed to many smaller newspapers across the country. I am going to present the economic news reports in the Daily News-Sun pages which carried the large banner headline of THE WALL STREET JOURNAL SUNDAY.  This information was prepared by one of America’s leading and most respected journals.  Please scan these headlines and form your own opinion on the value and pertinence of information they give their readers.

Sunday November 24, 2002:
Finally, a Ray of Sunshine for Stocks - discusses the brighter aspects of the Fall rally in the stock market.
Growth Stock Bargains - a list of 12 stocks from a computer screen.
Barron’s Investment Insight - In Tech Wasteland, Lexmark is a winner.

Sunday December 3, 2002:
Get Your Funds Back in Balance Now - take a look at the losses of the last three years. Recommends re-allocation of assets and battered down tech stocks for better performance.
The Pension Payout - advice on taking a lump sum vs. monthly payments.
Buying a House in Foreclosure -  tips on how to find bargains from rising foreclosures

Sunday December 15, 2002:
Checking the Price Tags on Retail Stocks - problems from slower economy for Wal-Mart, Sears  and Federated Department Stores.
Stocks Fall as Investors Take More Profits - not to mention trying to stop their losses.
Rate Cuts Drive Demand for TIPS - all about Treasury Inflation-Protected Securities
History as a Financial Guide - do not buy previous years winning mutual funds

Sunday December 22, 2002:
What Might Blindside the Market in 2003 - next year will be good for both stocks and the economy, though not special.  Bonds will not have another banner year.
Market Rebounds after Rally - analysts say investors were picking up  bargains.
Stocks Look Less Risky (and Less Rewarding) - quotes experts on history of the markets.
"January Effect" Picks - history says that January will be a good month for investors.

Sunday December 29, 2002:
In Too Deep? What to Do About Debts - good review of conventional advice.
Fund Manager says War is Bad for Economy - a review of the effect of previous wars.
Holiday Lightens Trading on Wall St. - Dow and Nasdaq fell Friday on light volume.
What Readers Want to Know about IRAs - suggestions for converting to a Roth IRA.

DISCUSSION OF THE WALL STREET SUNDAY NEWS COVERAGE

A quick run down on the articles of the past month shows a typical run-of-the-mill group of stories that fail completely to mention that our country is in a severe 3-year bear market and a very sluggish economy.  Our local readers, who may not be on the internet, are being very poorly served by one of the nations leading financial journals.

In none of these pages could a reader gain a true picture of the economy or stock market. There was no mention of the fact that the rest of the developed world is in a similar or perhaps even worse situation than the U. S. There was no mention of the 13-year old bear market and depression in Japan and the fact that we may be slipping into a similar situation.

So, in conclusion, this study showed an almost total lack of useful information to guide investors in this once-in-a-lifetime super bear market - a sad commentary on our leading financial journal. Let's now go to the pages of a large newspaper, the Arizona Republic.

NEWS IN THE BUSINESS PAGES OF THE ARIZONA REPUBLIC

Here are the most meaningful headlines with a few brief explanatory comments:

Wednesday November 27, 2002:
Vital Stats up for Economy - Consumer confidence, GDP both show gains
Bureau Hasn’t Declared an End of U.S. recession
Bush Proposes End to Manufacturing Tariffs.

Sunday December 8, 2002:
Intel’s Eye on the Future - U.S. workhorse shifting, CEO says.
Blue chips, Mutual Funds Hold Allure - Investment advisors list holiday shopping tips
Market Watch - Wall Street was fooled into another bear rally

Tuesday December 10, 2002:
Bankrupt United Airlines Faces Agonizing Makeover - No. 2 carrier predicts steep cuts.
Insiders Profited in Silicon Valley - Billions were pocketed, analyst says
Unemployment Figures Revised to Correct Errors - job losses went from 4,000 to 84,000

Friday December 13, 2002:
Stocks Mixed Despite Strong Sales and Positive Outlooks
Bankrupt United to Start Low-cost Air Carrier - also trying to cut pay and get a new loan

Sunday December 15,  2002:
Investors May Uphold Holiday Rally Tradition - but sobering news might end the party.
Stock Tips for the Xmas Stocking - investment books to provide skills for teenagers.
Investment Optimism Abounds for 2003 -  advisors see improving economy and stocks.

Friday December 20, 2002:
Possibility of War puts Damper on Stocks - war fears overcame good economic reports
CEOs Won’t be Charged for Misleading Investors - no one will go to jail in settlement terms

Sunday December 22, 2002:
Fiscal Worries Mount with War Possibility -  military reservists need to be planning ahead.
Companies Promote More Whistle Blowing - setting up toll-free ethics hotlines etc.
Hiding Places Few for 2002 investors - every one of 10 S& P sector indices fell in price.
What They’re Buying - Advisors say Go for blue chips, nibble on fast food too

Friday December 27, 2002:
Stocks Slide on Oil Slick from Iran, Venezuela - Investors are spooked by oil price rise.
Greenspan Likely to Stay On in 2003 - Chief’s departure hinges on rebound.
Justice Ends Global Crossing Scrutiny - losing stockholders get little help for their losses

Saturday December 28, 2002:
Good and Bad Money Lessons from 2002 - Republic columnist tells what he learned.
New Home Sales Set Record - Permits were up 27% over 2002
Retail Still Going Strong -  35 major retail construction projects are planned for 2003
Weak Season Worries Merchants - most wonder when people will spend
Funds Prepare to End Year Down Again - 4th quarter gains lessening the pains
Boeing Future Uncertain after Limping Through 2002 - year can’t end soon enough.

Sunday December 29, 2002:
Rebalance your Portfolio in 2003 - to reap rewards says Republic columnist
Arizona’s Brightness as a Boomtown Dims - jobs and growth dry up in "brutal" market
Market for Corporate Jets Falls on Very Hard Times - manufacturers are in a very bad slump

Friday, January 3, 2003:
Forget Diet! Do Financial Resolutions - columnist says save more and start a budget.
Mortgage Rates Drop but Trend May Not Last - refinancing accounts for 3/4 of loans.
Manufacturing Report Boosts Stocks into 2003 - factory activity jumped in December

Sunday January 5, 2003:
Mutual Reports Panned - investors are not getting enough or the right kind of information.
Market Slide Guides with Useful Lessons - look for earnings in hand instead of promises.
Keep Tabs on Health of Corporate Pension Plan - many are severely under funded.
Bear Market Still Prowls, Tread Slowly - advisors are staying selective despite price jump.

Saturday January 11, 2003:
Front Page Main Headline: Public Funds Suffer Hit -State, cities, counties lose $131 million in investments in the AAA rated bonds of a failed company.
Business Section:  Arizonans Scramble for Jobs - Misfortune expected lo last till summer
Retirement Fund Still Likes Stocks - New  Arizona State Pension chief plans to hold stock at the present 70% of the portfolio, despite losing $2 billion dollars or 12.4% of assets in 2002.

ARIZONA REPUBLIC FINALLY MENTIONS JOB/STOCK LOSSES

In the second week of the new year, our major newspaper discovered that Arizona governments had taken a 131 million dollar loss in bonds that went from being AAA rated to zero value. More important, they also mentioned, but only buried in the fine print of the same issue, that the state pension plan had lost $2 billion dollars last year, a huge loss for a small state. Even worse, they reported that the incoming pension director planned to keep the very high 70% stock position inherited from his predecessor, putting the remaining 17 billion dollar fund at huge risk from a further steep bear market decline expected by many experts.

To compile the above very sorry record, I saved the news pages to the deadline for writing this report. I literally saved every page that had any news on the stock market or the economy. The sum total of my effort is a sorry record for The Wall Street Journal and Arizona Republic.

Of course this gross failure to inform the public by the print media is shared equally with the TV broadcasters, of whom CNBC takes first prize in obeisance to its advertisers.

WILL THE MEDIA EVER PUBLISH THE TRUTH?

I, for one, will have to admit that I do not know the answer to this question with respect to the economy and stock market.  But there are other great issues that involve the public. When will our media start to inform their readers about the payoffs being given by our politicians in Washington to their political contributors, both individuals, groups and corporations?  When will our media tell the truth about the shenanigans in the financial books of our Federal government which are even worse than those in the private sector?  When will our media tell the truth about the financial problems of Social Security and Medicare? When will they bare the true story of the fudging of important federal statistics like the cost of living index and the unemployment index - just two of many manipulated statistics?

It is probably impossible for any investigative reporter or team of reporters to get the truth about many of the deliberate lies and incorrect data being published by our government. But a concerted effort by our national media in bringing this huge problem into public view would be a good start.  How can we ever expect to get this economy on the track again if the official numbers are being "cooked" to look better? Let’s put some heat on our Congress. They were quick, maybe too quick, to place heavier regulatory burdens on corporate America.  The time is long overdue to put the spotlight on Government waste, inefficiency and incompetence.

THE INCREASING ROLE OF THE INTERNET

A small but growing group of Americans are turning to the Internet for objective information they can believe. This may eventually exert pressure on our press and print media, but it will not solve the evils stemming from the current cozy relationship between advertisers and the media. However, in the case of news about our stock market and economy, further relentless market declines will eventually cause bold front page headlines.

To keep abreast of what is really happening in the stock market and economy, I regularly spend several hours daily on the Internet, checking various expert web pages. How many other retirees in this country are doing this? Probably a very small percentage, and for the working segment of our population, an even smaller percentage are getting timely objective information.

I conclude this essay by urging the major newspapers in this nation to assume a key role in getting our economy back on track. They can help do this by goading the government to produce better statistics. An even better goal would be for the media to remove their rose-colored glasses and give their readers a more realistic view of the economy and the market.

BEAR MARKET PROSPECTS

The history of all previous major market boom/bust cycles clearly shows that the current bullish sentiments held by Wall Street and most investors will end, either in a panic crash of  great size or in a series of smaller declines which bring the same end result  As in the1929 and the 1973-74 bear markets, there can be no cover up by the press. The stories about the stock market will eventually move from the business page to the front page of our papers.

Current stock valuations are still higher than those at the top of the 1929 bull market peak. The current bear market will eventually bring these valuations down, not to normal levels, but to those at previous bear market bottom levels - a very scary prospect. It took 25 years for the Dow to again reach its1929 peak. This time, correcting the greatest mania in world history, it may take very much longer.

I intend to send a copy of this essay to the editors of my two newspapers and I hope that my widely spread U. S. readers will follow suit with their local papers.

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© 2003 Robert B. Gordon, Sc. D.
Visit FSO's Cover Page for more editorials by Dr. Gordon

Robert B. Gordon, Sc. D.
Sun City West, Arizona
January 15, 2003
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