Professional Secret keeping

Today the Bank of England disclosed that it provided more than 60 billion pounds only in emergency loans to RBS and HBOS at the height of the credit crisis last year. The reason why this figure has not been published in the annual report already back in May but just now is because of the Bank of England's fears of its impact on the banking system. Now, with the two banks on a sounder financial footing, there is believed to be no more reason for secrecy. To me this action behind the back of a population that buys newspapers in order know what is going on, is just not fair. This is why I am curious about discovering how different newspapers are approaching this topic today.

Reuters described this situation objectively, however, not clearly. From the language used in this article, the reader cannot draw conclusion on what the author's position this is. The Bank of England deputy governor states in this article that it 'was a dire emergency'. In my opinion this is a weak excuse that does not give me a satisfactory explanation to the large secret they kept. The statement continues with the words that it was a decision made in order to 'prevent a loss of confidence in (...) the financial system as a whole'. At this point I wonder what financial institutions expected the confidence to be after these shocking numbers get confirmed!? Now, when the banks successfully repaid the borrowed amount and the collateral hasn't got touched, Gordon Brown's spokesman proudly says that 'it was a powerful reminder of how close the banking system came to near collapse'.

The article in the Financial Times, which was published 4 hours later, added some more information: both banks were already eligible for a variety of liquidity providing actions when the Bank of England gave financial aid. The extraordinary measures were not enough to sustain the other lenders. This information worries me even more since it means that actions have been undertaking for much more time than so far expected; everything secretly. Even the Northern Rock bailout was kept secret the year before. The bank added that since RBS now signed up for the famous government-run asset protection scheme and Lloyds took over HBOS in highly controversial government-backed rescue merger, there was no longer a need to keep this information from public. I do very much believe that it was not possible anymore to keep it secret, since too many things were involved. It would have been especially interesting to keep it from public now, considering that investors just started to gain confidence in the market after a long time. To discover the exact, horrible numbers of the crisis, which is not really over yet, certainly make me less risk-loving.

The Guardian was as expected not able to hide its centre-left political orientation: already in the title a sarcastic language is used ('billions spent 'propping up' RBS and HBOS). Under a large picture of Mervyn King the biting language continues with statements such as 'figure had been known to only a handful of people until today' or 'how many universities, colleges and jobs you could support with this'. Hyperlinked in the article is also the letter Mervyn King wrote to the Treasury select committee. This article was the longest, with the most information, the most links and the most interviews from all the article read in the Internet today.

However, the differences on the language used in the different articles is impressive. Whilst on Reuters and in the Financial times very objective language allowed the reader to make his own opinion, the Guardian is really pushy and seems to be willing to incite the reader to hate the whole financial system. This is not particularly useful since in my opinion it takes away the thinking, which should always be encouraged among readers. No source of financial media should sound convincing; they all should be as objective as possible. Since in general newspapers with a left political orientation are not very good at being objective, they are only useful to provide the reader with a critical point of view on information gathered from other financial media. I personally believe that an over reliance on left newspapers is manipulating, which in the current environment is fatal. As you will have understood already, the secret keeping was not a good move at all in my opinion. It is a very controversial action that now newspapers have to explain to the public. This is not easy in a period in which the market is in need of calmness and tranquillization in order to see rising confidence among investors. Only this confidence can then potentially lead to a steady growth of global economy. As a reader I am thus now asking for at least some objective information on this matter. Not for a game of hide and seek.

Sources:
http://www.reuters.com/article/companyNews/idUKGEE5AN16S20091124
http://www.ft.com/cms/s/0/b657a26c-d8e8-11de-99ce-00144feabdc0.html
http://www.guardian.co.uk/business/2009/nov/24/bank-england-rbs-hbos-loans
http://img.dailymail.co.uk/i/pix/2007/09_03/009mervynking_468x325.jpg

Is FTSE high equal to increasing investors' confidence?

The FTSE 100 index is up 2.9 percent compared to the beginning of this week. Only yesterday it increased by 19.88 points or 0.4 percent yesterday. The index thus reached the highest close in 14 months, since September 2008. The strong rebound of 53 percent since hitting a six year trough in March means that the FTSE 100 is now approaching the magical 5,300 points benchmark. Despite this fact making headlines in most of the major financial newspapers, I could not be convinced that this fact was enough to define the economic recovery as sustainable. So I started researching in...

...the Wall Street Journal, which in the article includes not only the general information about the FTSE needed to satisfy the reader that had been attracted by the headline, but also examples of some companies. An overview of some European markets, including the recovery of major brands in the jewellery and clothing industry is given. Mentioned are also the major events in the French CAC and the Nikkei index in Tokyo. This is all interesting information but not what I need in order to find out if the FTSE 14-month high means anything to the world's currently major concern: the economic recovery. From a rather long article with the words 'FTSE' and '14-month high' in the title I expected more information than just the numbers I can read off a normal chart in no time. Furthermore the fact that no primary research is referred to in the text makes the article rather dry and boring.

From a very short article on FinanceRoll I was able to get more specific information about the 'whys' of the good results: British Airways improved not only the stock but also partly the index since the merger with Iberia and BT Group raised its cash-flow forecast. However, these two facts told me that the FTSE 100 high was mainly influenced by one large merger and by a lousy forecast of one of the world's biggest companies. An increase in indexes is generally speaking a good news, but in this case certainly not something that convinces me that everything is fine already.

The article I read in Reuters afterwards increased my disappointment for the newly discovered source of FinanceRoll: it was not mentioned that it was the increase of heavyweight bank HSBC that added the most points to the FTSE index. Only this week HSBC's stock increased by an incredible 8.5 percent. Along with results of other banks also the stated stock changes of large energy firms helped me to create a picture of what the main drivers for the FTSE index were. From an interview (!) with a strategist at IG index I learned that also the good US retail figures and the recent UK inflation data could be considered as evidences of economic recovery. This article was the most complete, which is probably why it has been published on many other websites including Yahoo Finance, Euroinvestor and Forbes.

On the whole it can be said that some more of investors' confidence can be found in the market. However, uncareful readers can be misled once again by the optimistic titles in this weeks' financial media. The fact that some other large banks like Barclays or LLoyds actually experienced falling stock prices shows that a common phase of reinvesting in the market has not started yet. However, the increasing hunger for investment opportunities not directly related to the market, for example in real estate, lets profits and forecasts of many big players and companies depending on these big ones, increase. I believe that this is likely to lead to more homogeneous results throughout the stock market and means that financial media can look at the economy as a whole again when making positive headlines. Not just at FTSE 100.

Sources:
http://online.wsj.com/article/SB10001424052748703811604574533830637220564.html
http://www.reuters.com/article/londonMktRpt/idUSLD5164620091113
http://www.financeroll.com/en/headline-news/news-stock-market/149995-ftse-index-end-higher-at-14-month-high.html

http://uk.finance.yahoo.com/news/ftse-hits-14-month-closing-high-hsbc-advances-targetukfocus-c5fc9fbc6e63.html
http://www.euroinvestor.co.uk/print/printnewsstory.aspx?storyid=10734753
http://www.forbes.com/feeds/afx/2009/11/13/afx7121007.html

US unemployment weighs on European market

One of this week's main headlines is the reaction of European stocks to the release of US job data. An unemployment rate 10.2 % is the highest in more than 26 years and clearly exceeded the expectations of 9.9%. In jobs getting cut this means 190.000 instead of 175.000. And this is the 22th month in a row that jobs get cut and unemployment has been increasing steadily. These incredible numbers gathered only from headlines and subheadings definitely attracted my attention and I kept on reading several articles about this topic.

Different financial media including articles from the NY Times, BBC News, The Guardian and Reuters as well as videos online about the released unemployment figures all give rather detailed data. Numbers and figures as well as forecasts are all very similar and increase the credibility and reliability of the news. However, none of them gives such a general picture of the current situation and the consequences as the article in the Wall Street Journal which is why I choose to have my blog's main focus on the analysis of that article.

The first paragraphs of the Wall Street Journal were able to persuade me to continue reading. A simple language and a different approach to present the fact to the reader were enough for me to classify this article as more interesting than the average. Unlike articles in the Financial Times or on Bloomberg.com, the Wall Street journal is not just throwing numbers in the reader's face with a 'this is the news - now you think about it' attitude, but is describing immediately the 'whats and whys and hows' I am looking for when collecting information. The article does not give the reader the feeling of being reading about numbers that motivated some changes now but it's not actually important since in an hour something else will be influencing the market. It instead describes the news as something bigger and more important by including more general information. For example it describes the event as a reminder for investors that an economy that had been confirmed to have emerged from recession several times over the last weeks, is only recovering very slowly. I personally appreciate when an article gives me more a general idea and overview instead of tons of precise facts and figures which are not really in a context. Only one sentence with detailed percentage changes in the European stock market as a consequence of the job cuts can be found in this article.

For these reasons I felt addressed by this article and felt like one of many readers who are interested in finance without being a professional depending on exact and reliable data. I felt like a person that simply wants to know what is going on in the world without having his family's net worth fluctuating with the market, simply like a person that makes part of the target audience this article is written for.

It is also explained that this is the longest period jobs have been continuously cut in 70 years and talks about how important the US labor market is for the global economy since it accounts for two thirds of the US economic activity which again accounts 20% of the world economy. More interesting news follow in an interview with Paul Ashworth, economist at Capital Economics: he says that even though the recovery in output began already, the U.S. economy would still not be expanding rapidly enough to generate net gains in employment. This is an interesting point of view and explains the current position of the US nicely. This article gives the reader the news, the detailed figures for those interested and a good and objective picture of where the US economy is as a whole now. In my opinion this is financial media at its best.

In my opinion there is a fact related to this current situation that does not get as much attention in financial media as it should get. The average working hours in the US where lower in good times and increased since the beginning of 2008. This means that banks are exploiting the gratefulness of employees who still have a job and make them work even harder which means that less people are needed and costs are saved. It is worrying that tendency is still increasing because this means that the better the results get the less jobs there are. Are we willing to pay for pay for good results with jobs? As long as its my neighbour's job - yes!

Sources:

http://news.bbc.co.uk/1/hi/business/8346936.stm

http://www.reuters.com/article/eurMktRpt/idUSL650179820091106

http://online.wsj.com/article/SB125749164584233339.html

http://www.guardian.co.uk/business/2009/oct/02/us-unemployment-figures-job-losses

http://www.nytimes.com/2009/11/07/business/economy/07jobs.html