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What Was Media's Role in Stock Market Boom and Bust? - 2002-12-06

A recent survey reports that for the first time in almost 20 years, fewer American workers are participating in their retirement plans. The study says that participation rates in so-called 401(k) retirement plans dropped 2.5 percentage points in the past year to 75 percent, and suggests that employees fear more stock market losses and economic instability.

The study is one of many analyzing the recent years of the declining American stock markets after the boom times of the 1990s. Two of the most influential American financial journalists discussed with VOA the media's influence on the markets.

As the first journalist ever to report daily from the floor of the New York Stock Exchange, Maria Bartiromo of the CNBC business-cable network became something of a media celebrity, even earning the dubious nickname "Money Honey." The rise in celebrity of Ms. Bartiromo was part of the American economic atmosphere of the late 1990s, when fortunes were being made from buying the stocks of little-known "dot-com" and other technology companies. Maria Bartiromo recalls how the booming economy drew in many viewers and later, investors, to her broadcasts.

"The bull market had a lot to do with it. As the market went higher, people wanted to participate in making money through market investments," she said. "As a result of the bull market and the huge explosion in information, now 100 million Americans are actually investors whether through their 401(k) plans or through direct ownership of stocks. So you have this real change in information available to investors they educated themselves, became more savvy, and then as a result, invested."

Many of the CNBC network's viewers simply followed the advice of "stock analysts," representing financial companies that bought and sold stocks and bonds. Ms. Bartiromo says it wasn't always clear how many viewers actually understood the analysts' comments and their reasons for touting stocks.

"Well, I'd like to think that my viewers are savvy and do understand [the markets]," she said. "I do believe that people understand how business works. Of course, some understand it better than others. You won't have everyone understanding it 100 percent. But over the last 10 years, with the explosion of information, and as it's available to investors, they've taught themselves. Certainly there's part of the population that wasn't as savvy as they could have been, but maybe they just wanted to participate in what was a booming stock market."

Some market watchers suggested that Ms. Bartiromo's and other reporting influenced the prices of stocks and that Wall Street "insiders" perhaps feeding some of the stories - could profit from forehand-knowledge of news reports. Others wondered whether the excited discussions between TV show hosts and financial company analysts helped spur the boom.

Darren Gersh, Washington bureau chief of the non-commercial Nightly Business Report on public television, weighs the media's role in the market boom and bust.

"I think it's too simple to say the media caused the stock market bubble," he said. "I think the bubble had quite a bit of help; it didn't necessarily need the media for it to become a big bubble. Having said that, I think the coverage was sometimes a little breathless [too enthusiastic], sometimes a little too trusting, and sometimes too in awe of the economic circumstances that we saw around us with the idea that the market just seemed to be going up. We stood in awe of it like many people, and didn't question it as much whether the fundamentals [economic data] were there. There were people pointing this out; there were people in the media reflecting that. But I don't think [the public] always wanted to hear the fundamentals while they were getting rich! I don't think they wanted to hear [analysts] say maybe there aren't the earnings to back this up and maybe we're out of control here."

Ms. Bartiromo says CNBC, as well as other financial news networks are simply providing information to their viewers.

"I would say that I live in America and we live in a free country and I would prefer to have my [investment] options open to me and prefer to have the information accessible to me," she said. "I would rather not have someone say, 'Oh you can know this, but you can't know that. Every investor has to realize that it's their money and they need to [understand] what they're buying or selling. But I think that more information is good."

As a correspondent for a non-commercial, public network, Darren Gersh says he is not as "pressured" to attract more viewers.

"I think it's helpful when you're a bit insulated from market forces. I think a lot of the people who work at those [media] organizations did very good work and do very good work," he said. "Having said that, there is [viewer] ratings pressure. There's pressure to keep it interesting, which is different. Keeping it interesting sometimes may be confused with [stock prices] going up. There was an effort to make the stock market seem more entertaining and that it was only going in one direction. That was a problem."

Following the economic debacle of such companies as the energy giant Enron and the telecommunications firm Worldcom which resulted in investors losing millions of dollars - changes are underway in business reporting, as Maria Bartiromo points out.

"Obviously we've seen a lot of disclosure and I think that's good," she said. "The criticism recently of analysts and people who missed the bad situations like Enron and WorldCom, certainly put a spotlight on the people who were pushing [marketing] stocks. Certainly that was one of the reasons. I think the conflict of interest issue has definitely been exposed. Now people want to know all the details of why anyone would want to push a stock and if in fact they're pushing it for an ulterior motive."

Many business reporters now pointedly ask stock analysts if their company - or if they personally - own a stock they're recommending. Public television's Gersh says reporters are now more careful about their sources.

"I think it's fair to say there's more skepticism," he said. "I know, personally, I feel that many companies that were very respected and [touted] themselves as experts turned out to be anything but. It's hard not to be more skeptical than before. I think most journalists were skeptical; maybe they're a little more hard-edged now."

With the revelations of misdeeds in the industry, new accounting reforms, and calls for greater government regulation, Maria Bartiromo says America's stock markets are entering a new phase.

"I think we're in a new era and it's good," he said. "I think that everything that's going on now is only going to be positive for the markets and for investors. I think investors have to get a feeling that they can trust the system again. I think it is a new era."

And although many Americans have lost lots of investment money in recent years, public television's Darren Gersh says most Americans will continue to invest in the stock markets.

"History has shown that most people do come back to the market," he said. "History has also shown that most people come back to the market just when they shouldn't be. That's the history of market cycles. It seems to me that when I go out to talk to investors for stories it may not be scientific- but most people seem to be hanging on and understand they have to be in the market for a long time before they get a payoff; they're playing the averages. I think that message has gotten through to a lot of people. Certainly there are people who are discouraged; a lot have lost money. But I think that the message of 'stay the course' is one that many investors have taken to heart."