In a recent blog post, I argued that business journalists shouldn’t be allowed to report on companies in which they won stocks. Warwick Lucas, an investment analyst at a securities firm, made the following comment:
“Should anyone believe in a s*x therapist who is a virgin? Or a chef that doesn’t eat their own cooking? Then why would the opinion of someone on the trading or investment merit of shares be worth reading if they didn’t stick their necks. As far as I’m concerned a lot of so-called best practice is just a triumph of form over function.”
The Afrikaans writer CJ Langenhoven once said: you don’t have to be a carpenter to know that a table is badly made.
How right he was. You don’t have to be an investment analyst to know that now is not a good time to put your life savings in the stock market (and you didn’t need an investment manager to lose a lot of money in the stock market over the past year, although it would have helped).
Most of the world’s most highly respected financial news organisations – Bloomberg News, the Wall Street Journal, the Economist, Reuters, you name them – have strict rules about the investments their journalists may or may not make. And in most cases, the rules boil down to not allowing their reporters to cover companies in which they own stock. The following excerpt, from the New York Times’ code of ethics, is fairly standard:
“125. Because of the sensitivity of their assignments, some business/financial staff members may not own stock in any company (other than the New York Times Company). These include the Market Place writer, other market columnists, the regular writer of the daily stock market column, reporters regularly assigned to mergers and acquisitions, the daily markets editor, the Sunday investing editor, the Sunday Business editor, the business and financial editor and his or her deputies.”
So by arguing that the opinions of people without a stake in the market are worthless, Warwick is blithely dismissing all the journalists and columnists who work for these organisations. Maybe he is right. But what about the 300 000 other stock brokers, investment analysts and the like who pay $1 600 a month for Bloomberg?
Is it a case of form over substance? Well, the current debacle in the global financial system should have taught us that sometimes, form is important. It is precisely because regulations, rules and norms were thrown out the window that we sit with the problem we have. The fact is, there is a clear conflict of interest when a journalists writes about a company while holding shares in that company. One way of addressing that conflict is to declare the jurnalists’ stock holdings, as Fin24.com does. But that doesn’t quite solve the problem, as far as I am concerned.
Take for example, an investment adviser who works on commission for one of our big insurance companies. If he analyses your needs, and advises to invest solely in products offered by that insurance company, well – his advice may be in your best interests. But you would still be well advised to seek a second opinion.
A last word: I wouldn’t ordinarily eat the food of a chef who won’t eat his own cooking. But the idea of a virginal sex therapist is rather appealing….