Times Investment Is a Harbinger of Disaster

Maybe Harbinger Capital Partners is going to start a brand-new news channel and we don't know it? Is that the stealth reason a hedge fund would keep buying the stock of The New York Times (NYT - commentary - Cramer's Take) -- holding 28.5 million shares, or 20% of the float -- as the stock just keeps getting hammered? Do the people behind Harbinger just want to own a trophy property, like the Times, so they can say they do?

Or is this just one of those situations, like Sam Zell with Tribune, like Gary Pruitt at McClatchy (MNI - commentary - Cramer's Take), where the hedge fund is just plain wrong and continues to dig a deeper hole by buying the common stock of a wasting asset?

You know which one I think.

Lightning struck at Dow Jones because a private company had a vanity interest in owning The Wall Street Journal and was starting a new business channel that could benefit from the tie-in. Oops -- News Corp. (NWS.A - commentary - Cramer's Take) isn't a private company, but you would never know it by the way Rupert Murdoch's treating shareholders.

I think Harbinger believes it can cause lightning to strike at The New York Times. I think Harbinger believes that there is lots of hidden value at the Times.

But, as a former hedge fund manager, here's what I think is really happening: They got it wrong, and now they are averaging down in a hideous fashion. I think they never figured that the Times could see a 15.3% plummet in advertising. I don't believe they foresaw a 24.5% plunge in the Boston Globe and the New England Media Group.

And I certainly don't believe they saw a peak in online revenue, because when they started buying their stake, there was talk that the online business was worth the price of the whole company: $1.8 billion.

Here's the truth about newspapers: They are all owned not by their shareholders, but by Google (GOOG - commentary - Cramer's Take). And while Google is great as an ad server for online, it is the great destroyer of the core franchise of any paper. And if Google ever fixes Google News -- which CEO Eric Schmidt says is coming -- the next generation may not even know what The New York Times is. The darned thing is a wasting asset.

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