In journalistic jargon, the "nut graph" is the paragraph in a column that immediately follows the lead and lays out the entire premise of the article. After reading the
this weekend, the Business Press Maven must officially declare the story's nut graph nuts.
I should have known trouble was coming from looking at the cover alone -- it appeared solid and counterintuitive.
"Oil Bubble: When It Will Pop and Why," it said, accompanied by a big, black, oily bubble. I settled into my chair, ready to read a top-flight intellectual case for why the oil market was set to tumble.
Because you, the savvy investor, must consider future movements in the prices of stocks, commodities and markets, that's the type of journalism that works to your advantage. The other type, which is unfortunately more prevalent, is journalism that presents itself as courageous despite being rife with caveats and escape hatches. The latter type of writing suggests the writer has spent more energy protecting himself from the consequences of being wrong than figuring out what is right.
They Just Don't Get Oil!
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So, I turned the page and saw this headline: "Bye, Bubble? The Price of Oil May Be Peaking."
This was the first sign of trouble.
had backpedaled from predicting oil's demise to questioning its demise, suggesting the price "may" be peaking. That said, this could just have been overly cautious headline writing.
The article begins by tracing oil's sharp move up. We then get this line: "In the next decade, oil indeed may hit $200 a barrel," before the nut graph starts in earnest, explaining what
happen, why this bubble
"But prices could fall to $100 a barrel by the end of this year if Saudi Arabia makes good on its pledge to increase production; global demand eases; the Federal Reserve begins lifting short-term interest rates; the dollar rallies, and investors stop pouring money into the oil market."
Thanks for the firm grasp of the obvious,
all those things happen, then oil will fall. That's like saying, "If I get more handsome, if I get more wealthy, if my verbal skills improve and develop a sense of humor and ability to talk to women, then I will date supermodels." Of course oil is going down
all those things happen.
The rest of the article is filled with awkward verbal hedges: "There is growing talk of an oil bubble, though evidence of asset bubbles isn't conclusive until they burst."
Again, duh. The author stresses the impossibility of predicting anything with total accuracy (of course this is true, but investors, unlike journalists, must risk such predictions) before returning to the "ifs" and adding the nutty notion that even under ideal circumstances, oil will only fall to $100:
"But it's impossible to know with precision when the bubble will burst. The Saudis could roil the markets with a pronouncement June 22; the dollar could revive or demand could plummet, or all three. And if prices start falling, the downturn could accelerate, sending crude back to $100 -- where it would be cheaper, but still far from cheap."
The article mentions how airlines and retailers might benefit if an oil bubble pops. And it points to oil companies like
that can get hit badly, while larger ones like
might fare better. Are they saying that if oil plummets, airlines and retailers will do well?!? That's crazy talk!
And the specific breakdown is, again, way too hedged. How small oil companies would get creamed and larger ones fare better I don't know. It seems that
all those "ifs" happen, all the oils will get creamed.
In the end, when the main aim of the article is not to inform investors, but to keep journalists safe from the consequences of their calls, beware. And be aware.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
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