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Lose the Drama and Give Markets Their Due

A disturbing media trend presents scary figures with no regard for context or capitalist realities.
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Having been exposed to a particular article in this morning's Wall Street Journal, which echoed a similarly misguided effort in yesterday's Journal, The Business Press Maven turned into an empty silhouette of a man.

As a result, I need to step back for one moment from analyzing the business media's work on any particular company or economic issue to get at the larger issue of why so many are so wrong about so much. It has to do with the small little fact that they don't understand in the least the way the entire capitalist system functions.

Ours is a dynamic system. And it is rarely, if ever, a zero sum game. But journalists consistently write about it as if it were. Read this morning's "

Broadway Strike Weighs on New York City" and see if it doesn't hit you right in the orchestra pit, too.

It is full of typical estimates (we've heard 'em a million other places in the past few days) that the stagehand strike, which began this weekend and shut down a bunch of Broadway plays, will "cost" New York City on the order of $17 million a day.

That was an estimate given by a theater organization, and it was then followed by a Times Square neighborhood alliance, which weighed in on "the immediate and palpable sense that the wind has been sucked out of the sales."

But no one who was interested in -- or who knew the least bit about -- how a free economy functions weighed in with the true answer. While Broadway itself will suffer, the city will not, at least not nearly on the order of $17 million a day. That estimate is essentially based on a direct count of Broadway tickets and meals and other monies spent relating to shows. But there is other stuff to do in New York City, like see ball games or go to museums or even take in an off-Broadway show. A lot of people will take their money and spend it on all those things instead.

Just let it be said for the record that Michael Kuchwara, an

Associated Press

drama writer, understood the dynamic nature of the consumer economy better than

The Wall Street Journal

with this recent effort: "

Business booming off-Broadway."

And lest you think that those who cover financial firms in the cradle of capitalism on Wall Street would have a moderately better notion of how capitalism tends to function, look at this article about


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in yesterday's

Wall Street Journal

called: "

A Salary Cap For Bankers: $750,000."

The central issue is that with all of UBS' issues, the firm is putting a ceiling on cash pay for investment bankers and traders at the three-quarters-of-a-million mark. Anything more will have to come in stock, which is not as attractive because it vests over a longer period of time and thus creates an umbilical cord between the bonus baby and the firm.

But the lead in the article is buried. In fact, it's worse than buried, it's not even there. To wit: With UBS the first firm to take such drastic measures to limit its traders and investment bankers to such (comparatively) subsistence level bonuses, how many might bolt?

An executive search firm official is quoted as saying that other firms might follow suit, but if they don't or if they keep the cash ceiling higher, what does this mean for UBS? Doesn't a central issue in the future of talent retention for


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, UBS,

Merrill Lynch



Morgan Stanley

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in these troubled times stand as this: Are the firms with the most constricting bonus crackdowns going to lose top-tier people to those still giving cash out with a ladle?

After all, that is what happens in a dynamic system.

Well, just as we did not read any anticipatory writing about what people might do instead of going to Broadway, still spending money, we don't hear what capped-out UBS traders and investment bankers might do instead of accepting such meager rewards. Remember, in capitalism, there are never offers you can't refuse.

But the


just told us what Wall Street usually does during market slumps, how $750,000 is a lot in other fields, how they will receive two kinds of stock. They refer to "morale" at the firm suffering without mentioning that those will low morale might see it lifted by jumping to a firm that caps cash bonuses in the million-dollar range. Instead they quote an analyst saying that if you are getting a $750,000 bonus, you are only bringing home $350,000 after taxes anyway. But, uh, if you get a $1,000,000 bonus, you are bringing home $550,000.

Anyhow, there you have it. And that is why The Business Press Maven gives out bonuses to journalists in the form of a coveted "Nod of Approval" award when they show evidence of understanding the economic system we live under. Michael Kuchwara, you win.

Now let us speak of mergers. There is no larger point to make here, but I want you, the savvy investor, to take note of how writing about the same merger changes tone depending on whether the journalist is writing from the perspective of the acquiring company or the acquired. First

Business Week



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acquisition of Cognos:

"IBM, Cognos, and the End of Best-of-Breed: The software giant's $5 billion acquisition of Cognos shows how difficult it is becoming for midsize software companies to survive on their own."

Now, a word from


: "IBM Goes Cognos Crazy."

However: I do want to point out how the often-excellent column from

The Wall Street Journal

makes the point, not made above, that the acquisition reduces the value of IBM's service business.Read: "

Why Big Blue May Still Lag."

The Business Press Maven, in his own humble estimation, was at the typical top of his game last week in

criticizing the business media for being at the

typical bottom of theirs. They presented Robert Rubin as genius, ignoring his years in the muck at Citigroup, and they made excuses for CEOs leaving reeling financial firms with big pay packages.

That's why John Gapper, writing in

The Financial Times

, was such a welcome departure and earns today's second Nod of Approval. Like a rose rising out of wreckage, Gapper wrote "Sadly, it pays to retire disgracefully" and made the appropriate case that it serves both the concept of truth and the bottom line to fire these people instead of allowing them to resign with dignity and considerably more loot. Well done, Gapper, and sir, The Business Press Maven genuflects in your general direction.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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to send him an email.