People often ask me who comes up with story ideas -- the reporter or the editor -- and that question puts me in the uncomfortable position of having to tell the truth.When it comes to the business media, it's often a bunch of impulsive stock traders who are setting the story lines. This was pretty clear in the vacillating coverage of Amazon's ( AMZN) earnings late Tuesday and early Wednesday. But before we get to that (and Apple ( AAPL)) forgive me a few sentences of self-aggrandizement to make a larger point about the sorry state of affairs investors face when it comes to puff-files of CEOs. Both
Granted, I never said anything laudatory about Mozilo before that, but that I am (rightly) credited with being early stands as a pathetic lesson about how careful you need to be as an investor when reading worshipful profiles of CEOs, which is the true stock and trade of the business media. Until the implosion, Mozilo was portrayed mainly as a great entrepreneur and a courtly lender. Now let me get to those beguiling traders -- the power behind the press. With the market strong and technology traders feeling giddy throughout the day thanks to Apple's earnings, Amazon was up strongly in Tuesday's trading session. At 4:01 p.m., right after the market closed, Amazon reported. The first batch of news reports, either directly referencing or obviously influenced by Tuesday's strong showing where Amazon was up 10% and got over $100 for the first time since the end of 1999 (before the dot-com crash), had entirely happy things to say. Check out these headlines: At 4:06 p.m., MarketWatch from Dow Jones, ran with an excited: "
Amazon.com earnings surge in third quarter." Hot on its heels, also clocking in at 4:06, came an equally enthusiastic headline from paidcontent.org: " Earnings: Amazon Q3 Sales Jump 41 Percent; Income Soars." The lead said it all: "The market was expecting big things from Amazon, and the company has delivered." End of discussion, huh? Not exactly. See, Amazon was dropping in after-market trading. So by 4:26, we got this headline and subhead from CNNMoney.com: " Amazon: Good but not good enough. Web retailer's earnings climb 313% from last year, citing low prices and free shipping; but stock falls after-hours."
That article speculated that the market was disappointed because guidance going forward was not higher. Just a bit later,
MarketWatch from Dow Jones, which (remember?) had been all positive at 4:06 when writing to the backdrop of Amazon's good Tuesday, was expressing concern when writing to the accompaniment of weak after-market trading. The headline and subhead this time: "Amazon net surges, but outlook worries investors.Shares fall in after-hours trading on margin forecast after hitting $100 mark." And MarketWatch was hardly alone in the rotating headline game. Even The New York Times had an evolved take. This was the celebratory headline that appeared on its Web site on Tuesday: "Earnings Show Amazon Is Back on Top." Break out the bubbly! But Wednesday's paper saw the issue at a more measured distance: "Amazon Says Profit Jumped in Quarter." Just remember: What you are reading about earnings might very well be shaded by the impulsive reaction of some traders, or even a bit of profit-taking that might have little direct relation to the earnings. All of it can set the course for story lines much more forcefully than editors and reporters. Beware and be aware. Interestingly enough, of course, we can see battling headlines even when fleeting share price fluctuations are not the cause. Case in point: Schering-Plough ( SPG). These two headlines came a few hours apart, although the stock was at about the same level:
Schering results miss targets." The Associated Press: " Schering-Plough 3Q profit up on gains." Finally, a public service announcement. If the article you read about Apple's earnings and expectations for next quarter failed to make clear how Steve Jobs plays the expectations game so masterfully, then please read this Business Press Maven classic, which has probably been referred to even more widely than my writing on Mr. Mozilo, Countrywide's Orange King. Here's the gist: Jobs, a hands-down genius of promotion, consistently vexes the business media by the dual nature of his promotional abilities. To wit: When it comes to promoting his product, he is more flamboyant than P.T. Barnum, a real pusher. But, and this is key, when it comes to setting financial expectations, he is consistently low-key, sandbagging, saving and downplaying. If this is not mentioned in what you are reading about Apple, make sure it is set in your mind. It is key to understanding the company, Jobs' confused, conflicted, don't-get-him relation to both Wall Street and the business media and, by extension, Apple's future stock performance.