Monday, September 28, 2009

Topic of the Day: Zero Hedge "Head" ID'd And Profiled in NY Magazine

This longish story has popped on many "must read" links starting Sunday night. It is the uncovering of the guy who is the driving force behind Zero Hedge. I have been following ZH since the spring, and the blog is a standout among the 250+ subscriptions I have. Here is why:
(1) Written by plugged-in professionals
(2) A wealth of timely information
(3) Level of detail and intensity that is unmatched almost anywhere in the blogosphere (never mind the "traditional" media)

ZH has been attacked viciously by the mainstream because ZH to them is what a mammal is to a dinosaur (how's that for a SAT question?) It is simply a better model of (financial) media.
See, journalists for the most part are not experts at the subject matter they report on. The crisis has made that painfully obvious. Most seem innumerate and completely out of their depth when trying to grasp complex issues. It is not their fault: no one taught them those things in journalism school. Some of them, I am sure, went to journalism school to begin with because they did not have to do any math, let alone financial math. Mr. Gasparino may have spent three years reporting for The Bond Buyer but I somehow doubt he knows what bootstrapping a yield curve is.

The traditional journalistic model has been chasing a story, packaging it in the most sensationalistic way possible in order to up the ratings/sell copies, and moving on to the next story. The media outlets have been both the bottleneck and the toll collector for both news consumers and advertisers. What is happening now? The mammals are out and the dinosaurs do not like it at all. Neither does the government because "the message" and "the issues" cannot be controlled like they used to be. This is what now Congress is looking at bailing out the newspaper industry by granting it a tax-free (aka non-profit status that can later be used as a lever to control the message).

With blogging, everyone has a soapbox. This includes a number of professionals who understand their own subject matter much better than any journalist ever will. Consequently, more specialized topics are much better presented and discussed in the specialist forums, not in the mainstream. The traditional media model has neither the cadre nor the time and space for deeper thoughts.

Blogging, of course, is a true survival of the fittest. You do not have the licensing and frequency restrictions (for now) that traditional media has, nor the capital requirements. Therefore, a better product can do what House of Pain once sang about: "I'm the cream of the crop/I rise to the top." If there is no value to a certain blog, it simply won't get the traffic and publicity. ZH has done both: the results speak for themselves. There would not be ZH if what they wrote/write about is of no value to the readers. Do I agree with every post? Of course not: you cannot expect someone else to do your thinking instead of you. But the old media would have you believe so, and that is why they are grasping for every possible straw in their feeble attempts at attacking ZH's credibility.

ZH, and many other blogs, have honestly earned their credibility through professional competence while a "regular" talking head on CNBC will never even come close to it. We do not expect journalist to interpret medical studies' results and yet, some of them try (and often fail) to add "depth" to the discussions of complex financial issues. If one then adds commercial breaks and sound-bite oriented hosts, the one has to spend a lot of time in front of the screen to learn anything of value. By my estimation, Durden's raw IQ is at least 50 pts higher than that of any CNBC "personality."

Old media sees its grip slipping away, and is trying to both play by the new rules and to attack the "morons" that write blogs. Some bloggers with decent online rep have joined Reuters, for example. But old media is losing in the new landscape because there are no barriers to entry and news consumers can vote with their browsers quite easily. I canceled my WSJ subscription soon after I discovered Google reader. And I do not know if most old media journalists have the basic business wherewithal to understand the paradigm shift.

How can one play this? It's not a secret and it is probably priced in: NYT, WaPo, Gannett, Scripps, McClatchy are all publicly traded.

What may not be priced in is the view that timberland is a good inflation hedge: we might be having a qualitative change here that we have not had since Gutenberg so it may not work out as well this time around.

Update 1 9/30/09: Here's a blogger from Reuters with what sounds like a very, very acidic case of sour grapes. I would describe it as a rather unsophisticated attempt to disparage ZH's readers as"delusional" "angry" "have the hubris" "daytraders."
While I enjoy the author's usual fare and read 80%+ of his writings, I do think he lacks depth even in areas where he claims some expertise (i.e. sovereign bond defaults, the business of art, biking) and his claim to fame is nothing more than an attempt to simplify a rather complex phenomenon to mass-market levels. Even his unique topics, such as the Leibovitz loan or the Brandeis art collection scandal, have had all the sharpness of a gefilte fish.

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