As a former trader, this doesn’t strike me as heinous. “Moves the markets” means “contains new and salient information.” That’s a good benchmark.
The risk—that reporters will make things up for short-term gains—can be addressed through a tighter-than-usual editorial process.
In the end, Bloomberg makes its money selling terminals. The organisation, as a whole, is strongly incentivised to police against crap. Perhaps too much so. This policy may serve to counterbalance that inbuilt conservatism.
No, "move the markets" means that the reporters have convinced readers their article contains new and salient information. That's not quite the same thing. For example, this gives Bloomberg reporters a direct financial incentive to portray their information as more solid and well-founded than it actually is and downplay any hint that it's not in fact new.
I'm not convinced. If you only cared about the short term then yes you would do as you described. But both Bloomberg and the author are pursuing long term strategies. If you publish misleading/inaccurate articles consistently, then people will ignore you. The author and Bloomberg will both loose credibility. This is bad for the author who wants people to read what he writes, and is bad for Bloomberg.
>> "If you publish misleading/inaccurate articles consistently, then people will ignore you."
I can't find it now, but someone made a site to score opinion piece writers and see how many were right. Few were, but they still had jobs. You give people too much credit.
> But both Bloomberg and the author are pursuing long term strategies.
Are they though? Where's the metric that measures credibility, or is that something that's left to human discretion? People will optimize for the metrics they're measured against, and it sounds like in this case they've chosen a metric that conflicts with the aims of a news organization.
The principle seems sound, but if you just say that short-termism is not advantagious in the long-term, how do you account for most of press today, and what makes Bloomberg special?
The grandparent comment's argument about how Bloomberg is incentivised not to print crap by making it's money through terminals sounds almost convincing, I have to admit, but I see someone thinking "why not have the pie and eat it too".
I think this does give an incentive to reporters to paint things in a more black or white biased one sided narrative. You can't just have an article that talks about the good and the bad and expect people to feel like they ought to buy or sell whatever is being talked about.
How does this promote fair and factually accurate coverage over the politicized FUD bullshit we are constantly being fed by the media nowadays?
From the perspective of Bloomberg, is that a reasonable concern? Their business is to sell information that allows people to decide if they should buy or sell, not to promote fair and factually accurate coverage. I think this is something to keep in mind when you read all news. There are many great and devoted journalists and they work hard. But there are also many great and devoted computer programmers. Just look at what we do in order to meet the demands of our businesses. It would be nice to hold journalism to a higher standard, but I don't think it is realistic.
Reading through the comments below, that story is seen but some people as evidence that the Bloomberg story about SuperMicro and the Chinese hardware hack are wrong. Which is strange, because the tenor of comments under the explicit stories regarding the hack leaned more towards "absolutely possible". That the Bloomberg story about the hack went against Apple and Amazon, and indireclty against self perception, all of that could make sense after all, so.
There was no editorializing here by the poster of this article, but given recent news I have to suspect it's obliquely a claim that there may be certain incentives at play in the recent reporting of the SuperMicro issue (https://www.bloomberg.com/news/features/2018-10-04/the-big-h... and Amazon/Apple/gov't-agency denials).
I don't feel that I know enough to make claims about how justified (or not) that is, just pointing out why a story dated "Dec. 11, 2013" might have been posted.
Why is this surprising? Their entire business model for having a news wing is to funnel traders into their terminal. Being the first to break market-relevant stories sounds like a plus, not a negative, even if the incentivization model is potentially encouraging to write stories with a bias towards moving markets.
You can't design a system with (supposedly) misaligned incentives and hope the SEC will research everything and keep it fair. That would just shift the solution from:
"Write articles that move markets"
to:
"Write articles that move markets in a way the SEC won't find out"
Also how good do you think it would be for Bloomberg (from a PR perspective) if their reporters are getting charged left and right for market manipulation?
That's a reasonable presumption - Bloomberg makes its money selling access to reliable information, the people buying their services are not reading Bloomberg for entertainment but in order to make financial decisions. The editors know where their paycheck comes from and, unlike most other news sources, have a strong incentive to avoid speculative clickbait.
Speculative clickbait is not the same as market-moving stories, and this isn't an article about Bloomberg paying reporters for clickbait. Market-moving stories are the ones valued by traders in making decisions, almost tautologically since trader decisions are the market. I don't see why the editors would have different incentives than the reporters.
Do you mean in reality, or in hypothetical not-dysfunctional fantasy world?
Because in reality, the job of an editor is to avoid being fired for angering the corporate sponsors/owner, and anything about ethics, or upholding the standards of the publication, is merely coincidental.
The role of an editor is to implement the owner's plan for the publication, and that means their incentives are clearly aligned if that plan includes paying reporters more for stories that cause their audience to act.
As someone who edited various technology magazines for a decade or so, I wish someone had told me this. There I was going through life, thinking my job was to ensure a mix of stories that would be interesting to the targeted readership, that read well, that could be properly 'stood up' as factual and didn't land us in too much legal trouble.
Oh - and to make sure the pages were filled on time and budget and that the editorial staff were reasonably happy, and that we referred to companies in the singular.
Wasn't there an article about an editor of pc magazine getting fired for writing some slightly critical articles some weeks ago?
I think the topic is how business interests from corporate sponsors are weighted against factual reporting.
Not saying magazines have much choices, but manufacturers disallowing any criticism speaks volumes about their products. We should strive for more transparency here.
Not that I would expect most tech articles to not be advertising these days. It has become a standard.
I've no doubt that there are some unscrupulous publishers. I worked at 4 different publishers over the years in the UK, 3 as an editor. The only times I spoke to the publisher about editorial content was (a) When we were producing the feature list for the year (those were heavy ad-gets) (b) on occasions where we had a good story that we thought could cause trouble so I wanted to consult a solicitor first.
BMTF is a tiny separate arm of the Bloomberg group that is incidental to its main line of business. Bloomberg is primarily a data/analytics/news company.
"move markets" seems highly correlated with juiciness and high view counts which are standard practice. In fact, I can't think of many examples where they're not... have any good ones?
I can also see a finance focused media outlet using that jargon internally to describe the underlying metrics (moving market's isn't really easily measurable directly anyway). To me, this doesn't seem like news. This seems like a bad jab at Bloomberg's credibility, which has been really important recently.
There's probably a discussion to be had about for-profit media and reach optimization. But that's been done many a times over the discussions of public/gov't/nfp news sources.
They've stopped this practice, in part due to this article (note the date - 2013). I have friends who were journalists there at the time who told me about it.
I guess the bonuses are not handed the day after, so there's time for the response and to see if the story was legit. Otherwise there's a incentive to write "XXXX Co to restate earnings since 2007, major fraud suspected" and to get it past editors one way or another.
Linking the story with market moves can be legitimate, they are a business news org and market is moved by major investigative stories.
Unless the story is really, really bad, it seems headlines barely budge the market these days, possibly due to the market becoming more efficient and an overall strong economic and buy-the-dips backdrop . I stopped paying attention to headlines years ago. volatility is in the toilet. It also depends on how one defines 'move'. A move of 1% can be attributed to other factors, and if 3 or 4 financial outlets are reporting the same story at once, it's hard to attribute it to Bloomberg.
If you look at the example of Walmart they gave, the stock was already down 1.5% when the story broke, so it only fell 1.5% instead of 3%:
If a journalis sells short a company stocks before printing a story that will shock shareholders, is that insider trading? What's the legality of that?
Having disproportionate influence in the market isn't illegal. Never was, never is, it wasn't the intent of Congress, wasn't an interpretation ever considered by the SEC, and nobody in the courts care. In fact, the courts typically find the SEC's interpretation of 'insider trading' to be WAY too broad.
So this Hollywood interpretation needs to go.
Its only insider trading if you trade on material non-public information ABOUT SECURITIES (but if we're being honest, only equities and equities derivatives, corporate bonds are supposedly covered but no-one cares enough) where you have a fiduciary duty to not tell, such as by being employed with the company or in a nondisclosure agreement. You also create liability if you have a fiduciary duty not to tell, and you tell and that person or someone in that chain or persons trades.
If you:
- don't have a fiduciary duty not to tell, and you have material non-public information, you can trade or tell people who then trade.
- don't have a fiduciary duty not to tell, and you have baseless non-public information, you can trade or tell people who then trade. It doesn't matter if you KNOW that your baseless information is going to move the markets. To avoid liability from individuals - this is distinct from liability from the regulators - all you do is put a disclaimer at the bottom of your post. The PSLRA of 1995 streamlined this due to frivolous lawsuits.
- and last but not least, if you aren't trading securities then there is no prohibition of insider trading. there is no regulator that polices trading ahead of information in non-securities markets, there is no statute, there is no interest in Congress which assumes they could even make that constitutional at all, since there is no voluntary fiduciary duty role people could get themselves into.
Typically, if there's no exchange of value from the person with insider knowledge to the person making a trade, it's not insider trading. Generally speaking, I can go golf with my CEO buddy and he can mention what's going to happen in the next quarterly report without me ending up in jail. Matt Levine was in the banking industry and now frequently writes about insider trading.
One might question journalistic integrity and incentives, but there is some good that can come from this sort of reporting. It helps in price discovery. In the below link, someone does additional research and short sells companies he believes are fraudulently reporting numbers to great success.
Having insider information doesn't necessarily mean it's insider trading.
It is totally legal to get information ahead of the market, especially if it's "public". It is not legal to trade if it's non-public information as it relates to securities. In this case, it's also legal to get information from a paid source (think a paid news source - WSJ), it's not legal if they are bribing.
In this case, the journalist is just selling the story to bloomberg who is then distributing the news (potentially) slightly ahead of it's public release (this is no different than a paid journal).
Short answer: If they "stole" the information (by, say, bribing an insider), they it's probably illegal. If they found it out by being clever (by, say, buying some satellite images and counting cars in parkings lots), then it's probably legal.
If you need to know how a court is likely to draw the line, talk to a lawyer. :) But in general, the fact that a journalist is involved doesn't really change anything. In general, you can trade on whatever information you may have; the exception is if you have some duty not to trade on it.
If you don't disclose your position in the stock, that could be illegal stock manipulation, but it isn't the same as insider trading. Try this discussion on for size:
I can say that as far as Bloomberg is concerned, that would violate company policies (one policy about short selling and another about trading in ways that could harm the company’s credibility).
If they got information from an insider, it could potentially be insider trading. Something somewhat similar happened when MedSec shorted St. Jude before publishing some security research about some hardware: https://arstechnica.com/information-technology/2016/08/tradi...
I don't believe that case was considered insider trading but I may be mistaken.
Buying a product, realising it's trash, shorting it, and then telling people why you shorted it isn't insider trading.
The giveaway in this case is that MedSec/Muddy Waters were not in any way insiders, they were simply smart enough to investigate a company and find out it was overvalued before anyone else did, and then pointed it out when they had their financial ducks in a row to benefit from it.
Would probably hinge on where the information in the story came from. If the story is based on insider information the absolutely it meets the definition of insider trading. If the journalist is simply using publicly available information then no.
What you are describing is expected and normal behaviour especially for shorts. If you complain, you will be duly lectured on the role of shorts in maintaining a sensible market and finding true value of stocks, yadda yadda.
Classic article structure, click bait title, two thirds exploring the headline, near the end reveal the click bait headline conned you - and be secure from being sued.
"To say that people are getting a big $5,000 bonus for some market-moving win is completely wrong."
Surely this piece of news coming after SuperMicro report by Bloomberg is just a coincidence. Surely Business Insider wrote that piece of news from their own initiative.
It's dated 2013. Someone brought this exact article in another thread and now it's been brought up to so doubt about the hacking article.
Seeing situations like these has led me to an intellectual predicament.
In the past year or two I have seen a massive amount of propaganda and now I'm left with a question that I hope others can answer.
How can we have free trade when every trade is weaponized? How can we have a dissemination of information when any single group who wants power uses every post on the internet as a way to insert their own ideas? We make fun of anti vaxxers but then we see that a government used a vaccination program to find their enemies[1]. We make fun of the paranoid, but then a Snowden comes out and we discover that they werent actually paranoid. How does a society function when any given transaction, whether in physical goods and services or information, is used as a weapon against another group?
I dont see how we get out of this without reverting to a super tribalist set of societies that calls out everyone who is different from the default group. Whether that's based on ideology, race, geography, etc we are all losing out because we have reached a point where there is no trust between anyone anymore
It’s a long draw of the bow to go from the US tracking Osama under the guise of a polio campaign to your regular anti science anti vaccine westerner being justified in their pseudoscience.
The answer to your question is the same way trust has always been built (and lost) - micro transactions establishing credibility and mutual trade and dependence, not in paranoia and closing doors, which is sure to only antagonise things
Paying people more for doing their job well? Yes, it's legal. :)
(I'm sorry if the answer comes off as flippant, but really, there's nothing particularly odd or unsavoury here. Journalists are paid to break stories that get attention or are otherwise important, and this is a perfectly valid metric for "important". Why would it be illegal?)
It's ALWAYS been the case that journalists that sell more papers (or more recently, attract more viewers, or more ad impressions) get more prestige and money than ones who do not.
If you thought that journalists were entirely disinterested seekers of truth, then uh...I just don't know what to tell you, but you're going to be really disappointed when you find out the incentives your doctor, lawyer, and car mechanic have. :)
The phrase "yellow journalism" is over 100 years old now.
The talking heads on cable news are well aware that their salaries and continued employment depend on their ability to attract views. And there have been plenty of scandals in the "old school" serious print media of journalists making stuff up for prestige or renown (Stephen Glass, Janet Cooke).
People look back with nostalgia on an era that never existed.
> the phrase "yellow journalism" is over 100 years old
I don’t know if anyone has studied the longitudinal accuracy of journalists. The 19th century brought unique economies of scale to mass-market journalism (through industrialised printing and steam-powered rail transport). “Realizing that they could expand their audience by abandoning politically polarized content, thus making more money off of advertising, American newspapers began to abandon their partisan politics in favor of less political reporting starting around 1900“ [1]. Quality thus increased, and remained increased, until the Internet made niche journalism profitable again.
Journalism 150 years ago was crap. And a lot of journalism today is crap. It does not follow, however, that the intervening years were similarly dominated by dumbassery.
> Quality thus increased, and remained increased, until the Internet made narrow-niche journalism profitable again.
I basically agree with your overall point, but I think you may have that part backwards, actually. Advertising in general (and for newspapers, classified advertising in particular) represented an enormous torrent of money. The internet killed that. It's not that the internet has made narrow-niche journalism profitable again (it never stopped; there have always been niche magazines and newsletters), it's that the internet stopped newspapers being profitable at all, and now all we're left with is the narrow niches that never went away.
Are we worse off as a society now that all that money flows straight to Facebook and Google instead of the Village Voice and it's kin? Sure, maybe. But was journalism magically more ethical during that period? I see no evidence of such. And I don't think lying for a Pulitzer is any more noble than lying for some page views.
> It's not that the internet has made narrow-niche journalism profitable again
I think it has. Before industrial printing, printing a broadsheet was expensive. Before steam locomotion, quickly shipping it far was expensive. That limited the addressable market. Add in lower population densities and you have a narrowly-distributed product for which a high price must be charged.
Enter industrial printing and steam locomotion. Economies of scale emerge. Those operating with scale can outcompete narrow operations on price. Apolitical news becoming cheaper meant partisan rags had to fight harder to justify their price premium. In the end, scale won.
The Internet makes production and distribution cheaper. At the same time, it gut punched the majors by taking away their ad revenue. It’s the reverse of the above happening, and it’s newly enabling small, partisan publications to turn a profit. (They needed to appeal to a broader market, before, to pay for their fixed print and distribution costs.)
> It's not that the internet has made narrow-niche journalism profitable again
Their hit piece on SuperMicro is a prime example. With zero hard evidence, they posted a multi-page hit-piece on them permanently damaging their brand developed over past 25 years. The stock is down 45%, added some more salt to US-China tension and the authors are happy with their paycheck.
Libel laws need to be improved to hold shoddy reporters accountable for their work.
Did any new information about its accounting irregularities come to light on Wednesday or Thursday? If not, why would they have driven the stock price decrease on those days?
Supermicro was delisted from Nasdaq a month and a half before the article for shady reasons. They did a pretty good job damaging their brand all on their own. I'm sure they don't want to file a lawsuit where discovery shows what's really happening inside the company.
Accounting issues are internal issues and can be sorted out - they do not affect a customer who is paying money to buy a server. If however someone spreads a rumour saying your server does surveillance for China - people will just go to another vendor to avoid the fallout.
The risk—that reporters will make things up for short-term gains—can be addressed through a tighter-than-usual editorial process.
In the end, Bloomberg makes its money selling terminals. The organisation, as a whole, is strongly incentivised to police against crap. Perhaps too much so. This policy may serve to counterbalance that inbuilt conservatism.