Introduction to Business Reporting

1. Introduction to Business Reporting Ulan Bator, July 2005

2. Commonly thought of as boring • Business/economic journalism used to be considered an obscure and uninteresting subject. It was not a job people wanted, people went into journalism to cover Moscow or the West Bank not some boring old company. (in the eighties this changed a bit as the wires expanded) • But I think this attitude is all wrong. In fact if you care about the world and international affairs then writing about the trends of economics and finance is a wonderful way to learn about what is going on. If you look at the last six years some of the biggest stories have been the Asian crises of 1997 and the ones that followed in Russia, Argentina, Brazil and Turkey.

3. Can Be A Good Way to Get a Job • Even in the US in the nineties with the doctom bubble working for an internet publication replaced going to a small town to cover school boards or zoning meetings. In short learning about business and economics is crucial to being a successful journalist today and for understanding about the world and the way it works. • On a practical note , it’s extremely helpful in terms of job hunting. Being a trained business reporter has pretty much always meant job security and even now a lot of the people I know who have lost their jobs have wound up finding jobs fairly quickly.

4. What Do Business Reporters Write About? • Almost everything: we write about companies, markets, the broader economy, new regulations, government policies, scandals, debates. • Overseas we write about commodities, privatizations, banking, foreign exchange, trade and development.

5. The Same Old Rules apply • Everything you have learned about reporting and writing stories is true of business reporting as well. • We use ledes, nutgrafs, colorful quotes, kickers. We look for interesting people, spot news and trends. • We use numbers but try not to use too many of them. We pick and choose.

6. Writing Rules Apply • No matter who you are writing for, the same rules apply: • Write clearly, simply and avoid jargon • Don’t write about what you don’t understand • Make sure you understand your story before you write it.

7. Getting Information • We talk to analysts, people in the market, company officials, government officials and the little guy. • It’s very helpful to understand accounting and corporate finance. If you are serious about doing business reporting then it’s a good idea to study these subjects. • Reports, trade papers, newsletters • the internet • International organizations

8. Getting Information • --getting all sorts of views little guy, small company, minority everyone ignored. You get great stories by going to the people no one else talks to • ---going down the food chain, not the minister but the low level guy, not the central bank governor but the research guy • --reading up on other countries’ experiences as a guide to what could happen in your own country. • --if you are doing market stories, it is worth reading and interviewing academics. Often editors are dismissive of academics—too isolated and ivory tower. But they know a lot about how things are supposed to work and can give a counter intuitive view. While Wall Street was applauding the repeal of Glass-Steagall, academics were predicting what would happen and the academics were right • --plus they come out with lots of interesting reports which you can get story ideas from knowledge@wharton.com is a great resource for new research • --research dept of World Bank often in the lead and new research from there can set the way for later changes in policy. Example of this is the bank deposit insurance debate. • --far fewer analysts being quoted now, more quotes from people on the buy side. Says who they are and how much money they manage • --go back and see if people were right. Ticker now does this and does stories later on what the analysts said.

9. Business Reporters are Vulnerable • Beware of your sources. As with all stories they have agendas • The people that will train you are the people in the sector you cover and they have agendas • too easy to imbue the biases of your sources. If the IMF/WB are the only people willing to take the time to explain something you start to share their views, the same with any complex subject (I met someone recently who does i-banking in chemical sector and said his firm always get great press because they basically raised a whole generation of reporters)

10. Many examples of Bias Creeping into Reporting • There is often a hectoring/moralistic approach to covering economics/business. You would do well to avoid this sort of mind set as it gets in the way of reporting. • In Vietnam IMF/WB always lecturing the Vietnamese on what they were supposed to be doing. Reporters would take on the same tone of voice and talk about “much needed reforms” . I once heard the FT reporter asking a visiting director of the WB if Vietnam understood what it “needed” to do. I find this patronizing but also unprofessional our job is to listen and understand • Same thing in Europe. Coverage of French and German economy always a bit derisive about the spa vacations for German workers, how the shops shut on Sundays, the French retire young and only work 35 hours a week. There is a sort of patronizing attitude: these people need to restructure their economy, don’t they get it, they don’t work as hard as we do in the US. • Articles about corruption all the time and cronyism. Yes, developing countries have a lot of corruption but also no question that it’s the richer countries who pay the big bribes. • Media in developing countries often take an anti-foreigner view. This is just as destructive to good reporting.

11. Life on the Job • Journalism is like an apprenticeship in many ways. In this country you pretty much always start at the bottom with the smaller pieces and then work your way up, in the beginning you cover markets and then later you get to interview finance ministers. So we will begin with market coverage. It’s the bread and butter of the wires and the daily papers and every reporter needs to understand a bit about how the markets work before they write anything else about business.

12. Good training • Can be a bit routine—at DJ we used to say you are scared for the first two months and then bored for the last two but in fact this kind of reporting is important: • --also it is great training for writing quickly, • --quick reflexes, responding quickly to news • --you build up sources you can use later for other kinds of stories • You cant write the big stories without coming to grips with the smaller routine stories

13. Market Coverage • Market coverage means writing about bonds, forex, commodities such as oil and rice and the stock market. Major newspapers in countries where the stock market is active and important will typically have one or two stories each day about the market and where it closed. Wire services will put out stories every two hours or so on the different markets they cover. At DJ we had a forex comment every two hours around the clock, and in individual bureaus we would have 2 stock market comments a day in somewhere minor such as Amsterdam and desks of people covering major changes in share prices throughout the day in somewhere major such as London or New York. Typically in developing and transition countries the stock markets are tiny and don’t have much liquidity and they just aren’t that important. Companies don’t get money to expand from the capital markets, they get it from banks and so banks are more important. (of course in the US most share price issues are done to help companies do takeovers with stocks—you buy a company by issuing shares and doing a swap--but we still have this myth that the stock market is where companies raise funds to expand their core business)

14. Market Stories • Basically the point of a market story no matter what the market is to: • say where the market is and why • predict where it’s going • explain lede, nutgraf • Some numbers that have to be in the story include: where is the market, volume, prices, news that affected trade

15. What is Market Moving? • --weather conditions affect commodities. A drought can mean rice prices will rise • --the possibility of a war in Iraq means oil prices could rise and so prices go up on anticipation of this • --if a company reports a better-than-expected financial result the share price could rise so any news that could mean results will be good can drive up share prices on anticipation • --on the currency markets, traders are always watching to see if the CB will raise interest rates so they look for signs of economic overheating. A drop in jobless claims or a rise in manufacturer purchasing or housing starts can cause a rise in a currency as they expect the CB could then raise interest rates. (This is an example of the disconnect between economics and market. There is an economic theory that interest rates in one country = interest rates in another country plus the exchange rate. This is called covered or uncovered arbitrage and the idea is that if there are inequalities of interest rates, people will borrow from a country with low interest rates and then lend in a country with high interest rates –by buying bonds for example—there is a big body of literature on this but in the world of your average forex trader it’s sort of ignored. Traders believe the money will go to wherever interest rates are higher. And so they spend a lot of time watching indicators such as • --jobless claims • --CPI • --retail prices • --consumer confidence • --trade figures • In developing countries far fewer indicators are released. In developed countries you can get everything, in Holland we were given pig figures, I seem to remember

16. Interest Rates • In general interest rates rises drive down stock prices as people assume that when the interest rates rise people will take money out of the stock market and put it into the bank. • They also drive down bond prices as when the bond yield goes up (the interest rate on the bond) then the price falls down • So all bad economic news that suggest economic growth is going to be dampened means good news for the bond market • Emerging market bond rates are usually done as a spread with LIBOR, SIBOR and t-bill rates • When there are crises in emerging markets then the risk is viewed as high and the interest rates go up to compensate and the prices fall. So in the Asian crisis of 1997 you expect to see spreads widen on emerging market debt in Argentina or Brazil or Russia. • So a lot of time is spent watching interest rates and where they move.

17. Other Business Stories • Anything that can affect a company’s earnings will move the share price so all of these factors are considered news: • earnings • New products, lines, marketing strategy • Strikes, labor disputes • Government intervention, regulation • Moves in the broader economy • Outlook for the sector • Management reshuffles • Mergers and acquisitions and sell-offs of divisions • Stock splits, share issues and offerings

18. Disclosure • Countries with markets have rules about disclosure. • Information that can move the market must be made public. • Companies need to release information that will affect their earnings even if it’s outside the earnings period. • Developing countries often less transparent. • In the US we have Reg FD and other laws.

19. Broader economic stories • Trade agreements • Privatizations • Pension reform plans • Forex crises • Bailouts • Debt negotiations • Negotiations with bilateral donors and WB, IMF, ADB, IMF • Employment figures • Government policy changes • Infrastructure construction

20. Using Numbers • Once you have your lede and nutgraf you will know what you are trying to say, what your story is. • Then you pick the numbers that tell that story. • Compare apples to apples • Split them up so they don’t overwhelm the reader • If they look strange, they are strange • Check, check and check again