The sensationalist WSJ

By Felix Salmon
February 26, 2010

Here’s the front page of today’s Wall Street Journal; I think it says a lot about where owner Rupert Murdoch and managing editor Robert Thomson are taking the paper.

SNV33421.JPGThere are three main items on the page. The big headline splashed across the top is “Hedge Funds Pound Euro” — a story which, in its online telling, is weakened significantly to “Hedge Funds Try ‘Career Trade’ Against Euro”, although the headline on the home page remains the same.

The story is accompanied by a chart showing the recent deterioration in the value of the euro, for all the world as though it were caused by the hedge funds in question. There’s even hints of conspiracy: the story begins with the tale of a few fund managers having dinner — together! And talking about the euro!

There’s only the vaguest hint, in the ostensibly-sober WSJ, that it’s ridiculous to think that hedge funds could cause a large medium-term change in the value of the euro against the dollar. They can certainly bet on such a move, and make money if it happens, but you can’t manipulate the largest currency pair in the world, when it’s freely floating and does over a trillion dollars in volume per day.

But that doesn’t stop the WSJ from trying. After talking about nothing but currency trades for the first 11 paragraphs of the story, there’s then a screeching of gears and those demons du jour – credit default swaps (CDS) – are shoehorned into the story, which suddenly starts talking about bets on Greece’s creditworthiness.

While it’s true that worries about Greece can have an adverse effect on the euro, again it’s pushing the limits of credibility to suggest that hedge funds are deliberately trying to manipulate the market in Greek credit so as to make money on their foreign exchange plays.

Especially when, as the article concedes, the only named player in Greek CDS — John Paulson — is now reportedly bullish on the country.

Basically, the article is long on sensationalism and short on news — much like the big photo on the page, a human-interest picture from Haiti, underneath which we find a crypto-denialist story about climate change carrying the headline “Push to Oversimplify at Climate Panel”.

The story loves that “oversimplify” word, using it in two headlines and twice in the body of the article, but in all cases the shorter and more objective “simplify” would be much better suited.

The story talks about “institutional bias” at the the Intergovernmental Panel on Climate Change (IPCC), but there’s clearly an institutional bias at the WSJ on this issue too, as evinced by things like the paragraph which begins with this:

Even some who agree with the IPCC conclusion that humans are significantly contributing to climate change say the IPCC has morphed from a scientific analyst to a political actor.

That kind of language makes it seem that there’s a pretty symmetrical argument about the existence of anthropogenic climate change, and that even some people on the IPCC side — the side of the believers — are still critical of the U.N body. But of course there isn’t a serious scientific debate over the existence of anthropogenic climate change, not that you’d ever learn that from reading this story.

And just look at the smoking gun that the WSJ presents as evidence of oversimplification in IPCC reports:

wsj.gif

This is oversimplification? It’s simplification, yes — it’s taken four different time-series of historical temperature, and averaged them.

But I don’t think it’s oversimplification: they all show pretty much the same thing, that temperatures stayed pretty constant, within a 0.5-degree range, from the year 1000 to the beginning of the industrial revolution.

Since then, temperatures have been rising sharply, and all the different scientific scenarios for the future show them continuing to rise dramatically. The final report shows projections for the future, as well as historical data from the past, making it clear which is which. In that sense, it’s much more useful than the historical data alone for the purposes of policymakers.

In any case, it’s clear from the photograph and the two main stories on the WSJ’s front page that the paper is aggressively becoming both sensationalist and political. That might be a sensible move, from the point of view of selling copies, especially on the newsstand. But it will also inevitably serve to erode the trust that many people, on Wall Street especially, have in the reporting of the WSJ.

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