The news is Einhorn

Posted by Josh Friedlander | 1 Comment

NEW YORK (Reuters) – The level of risk on Lehman Brothers Holdings Inc’s balance sheet remains too high despite moves to improve its balance sheet strength, hedge fund manager David Einhorn told Reuters on Monday.

Lovably soft spoken hedge fund manager David Einhorn should be worried about the monster he’s created. Shocked by the ability of the stock market and regulators to ignore facts, Einhorn has discovered that people do respond to personality. I worry that he’s building his own cult of it.

Reuters should not lead a story with the fact that a hedge fund manager has stated an opinion, unless that opinion is accompanied by or promises an action (e.g., Einhorn says company leverage is too high, enlarges short”). “Mayor dislikes cigarettes” is not news. “Mayor to ban cigarettes in bars and restaurants” is news.

Who is David Einhorn that his mere thought is a lede? That’s not to say he isn’t correct, but his opinions are not facts nor do they necessarily foretell actions. He’s already shorted Lehman; he made a newsworthy action when he went short. Everything else is just noise, promotion, Einhorn talking his book. Imagine a story that led with a stockholder saying that a stock he bought long ago was still undervalued!

In his recent book, Einhorn was very critical of a financial media that only reports easy stories, ignores investigative journalism, avoids stating facts or taking obvious, but difficult, stands, is ignorant of basic accounting or business procedures, and which deceitfully tends to shoot the messenger while gaining access by pretending to be a compatriot. I agree with his observations.

The mainstream press mostly avoids doing reporting and research in favor of producing “gotcha” journalism and trend stories. I don’t think that’s an easy problem to fix, but now that Einhorn has begun to win over the mainstream press, he seems to be having a heady time exploiting the media’s tendency to focus on the words and actions of an interesting public figure.

That’s certainly his right, but if he believes in fostering better journalism, he might consider taking his name out of the picture. He’s gotten the press to take an appropriately skeptical view of one particular company, but if the story is about him and what he says, and not about the company, he runs the risk of confusing the issue and inviting backlash. Lehman IS at risk, whether David Einhorn says it or not.

Comments