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Join Post staff writer Howard Kurtz to discuss his piece in the third part of the Post's Bubble Economy series on CNBC and the media during "the heady days of a stampeding bull market." Read On CNBC, Boosters for The Boom (Post, Nov. 12).

During the boom period, media outlets such as CNBC "was a driving force, a cultural phenomenon, a ratings success, the play-by-play announcer for America's new pastime." Find out how the media plays a significant role in market watch.

The Bubble Economy, once known as the New Economy, had everyone cheering and the activity of the financial markets became a national obsession.

Starting around the mid-90's, investors were jumping to get in on the Internet action, unemployment virtually disappeared, companies projected 20, 30, 40 percent annual growth rates and stock prices were flying high.

But in 2000, the bubble burst, the good times halted and shortly thereafter, the economy sank into a recession. Meanwhile, the talk on Wall Street shifted to corporate scandals and speculation about when the Dow would rise above 10,000 again.

The Post's six-part series takes a retrospective look at the key players in the Bubble Economy and gives an analytical view of the bubble phenomenon. Read the Post Business Special Report: BUBBLE: The Roots of the '90s Boom and Bust.

Below is the transcript.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Burke, Va.: Looking at the stock market now, the projection of the markets going up with Republican control that came out right after the election seem really really stupid. What are your thoughts on these articles?

Howard Kurtz: Pretty dumb. I mean, who really knows? If there's one thing we've learned in the last three years it's that stock market predictions aren't worth the paper they're printed on. Now it does make sense to say that certain sectors -- say, defense and pharmaceuticals -- will probably fare better under an all-Republican government. But beyond that, you might as well predict the Dow based on who wins the Super Bowl.

Portland, Ore.: Do you think the bubble fed an increased skepticism of government? It seems to me more and more people "believed" in the private sector and wanted to denude government of much of its authority and responsibilities.

I sense a turnaround in attitudes towards the government since Sept. 11th, perhaps the crashing end of the bubble is part of that too.

Howard Kurtz: I think everyone associated with Wall Street ended up looking bad. The SEC (and more recently Harvey Pitt) wasn't aggressive enough. The analysts weren't credible and sometimes were corrupt. The media were often in the role of cheerleaders. The accountants were either incompetent or crooked. There's a huge amount of blame to go around, and government has to take its share.

Orange, Va.: Well written story, Howard, I especially enjoyed the quotes from Kernan(he must be a journalist's dream interview), but all and all I still felt like you were playing shoot the messenger a little too much. It would be like holding the Post responsible for their early positive coverage of a politician gone subsequently bad. Would we expect a newspaper to be able to predict the future, and if not, still blame them because the news about that particular individual turned sour. I don't think so.

washingtonpost.com: On CNBC, Boosters for The Boom (Post, Nov. 12)

Howard Kurtz: Thanks -- you're right, Joe Kernen is a fascinating guy. But my point is not that journalists should have been able to predict the future. It's that many of them aided and abetted the boom by not digging into these companies, by pooh-poohing the inherent conflicts of interest of Wall Street analysts, by swallowing the New Economy hype, by turning CEOs and Henry Blodget types into superstars. It was not, by any standard, an impressive performance.

Dupont Circle, Washington, D.C.: We just got notice of the sales in our condo last year. The one bedroom next door to me sold for $199,900. It is less than 600 sq feet! When is this bubble gonna blow?

Howard Kurtz: Ah, the housing bubble scenario. I've read a lot about this and the journalistic consensus seems to be that it's not as much of a bubble as the stock market was, though the rate of price increases will surely slow down. But then, the media have been wrong before.

Alexandria, Va.: I don't think you were hard enough on the financial press! The CNBC fools are still trying to talk up the market, fawning over CEOs all day, not to mention their blatant political comments (dissing Dems, kissing up to GOPers).

Howard Kurtz: I certainly don't see signs that, for example, Joe Kernen and David Faber are trying to talk up the market. But as I noted at the end of the piece, CNBC (and most financial news outlets) interview lots of people -- CEOs, fund managers, analysts -- who have a vested interest in saying things are great and stocks will be going up. I think everyone in the media is now more skeptical about these claims, but that hasn't stopped us from still giving these folks a huge platform. And when we blindly report that Salomon Smith Barney or Merrill Lynch upgraded this or that company, we seem to forget that these and other brokerages are being scrutinized for questionable dealings, privately deriding the stocks they were touting, etc.

Weston, Fla.:
I think the CNBC format, with the same people is getting "tired" How are their ratings? Also, I think I read they have a new boss, are there any changes in store?

Thanks

Howard Kurtz: As I mentioned in the piece, CNBC's ratings plummeted about 25 percent after 9/11 but have enjoyed a modest rebound (though not to 2000 levels) since the corporate scandals became a big story. The network says it's trying to focus more on real estate, news you can use, Washington, etc. But the overall programming formula is basically the same. Keep in mind that CNBC is basically aimed at a high-end audience, which is why it's so profitable for advertisers and for NBC.

Arlington, Va.: Were newspapers like The Post also to blame for talking up the Bubble economy? I seem to recall The Post favorably covering every little tiny public tech company back in the day, even though most were firms that never should have IPO'd, not to mention been started in the first place.

Howard Kurtz: Sure. The Post quoted some of the same analysts whose credibility is now in tatters. The paper wasn't skeptical enough of MicroStrategy, a Virginia company that was a classic boom-and-bust outfit with accounting problems (though it did a good job after the stock imploded). Nor did it raise many early questions about Enron, WorldCom, etc. One Post reporter joined a local tech firm and wrote a huge piece about how much money he made from the IPO. I think one reason newspapers and magazines believed in the New Economy is that they were awash in Internet advertising.

Springfield, Va.: The tone of the articles seems to be -- The Little Guy Gets Screwed by Them (whomever "them" is). I have no sympathy for anyone who loses money in the stock market. Anyone who believed it was a money machine that would never quit deserves what they got. Don't get me wrong, I have a large (for me) position in stocks but I do my homework. Anyone who invested in VA Linux at any price would most likely have blown their money on something else, like say the Brooklyn Bridge.

Howard Kurtz: Investors are grownups and are responsible for their own actions. No argument from me on that point. But the average investor also had no way of knowing that Enron was committing fraud, that Arthur Andersen was certifying lousy numbers and shredding documents, that CEOs were engaged in self-dealing, that Wall Street analysts were privately dissing the dot-com stocks they were telling the public to buy. That's why I believe the media could have played a crucial role in being more skeptical.

Arlington, VA: Great article. Do you think Kernan views himself more as a news person or an entertainer (he is, obviously, a little of both)? How thoughtful was he on articulating that balance? How skilled at actually doing it?

washingtonpost.com: On CNBC, Boosters for The Boom (Post, Nov. 12)

Howard Kurtz: Absolutely as more of a journalist. The guy is incredibly knowledgeable about the stock market. It's fascinating to watch him look at his multiple computer screens and figure out which stocks are moving and analyzing why. Sure, he kids around a lot on the air, and that makes for better television. Everyone who sits before the cameras is a performer to some degree. The question is whether they deliver the substance, and Kernen does.

Laurel, Md.: Lengthy article, so I may have missed it, but did you include any stories of anti-bubble skeptics among reporters and news analysts? Were any demoted, fired, taken off certain shows, etc. for not being "on message" (i.e. favorable) about the market run-up?

Howard Kurtz: One stock analyst was kicked off Rukeyser's Wall Street Week for being too bearish, and bears became harder for television to book because some were losing their jobs. As for journalists, Barron's Alan Abelson was consistently bearish, but others noted that if you'd followed his advice you would have missed a 7,000-point runup in the Dow. Columnist Chris Byron repeatedly argued that Net stocks were way inflated and was widely ridiculed. Other journalists were skeptical but gave in by '99 to the idea that the rules had changed and the higher stock prices were justified. It was hard to keep sounding the alarm when so many people seemed to be making so much money.

Re: Burke, Va.: I agree with you. You can't read to much into the markets reaction. There are so many variables driving the market its absurd to predict or interpret its movements. Plus we are really at crossroads I think even liberals will be singing a different tune.

Howard Kurtz: If it was easy to predict the market, would the prognosticators be doing it for free? They'd be on the phone loading up on the stocks they're convinced are going up and shorting the losers.

Boston, Mass.: Do you think the new republican talk of more tax cuts, especially around deducting capital gains taxes, is an effort to re-inflate the bubble? Or is it just talk for short term political gain. One would think that with the debt right at the legal limit and with huge war spending coming another tax cut would be the last thing on people's minds.

Howard Kurtz: I think it's not so much an effort to juice the stock market as it is an attempt to kick the sluggish economy in the pants. This, of course, is why we have elections. Although I've been reading in the last couple of days that the Republicans are not inclined to push a capital gains tax cut that is so dear to their hearts.

Arlington, Va.: CNBC makes for an easy scapegoat for the rest of the news media. I remember when general news outlets like the Post, the Times and Newsweek panicked and played catch-up to CNBC on the economy in the late 90s-2000. I think it was the me-too by these other outlets that hyped the story. Or do they get off the hook because they weren't "business" specific like the Journal?

Howard Kurtz: They don't get off the hook at all. (I mentioned the Newsweek cover "Everyone's Getting Rich But Me" in this piece.) I've written before, in The Post and in my book "The Fortune Tellers," how the media were swept away by the Wall Street hype and helped inflate the bubble. Time made Jeff Bezos its man of the year. The Post had a zillion-word piece on Henry Blodget. Everyone, including The Post, breathlessly covered the AOL-Time Warner merger as a great event and then watched the stock plummet. But CNBC gets the most attention because it's the thousand-pound gorilla of business news and became such a cultural phenomenon.

Bethesda, Md.: Because of the data suggesting the economy was already slowing down in 2000, "the Bubble" starting to implode early in the first year of the new administration, AND 9/11, most people would not blame President Bush or the Republican Party for the downturn while choosing candidates in the voting booth. Care to speculate anew on how long that phenomenon may last? Is it Bush's and the Republican party's economy starting the day AFTER the mid-term elections and from this point forward?

Howard Kurtz: There's no question that the stock market decline began in March 2000, the final year of the Clinton administration. And I think most people give a new administration a pass for the first year or so -- a period that may have been extended by the 9/11 attacks. But if the recovery continues to stall, I think Bush will get the blame, just as he'll get credit if the economy comes roaring back.

Bowie, Md.: It is very easy to make money in the stock market by doing two simple things: diversify and hold long term. There probably aren't 1-in-100 analysts in the country who outperform that formula that by doing anything else.

But you can't build an entire cable network to repeat that message 24/7/365. Is the whole premise of CNBC a piece of bad advice?

Howard Kurtz: CNBC doesn't offer advice; it provides a platform for people who offer advice and who have a vested interest in being bullish on stocks. Buying and holding for the long term is excellent if unexciting advice, though in the last three years people who were doing this have watched their portfolios nosedive. And the magazines (Money, SmartMoney etc.) that keep putting out issues on "Ten Hottest Stocks for the New Millennium" obviously have to keep updating their advice as a way to peddle their product. "Keep Holding Onto Last Year's Stocks" isn't likely to fly off the newsstands.

College Park, Md.: Ummm, let's see; the President's solution to relieving people's fears about corporations and investment firms lying to them is to go to the head of NASDAQ who was utterly complicit in setting the lowest possible bar for corporate honesty? How does this help the economy, to have the foxes guarding the hen-house? Why do corporations want this kind of phonus-balonus regulation when it only makes people more nervous about investing? Who's going to trust any business or investment firm now?

Howard Kurtz: In fairness, Frank Zarb, the ex-Nasdaq chief, is just one name that's been floated to replace William Webster on the new accounting board. But I do think such a nomination would be widely ridiculed. No amount of government regulation can protect against every instance of Enron-type fraud, but the federal government has obviously lost credibility on this front, as have many big corporations and the Wall Street brokerages that claim to be providing unbiased advice.

Washington, D.C.: At least during the bubble, was financial news the opposite of the "bad news sells" theory? Was it in the news organizations interest to be overly optimistic about the economy? Why was there such a difference between the approach to financial news versus other types of news?

Howard Kurtz: I don't believe that news organizations deliberately tried to "sell" good financial news as part of some hidden agenda. Obviously, the rise of the Internet, the explosion of the Nasdaq, the hip CEOs like Bezos and Case and Gates, all that made for good copy. But I think the media just got swept away and lost much of their normal skepticism. Financial news is handled differently in some respects; it's considered perfectly okay to report rumors or unconfirmed reports of merger talks or other corporate news on the philosophy that rumors move the market. Not to mention the constant quoting of professionals who own the stocks they are praising.

Bowie, Md.: How, if at all in your opinion, did the stock market affect the reporting of other economic news? Whenever an important indicator comes out, we're used to hearing "The Dow dropped 45 after unemployment figures were released showing..."

But it seemed for a long time like the trade balance, unemployment, wages, etc. were only considered important to the extent they affected the stock market, not as measures of people's livelihoods. Did "the market will take care of any other economic woes" become an article of faith?

Howard Kurtz: To some extent, yes. As everyone, journalists included, kept checking their stocks online every 10 minutes, there was a tendency to view everything through the stock market prism. A classic example were all those stories that said Xerox (or some other company) will lay off 10,000 people and this is expected to boost the company's stock. Too many of us lost sight of the impact on the very real people losing their jobs. And the fact that not everyone, after all, was playing the market game.

Fairfax, Va.: How does a society generate an economic bubble? Is it a function of Wall Street's relationship with businesses that have organized to cooperate (rather than compete) to maximize their take in the world market?

My biggest question is the reporting of inflation. As a consumer, the cost of housing, transportation, energy, food... has increased much faster than my income. In fact, I feel like I am loosing ground. Yet, I keep hearing inflation is in check. Could it be that real inflationary components are being factored into the economy these days and, thus, deflating the bubble?

Howard Kurtz: You can argue about the formulas used to calculate inflation - whether they give enough weight to housing costs and so on. But having lived through the double-digit inflation of the '70s, there's no question that prices are rising just modestly compared to the past. Still, I understand the feeling of going to the supermarket or shopping for a car or a health insurance policy and feeling that everything is more expensive. That may be in part because wages have not risen much in the last couple of years as many companies have tightened their belts.

Indianapolis, Ind.: I've always hated CNBC. They interview CEOs all the time and the CEOs have one message: That everything at their company is coming up roses.

What a news flash.

Howard Kurtz: That's why you have to take it with a grain of salt. The politicians who are interviewed on television often have one message also, but people have learned to be skeptical of them.

Chicago, Ill.: Mr. Kurtz,

I always watch Reliable Sources. You are the most independent journalist in America. Please keep it up.

One question. Will it hurt John F. Kerry if he is one of the richest man in American to run for 2004? Can you compare and contrast him vs. John Edwards? Also, do you believe that it is Edwards or Kerry at the top of the ticket? What do you think of Dean as a VP? (Kerry/Edwards, Edwards/Kerry, or Kerry or Edwards/Dean).

Thanks, Mr. Kurtz, for your insights.

Howard Kurtz: Americans don't seem to have discriminated against wealthy candidates in the past (FDR, JFK, Rockefeller), and Bush is certainly no pauper. The biggest question with Kerry and Edwards is whether Democratic voters will want a veteran lawmaker with a liberal reputaiton from the north (where no Democrat has been elected president since 1960) or a moderate but inexperienced politician from the south (the birthplace of the last three Democratic presidents).

Herndon, Va.: This is a great series of articles! I still find it hard to believe that there weren't more skeptics (at least skeptics who had access to the media) about the "bubble" as it kept expanding. Of course, hindsight is always so clear.

Howard Kurtz: It was really a failing of colossal proportions. But journalists who tried to be skeptical tell me they were often denounced for being too negative, trying to hurt the market, just not getting it, etc.

Fairfax, Va.: Don't you love it when you recall the sages (some now 'de-saged') commenting on the astronomical climb of the stock market, saying "the market speaks." Same thing seems to be happening now with the lack of investor confidence. We definitely need a strong SEC and accounting industry who keep in balance and prove to us individual investors that at least business isn't TOO crooked. Dishonest - no; competitive - yes.

Howard Kurtz: A lot will depend on who the president taps to run the post-Pitt SEC.

Mt. Rainier, Md.: Maybe it pays to be a cynic, or maybe it pays to read history. I can't understand how all the supposedly brilliant people entrusted with millions of dollars couldn't smell a bubble before they got sucked into it. Or maybe they did: as this last article on the bubble makes painfully clear, the people entrusted with the money weren't the ones who lost and in fact had built in their parachutes against disaster.

Howard Kurtz: Maybe they weren't so brilliant. But it sure is fascinating that many of the insiders sold early or otherwise feathered their nests while their company stocks were plunging.

Washington, D.C.: I just wanted to add that the observation that people who bought and held have seen their portfolios plummet is irrelevant to people actually committed to that strategy. If you are holding for 30 or 40 years, it doesn't matter if between years 15 and 20 you take a big hit. The buy and hold theory is premised on the idea that years 0 to 15 or 20 to whenever make up for that dip. This is a point rarely made clearly in by the media.

Howard Kurtz: Right. But if you're near retirement age you may not be able to wait another 10 or 15 years.

Towson, Md.: How much faith should investors put in the media and guest analysts given what has happened?

Howard Kurtz: My advice is to be cautious. The credibility of these folks has taken a hit, but there are still smart people out there with insights that can be valuable for investors. But anyone who runs out and buys a stock based on some talking head, without checking out the company, ought to have their own head examined.
Thanks for the chat, folks.

washingtonpost.com:

That wraps up today's show. Thanks to everyone who joined the discussion.

Stay tuned to Live Online:

National Defense: Vernon Loeb at 1 p.m. ET
"The Hours" Author Michael Cunningham at 2 p.m. ET
Bubble Economy Series: Paul Farhi on Regulators at 2 p.m. ET

Did you know that you can follow more than one Live Online discussion at the same time? Just open another browser window and toggle back and forth between discussions! And, if you miss one, catch up with the Live Online transcripts.

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