This came from a reader in So Paulo: I have not invested in funds, so therefore, I have not been harmed. Because I read newspapers on a daily basis, however, I could have alerted some friends if I had been warned by Folha. One was desolate when he asked me: Hey, you could have warned me after all because you read so much. What good does it do to read the newspapers anyway?
This came from another reader who lives in Wivenhoe, England: Is it possible that some of those boxes saying Where to invest your money by alleged experts who advised the editors of the section warned about the changes that the Central Bank had announced in February?
The two readers refer to the losses suffered in investment funds last week starting with the change in the accounting rules for the daily values of the rates in effect since Friday, May 31.
The decision was made by the Central Bank in February. The effective date underwent changes, due to pressure by banks, having been set for the end of September, until they decided to move it up a bit on Wednesday, May 29.
Apart from what the measure could signify from here going forward (its defenders argue that it makes the investment picture more transparent, uniform and tied to market realities), there were sensitive losses, changes from this to that investment, and above all else, many doubts, fears and panic among small investors.
All of this was in a landscape of a high dollar and the so-called country risk besides the conflicting analyses and/or speculation about what thinking had more influence on that uproar: the prospect for victory by the opposition (in other words, Luiz Incio Lula da Silva, the presidential candidate of the left-leaning Workers Party, or PT), general uncertainty about the future, the current vulnerability of the Brazilian economy, the ravenous activities of big speculators, an alleged political maneuver or mere sloppy management by the Central Bank, or simply the sum of all these factors.
Financial markets have always been nervously speculative, exploiting all the political and economic possibilities, or reflect the more or less forced aguish concerning legitimate uncertainties about the future. The reality is exacerbated by this years presidential elections.
What readers have told the ombudsman they are most upset about is the fact that Folha, besides not having called attention to the concrete possibilities of losses in these funds a phenomenon on the agenda since the beginning of the year did not devote the necessary vigor through the week to clarify and orient investors/readers who sought its help.
The nervousness in the market contaminated the newspaper. By giving an accounting of the size of the problem, instead of serenely turning its attention to its public, it entered into feverish speculation, running stories with disparate explanations about the origin and scope of the crisis besides exposing an obvious difficulty of showing with real examples what happened to investors assets and their prospects.
Remember that its true that Folha was not alone in this whirlpool. The so-called big general-interest newspapers all showed themselves to be stunned by the agitation (the difference among them was in the rhythm with which they regained some level-headedness).
Also remember that the newspaper sought in the first days to explain what the funds are, how they are composed and why they lost value. Such instruction, however, was superficial, and superseded the most relevant question: What to do?
Idiocy
The situation is even more serious, thinking about Folha, if you consider that the newspaper, through its investment advice section called FolhaInvest, always was clearly enthusiastic about investments in indexed, short-term certificate of deposit funds, the firm anchor in investment markets.
Now the lack of concrete orientation cannot be explained by not knowing.
On Jan. 7, for example, the newspaper carried a story headlined Revise your portfolio more frequently. It asserted:
To overcome the financial instability that 2002 promises, investors will have to closely monitor their money. This means following the main economic indicators, always asking the bank manager about what the best investments are and knowing how to carefully evaluate the term and objective of the investment.
Thats perfect. Its just that through the end of May, despite the Central Banks decision that was made in been February and many funds would in April already have started to apply the new rules, the newspaper maintained its same advice as before, favorable to the CDs as the main attraction, with no specific warning.
More detailed information has come out in specialized newspapers (on May 2, for example, the financial daily Valor Econmico ran the headline CD is no longer a sure bet. Folha still seems not to have paid attention to the scope of the idiocy that was going to be.
Only on May 26, in a long story about the topic, did it announce the drama: CDs are no longer safe haven. At the end of the story, there was this advice: Those who have money invested in a fund that showed a negative return or loss of value … should not bail out in fear of further losses. The risk in changing investments is to suffer new losses when the administration of the new fund adjusts its rate, adopting the new way of accounting assets.
Hiatus
Despite being a complicated topic and subject to political manipulation (proved last week by the government on one side and by the opposition on the other), one way or another it was clear, for analysts and for the newspaper, what occurred and what could happen. It was known that the changes would affect investors in any event.
If that was the case, why from the first moment did they not save readers from so many doubts about the fate of their money?
Why was it only in Thursdays edition, June 6, when affected readers had already been in a state of shock for days, that Folha gave clear directions about what to do about the commotion which had been going on since the previous week and was getting worse day by day?
Its not the first time that there has been a hiatus, a type of involuntary omission between what the newspaper knows and what it, in practice and what it should emphasize, tells readers.
This is not about bad faith, but is a question of the editorial line and priorities: Many times, rather than writing for those who buy newspapers, journalists seem to be writing for themselves, their peers or their sources. When this happens, its not clear who really is in control.
Nobody doubts that what happened in recent days represents a hard and serious lesson for the smallest and most conservative investors: There is no completely safe investment.
What newspapers from which these investors/readers always expect a lot and who sometimes fearfully, have placed their confidence also have learned a lesson from this.
* * *
Last week was supposed to be focused on the World Cup, but the topic was hijacked by coverage of the crisis in money market funds and the resulting fallout.
Folhas section about soccers biggest event carried news with graphics, along with a looser and more expansive language. The visual contrast is obvious between it and the sections published by other newspapers, which took a more traditional approach.
Some readers complained to the ombudsman about the legibility and organization of topics in the section. In some cases I agreed and commented in my internal critiques. In others, I didnt.
Well return to this topic.
