Tech stocks have returned to bubble levels, thanks to PR, weak financial journalism and cheap credit, writes noted financial journalist David Cay Johnston.
Johnston writes, “These sky-high valuations get little skeptical coverage in the financial press, which has acted more as lapdog than watchdog in the past decade. Instead of barking warnings, many Wall Street reporters wag their tales in ways that please the speculative crowd, which, at great profit, feeds them market-moving tidbits along with a pat on the head.
“A key element in today’s irrational exuberance is the rise of novel ways of valuing companies that gloss over key facts.
“In the 1990s the stock bubble expanded as companies persuaded journalists to shift focus from traditional measures such as net profits and net earnings per share. A new standard — earnings before extraordinary items — became a common measure, even though some companies reported extraordinary items with almost the regularity of quarter financial reports.”
Read more here.