Tuesday, just after the New York Stock Exchange bounced in and out of the 500 point pothole, an interesting item appeared on the blog site for the U.S. News & World Report. In it, senior writer James Pethokoukis asked the interesting question:
"Did the Drudge Report help tank the stock market?"
In fact, there were a number of other, more likely, causes, ranging from Alan Greenspan's warning that morning about a possible impending recession, falling durable orders and housing sales, rumors of China instituting a capital gains tax, etc. But still, Pethokoukis's question was intriguing.
As he noted, Matt Drudge has enormous impact both on America's leaders, as well as its journalists, both groups regularly clicking in on his web page throughout the day (it's been my home page for the last five years).
Drudge first made his name breaking much of the Clinton-Lewinsky scandal, and though he was vilified by the mainstream media then, he's been a must-read ever since. With his site, his radio show and his carefully constructed Walter Winchell look, complete with fedora, Matt Drudge, though he has gained some legitimacy, remains the great news source that no one talks about.
Strictly speaking, the Drudge Report is not a blog, but an aggregator site. That is, he and his team comb multiple news sources of their own - on the web, wire services, blogs - around the world and then post links to them. Part of the appeal of the Drudge Report is that it is one of the last refuges of good old-fashioned tabloid headlines.
On a given day, the Drudge Report may contain thirty or forty sentence-long headlines, the most important ones in red, all under a single major headline in large, bold type. On the really big breaking stories, especially the ones still emerging, Drudge will even post a flashing siren on the screen . . .and you better believe every journalist in America notices. So do a lot of other people: the Drudge Report can get 20 million hits per day, and is currently running more than 4 billion hits per year.
All of this is back story to what Pethokoukis thinks may have happened on Tuesday. It seems that former Federal Reserve chief Alan Greenspan gave a speech in Hong Kong on Sunday in which he said, reasonably, that this being one of the longest economic expansions in recent years inevitably certain countervailing forces were growing that would inevitably lead us into the next recession. In particular, said Greenspan, U.S. profit margins were beginning to stabilize, and that was a classic indicator of an economy that had peaked - suggesting the beginning of a recession in late 2007, perhaps 2008.
Not exactly earth-shattering. A lot of people are saying the same thing - heck, you read the same thing here a couple weeks ago. Greenspan wasn't saying anything shocking; on the contrary, he was being his typical prudent and opaque self. You can turn on any cable financial show right now and hear a lot more apocalyptic predictions.
Indeed, the story was so unthrilling that it appears only AP covered it - and, contrary to its current reputation, actually managed to write a balanced and objective story. And, as you might expect, it produced little more than a shrug from the financial markets.