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Monday, 18 December 2017

Where does the Murdoch buck stop?

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In another life, I found myself in Independence, Missouri, home of the Harry S. Truman Library where there is a reconstruction of his White House desk and upon which sits a little wooden sign declaring “The Buck Stops Here”. Yes, the folksy Truman acknowledged that the buck stops at the top, not in the middle and not at the bottom.

The culling of the News of the World by the Murdochs yesterday is trying to disprove this assumption. There is no defence for the phone-hacking that went on. There is no defence for illegal phone-hacking in any shape or form and it is a sad reflection on our society that it took revelations of the type concerning the Millie Dowler case until the “merely” illegal became the utterly unacceptable. However, if the Murdochs, Senior and Junior, thought that killing the NotW would disinfect the environment and suppress the stench, I sincerely hope that they are wrong.

Anthony Peters, SwissInvest Strategist

Anthony Peters, SwissInvest Strategist

That the British tabloid press is out of control is barely new but what many non-Brits will not be aware of is that there is a much bigger corporate game being played. Murdoch owns 40% of B-Sky-B – the dominant British satellite TV provider which owns Sky TV – and wants to own the rest. This has been an extremely contentious issue and one which has been taxing the rules of plurality, meaning there are enough varied news sources to prevent one sided reporting. The fact is that, so I am informed, the Murdochs control a larger part of the British media than Silvio Berlusconi does of the Italian.

However, there is another test which can also be applied by the authorities, namely whether someone is fit and proper to own and run broadcast media. This brings up the question as to whether killing off a 168-year-old newspaper, the largest selling single title in this country, is a way of proving that they are fit and proper.

The chief executive of News International, the British arm of News Corp is Rebekah Brooks who was editor of the NotW at the critical time when the relevant hacking took place. James Murdoch, Chairman and CEO of News Corp (and fourth son of Rupert), has expressed his sadness with respect to the events but has also affirmed his confidence in Brooks and his desire to see her remain in her post.

So, how far down the tree does Murdoch reckon the buck stops? If the Murdoch empire has grown to such an extent that the senior management no longer controls what is happening as a matter of course on the coal-face, then one must question whether it is fit and proper; I guess Messrs. Murdoch Sr. and Jr. reckon that the only buck that needs to stop at their respective desks is the one printed green on white and that for the rest they can stick with the maxim that “In God We Trust”.

Portuguese peril

Over the past few days I had seen some similarities between the relationship of the News of the World and the British people and the relationship between the ratings agencies and the European authorities. I bet the latter would have loved to see the former just closed down but so easy it will not be.

Jose Manuel Barroso and even Jean-Claude Trichet are busily supporting the cause of Portugal and I hope that they can stop the rot as the Portuguese curve is beginning to behave as the Greek one did a few months back. One should say that at least the Greeks still have state assets to sell – how good they are and what they might get for them is a different matter – but Portugal has already flogged the crown jewels and spent the money.

However, I still see some harsh criticism of the role of hedge funds in this game. I received a note recently which reported outstanding credit default swaps on Greece of a net notional of US$4.8bn equivalent. This is according to the Depositary Trust and Clearing Corp which is a central registry that captures most CDS trades. That is equivalent to around 1% of the €292bn of outstanding government debt. I can’t see the tail wagging the dog here, can you?

US equity markets had a punchy day on Thursday with the S&P up just over 1% as the focus turns to today’s payroll report. I guess I’m not the only one who is expecting a positive surprise. We’ll see but I’d hate to be standing in the way if the market is wrong.                                                        

Alas, it’s that time of the week again. All that remains is for me to wish you and yours a happy and peaceful weekend. May you, as you collect your very last News of the World – which isn’t worth collecting as there will be no scarcity value, ever – appreciate that the only safe thing to hack is deadwood in the garden.

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