November/December 2000 | Contents

ROLE MODELS: CAROL LOOMIS

From time to time, under the title ROLE MODELS, CJR will ask accomplished journalists to write about the people who inspired them. Here Floyd Norris, chief financial correspondent of The New York Times, discusses Carol Junge Loomis of Fortune.

BY FLOYD NORRIS

My discovery that Carol J. Loomis was a phenomenal journalist came in 1983 -- long after many others had figured it out. She disclosed in Fortune that American Express had manufactured profits at its Fireman's Fund insurance subsidiary by engaging in a transaction that had no economic reality, but that enabled the company to report decent results when the company's business was under great strain.

What was most impressive about the article was how she had pieced it together. The company had avoided disclosing it in its filings with the Securities and Exchange Commission, and even the members of the audit committee of American Express's board of directors appeared to be in the dark. Loomis had gone through the reports that insurance companies must file with state insurance commissioners.

It was not the first triumph for Loomis, and it would not be the last. The previous year she had noticed that Aetna was using extraordinarily aggressive accounting to report profits. The information was in a footnote to the company's annual report, but the S.E.C. had not noticed it. After Loomis reported on it, the S.E.C. went after Aetna.

What struck me was that Loomis was not simply reporting what others had said, or amplifying a corporate press release. The information she relied upon was public, but to get at it someone had to read the documents carefully and understand them. That person had to have at least a basic understanding of accounting rules, and of the games that companies can play with them.

Over the years, Loomis has also been an excellent -- if infrequent -- commentator on the stock market. In 1978, she wrote a classic piece for Fortune, "The Irrational One-tier Stock Market," which argued that stocks were cheap, and growth stocks ridiculously so. That was not the conventional wisdom; investors in general were avoiding stocks.

Last year, while much of the much-expanded financial press was celebrating the market's strength, Loomis returned with an article explaining why stocks could not possibly live up to the then-exorbitant public expectations. This year, when Time Warner agreed to merge with AOL, she questioned whether AOL could be a good long-term investment at the prices then prevailing. (It is a credit to Time Warner, the publisher of Fortune, and to Loomis's stature, that the piece was published.)

Loomis's stock market writing is clearly influenced by her long association with Warren Buffett, the chairman of Berkshire Hathaway. It is a relationship that goes far beyond reporter-source: she edits Berkshire's annual reports -- without being paid for the task -- and plays bridge with Buffett over the Internet. That relationship bothers some journalists, especially when she writes about Buffett for Fortune. But she is always meticulous about disclosing the relationship.

Given her clear expertise in accounting, it is a bit surprising that Loomis has no formal education in the area. She graduated from the University of Missouri, with an undergraduate degree in journalism, in 1951, and worked on the Maytag Company's house organ, which enabled her to travel around writing articles about successful Maytag dealers.

She wanted to move to New York, so she applied to Time, Life, and Fortune magazines for a job as a researcher. In those days, the magazines had researchers -- almost always women -- and writers -- usually men -- who worked together on stories. Asked at her Time interview which section she would most like to work on, she answered Business and was told that few applicants for researcher had ever said that before.

Fortune bit, however, and she started in January 1954. She became the assistant chief of research in 1958, a job that included overseeing preparation of the Fortune 500, then a relatively new thing. That job forced her to learn some accounting. "I just kind of picked up the accounting," she said in an interview. "I still am. You never get on top of accounting, or at least I don't."

In 1962 she was put to work on Fortune's investing column and in 1968 -- fourteen years after she joined the staff -- she began writing what are called "middle-of-the-book'' articles. She's still at it, although she now works for seven months a year and takes five months off. At seventy-one, she says she has no plans to retire.

When Loomis begins research for a corporate article, she reads the company's last five annual reports, cover to cover. "I just discovered this was a great way of learning about a company," she said. "You would see the company was no longer headed in the same direction as two years before." She found that interviews went better when executives discovered she was well-informed.

Getting a copy of a company's annual report is not hard. But it is amazing how underused they are by business journalists. It takes effort to make sense of many corporate disclosures, and it takes a lot of time to read the filings in detail, particularly if the reader does not know exactly what he or she is looking for. Loomis says she thinks that many journalists are simply scared of numbers.

Looking back, it is clear that reading Loomis helped show me the course I wanted to follow. She was, and remains, an inspiration.