Don't Invest in NewspapersS

You may be aware that deathly newspaper company stocks have experienced a brief resurgence recently, amidst speculation that things aren't so bad after all for the newspaper industry. If you benefited from this resurgence at all, lucky you. Now sell.

Summary of what's going on in newspaper industry stocks in the last couple of years: They're finally tanking, and rationally so. Warren Buffett—partial owner of the Washington Post!—declared this year that he wouldn't buy a newspaper at any price. The last bits of hopefulness have left investors, even the contrarians. The newspaper industry is the buggy industry during Henry Ford's time, and other cliches.

But! Here in the muddy, mythical end of the recession, it's become fashionable (primarily amongst newspaper company executives) to say that a comeback is in the offing! The worst is over! The New York Times' recent $35 million quarterly loss, for example, is a sign of the great progress the company's making. Get in while the getting is cheap!

Well, as the WSJ ably points out today: What's really happened is that newspapers saw momentarily more encouraging numbers thanks to vicious cost-cutting across the board, and a somewhat less horrific economy at large. But there's not a whole lot of cost-cutting left to do before you cut your paper down to nothing. And the newspaper advertising business isn't looking up.

The reality is that newspapers are suffering severe declines in ad revenue this year on top of the double-digit percentage declines they suffered last year.
Compared with the first half of 2009, their recent performance doesn't appear to be getting much worse, but it has yet to show any real recovery.

The print ad business is in an irrecoverable dive, there's no comparable replacement revenue source, quality will likely continue to decline (unto death) at many old-school newspaper companies, and the internet still exists. Sorry.