The way I see it, the decision of the New York Times to sell the Boston Globe for a 93 percent loss – or rather, a 103% loss if the pension liabilities are considered, indicates one of two things:
After purchasing the Boston Globe in 1993 for a then-record $1.1 billion, the financially troubled New York Times just announced that it sold the 141-year-old paper to Boston Red Sox owner John Henry for a mere $70 million. That’s a straight 93% loss. Figuring in two decades of inflation would only make it worse — as does the fact that the Times retains the Globe’s pension liabilities, estimated at over $100 million.
The Times announced in February that it was putting the Globe up for sale. News reports claimed that bids had been as high as $100 million. What might have sweetened the lower offer for the Times is that Henry offered a straight cash deal, which is expected to close sometime in September or October.
In 2011, the Times turned down a $300 million offer from Aaron Kushner, CEO of Freedom Communications, Inc., publisher of the Orange County Register and other newspapers in California. This offer even included the assumption of pension liabilities, which are currently estimated at $110 million.
Either it was worth $340 million to the owners of the New York Times to keep the Boston Globe out of the conservative-leaning hands of Freedom Communications or the value of $70 million in cash trumped $410 million in non-cash. If the real reason was not ideological, this tends to indicate that we are proceeding faster into the deflationary scenario than even most deflationists understand.
In inflationary environments, stock is worth more than cash and credit is fully exchangeable with cash. In deflationary environments, cash is worth more than stock or credit due to the expectation that the former will decline and the latter will be worth less than its nominal value.