The future of the newspaper industry is looking very gray, which makes the recent performance of the media exchange traded fund (ETF) a little surprising. What’s the secret?President Barack Obama did clarify that the one industry to which he will not extend Federal help is the newspaper industry. Pubic assistance of any kind to the newspaper industry is alluded to as a “tricky business” and that government may not be able to help at all.

As a sign of the trouble the newspaper industry happens to be in, the PowerShares Dynamic Media (PBS) doesn’t have any newspapers in its top 25 holdings. Last July, the fund counted Gannett (GCI) and The New York Times Company (NYT) as top holdings, but they’ve since been demoted. The fund instead now focuses on television and internet components.

Massachusetts Senator John Kerry  held a hearing on the future of newspapers and how the federal government can help, reports The Wall Street Journal. Newspapers are rapidly losing money as advertisers turn to search engines and readers increasingly get their news online – and for free.

A federal subsidy could help the industry, but what newspapers would have to give up to get it may not be worth it. For one, a subsidy could jeopardize the integrity of political endorsements. And if readers knew their paper was federally subsidized, would they trust that the reporting was truly unbiased?

  • PowerShares Dynamic Media (PBS): up 17.7% year-to-date; Liberty Media 5.19%; The DIRECTV Group 5.15%; Time Warner Inc. 5.15%

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.