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Truth Leaks Out: Market's Been Flat

Reported by Judy - March 25, 2006

Somebody blurted out the truth again on Fox News' "Bulls and Bears" on Saturday (March 25, 2006): the stock market has been flat, not soaring, for five years.

The truth leaked out during a discussion on the housing market, something that gets discussed over and over on this show, probably because it's the one investment most viewers have made and can relate to. Host Brenda Buttner opened the show asking, if the housing market tanks, "Will it also take down our soaring stock market and economy?"

Gary Kaltbaum, of Kaltbaum Associates, and Pat Dorsey, of morningstar.com, argued that a downturn in housing valuations would slow the economy because consumers would feel less wealthy and would spend less money. The U.S. economy is consumer driven, they argued, so less consumer spending will hurt the economy and the stock market.

Gary B. Smith, of Exemplar Capital, disagreed. People who are not planning to sell their homes will be unaffected. A downturn in housing prices actually would make housing more affordable for more people and they would be able to buy. And speculators might turn to stocks instead of buying houses. Then he said it: "If there was an effect on the market, you said, we’ve been in this boom for the last five years, the market would have gone straight up in the last five years. Instead the market’s been flat the last five years.”

What? The market's been flat for the last five years? Week after week most of the people on this show have said that the stock market has been "soaring." It's about the only adjective Buttner knows. But Gary B. says the market has been flat? I could almost hear Buttner's bosses gasp.

Not to worry, nobody called him on it. Nobody noticed Gary B.'s false step.

This week's discusison of the housing market, nevertheless, was a cut above the usual "Bulls and Bears" banter about the "soaring housing market" and whether the "housing bubble" will burst. Tobin Smith of changewave research did mention there are regional variations in housing trends, with some areas of Florida, Las Vegas, Virginia, and Arizona experiencing declines. Usually, this crew treats housing trends as if they were the same everywhere in the country, which they are not, due to regional strengths and weaknesses in the overall economy. Think of it, where would you rather own a home right now -- in a suburb of Detroit with GM's troubles or in Arizona?

Still, the discussion avoided the complexities of pricing in new homes. Prices never seem to come down. Builders keep prices the same and just include more options in the base price -- things that previous buyers had to pay extra for.

The bottom line is, even if somebody on this show occasionally tells the truth, they are not your best source for what is going on in your local housing market. I would never make a decision on something to do with my home based on these guys' comments. The only thing they're expert on is the Bush bottom line: everything is always soaring.

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