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Cost of Freedom Business Block: Saturday Morning Quarterbacking the Stock Market Plunge

Reported by Marie Therese - March 4, 2007 -

Heaven help those trusting viewers who think they are going to get "fair and balanced" financial reporting on the FOX Business Channel, scheduled for launch in Q4. If the Saturday morning "Cost of Freedom" financial shows are any indication, FBC will be populated by nothing more than a bunch of loudmouth know-it-alls jockeying for position, interrupting and overtalking each other trying to force the global economy into a tiny little box called "Republican Talking Points". The good news is that CNBC will have nothing to worry about, competition-wise - unless, of course, News Corporation is planning to acquire CNBC in some kind of stealth trade-off or hostile takeover involving parent company NBC Universal (which is 80% owned by General Electric whose former CEO Jack Welch appears regularly on Your World with Neil Cavuto).

Yesterday morning (3-3-07) none of the FOX News rah-rah boys (and girls) were able to gloss over the nasty tumble that occurred in the stock market. Signs of stress were obvious in all four shows, manifesting occasionally in angry outbursts and name-calling. Even though the various hosts tried to squeeze the commentary into the usual pro-Bush GOP straight-jacket, it was a lost cause. REALITY reared its ugly head last week and, suddenly, FOX's business experts were forced to deal with the fact that the global economy has a mind of its own and doesn't give a fig about George Bush's political agenda.

Bulls & Bears, the first of the four half-hour shows, featured host Brenda Buttner and regular panelists Gary B. Smith (Exemplar Capital), Tobin Smith (ChangeWave Research), Gary Kaltbaum (Kaltbaum & Associates), Scott Bleier (HybridInvestors) and Adam Lashinsky (Fortune Magazine). Tobin Smith - who reminds me of a suede shoe car salesman - did his usual "everything is going to be just fine" bit and encouraged investors to make a list and buy on Monday's open.

Gary Kaltbaum, Gary B. Smith, Scott Bleier and Adam Lashinsky all urged caution, claiming that the bottom has not been reached and advising individual investors to sit it out for a while.

Gary B. Smith, who has been nicknamed "The Chart Man" because of his reliance on sophisticated charting, advised caution, claiming that the market was headed back down to 11,000.

Brenda Buttner noted that "every time there's a drop like this" investors make money "unless, of course, there's another drop." (Yes, Brenda, that does about sum it up!)

Adam Lashinsky said that he saw "echoes" a 1998 drop involving Russia and Thailand but, since the economy is in "good shape," this bear market will not last long.

Gary Kaltbaum, who is generally very gung-ho and supports the FOX News position du jour, was very negative, stating "I say you sell. ... I don't know about a year, two years from now. All I know is the complexion of the market changed this week from accumulation to distribution, a big way, and not just our market."

Scott Bleier joined the chorus of bears and advised selling. "I don't think you buy just because the market began its dip last week," Bleier said.

"It's always those times when you build on these little things," Gary B. Smith noted. "First it's the sub-prime crisis. Then it's the China thing and all of a sudden these little things add up and you find yourself - you look back and you go 'My god, the signs of a bear market were there. Why did we take it so lightly?'"

What surprised me was Gary Kaltbaum's negativity in light of his past history as a cheerleader for the typical FOX News rose-colored view of the economy. He was definitely bearish, as can be seen from the following exchange when Brenda Buttner asked if individual investors should begin "selling things" in their 401K plans.

GARY KALTBAUM: "But all I'm saying - my contention is there's more lowering of price to go. And by the way to [Tobin Smith's] point about 15 PEs and all that, those are all estimates and if the economy starts heading south, those numbers are gonna go up. And, just remember, the market doesn't care about the good news today. It cares about what's going to happen in a few months and maybe it's sniffing out something. I think it's called credit crunch which is a big potential going forward, now."

BRENDA BUTTNER: "So you're basically saying the market likes the bad news and isn't caring about the good news, because there was lots of good news out last week."

SCOTT BLEIER: "Listen, Brenda, the bigger they are, the harder they fall. We spent 8 months going straight up without so much as a 2 percent correction. There's a price to pay for that kind of great action. The price is going to be this unusual volatility for a period of time and, if you're an individual investor, I think you stay away from it and you wait for things to settle down. If you're an active trader, you go after it and you make money or you at least try to make money. If you're an individual investor, you let the dust settle."


GARY B. SMITH: "Well, here's the thing. If you think we put in a bottom this past Friday, then you're in Toby's camp. You should start buying."

BRENDA BUTTNER (interrupting): "Yeah, but you're supposed to be tellin' us that!"

(N. B. I found this comment of Buttner's to be very interesting in that it appeared that she was scolding Gary Smith for not following a script.)

GARY B. SMITH (annoyed): "I don't know! I don't think we put in a bottom."

TOBIN SMITH (loudly): "You gotta make a call. That's what you're here to do! Come on!"


GARY B. SMITH (even more annoyed, loudly): "And I - do not buy Monday morning if - certainly, if you have a short time frame, you should be selling for [indecipherable]trades Monday morning."

BRENDA BUTTNER: "And he doesn't even need a gun to his head!"

GARY KALTBAUM: "If you think a bottom's been put in already, you're on your third bottle of Jack Daniels, as far as I'm concerned."

(N. B. There have been many references in past shows to Tobin Smith's favorite bars and love of drinking.)

Tobin Smith then declared that, since both Garys were bearish, the market bottom had been reached, because in the past when those two agreed, the opposite happened - or, at least, I think that's what he was saying.

(I pity any investor who was looking for business "science" in this discussion. With the exception of Gary B. Smith's one chart posted early on in the segment, this was all a lot of opinion. Give me CNBC where at least the guests get to be heard all the way through and back up their predictions with facts and figures.)

In the next segment all of the analysts waxed enthusiastic about the strength of the American economy, declaring that it has withstood many hits bigger than this last and will stand for all time, blah, blah, blah. I felt like I should stand at attention and salute.

Tobin Smith (speaking so fast his words occasionally became jumbled) summed up the FOX News business mantra really well, when he said "One would think with all these bad things, there would have been in a recession. There's a reason why we're not in a recession. We have, by far, the world's most spread out economy. Our economy is not just cars. Our economy's not just technology. Our economy is so many diversified sectors and we've never really know (sic) that until the last ten years because if you've seen the things that we've hit the last ten years that haven't knocked us out. We're a service economy. We're not a manufacturing economy. We're not an economy that needs to export as much as we need to consume and that is the inherent strength of our diversity that I think people don't realize in 2007."

However, when Tobin Smith praised American "diversity", claiming that we are no longer a manufacturing economy but a service economy, I got the same queasy feeling I always get in the pit of my stomach when someone argues that a service-oriented consumer economy is inherently better than the old manufacturing-based producer economy.

As I frequently tell my friends, we better hope China doesn't declare war on us. We couldn't make an aircraft carrier or jet plane without parts we can only buy from the enemy. It seems to me, from a pragmatic standpoint, that Wall Street has sold Main Street down the river for a quick profit and that, last week, the new industrial giant of the world - China - sneezed and the U. S. markets caught a cold.

It remains to be seen if that cold lasts for only a few days or develops into long-term pneumonia.