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Bulls & Bears
This past week's Bulls & Bears: Gary B. Smith, Exemplar Capital managing partner; Tobin Smith, ChangeWave Research editor; Scott Bleier, HybridInvestors.com president; Rob Stein, Astor Asset Management managing partner, and Bob Olstein , Olstein Funds president.
Trading Pit: Al Qaeda Keeping the Dow From Its All-Time High?
The Dow was nearing a close that would have marked a new all-time high. But late Friday, al Qaeda's second in command, Ayman al-Zawahri, released a tape that threatened another holy war. Stocks retreated and the high was out of reach. Is Wall Street still spooked by these guys?
Tobin Smith: No. I will not give this joker credit! There were a lot of things going on. Automatic computer trading sold all these stocks not this terrorist. They are not going to have an impact on the market.
Bob Olstein: Terrorists spook market from time to time. The rally resulted from the 10-year rate going from 5 percent to 4 ½ percent. Put simply, interest rates came down. Inflation has been overstated. The market is undervalued but needed a correction and this gave an excuse to sell.
Gary B. Smith: These tapes didn't help, but the market had been selling off most of the day. If the terrorists' goal is to hurt economy, they'd wait for us to hit an all-time high, suck all the buyers in, and then attack. Right now, I think these tapes are background noise.
Scott Bleier: The market did not fall due to Al Qaeda. They're released so many tapes already. We have a fight over there so we don't have to fight over here. The Dow was toying with new high all last week. Stocks will back away and do a little work before breaking through.
Rob Stein: Stocks know that we're fighting a War on Terror, I just don't think it's priced daily into the market. Whether we close 50 points lower higher or lower from an arbitrary number has nothing to do with a specific tape. There were more significant factors affecting the market, like the end of a quarter and month, than this tape.
Home Prices: One-Time Drop or Worst to Come?
Home prices falling year over year for the first time in over a decade. Is this fall a one-time drop or is the worst yet to come?
Rob: This is not a one-time event. I think there will be much more downside in housing. The bottom won't fall out, but the Federal Reserve is tightening rates and targeting housing. We're seeing the effect of raising interest rates now. If the Fed goes a little too far, housing market will correct a little more. The stock market will then absorb a lot of that pain. It's similar to when the stock market was falling; the housing market supported the economy.
Gary B: The housing market is now a buyer's market. We're paying far too much attention to housing prices. If you look at a monthly chart of the median home prices, they've been going up since 1972 in a nice even curve. It peaks and pulls back, peaks and pulls back. Right now prices have pulled back, but the overall trend continues to be up. I don't see any problems right now for housing.
Tobin: If you look in California, the number of home sales has come down substantially, but they are staying at the average price. Very few homes are selling at the high end. If you look at the very extended areas, homes are sitting for 6-12 months. There's much more pain ahead for those in a very high areas.
Bob: A decline in housing and a little bubble burst in the housing market is positive for the stock market. For one, the housing market was over inflated. Second, it takes money out of that area and makes more money available for the stock market. Plus, it's good news now that interest rates have come down.
Scott: The worst is over in the housing market. Part of it is that interest rates are coming down. It is also the person that is flipping homes that is out of the market too. This is why prices have come down. The flippers lent a lot of upward pressure to the housing market. Now that they are gone, the housing market is stabilizing. If you want to buy a home, there's a short window where there are some desperate sellers and now would be the time to buy your home for a home.
Bob Olstein, one of Wall Street's best, picks his favorite stocks.