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Toll CEO: Fourth Estate Razes Real Estate

The homebuilder didn't blame the weather, but blaming the media was just as lame.

It's true that the Business Press Maven casts an angry eye on the business media each day, risking journalistic hate mail and kicked shins at cocktail parties. But there is only one place I draw the line. When someone blames bad business on the media ... I have to take up arms in the media's defense.

Blaming the media for the fractured state of your business is lamer than the retail industry's fallback excuse of too hot/cold/rainy/dry weather. It is also an indication that your troubles are far from over.

Enter Robert Toll, CEO of the estimable

Toll Brothers

, flapping his gums about how media reports about falling house prices are scaring customers away from buying.

Said Toll, while announcing anemic preliminary quarterly results:

"We believe there is significant pent-up demand which is growing. When we have held promotions, buyers have come out to play and put down deposits. Often, however, a lack of confidence in the direction of home prices overcomes their enthusiasm and they don't take the next step of going to contract. They, like all of us, read the papers and watch TV, both of which keep advising them that home prices are declining."

They Just Don't Get Toll!

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This has become quite a go-to line for the leader of an overextended company, one whose products customers can't afford based on carrying costs. Last quarter, while reporting the company's worst results in two decades, he said:

"Ceaseless talk of a recession continues to dampen the mood of consumers. This drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures has kept pent-up demand on the sidelines."

Got that? It's not that a recession is (probably) at hand. Nah. It's the media talking up a recession, probably because they want the newspapers they work for to go Chapter 11 even quicker.

Let's count the ways that Toll's sad little mantra is misleading:

    1) I don't remember Toll crediting the media during the ridiculous housing run-up for chasing real estate advertising money with 1,423,789,678 happy profiles about people in houses that they had redecorated and were going to increase in value forever. Remember? The word "subprime" was literally not in the journalistic vocabulary.

    2) Since the housing downturn began, a good portion of the media has been busily predicting its recovery. Watch The Wall Street Journal build an entire imminent recovery story on a single statistic: from a realtor trade no less. Or witness The New York Times not even mentioning the role of the strong dollar in temporarily propping up New York City housing prices. Or that widespread declaration of a recovery before the downturn had hardly begun when existing home sales blipped up for a grand total of two months in a row. Usually it takes three to declare a false trend, but they made an exception for real estate at two.

    Look, bottom line is that whether you are talking about a retailer blaming the weather or a home builder like Toll,

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    blaming the media, the savvy investor needs to redouble caution when a company uses a tool of distraction.

    The irony is that the media, so cowed by fear, eager to shift story lines and write real estate recovery stories and apt to report in an on-the-one-hand-on-the-other-hand fashion, which gives a free showcase to any ridiculous claim, does not call this for what it is: a hustle job.

    But look closely at Toll's quote at his company's most recent disaster of a quarter. He mentions people reacting to promotions, but not going all the way to closing. Part of that is a function of the credit crisis. The loans are just not going through. But anyone in any business -- even that retail outlet that people are not shopping at today because it's 70 degrees and sunny -- will tell you this: If people are getting intrigued by discounts and promotions, but not yet making it all the way to the cash register, guess what it means? The discounts and promotions are not steep enough and prices have to come down by another 20%. And that ain't the media's fault.

    At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

    Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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