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PulteGroup, Inc. (PHM): The Reality TV Show Indicator

It’s far from scientific, but perhaps it’s worth paying attention to: Is there a reality TV show indicator?

Investors have long cited, at least anecdotally, the existence of a newspaper indicator — that is to say, when the front page of a mainstream newspaper is dedicated to the market, the top (or bottom) is in.

Reality TV as a cultural phenomenon is still somewhat new — perhaps 15 or 20 years old. That said, the rise of some shows has definitely coincided with the tops of markets.

PulteGroup, Inc. (NYSE:PHM)

Home flipping shows and the real estate bubble

In hindsight it’s obvious, but back in 2005, the existence of a real estate bubble was still very much open for debate. (David Lereah’s book Are You Missing the Real Estate Boom? is proof enough of that.)

The first season of Discovery Home Channel’s show Flip That House debuted in 2005. Each episode detailed a group of people’s efforts to flip a house — initial purchase, remodeling and final sale.

A&E had a similar show, Flip This House, which debuted the same year, as did TLC’s The Property Ladder — another show based on house flipping.

During the boom, flipping houses was a way to make a great deal of money — with home prices rapidly appreciating, speculating on homes made sense. Shares of PulteGroup, Inc. (NYSE:PHM), one of the largest US home builders, peaked near $49 in 2005, before later cratering to under $4.

Interestingly enough, as The Washington Post notes, house flipping has returned. In the first half of 2012, the popularity of flipping houses increased 25% from the prior year. Since the beginning of 2012, PulteGroup is up more than 200%, and now trades with an above market price-to-earnings ratio of nearly 25.

But PulteGroup, Inc. (NYSE:PHM) shares aren’t the only thing that have rebounded — home flipping shows are back! A&E’s Flipped Off is a Houston-based flipping show, while Spike’s Flip Men was about flipping houses (it has been cancelled). HGTV’s Property Brothers isn’t directly about flipping houses, but does center around buyers acquiring and remodeling existing homes.

While few analysts are calling for a second American housing bubble, a couple are cautious on PulteGroup, Inc. (NYSE:PHM). JP Morgan downgraded the stock at the end of April, arguing that Pulte was poised for below average order growth through the end of next year.

Goldman Sachs reinitiated coverage last month with a Sell rating and $18 price target. Goldman expects Pulte’s margins to improve, but believes the company will have difficulty growing in the near future.

Gold Rush and the gold bubble

Economist Nouriel Roubini has championed the bursting of the gold bubble. Yet, unlike housing, the existence of a gold bubble is still open for debate. Nevertheless, it is interesting to note the rise of a gold-based reality TV show.

In December 2010, the Discovery Channel debuted Gold Rush, a show about a group of men digging for gold in Alaska. The spot price of gold peaked just nine months later, briefly breaking above $1900 an ounce.

Along with the spot price, shares of the SPDR Gold Trust (ETF) (NYSEMKT:GLD) peaked around $183. Since then, shares are down over 33%.

GLD is the most widely known gold ETF out there, and largely trades in line with the price of gold. Although it has a 0.40% expense ratio, it’s one of the best ways to play the price of gold directly without getting involved in the actual bullion market.

Gold-based reality shows haven’t caught on to the same extent housing-based shows did, but History Television’s Yukon Gold debuted this year — the show largely mirrors Gold Rush’s premise.

If gold prices do fall further, and observers looking back firmly categorize its meteoric rise as an instance of an asset bubble, they’ll be able to point to these gold-based reality shows as an indicator.

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