One-third of people who bought their houses in 2003 have negative equity, and if you bought your house at the peak of the market in 2006, things look even worse. But what about everyone else? Spencer Rascoff, chief financial officer of Zillow, was my guest this week and we talked about some practical tips to make the downturn work for you. Or at least not hurt as bad.

Related segments:
How Zillow Is Weathering the Housing Downturn
Heads Out of the Sand, Homeowners!

Is the peak of an epic housing bubble the best time to start a Web business all about real estate? Watching it all implode, Zillow wasn't so sure. But now, two years after the bubble's peak, chief financial officer Spencer Rascoff says yes. Zillow is all about information and community. In a volatile housing market like this one, people are gluttons for data and, well, misery loves company. Its traffic has grown 25% year-over-year.

Monetization is another matter. Zillow is an ad supported business, and even Rascoff admits the market could be more robust.

Related segments:
Heads Out of the Sand, Homeowners!
Housing Has Its Biggest Fall in a Decade. What's in It for You?

Calling the housing market weak is about as "duh" as calling gas pricey. So why do so many people think their house has more value than it does? According to online real estate site Zillow.com, only 40% of people think their house has lost value, when in reality 70% of houses have plummeted in worth. That could mean people are still spending like they're got more money than they do. And that could mean all that bad real estate news isn't yet hitting the shaky economy. Are we in for a brutal second half?

Spencer Rascoff, chief financial officer of Zillow, joins me in studio to talk about the perception and the numbers.

Related segments:
How Zillow Is Weathering the Housing Downturn
Housing Has Its Biggest Fall in a Decade. What's in It for You?

Although interest rates remain historically low, Brusuelas says deficits definitely do matter from an economic perspective. The U.S. current account and fiscal deficits (a.k.a. the twin deficits) have directly resulted in "reduced purchasing power of the U.S. dollar" since 2002, meaning "higher inflation and a reduced standard of living for all Americans," he says. (The economist - who helps set strategy for the Merk Hard Currency fund - is not a believer the dollar's recent bounce is sustainable.)

Looking ahead, Brusuelas sees the U.S. federal deficit reaching $550 billion to $600 billion in fiscal 2009, which begins Oct. 1, up from the CBO's estimated $400 billion deficit in fiscal 2008.

In addition to increased spending by whoever becomes President, Brusuelas sees a likely need to aid the FDIC with problem banks, as well as potential bailouts of GM and/or Ford. And let's not forget, the official federal deficit stats don't count "off the book" transactions to fund the wars in Iraq and Afghanistan, he notes.

As bad as that sounds (and is) Brusuelas says what he calls "Globalization 2.0" is being characterized by emerging market economies spending more money at home on infrastructure vs. exporting deflation and capital to the U.S. as in "1.0."

"The free ride we've gotten from the global economy visa vis massive injections of [foreign] capital may not hold," he warns. As a reult, Americans should brace themselves for having to work longer, with reduced benefits while likely paying higher interest rates and taxes. (Good times!)

In the end, and going forward, deficits very much do matter.

Updated from 6:00 a.m. EDT

Lost a bit amid vacations, stay-cations and the Democratic convention, a series of reports this week have shown the U.S. economy to be in not as terrible shape as many believed.

A trio of reports Monday and Tuesday showed some glimmers of hope that the housing market's descent has slowed - a key first step toward a bottom (however tentative.)

Wednesday and Thursday brought more unambiguously positive data - at least the headlines - in the form of stronger-than-expected reports on July durable goods and second-quarter GDP.

But "don't get too excited" about the data, says Joseph Brusuelas, chief economist at Merk Investments, a California-based mutual fund family with over $430 million of assets under management.

Update: As Brusuelas predicted in the accompanying video, Friday's personal income and spending data marked a "180 degree" turn from the strong reports earlier in the week.

• Personal income fell 0.7% in July, the sharpest decline since after Hurricane Katrina in August 2005. The consensus was for income to stay flat last month.
• Consumer spending rose 0.2%, as expected. But that's the slowest gain since February, and spending dropped 0.4% on an inflation-adjusted basis, the biggest slide in four years.
• The personal consumption expenditures index rose 4.5%, the steepest since February 1991. Core PCE rose 2.4%, the biggest gain since February 2007 and well above the Fed's "comfort zone"; but don't expect a rate hike anytime soon, as Brusuelas and I discuss in the accompanying video.

As with other economists, Brusuelas notes the 3.3% second-quarter GDP figure was goosed by the one-time factor of tax rebate checks. There will be a "payback" for the fiscal stimulus in the third- and fourth-quarters, the economist says, predicting a very soft holiday shopping season.» More

Stocks jumped Thursday thanks to a strong second-quarter GDP report and another drop in oil prices.

The rally left the Dow up 213 points at 11,715, within striking distance of a weekly (and monthly) close above its 200-week simple moving average of 11,740 and (possibly) its Aug. 11 high of 11,867, notes veteran market watcher Richard Suttmeier. The proximity of such key technical demarcation makes Friday more important than a typical pre-holiday session. (How Dell's after-hours disappointment factors into tomorrow's trading remains, of course, to be seen.)

But James Altucher, managing director of Formula Capital, is looking beyond such short-term technical indicators and seeing a stock market that, to him, is a screaming buy.

Mega-caps like Microsoft, GE and ExxonMobil are trading with P/Es below that of the S&P 500, which itself Altucher says has not fully adjusted to the drop in oil prices. (The last time oil was trading around $115, the index was 10% higher, he notes.)

Altucher also believes the housing crisis and subprime news is "baked in" to the market. The fund manager and author shares some of his favorite individual names in the accompanying video but declares "you can't go wrong," with a basket of stocks as a long-term investor.

Disclosures and disclaimers: » More

Barack Obama defied the odds (and the Clintons) and made history to become the Democratic party's nominee for president. As the Democratic Convention comes to a close at Invesco Field Thursday evening, concerns linger about whether Obama is experienced enough to be Commander-in-Chief, or appealing enough to blue-collar workers.

But Joeseph Brusuelas, chief economic at Merk Investments, says Obama's biggest problem is his tax policy, which he believes would be a "profound mistake."

While planning to cut taxes for "working families," Obama proposes raising taxes on wage earners above the $250,000 level, as well as on capital gains and dividends. Such policies are "courting disaster" in an a weak economy, says Brusuelas, who believes Obama's tax plan is much better campaign politics than governing policy.

But is John McCain's plan -- which is mainly to extend the Bush tax regime -- really a better idea? Tell us what you think.

Here we go again....

After the release of the minutes of the Fed's August meeting on Tuesday, stories about a possible Fed rate hike started circulating.

Such reports hinged on the following declaration: Fed "members generally anticipated that the next policy move would likely be a tightening."

That's probably true, but the eagerness of some news organizations to distill the minutes into a simple conclusion (i.e., "rate hike coming") omitted several key points which add up to a "no rate hike anytime soon" conclusion, including:

• The line following the one about a tightening, which reads: "The timing and extent of any change in policy stance would depend on evolving economic and financial developments."
• The Fed's downgrading of its GDP forecast for the second half of 2008 and 2009.
• The Fed's comment about how "the financial system remained fragile" and a separate report Tuesday from the FDIC showing a sharp rise in the number of "problem banks."
• In addition, "most members did not see the current stance of policy as particularly accommodative," the minutes read. Translation: Most Fed members don't think policy is too loose, meaning there's less need to tighten -- more especially now that commodity prices (especially oil) have come down from their mid-summer peaks.

Finally, while Ben Bernanke must talk tough about inflation, his actions suggest otherwise and the Fed would actually prefer a little inflation to a deflationary spiral -- especially given the nation's debt overhang -- as Henry and I discuss in the accompanying video.

In sum, take any reports about future Fed rate hikes with a very large grain of salt, and don't forget, many reporters fell into this same "rate hike coming" trap in the spring.

Some hopeful housing numbers surfaced yesterday, among them the Case-Shiller Index showing that the rate of home-price declines slowed from May to June and that 9 of the 20 cities tracked by the index posted minor month-to-month gains.

That's no reason to start calling a bottom in the housing crisis, though, as Henry and I discuss in the accompanying video. The Case-Shiller Index also revealed that national home prices fell by a record 15.4% in Q2 compared to a year ago, and a recent Zillow.com survey indicates that a whopping 29.1% of homeowners owe more on their mortgages than their houses are worth. Factor in rising unemployment, tighter credit for borrowers, and a record unsold-home inventory, and the bottom still looks a long way off.

John McCain touched off a furor last week when he couldn't remember how many houses he owns.

The answer is seven.

His wealth, of course, is largely tied to that of his wife Cindy, whose father founded a lucrative Budweiser distributorship.

Together, the net worth of the McCain couple is some $140 million. Obama's is just over $1 million. But the guy who wins the poor guy sweepstakes is Joe Biden, worth a paltry $150 THOUSAND. And by many accounts, Biden's everyman lifestyle was a key factor in why 0bama chose him to be his running mate.

After all, the McCain camp has had some success branding Obama as both an elitist and celebrity, suggesting he's not just like the rest of us.

And recent political history has shown that the elitist tag can hurt. Remember George H.W. Bush, who didn't have a clue about price scanners, much less the price of milk?

And John Kerry, the WINDSURFER? His culinary gaffes were many -- he went to a Midwest diner and ordered green tea. And even worse, he ordered a Philly cheese steak with Swiss cheese, instead of Cheez Whiz.

They both lost.

So how important is a candidate's wealth? Tell us what you think.