YOU PROBABLY THOUGHT

that "MEW" is the sound that kittens make. Wrong...it's the sound that bears make.

MEW stands for "mortgage equity withdrawal," and that means the cash that homeowners can extract by refinancing their houses, or taking home equity loans. Over the last several years, as home prices have risen and interest rates have stayed low, MEW has been running at a record pace.

Now that home prices have stopped rising, MEW has fallen off. And the bears think that's going to be enough to trigger a recession.

Before I explain why the bears think that, let me remind you who these people are. These are the people who have been wrong about the economy and the stock market for the last four years. The S&P 500 index, including dividends, is up 101% since the bottom in October, 2002. Back then was when Bill Gross, the bond manager, put out his famous call for "Dow 5000."

Since then the bears have invented lots of new ways to be wrong. They said that high energy prices would kill the economy, and the stock market. They said rising interest rates would do it. They said the federal budget deficit would do it. That the trade deficit would do it. That outsourcing jobs to China and India would do it. They said that Hurricanes Katrina and Rita would do it.

But nothing did it.

Now the story is MEW. With housing prices off, and with the subprime mortgage market in disarray, the bears say that the American consumer won't have a source of ready cash anymore. No cash, no spending. No spending, no GDP growth. No GDP growth, no bull market.

In fact, the bears are saying that, if it weren't for MEW, we wouldn't have had an economic expansion or a bull market at all. This whole thing, according to them, has been a debt-financed spending binge made possible by MEW.

One of the MEW-mongers is Barry Ritholtz, a portfolio manager with whom I occasionally appear on financial television shows, and against whom I have been debating this week on the financial blog of US News & World Report. He said, in that debate, without MEW, "the past five years would have looked very different the economy would have been expanding at about a 1% rate."

So let's assume that MEW has ground to a halt. According to bears like Barry, that means we're doomed to a shabby 1% growth rate going forward. That's the stuff that serious bear markets are made of.

Fortunately, none of it has any basis in fact.

First, this whole thing is based on a fallacy that somehow MEW represents money in the economy that wouldn't have existed otherwise. But since MEW, by definition, is produced by mortgage debt, then the money must have already existed. Someone had to have it initially in order to lend it to the mortgage borrower. Why is it so important whose hands the money is in? The bears don't even think about that.

Second, pretending for a moment that MEW actually means anything, nobody really knows how big MEW has been over time. You can get jobs numbers from the Department of Labor, and spending numbers from the Commerce Department but there's no official, reliable source of data on MEW. A number of Wall Street firms have made estimates based on the volumes of different kinds of mortgages, but they are just estimates.

Third, nobody knows how much of MEW assuming we even knew how much MEW there was to begin with goes into consumer spending, as opposed to savings or investment. The bears always argue that consumer spending is what drives GDP, and MEW is what drives consumer spending. Yet they have no real measure of the MEW-spending connection. Sure, there are models that purport to estimate it but they are models, not measurements.

But enough theoretical arguments. Let's just look at the facts. Let's go to the Bureau of Economic Analysis at the Department of Commerce and look at the figures for consumer spending over the years, and compare them to the figures for personal income. When I say income, I'm not talking about MEW or any other source of credit. I'm talking about wages, salaries, tips, bonuses the real stuff.

The chart below, which I built from BEA historical data, shows year-over-year real (inflation adjusted) growth in personal consumption expenditures and disposable personal income, for the past 15 years. Do you notice anything?

The two lines pretty much move together, don't they? Income up, consumption up. Income down, consumption down. That tells you just one thing the changes in income drive changes in consumption. People spend what they earn. Everything I ever needed to know I learned in kindergarten.

With the unemployment rate at a low 4.4%, do you really think there's any risk to incomes here? I don't.

And where's MEW in that analysis? Nowhere.

MEW volume, according to the bears' dubious statistics, surged from 2002 to 2005 during the real estate bubble. If all that MEW money went into spending, then why don't we see a surge in spending growth during those years? Or for that matter, why is there a surge in the late 1990s, when MEW wasn't particularly doing anything at all?

It's simple. The bad MEWs bears are wrong. MEW is irrelevant. It didn't prop up the economy when it was running hot, and it's not going to kill the economy now that it's running cold.

Stocks have been in a correction since mid-February while the marketplace sorts out this latest craziness from the bears. I call it a buying opportunity. Or, rather, another buying opportunity. Thanks bears for keeping stocks cheap for the rest of us.

Donald Luskin is chief investment officer of Trend Macrolytics, an economics consulting firm serving institutional investors. You may contact him at don@trendmacro.com.