This one has kind of a Saturday Night Live feel, but serious message.

Click here to view the embedded video.

If, after that, you’re not sure if you should laugh or cry, this should lift your spirits.

Click here to view the embedded video.

Imagine all of our surprise when not only did nothing happen, but we heard nothing of the matter whatsoever.  What ever happened to financial fraud?

Well, at least the SEC had enough presence of mind to fine the crap out of him and get a settlement check.  Hurry, quick, I would cash it right away, but don’t spend it all in one place, you might need to hire some people to investigate all of the other financial frauds you’re responsible for finding.  (Madoff, Stanford, etc)

Actually, I just hope they don’t blow it all on gold-plated toilets and Porn Parties.

Either way, I’m glad to see SOMETHING happen.  Couldn’t happen to a nicer guy, too.

From The Bubble Side:

Meanwhile, bubble theorists also say that today America is “overbuilt” as a result of the bubble.  With too much housing and no additional demand to be supported by market fundamentals, real housing prices should, according to the bubble theory, be lower today than they were in the late 1990s.

From the Non Bubble Side

But another interpretation is that a large fraction of the housing price boom was justified by fundamentals (and next week I’ll consider some of the specific fundamentals that may have permanently increased housing demand in the 2000s).  If so, we are probably asking too much of the Federal Reserve and other regulators to accurately disentangle bubbles from fundamentals the next time that asset prices rise.

I’m very much looking forward to his next installment, if this one is any gauge to the next one.

However, I’ll point out some concerns that I already have with the generic type of analysis.

1.  I’ll side with many real estate agents in this in one way: Real Estate is local.  Yes, you heard me right.  However, this only damns places like Orange County and LA more than Inland California.  While the inland areas have fallen as much as 80% in some areas, much of the coastal areas have remained priced barely below peak pricing.  While the pressure in some areas is upward, much of the higher priced homes still have significant pricing problems, most notably manifested as years’ worth of inventory.  Getting into Million+ homes and in some cases there are possibly decades of inventory at current prices and volume.  We’d need to create a lot more wealth outside of housing to support the current prices.

2.  Tax benefits are currently a major sticking point for many areas.  With so much uncertainty about the future of our fiscal problems, both at a state and national level, one can expect a pretty significant overhaul in this area.  Especially when considering that it would require an income substantially within the current executive administration’s definition of wealthy, and therefore fair game for further taxation.

3.  I think Mulligan is oversimplifying the “bubble theory”.  He assumes that bubble believers simply extrapolate based on inflation adjusted housing prices, leaving the above issues aside and ignoring the elephant in the room, credit prices (interest rates) and credit availability (looseness).  There must be some factor that addresses the issues of credit, perhaps in the form of some coefficient (we can be assured that this is not 1), or as some derivative (because of the risk of selling into a restricted or pricier credit market).  These mean that housing prices cannot be reflected dollar for dollar by interest rates, but rather a portion of lower interest rates while a portion goes to reward the borrower for taking on the risk of buying in a cheaper credit environment and selling in a pricier one.  Few buyers consider the full 30 year or longer amortization of a loan in each and every home purchase.  It is, after all, a place to live for the time being.

Nevertheless, this type of open debate means that at least we can consider the option and decide for ourselves, which if anyone remembers, is a far cry in sentiment from the bubble days of 2005 when the mere mention of a housing bubble would cause eye rolls and latent anger.  I believe that there is overwhelming evidence that Coastal California has a significant imbalance between incomes and housing prices still to resolve.  One has got to give sooner or later.

As a parting shot, I’ll present Mulligan’s chart which shows typical bubble theory pricing (lower than 1990′s).  I’d put my own thinking a bit between both of them.  I think people are still way too optimistic about housing in much of Southern California, and it’s reflected in the house prices.  When it fails to deliver the goods, the actual price appreciation will need to eventually erase the “bubble gains” of the past decade.

Oops, guess not now that we have budget problems, and taxes are only likely to get worse.

I thought there was only “Taxachussets”, but now it seems that California is probably the worst place to retire financially.  I guess paradise costs, right?

The most expensive, and therefore worst, state for retirees is California. Seniors in the highest tax bracket not only pay a whopping 10.55 percent income tax rate, but they also pay an 8.25 percent sales tax each time they go shopping. For a few people, though, the draw of Napa Valley, Hollywood celebrity sightings, and Yosemite might be worth the cost.

True, just be rich if you come here.

Of course, if he “owned” a house, he could live for several years without worry.  Nice.

When the first alarm subsided, the tulip-holders in the several towns held public meetings to devise what measures were best to be taken to restore public credit. It was generally agreed that deputies should be sent from all parts to Amsterdam, to consult with the government upon some remedy for the evil. The government at first refused to interfere, but advised the tulip-holders to agree to some plan among themselves. Several meetings were held for this purpose; but no measure could be devised likely to give satisfaction to the deluded people, or repair even a slight portion of the mischief that had been done. The language of complaint and reproach was in every body’s mouth, and all the meetings were of the most stormy character. At last, however, after much bickering and ill-will, it was agreed, at Amsterdam, by the assembled deputies, that all contracts made in the height of the mania, or prior to the month of November, 1636, should be declared null and void, and that, in those made after that date, purchasers should be freed from their engagements, on paying ten per cent to the vendor. This decision gave no satisfaction. The vendors who had their tulips on hand were, of course, discontented, and those who had pledged themselves to purchase, thought themselves hardly treated. Tulips which had, at one time, been worth six thousand florins, were now to be procured for five hundred; so that the composition of ten per cent was one hundred florins more than the actual value., Actions for breach of contract were threatened in all the courts of the country; but the latter refused to take cognisance of gambling transactions.

The matter was finally referred to the Provincial Council at the Hague, and it was confidently expected that the wisdom of this body would invent some measure by which credit should be restored. Expectation was on the stretch for its decision, but it never came. The members continued to deliberate week after week, and at last, after thinking about it for three months, declared that they could offer no final decision until they had more information. They advised, however, that, in the meantime, every vendor should, in the presence of witnesses, offer the tulips in naturta to the purchaser for the sums agreed upon. If the latter refused to take them, they might be put up for sale by public auction, and the original contractor held responsible for the difference between the actual and the stipulated price. This was exactly the plan recommended by the deputies, and which was already shown to be of no avail. There was no court in Holland which would enforce payment. The question was raised in Amsterdam, but the judges unanimously refused to interfere, on the ground that debts contracted in gambling were no debts in law.

Thus the matter rested. To find a remedy was beyond the power of the government. Those who were unlucky enough to have had stores of tulips on hand at the time of the sudden reaction were left to bear their ruin as philosophically as they could; those who had made profits were allowed to keep them; but the commerce of the country suffered a severe shock, from which it was many years ere it recovered.

Remind anyone of something?

All because of tulips; consider how much worse a housing mania can be.  Look to Japan if you want to see how housing bubbles end.  Theirs ended in 1990.

Click here to view the embedded video.

I say yeah, right.

In most cases, short sales are heavily weighted towards the lender in California.  In many cases, borrowers are better off allowing foreclosure.  Tell the bank to pound sand.

Of course, this is not a moral discourse.  I’ll assume that you’ve done your diligence in trying to keep your property, and haven’t heloced the heck out of the place.

Is a short sale right for you?  In most cases, no.  Mark is dead wrong about California.

What do you think?

The dog ate my homework:

The academic at the centre of the ‘Climategate’ affair, whose raw data is crucial to the theory of climate change, has admitted that he has trouble ‘keeping track’ of the information.

Yeah, but…

Professor Jones also conceded the possibility that the world was warmer in medieval times than now – suggesting global warming may not be a man-made phenomenon.

And he said that for the past 15 years there has been no ‘statistically significant’ warming.

At least we’re staying scientific:

‘Of course, if the MWP was shown to be global in extent and as warm or warmer than today, then obviously the late 20th Century warmth would not be unprecedented. On the other hand, if the MWP was global, but was less warm than today, then the current warmth would be unprecedented.’

The past few years have certainly challenged the idea that real estate prices only go in one direction. But the downside of the “American Dream” is even more pronounced, says James Altucher of Formula Capital.

Owning a home has “never been a great investment,” Altucher says, noting housing went up a dismal 0.4% annually vs. 8% for the stock market from 1890 to 2004, according to the Social Security Advisory Board.

Moreover, Altucher says the notion buying a home is a ticket to financial security is a “scam” perpetrated on the American people by corporations seeking to keep us in debt, less mobile and with the storage to purchase all sorts of needless consumer goods.

That’s a provocative statement, hard to prove, and certainly subject to debate. Such a view also leaves out the intangibles of home ownership, such as the stability and other benefits raising a family in a community can bring.

Still, it’s hard to argue with Altucher’s main point, as detailed in a recent Daily News article: from a purely economic basis, there’s a lot of downsides and hidden costs to home ownership that get lost in the “American Dream” discussion:

* Insurance premium.
* Property taxes (which usually offset any tax deduction you get from your mortgage interest).
* Maintenance (pipes break, electricity problems, etc.).
* Remodeling costs.
* Utilities (utilities and maintenance for renters is often reflected in the rental price, but it’s not reflected in a mortgage when you own).
* Yard work, pest control, etc. (again, rents usually have this built into the price, but mortgages don’t).
* A down payment of at least 15%, which is $90,000 on a $600,000 home.
Closing costs, usually 5% of loan amount, or another $25,000.

Rather than concentrating so much of your wealth in a potentially illiquid asset, Altucher says most of us would be better of renting. If you want to bet on a housing recovery – and he does believe housing is a good short-term bet here – Altucher recommends buying a REIT like the iShares FTSE NAREIT Residential Plus Capped Index Fund (REZ).

So if buying a house is a bad investment, should the more than 20% of American mortgage holders currently under water just walk away, as some advocate? Check the accompanying video to hear Altucher’s take on this highly controversial topic.

SCREBC has donated all earnings for the past year to relief efforts in Haiti. I recommend you take a serious look at your lives and how you might help others with a little less in yours.

Visit msnbc.com for breaking news, world news, and news about the economy

Can you guess what the new year is going to be like?  Chuck’s predictions coming soon.

I know someone who stayed in their house without paying for 26 months.  It was a nice house too.  Ugh.  Makes me regret actually paying my bills.

I present 2 opposing viewpoints:

Blah Blah Blah… It’s warming. Just trust us, we’re scientists.

Blah Blah Blah… I dunno, seems like a lot of made up information to support a thesis.

Suddenly “peer-reviewed” data seems kinda suspect.  Kinda like asking the NAR if housing prices are going to go up.

Biflation is a state of the economy where the processes of inflation and deflation occur simultaneously.[1] The term was first introduced by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group.[2] During Biflation, there’s a rise in the price of commodity/earnings-based assets (inflation) and a simultaneous fall in the price of debt-based assets (deflation).

via Wikipedia.

Good news:  the outcome is easy… EITHER WAY YOU’RE SCREWED.

The Orange County Register published the following comments from the President of the National Association of Realtors (NAR) made during their recent convention in San Diego:

San Diego The 2010 president of the National Association of Realtors said that most members of her trade group did nothing to contribute to the global economic meltdown, adding that Realtors “don’t have to do any soul searching.”

 Asked at the NAR convention in San Diego if there are lessons for the future about Realtors’ role in the housing bust, Vicki Cox Golder said no.

 “For a Realtor to put someone in a property they can’t afford is something we never do,” Golder told reporters at a media briefing. “We don’t have to do any soul searching because our code of ethics is solid.” 

 The Realtor trade group touts its code of ethics in promotion materials as a strong reason why consumers should hire NAR members rather than using non-member real estate agents.

 Although a number of analysts have said that the blame for the housing meltdown is shared by a wide group of players – from Wall Street and lenders to mortgage brokers and even consumers – Golder said that nothing occurred to make her think that NAR’s code of ethics needs revision or better enforcement.

 Golder said that there are always a few bad apples in any group, but their numbers are few in NAR.

What a load of crap.  “For a Realtor to put someone in a property they can’t afford is something we never do,” I saw dozens of agents do that!!  Even as the market was falling like a stone agents were telling people it was the time to buy.  Go to an open house these days and listen to agents touting the buying opportunities. 

 I’ll never forget a closing I went to about three and a half years ago.  I was the listing agent and the buyer was having a hard time getting a loan and I had worked with the selling agent to give them extensions to get the loan worked out.  I had never met the agent or the buyer but happened to be at her office dropping off some documents while they were signing the loan documents.

 This poor buyer was a gardener who had just come from work for the signing.  He spoke limited English and was signing loan docs for a $759,000 house with 100% financing and a house payment of about $5,000 per month.  The only person in the room who could speak Spanish was his agent, who was a very attractive, buxom, twenty something year old girl with a very low cut blouse.  I remember her leaning down over the table explaining the loan docs to him but no one was looking at the loan papers.  I walked out of there shaking me head saying ‘Future Foreclosure”.  I don’t think he made it a year before the house was back to the bank.

 While I think that ultimately, Congress was at fault for the subprime loan debacle by forcing lenders to make loans available everyone, Realtors surely played a part.  The mantra was “Buy now or you’ll be priced out forever” and  “Don’t worry, you can refinance in a year”.  People with limited education and no understanding of basic economic principals (Realtors) were (and still are) giving advice about the largest purchase most people make in their entire lives. 

 While the NAR touts it’s code of ethics the qualifications to join are rather lax.  All it takes is a real estate license, a pulse and $135 for the dues.  That’s it. No classes, no ethics courses.  You do have to check a box that says you’ve read the code and agree to abide by it.  The entry requirements are low and the standards to stay in are even lower.

Brad Davidson – Real Estate Commission Rebates

Glug, Glug, Glug.

But negative equity “is an outstanding risk hanging over the mortgage market,” said Mark Fleming, chief economist of First American Core Logic. “It lowers homeowners’ mobility because they can’t sell, even if they want to move to get a new job.” Borrowers who owe more than 120% of their home’s value, he said, were more likely to default.

Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay — more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. “The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that,” the study said.

California's underwater a lot