Illegal aliens are the granite countertops of immigrants. Illegal immigration (or undocumented citizens as some more enlightened people call them) have been in the news a lot lately. I try to avoid discussing hot button political issues on this blog because the only ideology that interests me is capitalism and the only political party I belong to is the green party (green as in cash, not drugged out tree hugging hippies). However I feel a need to speak up on this issue because illegal immigration concerns housing prices. To put it bluntly, illegal immigrants add value to an area. They are, as I said earlier, the granite countertops of immigrants. Why? All one needs to do is look at the areas with the highest immigration rates and what do you see? That's right, the highest prices. Let me explain all of the reasons why:

1) Lincoln didn't free these people. Every successful nation needs a core group of poor, hardworking, easily exploited people. Let's face it Americans don't want to work hard. And why should we? We want to live a life of ease, comfort, and luxury. And that's hard to do on a middle class salary. However, we certainly don't want to spend our days toiling in filth for low wages. No my friends, we want to sit at some desk, cruise the internet or chat on our cell phone all day, and drive home in our H2 or BMW to relax in front of our big screen tv. In order to afford the lifestyle we deserve we need nannies, cooks, gardeners, etc willing to work for low wages. And you ain't gonna get Americans to work those kinds of jobs for those kinds of wages. Hence, these workers free wealth by allowing us to spend our money on important things like cars, boats, housing, instead of trivial expenses like childcare or salaries.

2) Diversity is good. Let's face it, white folk are boring. Other cultures add variety to our society. We want to have 200 different restaurant choices instead of just 10. We want our children to be able to date a rainbow. People crave diversity and they're willing to pay a premium to be able to have it.

3) Creative destruction. Let me tell you the famous parable of the broken window. A shopkeeper's window is broken by a little boy. But soon people realized that the broken window makes work for the window maker, who will then buy bread which benefits the baker, who then buys shoes, benefiting the shoe maker, etc. Eventually everyone concludes that the little boy was not guilty of vandalism, instead he performed a public service by creating jobs for everyone in town.

While people crave diversity, they also crave separateness. They love diversity, just not in their neighborhood. A few miles away is about as close as people really want it. So what happens when millions of our undocumented friends flood a city? Scared white people sell their homes and move somewhere else. However this causes a smaller and smaller area of "habitable" land to be bid up by more and more people. And remember the prices of even the "uninhabitable" areas go up too because their prices are based on these rising prices. So the destruction of whole areas of the city cause all the areas to go up in price. Often dramatically.

Do you really think prices would be going up this much if there were not these demographic pressures? And these changing immigration patterns are permanent. We will be getting 1 million or more illegals every year from now on. This will "destroy" more and more parts of the country causing prices to soar (the invisible hand of 20% appreciation rears its beautiful head).

4) New paradigm of financing. Smart lenders realize that these hardworking undocumented citizens are prime customers for our sophisticated financing packages. They are clamoring to own houses here and the lending standards will accommodate them. These millions of illegal alien housing investors will bid up prices even more. Remember Darwin's laws of supply and demand. We have limited supplies and ever growing demand. Put these two together with the lighter fluid of easy credit and you have a mushroom cloud inferno of price escalation.

So my friends, don't oppose our guests from the south. Instead, welcome them with open arms because every illegal alien is money in your pocket. And everyone loves money in their pocket -- even renters.

Greetings to all my soon to be wealthy readers. I've been so busy the last several days making my money work for me that I have not had time to impart my wisdom to you. Therefore, for this update, I decided to outsource this blog entry to a highly trained Indian worker with years of experience you can't find in the United States. And with that I introduce to you Sandeep.

Thank you very much. With pleasure and helping attitudes I bring today many good advices to make money in American real estate homes. Like America many Indians are buying homes to make riches for their future. My cousin Rajeev has flipped many Hyderabad condos (the Beverly Hills of India). He's made so much money buying and selling homes that he's earned enough to buy a 5 room mansion in Calcutta. Life is good for Rajeev. What is Rajeev's secret? He can sign his own name. Renters with angry taunts are bellowing their questions as to what this means. Let me explain to renters. All it takes today to be rich is to be able to sign the loan papers. You not need smarts or education, although I have a masters degree in electrical engineering with an MBA, MCSE, and over 10 years experiencing in programming the java and .net for major American companies. No my Hindu friend, you need nothing but a pen and the ability to mark your name on the papers. Once you do that the money comes to you.

Now I need to speak to you on how to find homes which make money. This is easier than dipping poori in your khorma. You look at the address. If it is in California, buy it immediately. Don't worry if it is over 1000 rupees. You make money for living in paradise. If it isn't in California you still buy it immediately but not make as much money. You still live in lesser paradise which is good except for people living in paradise get confused sometimes.

Is there a housing bubble? There's an old Hindu proverb: "when a camel is at the foot of a mountain then judge of his height." The home prices are the camel and the economy is the mountain. We buy houses for only a few thousand American dollars but the mountain of economy is trillions of dollars. The camel can grow many bigger until it is bigger than the mountain. Right now we are riding a little camel. But soon it will be too big to get on unless you are already on another camel. Eventually if you not buy house the camel will loom large over you and you can't reach it. Even little camels will be gone. Big camels everywhere and nowhere for you to stand on.

As camels prove there is no housing bubble. Now we speak with clarity and briefness about how many homes to buy. Answer is all of them. You want to buy every home in America. It isn't possible to do this but make it your goal. When you buy home you already have equity coming every year. Think of Easter Bunny coming to visit. Every year he brings you chocolate eggs to eat. You don't do anything but rabbit still brings eggs, like clock working in sync with bunny. Your home does same thing. You don't do anything but equity still comes to you. You take equity and buy other homes. These homes bring more money. You keep going until you own every house in the country. Then you can talk to Rajeev about some undervalued condos in the Indian Riviera.

Also, my new American friend Buck wanted me to mention that he has many beautiful homes in the most wonderful place on earth, Southern California. He can put anyone in a home with many smiles and happiness to ensue. Financing is no problem. Habla espanol. Bad credit? No credit? Legally dead? No matter what you say he will say he can put you in a home. He has homes for all payment levels. No income needed. Please call, email, or speak to Buck to start your journey into becoming the next Donald Trump. He's waiting to make you millions.

I've been getting many emails from home owners telling me that they're confused by all of the intellectual talk here on this blog. I'm sorry. I occasionally forget that not everyone is a real estate professional like myself and slip into highly technical jargon. So in order to help my visitors better understand what the real estate market is really like I've taken the liberty of writing this post in more appropriate language.

Once upon a time in the happy kingdom of Realatopia there lived a great prince named Realtor. Prince Realtor was renown throughout the kingdom as the wisest prince who ever lived. And he was much loved, for when Prince Realtor looked around his kingdom he saw that all his subjects were rich and happy. Nothing it seems could ever break the spell that he held over his happy subjects. But one day the court jester, a fool named Renter, began going around telling tales of the fearsome bubble monster. He said the monster was 20 feet tall, and could eat a granite countertop in a single bite. He said the monster was coming and would ruin them all.

At first nobody took the fool serious. He was, after all, a court jester. But after a while the happy people of Realatopia began to feel uneasy. Maybe there was something to this fool's ramblings. Maybe there really was a bubble monster coming to destroy their happy homes. Finally when the people could stand no more, they went to Prince Realtor and begged him to slay this bubble monster before it descended on their once happy land.

So the prince declared throughout the land that he would send out his two most brave knights to slay this unearthly beast. They were two knights who knew no fear and could conquer any foe. They were Option Loan and his brother Interest-only Loan. These two Loan brothers were already legendary amongst the people of Realatopia. For all of the citizens of this coveted land knew how helpful these brothers could be in an emergency and there wasn't anything they couldn't accomplish with these two heroes at their side.

Therefore at dawn of the first day in April these two honorable knights set forth into the countryside looking for the evil bubble monster. But try as they might they could find no trace of the creature. Everywhere they looked they found prosperity and mirth. Certainly no sign of impending doom. And just as they were about to give up, the brave knight Option Loan sighted the creature. It wasn't 20 feet tall and could never in its wildest dreams devour a beautiful and value adding granite countertop. For it was only a small, frightened little mouse, and not the destructive monster that the fool Renter made it out to be. With a laugh Option Loan named this "fearsome" mouse Bubbles and took it back to Prince Realtor to show to the people.

And once the people saw that the monster was harmless they welcomed Option and Interest-only Loan back into their homes and everyone, including Bubbles, lived happily ever after. Except for the fool Renter of course. But that my friends is a story for another day.

Hello friends. I'm sorry for taking so long between posts but I've been enjoying the fruits of my housing labor. I took a week long trip to Egypt. I flew first class, ate at the finest restaurants, and stayed at five star hotels. It was a trip to remember and the nicest part was I was earning money to take this trip. "How so," the confused renter asks? I used my credit cards to pay for the trip and earned a lot of points. Now I'm paying off the credit cards with my home equity line of credit (HELOC for those in the business) and not only do I get the good feeling of once again being debt free, but I also get to deduct the cost of the trip from my taxes (in the form of a mortgage deduction). Ah, being a home owner means living the high life. I get points, tax deductions, and the security of having no debt. As a wise man once said "owning a home is like printing my own money."

While in Egypt I went sailing down the Nile. I discovered that "the nile" is not just a river in Africa. No my friends, it is a state of mind. It is seeing the future stretching out, limitless, before you. Nothing seems impossible when you are in the nile. Next time you see some smart entrepreneur with 8 homes, each one more leveraged than the last, tell yourself this person is in the nile...and you'll know the truth about their success.

Somewhere a village is missing you: Now it is time for today's financial advice: be a contrarian. Look for a property nobody wants. Find one where everyone says only an idiot would buy that house. Become that idiot and buy that house. For soon that "idiot" will have an asset that people will clamor for. Need proof? If I told you 10 years ago that homes in Watts would go up more than any other area of California you would have thought me mad. You would have told me only an idiot would buy a home there. But the idiots were smarter than you. People said only fools would buy large numbers of homes to flip in Las Vegas or Arizona (it is surrounded by desert, scorching hot, etc) and yet the fools are rich and you are still poor. Our society today is built around rewarding risk takers and punishing the cautious. Those who are risk takers will find the entire world will lend them as much cash as they need. Those who are cautious will find their money slowly stolen from them by inflation and taxation. The future is for the bold my fellow nile travelers. Play your cards right and someday you too can be hip deep in the nile.

New viewers: Like a Christopher Nolan film, this blog is designed to be read backwards. For the full weight of the convincing argument please start reading from the earliest post (debt is wealth) to the newest.

These are exciting times for this blogger. My fame has spread to such an extent that I was recently interviewed by a major business magazine which I can't name. So for the sake of this discussion I'll call it Norbes Magazine. I don't know when they're printing the article but this morning the author e-mailed me a copy which I'm including below.

Bubble or No Trouble at all? The Experts Decide.
By Sally O'Tool

All across America real estate investors are pondering the question: is there a housing bubble? To answer this question we interviewed 4 of the nation's leading unbiased real estate experts: David Lereah, economist; Leslie Appleton-Young, economist; Gary Watts, a highly respected real estate observer; and a man who goes by the name "Buck" that runs a popular Internet blog called There Is No Housing Bubble!

(Editor's note: for space reasons I deleted the wonderful, touching, and poetic words of Mr. Lereah, Watts, and Ms. Appleton-Young.)

For a different perspective we contacted the owner of a blog called There Is No Housing Bubble! which has taken the Internet by storm. In its short lifespan it has rocketed up the Alexa charts to become the 12th most visited blog on the Internet. As the website's title indicates, "Buck" doesn't believe there is or ever was a housing bubble.

Norbes: First off, tell us a bit about your background. Are you in the real estate profession? For how long? And why the pseudonym?
Buck: Yes I am an experienced real estate professional, the kind of person smart customers seek out for my wisdom and depth of market knowledge. I've been an agent for almost 2 1/2 years now, all of which has been in the hot Southern California market -- the trenches of the future as I like to call it. Like most people in the industry I got my start as an adult film actor, so the transition to real estate was a natural and smooth one. As for the pseudonym, unfortunately there are a lot of angry renters out there. I've already had 2 attempts on my life since starting the blog (although one of which might have just been a misunderstanding between me and the drive through cashier). So the less these people know about me the safer I am.

Norbes: You've really sacrificed a lot to spread your message of economic opportunity to the masses. What caused you to launch your career as an Internet pundit?
Buck: It is hard for me to tell this story without choking up. Please bear with me. It was the winter of 2005, around Christmas time. I was showing a beautiful and striking example of early 20th century architecture in East Los Angeles to a young couple. He was a mortgage broker and she was an appraiser. They had a young 3 year old daughter. They were an ideal couple to move into this gentrifying, up and coming neighborhood. Being the financially savvy people you'd expect, they were concerned whether they could afford this home. Even with an option loan and making the minimum payment they wouldn't have much left over for other expenses. Buying this house would be a major lifestyle change and they were not sure if they had the courage to make that decision. And then, as often is the case, a young child imparts wisdom to her parents. The little girl said "mommy, I asked Santa to bring me a house for Christmas instead of toys. Do you think Santa can fit a house in his sleigh?" With that the parents looked at each other and told her they were sure Santa could fit a house in his sleigh. They made an offer that afternoon and after the obligatory bidding war they are now starting their new life together in their Christmas present. I remember thinking to myself what good people they were to assure their daughter's future by buying this home. Later that evening I went online and came across some real estate bubble websites. I was angry. What if this couple had read these lies? Would they have still bought that home? I doubted it for the lies were convincing in a nuanced way. I knew I had to take action, to stop the lies, and stand up for all the children whose future is in peril of these demonic bubble blowers.

Norbes: You seem to have a lot of animosity towards the housing bubble advocates. Why?
Buck: Several reasons. One, because they try to use fear to cause people to make an irrational decision when the fact is: if they don't buy now they'll be priced out forever. Second, real estate is a proven winner. As all of your experts pointed out, they ain't making any more land but they sure are making a lot of babies. And using Darwin's laws of supply and demand, prices of land will always go up. I defy anyone to show me someone who purchased a home in California and over a 30 year time span lost money on the transaction. They can't because it has never happened. In fact, over any 30 year time span you'll see the home owner made a small fortune. However these bubble headed liars claim it is different this time. That somehow the future will be different this time. Beware of anyone who claims "it is different this time." Thirdly, there is a new paradigm in this country. We are moving along well known economic laws, from an industrial economy, to a service economy, to a real estate economy. We are in the beginning stages of this new economy and new times call for new thinking.

Norbes: You are a big proponent of using your home's equity to leverage the purchase of other homes. Is that risky?
Buck: Let me tell you the story of a man named Charles. Charles lived in the early 20th century and devised a new financial strategy. He would use current revenues to pay current obligations and count on the appreciation of revenues to pay future obligations. This scheme was so successful that millions of dollars poured into his investment fund and eventually this technique become so popular that the US government uses it to pay for our nation's retirement plan (social security). Do you think the US government would use risky accounting methods to assure its citizens of their retirement money? I don't think so. So what I want to do is show people how they can use this time tested financial technique for their own profit. But first they must change their thinking. They are not buying a home, instead they are gaining control of a revenue stream. That stream of money can be managed to produce more and more wealth. It is the engine of your prosperity and all it needs for you to do is to be brave enough to turn the key. Will you turn your key?

Norbes: How do you respond to critics who say home prices have gotten out of sync with incomes?
Buck: With a four letter word. Just kidding. Seriously, these critics are looking at the problem with outdated ideas. It is different this time and requires different thinking. People who own homes have 2 revenue streams to work with. 1) their regular job income. This is a paltry and declining sum in today's world. 2) their home's appreciation. In most California markets the home owner is making another $30-100K a year in their home's appreciation. Once you factor that income stream in today's homes are extremely affordable. And as prices rise, the appreciation rises in real terms (although in percentage terms it might stay very flat). Therefore homes become MORE affordable as they become more expensive due to this secondary revenue stream. Bubble advocates never factor in this second income into their affordability figures. With that factored in everyone can afford a home, from the CEO all the way down to a farm worker and everyone in between.

Norbes: Do you believe it is a good time to buy?
Buck: Now is a great time to buy. In fact, it is the best time to buy. I have over 100 highly coveted properties that I can show this afternoon. I know most real estate agents have similar portfolios too. You can be like a kid in a candy story and cherry pick the finest homes made by the skilled artisans of Mexico that this nation has to offer and get them while they are still at ground floor prices. Believe me when I say you won't see prices like this in 5 years. You'll get down on your knees and beg to buy a home at these prices.

And there you have it. Four experts, four opinions, and one consensus -- now is a great time to buy a home.

As you can tell the response to this blog has been overwhelming. I feel I need to take a little time and answer a few of the many emails that have poured in.

G.F. from California asks:
Hi Mr. Bubble,

Prices have gone up so much in the last 5 years. I'm worried about buying at the peak and overpaying for a house. The house I'm considering is a fixer upper in North Oakland. It is 1100 sq. ft. and needs a new roof. The asking price is $675,000. What should I do?


Good question. First of all, remember, you can not over pay for a house. In fact, as I proved previously, the more you pay for the house the more money you'll earn in the long run. I know some deluded renters are screaming at their monitors right now "that's the stupidest thing I ever heard!" Here's the proof. Let's say you buy that house for 675K and we'll be very very conservative and assume only 10% yearly appreciation instead of the industry standard 20%. After 10 years you'll have a little over 1 million in equity (even if you negatively amortize a few hundred thousand you're still sitting on a mountain of cash). Now, let's say you aggressively bid 750K on this Oakland charmer. After 10 years at ONLY 10% appreciation on the higher price you'll have over 1.2 million in profit. That's right, you made an extra $200,000 by "overpaying" for that house. As the math above proves you can not make a mistake of overpaying for a home. In fact the only mistake would be passing on that cute Oakland home.


John A. from Missouri asks:
I never heard the phrase "housing bubble" until after September 11th, 2001. Who is behind all these lies?

That is a very perceptive observation my friend. I too never heard a single person mention the housing bubble before the terrorists struck at our country on that fateful day. Ask yourself this: does Osama Bin Laden want home prices to plummet? Of course he does. He would love for home prices to collapse and ruin the American economy. And if Hitler were alive today do you think he'd want Americans to make a lot of money in real estate? Or do you think he'd hope for falling home prices to bring our economy to a halt and make us more vulnerable to invasion? I think we all can agree that he'd want to destroy our economy. Do you really want to be on the side of the terrorists and the Nazis? Do you really want to help them win their war against our country and obliterate our entire way of life? Ask yourself why do the lying "housing bubble" proponents want you to sell your home and rent "before it is too late?" Do they really want to save complete strangers lots of money? Or do they have some other motivation? Some sinister motivation to wreck havoc on the new paradigm of our real estate based economy.



Alan G. from Washington DC writes:
Housing price bubbles presuppose an ability of market participants to trade properties as they speculate about the future. But upon sale of a house, homeowners must move and live elsewhere. This necessity, as well as large transaction costs, are significant impediments to speculative trading and an important restraint on the development of price bubbles.

Some homeowners drawn by large capital gains do sell and rent. And certainly in recent years some homebuyers fearful of losing a purchase have bid through sellers’ offering prices. But these market participants have probably contributed only modestly to overall house price speculation.

More likely participants in speculative trading are investors in single residence rental and second home properties. But even though in recent years their share of purchases of single family homes has been growing, in 2003 their mortgage originations were still less than 11 percent of total home mortgage originations. Overall, while local economies may experience significant speculative price imbalances, a national severe price distortion seems most unlikely in the United States, given its size and diversity.


Ummmm....I'm confused, are you saying there is a housing bubble or there isn't one? Whoever you are I hope you are never in a position of power because you talk out of both sides of your mouth.


D. Lereah from Virginia asks:
The story of little Timmy Jones has left a hole in my heart. What can I do to help Patrick and Timmy?

You can do what every patriotic American does, buy a home and convince everyone you know to do the same. If everyone owned 1 or more homes there would be no renters and no little Timmies would ever risk being born into the hell I described. In fact, if we all became home owners America would guarantee its place as the wealthiest nation on earth. However if we listen to the bubble heads and their easily popped lies, we're a nation headed into poverty and deprivation. We'd become a nation of Patrick and Timmies and that thought is too frightening to contemplate.


Anonymous from California writes:
I be a realuhtor in san jose. I sell milliun dolor homes to janiters waitors and morgage brokers. I urn my 6% comision. I maid 1 milliun dolors last yeer selling homes. I urn my money. Tell people the trooth about homes allways going up in price. Its a fact. I no. I'm a realuhtor.

Wise words from someone who knows his industry. Who better to listen to than a highly trained real estate professional who knows the market and your home's value? What sort of training do most of these "housing bubble" maniacs have? They are not trained real estate professionals. Rather they are bitter amateurs who are projecting their hopes and fears onto other people. They don't understand why changing demographics, immigration, environmental, and other socio-economic factors have caused real estate to reach a permanently high plateau. People in the industry and educated home owners know the truth. They don't need some outsider trying to confuse them with so-called facts. But I give you my pledge that as long as I have fingers to type I'll proudly proclaim "there is no housing bubble!"

Smart people know the truth. Don't you want to be as smart as Einstein?

It is January 1st, the year 2100. Patrick Jones sees the morning's dawn, the dawn of the new century. But he has no reason to view the sunrise with hope. For you see Patrick is a member of the R caste -- a renter. His father was a renter. His father's father was a renter. And as he looks over to his newborn son he realizes that little Timmy will be a renter too.

Once upon a time in the mists of history there existed a brief time when anyone could buy a home. Yes you read that correctly, anyone. Oh, does Patrick wish he lived back then. He tells himself he would give anything to have lived during that golden age. But he can't. He's trapped in the present with no hope.

For today a 2 bedroom, 1 bath home in California is worth over 1 billion dollars. With a median income of $50,000, members of the R caste have no hope of ever saving enough money to buy one of these desirable homes. The only ones who are able are the fortunate H caste members, the ones who are able to leverage their home equity (which at 20% appreciation is rising at 200 million a year!), to manage the cash flow necessary for home ownership.

Patrick's sad life was predetermined when his great grandfather heard some insane bubble preacher who claimed real estate was overvalued. Patrick's ancestor listened to this fool and sold his house, thinking he would jump back in when prices dropped. But as we all know, the economic law of 20% minimum appreciation continued to work it's magic. And once he realized he was wrong it was too late. He was priced out. Forever. Oh how bitter a pill that is for Patrick to swallow. He spits a curse at that long dead fool! Why did he destroy all of their lives by being so stupid? Patrick had no answer. For who could conceive of an answer to such irrational behavior.

Eventually society splintered into 2 groups: home owners and renters. As the wealth of the H caste increased, the R caste became poorer. They found their jobs being outsourced at a greater rate and with no home equity to tap, they could no longer live a middle class lifestyle. Their spiral into the consuming darkness of poverty and hopelessness has been unabated for over 100 years. Oh, these poor wretches still cling to the bubble notion. They tell themselves it can not last forever and someday they will be able to buy a house. Someday prices will drop. Someday. Someday. Someday. But, deep in their hearts they know that someday will never come.

"Enough wallowing in the past," Patrick tells himself. He has to get ready for work. His boss is always angry if he is late because time is money to Mr. Pierpont Tollson. Mr. Tollson is a Senior Mortgage Engineer and, more importantly, a home owner. Unlike poor Patrick, Pierpont has never had to spend 1 day in school. He's never really had to do much of anything in life except consume. His position at the company was inherited and involves little actual work. Like a prince or king of a bygone age, life is good for Pierpont Tollson because in early 2006 his great great grandmother bought a condo conversion in San Diego. Such a small action and yet what a large effect it had. For over the years that converted apartment was leveraged, upgraded, sold, and parlayed into a fortune of over 30 billion dollars. And Pierpont sits today as the recipient of her largess.

Patrick tries to avoid these bitter thoughts as he puts on his sweater. But he can't stop thinking about it. If only he could escape from this trap he finds himself in. If only he could give little Timmy the life he deserves, a life better than his. If only...and then it hits him. Yes! He can give Timmy a better life. He'll put him up for adoption on Ebay to the highest bidder. Since only H caste members can purchase humans on Ebay it'll guarantee he'll end up a happier person and eventually he'll inherit from his new parents a house. And with a single tear flowing down his cheek he posts little Timmy on Ebay knowing he's sending him to a better place. A happier place. A home; something which Patrick knows he could never give him.

The advice I'm about to give is for the bold. Frightened little bunnies who are afraid of wealth should read no further.

1) There's a pot of gold at the end of every rainbow and we're all living on rainbow street. Buy as much house as you can. Don't settle for a $300,000 house when a bank will lend you a million. But the timid out there will say "but I can't afford to buy a house that expensive." Pal, you can't afford not to. Let's employ my favorite friend, the calculator. Let's say you buy a $300K house and I buy a $1 million house. Assuming the standard 20% yearly appreciation rule, after 5 years you'll have roughly $450K in profit (assuming you do not leverage this perpetual cash machine to produce even more wealth). However, I will have made roughly $1.5 million in profit. As even the most jaded, bitter renter can see, the $1 million dollar home has produced over 3 times as much wealth in only 5 years. Imagine how much better off I'll be in 10 years.

B - There are no "bad" neighborhoods in California. The so-called bad neighborhoods in California (places like Compton, Oakland, East Palo Alto) have been some of the most profitable homes in real estate history. Today you can not buy a home in these places for under $300,000 and often times these "violent palaces" run over half a million or more. Even today, after the large run up in prices, these homes are still profitable for the investor with foresight. Let's say you buy a home in the coveted neighborhood of Compton for $300,000. As the numbers above show after 5 years of 20% increases you'll have $450K in profit. Let's say you get robbed twice a year, average cost of $5K per robbery, and stabbed or shot every 2 1/2 years costing you $50K in lost wages/hospital bills. $450,000 - 2*5*5,000-2*50,000 = $300,000 PROFIT. I don't know about you but I will take the occasional shiv in the back for $300K every 5 years.

Note: I left out family members being murdered because with proper insurance there should be no net loss for this event. In fact, it could be an equity building opportunity if your loved one had large amounts of insurance.

And don't forget, in addition to that treasured Compton address you get the much sought after Compton schools, governance, and community. You can't put a price on that California lifestyle.

III. Don't worry, be happy. Don't worry about the terms of your home loan. Only focus in on the payment. We in the west are no longer squirreling away money like some deranged rodent. No my friend, we are in the cash flow management business (just like how we no longer produce anything in this country, we outsource it all and manage the world). Who cares if the loan is neg am, interest only, or fixed. If the payment works, bank it. You can use the guaranteed appreciation to take care of all the details of how you'll pay the money back. Still doubting? Ask yourself, does a raindrop worry about how to steer the river? No, it sits back and enjoys the ride. Well, there is a river of money flowing right now. You can either let it flow to you or sit by on the banks and watch it pass on by. The choice is yours.

Four: Become the master of your domain. Become one of the highly trained real estate professionals that are profiting mightily from this new paradigm. Like the previous example let's look at 2 different people. Both are recent high school graduates. One decided to attend an Ivy League school for 4 years to get a degree in one of those outdated majors like engineering or one of the sciences. After graduation they attend grad school for 5 years and get their Ph.D. And now after 9 years of hard, menial, drudgery, what do they get as their reward? A job paying $50-60,000, if they are lucky. By the time this "genius" pays off their student loans they'll be 40 years old. 22 years of eating ramen and riding your bike to work might make some drugged out hippy happy but for us real Americans we want $$$. Now let's look at his friend. He decides college is for suckers. He works as a mortgage broker and part time real estate agent. He earns $100-200K a year. By the time Harvard boy has graduated our wise mortgage broker will have a BMW, 2 houses, and a sail boat. And he did all this without wasting his time with books or filling his brain with useless knowledge. He is a producer of wealth while the self-absorbed academic is a parasite on society. What would you rather be, a producer or a parasite?

Debt is Wealth -- look at all the great societies the world has produced and you see one thing in common: debt. Debt builds wealth. Imagine if there was no debt and no ability to borrow. Want a $50K BMW? You have to pay cash. Want a plasma TV? You have to pay cash. Want a house? You have to pay cash. How long would most people be able to function in such a world? It would be a nightmarish place filled with poor, unhappy people. However by introducing debt into people's lives you gain the ability to procure wealth. People can leverage that debt to purchase homes, cars, needed consumer goods, etc. The debt allows people to create wealth for themselves and also for other people too. Everyone wins in a debt fueled society except perhaps the gold hoarding no debt renter who keeps expecting civilization to collapse. For them the debt fueled world is a nightmare in which they fill up their minds with imaginary gloom and rationalize why all this wealth will lead to disaster.

Slavery is Freedom -- I remember reading once someone saying that they did not want to become a slave to their home. They felt the seeming high prices of homes today means they are slaves to the house, spending weekends fixing up the house or working second jobs to make the mortgage payment. But what they don't realize is the freedom the home gives you. You see, every hour spent putting in granite countertops or fixing the yard is money in your pocket. You are using your time to create wealth. And every nickel you put into that mortgage from that second or third job comes back to you dressed up as a twenty dollar bill. This wealth creation gives you freedom. If you need $100K to give your child an Ivy League education you can use the wealth created by your home to fund it. Try doing that with your canceled rent checks and see how far that gets you. If you need Bruno Magli shoes and an Armani suit for a social function you can tap your home equity line of credit and the best part is you get to deduct it all from your taxes. Thank you Uncle Sam! This so called slavery leads to the greatest freedom a human can possess: the freedom to do anything.

Fear is Happiness -- one of the main reasons why people stay renters is fear of failure. They are afraid if they buy a house they might lose everything. They see isolated instances of this happening and assume that they will be one of these unlucky few. However, by embracing the fear and buying one or multiple homes you open the door the complete and joyous happiness. Every home owner is afraid the first time they buy a house. They have those lingering doubts that perhaps it is a mistake. But as time passes, and the massive equity builds, they realize that the fear of success has been supplanted by happiness at their wisdom of purchasing a home.

But enough sloganeering, let's talk some real world numbers for a bit. Let's say you do something wise, you purchase a home in California for $500,000. This beautiful and desirable home will appreciate by about 20% per year. Therefore after 30 years that home that the renter unwisely turned his nose up to will be worth a little over $100 million. Now let's say you are even wiser than this. Let's say you use the rapidly rising equity in this dream home to purchase another undervalued home every year. So you'll earn 30*$100 million or over 3 BILLION dollars. That's right, you'll become one of the richest people in the world and all you did was sit back and let debt work for you. Imagine all of the wondrous things you could do with $3 billion. You could buy a whole fleet of Hummers, a plasma TV for every room of your house. Perhaps lunch in Paris and dinner in Tokyo while you jet around in your private plane? Whatever your heart desired all brought about by the magic of home ownership.

Now, some of you embittered renters probably think this is some unrealistic fantasy. But let's try to understand what the future will hold (we are all interested in the future, for that is where you and I are going to spend the rest of our lives) by looking at the past. If you look at history there has never been any period of time where home prices declined. Never. Even if you go back to Ugh selling the first cave to Ooog for 3 rocks and a wooden club, I guarantee you Ooog made money. No matter when, where, or how you look at it, home prices always go up in the long term. Sure, you might find some isolated instances where home prices declined for a short period of time but even after that aberration prices returned to their normal higher trend.

So what will the future be like? It will be a lot like the middle ages. You will have a landed aristocracy (home owners) and you will have the poor, embittered, masses (renters). These few, these happy few, these home owners, will have everything their heart desires because either they or their parents/grandparents/etc were able to see the coming changes in society and intelligently using debt were able to buy mountains of wealth for themselves and their decedents. Since 70% of Americans now own their own home, we will be an amazingly wealthy nation. We will leverage this wealth to run the rest of the world. But, sadly, 30% of Americans will be left behind with no hope of a better life. And like the serf of the middle ages they will leave to their children nothing but ashes. Ashes of dreams. Ashes of hopes. Nothing but servitude to their landed betters. What a hopeless existence they will have.

Unfortunately, a lot of reckless people are throwing about words like "bubble" to try to ruin people's lives. They are trying to use fear and ignorance as a weapon to destroy the lives of this future aristocracy. I believe they have one of two motives. Either they are looking into the abyss and see that they will never own a home so like an angry two year old they want to destroy the hopes of everyone else. Or they are greedy and want to drive prices down temporarily so they can snatch up this wealth from those foolish enough to heed their advice. But remember friend, when a man looks into the abyss he finds his character. For most of us, it strengthens our resolve to do whatever it takes to become one of these rich, happy landowners. For the frightened renter/bubble advocate, it causes fear and resentment to want to ruin other people's lives. Don't become one of these pathetic wretches.

That is why I'm writing this blog, to educate the few redeemable renters out there. To let them know that if they take a chance and let debt, slavery, and fear into their lives they'll find wealth, freedom, and happiness.