NEW YORK -- Playboy's Miss May, Jamie Westenhiser, may well be to the 2005 real estate bubble what the ubiquitous cabbie with a stock portfolio was to the 1990s dot-com frenzy: An indication it's time to get out.

The 23-year-old former Hooters girl told the magazine that she wants to abandon her modelling career to take up real estate investing, after she uses her Playboy earnings to pay off her debts.

Excerpted from Payboy's web site
	Miss May, 2005, Jamie Westenhiser DIMENSIONS: 34"-23"-34" WEIGHT: 112lbs. TURN-ONS: Honest, secure, good-looking men with confidence, class and $$! TURNOFFS: LIARS, jealousy, fakes and laziness. JOBS I HAVE HELD: Smoothie maker, Hooters girl and bookkeeper. MY HOME TOWN: Ms. Westenhiser hails from Hollywood, Fla., one of the hottest real estate markets in North America.

As with the dot-com bubble in the late 1990s, speculators are now fuelling overheated housing markets in many cities across North America. And as interest rates climb this year, many economists forecast that the inflated prices will crash back to earth, badly burning heavily indebted latecomers and speculators.

"Prices are likely to fall in places where they have been booming the most, and where people are having trouble affording the houses," said Yale University economist Robert Shiller, who has published a second edition of his book, Irrational Exuberance, which covers the housing market boom.

California and Florida lead that list, along with cities such as New York, Boston, Las Vegas and Phoenix.

"I think this is actually the biggest [real estate] bubble in U.S. history and possibly even world history," he said in a telephone interview yesterday.

Last week, U.S. Federal Reserve Board chairman Alan Greenspan denied there is a national real estate bubble, mainly because there is not a "national" housing market. But he acknowledged that "there are a lot of local bubbles."

He added that, in many key markets, there is an "unsustainable pattern" of speculation and reliance on mortgages that require little or no down payment to buy a home.

Mr. Greenspan argued that house prices -- which have risen at double-digit rates for several years in many U.S. cities - will soon "simmer down" but are unlikely to fall because there is a natural demand for housing, unlike technology stocks.

David Rosenberg, chief North American economist for Merrill Lynch & Co., yesterday begged to differ with the revered Fed chief. Prices "can and will fall," Mr. Rosenberg said in an interview.

Mr. Rosenberg said that despite Mr. Greenspan's somewhat reassuring comments, the Federal Reserve has signalled it is aware that key housing markets are experiencing unsustainable price increases.

He said that with the exception of Vancouver, Canadian real estate markets have not experienced the same speculative excesses as many U.S. cities, although house prices have climbed significantly.

The National Association of Realtors reports that a record 66 of 136 metropolitan areas had double-digit first-quarter increases in the median housing price this year compared with 2004.

In Orange County, Calif., the median price for a house sold was $657,000, a 15-per-cent increase from the first quarter of 2004, while the New York area saw an 18-per-cent increase in the median price, to $435,000. (The median is the mid-price point, with half sold above and half below.) At the same time, more buyers are purchasing homes as investments, often with little or no money down, or using mortgages on which they pay only interest. The realtors' association recently said that 23 per cent of homes sold in 2004 were purchased as investments, with such sales up 14.4 per cent from 2003.

Economists are worried that a downturn in the housing market will spread to the broader economy because U.S. homeowners borrow so massively against their home equity to finance consumer spending.

Mr. Rosenberg said U.S. homeowners boosted their liquidity by about $700-billion (U.S.) in 2004 through mortgage refinancing, home-ownership loans and capital appreciation.

Mark Zandi, chief economist with Economy.com, said he's worried about the vulnerability of the mortgage-backed securities industry, where hedge funds and other investors have made huge bets. That derivative industry funds many mortgages for home buyers, particularly for low-equity loans.

Problems in the mortgage-backed securities market could result in a credit crunch for would-be home buyers.

Mr. Zandi said his concern about the broader economy would escalate if the speculative interest in the real estate markets continues unabated, as he believes it will.

"If things continue on as they are for another year or even six months, the potential for price declines is that much greater and the risk to the economy is much more significant," he said.

Every reader knows my feelings on real estate:
1. Don't be stupid -- like borrowing 100% of an overpriced property.
2. Assume prices will fall 10% and 15%. Make sure your cash can take it.
3. The price you buy it at is your only chance. It's legitimate (and expected) to haggle.
4. Don't buy the first you see. Keep looking. My friends look at 100 before buying one. You should too.

Real estate is an imperfect market. There are always deals. All it takes to find one is hard work.

Google alerts work in a weird way: Pick a dozen attractive stocks. Set Google Alerts on them. Then buy the ones with the greatest number of positive alerts -- i.e. the ones mentioned most often positively in the press. When the alerts begin to fade, dump the stock. As most readers know, I do love Whole Foods (WFMI). I get several alerts a day... and the stock? Well, it's been an animal. If only I owned 100,000...

Is Whole Foods overpriced? Yes. Should you wait for a pullback before buying some more stock? I have been waiting, but have despaired. I bought some more and it went up. And then some more and it still went up. Will it continue to go up? Your guess is as good as mine. Meantime, today I and 9,000 other folks will shop at my local Whole Foods -- the one in New York's Time Warner building.

Ultra-neat U.K. Honda commercial: Click here.

Forty years in the sands: My dear friends, Paula and Gerry Friesen, just returned from Vietnam. They loved it. Thirty seven years ago, the Vietnam War was raging. I was a student at the Harvard Business School. My classmates and the faculty favored the War. I believed it was unwinnable and made no business sense. Too much expense (lives and money) for too few gains -- no natural resources. I have the same arguments against Iraq. But I don't express them often. I figure it will take us many years to figure the waste. Meantime, the latest issue of Harper's Magazine has a history article titled, "Forty years in the sand. What happened the last time freedom marched on Iraq." It begins:

The British created Iraq in 1918, confident it would become a beacon of enlightenment unto the Middle East, that it would nurture moderate Arab regimes, that its monarchs would serve as peacemakers between Zionists and Arabs in Palestine, and that it would anchor the region in the wider interests of a far-flung empire. The experiment persisted for forty years, and it failed.

The United States has occupied Iraq for more than two years now. Our stated ambition is to "spread freedom," nurture moderate Arab regimes, act as a peacemaker between Israel and its neighbors and anchor the region in the wider interests of American national security. Yet the lessons of Britain's failure have eluded the American promoters of Operation Iraqi Freedom, who remain strangely uncurious about Britain's chastening moment in the Mesopotamian sun. ...

Britain began its own adventure from a similar position of overwhelming might in the Middle East where its armies swarmed for the first time through the crumbling Ottoman Empire. By the end of World War I, Anglo-Indian troops had captured Baghdad and Jerusalem. ....

British rulers assumed their mastery would benefit subject peoples, possibly with divine benediction. George Nathanial Curzon, the future foreign secretary and viceroy of India memorably pronounced his nation's unrivaled power in 1894 as an expression of God's will. The Empire was "under Providence, the greatest instrument for good the world has seen." Speaking Crawford, Texas, in August 2002, President George W. Bush inadvertently echoed Lord Curizon: "Our nation is the greatest force for good in history." In Britain's case, this presumption of superiority was not lost on subject races, and their resentment fanned the bonfire that ended Britain's moment.

The full article is in Harper's June 2005 print edition. It has not been posted yet.

Dan Good is the smartest man in the whole world. I know because he told me so. He also found K7, the excellent free fax service. Meantime CallWave's (CALL) president, Dave Hofstatter, who is not the smartest guy on the planet, surfaced, was not pleased about yesterday's piece who knocked his horrid stock. He refuses to address the issue of his ridiculous price rise -- from $3.95 to $7.95 a month for fax-email service, which K7, his competitor gives away for free. I should have sold his stock short way back. Maybe I still should? It closed last night at $5.64.


Dancing for real estate: Remember this photo from yesterday's column.

Reader Bill Brandenberger with Smith Barney in Houston writes:

Harry -
The picture is something called Capoeira - a brazilian martial art. If you have never heard or seen it -- it is absolutely amazing, not to mention beautiful. On Saturday - June 4, there is what is called a Batizado at St. Mark's Church - if you are in NY that weekend you should really go see it - it is amazing. Not violent, but absolutely amazing. I have been doing it for 5 years and it is the best thing I have ever done. The website is www.tibacapoeira.com.

Getting her comeuppance:
Mary, the church gossip, and self-appointed monitor of the church's morals, kept sticking her nose into other people's business. Several members did not approve of her extra curricular activities, but feared her enough to maintain their silence.

She made a mistake, however, when she accused George, a new member, of being an alcoholic after she saw his old pickup parked in front of the town's only bar one afternoon. She emphatically told George and several others that everyone seeing it there would know what he was doing.

George, a man of few words, stared at her for a moment and just turned and walked away. He didn't explain, defend, or deny. He said nothing.

Later that evening, George quietly parked his pickup in front of Mary's house -- and left it there all night.

Harry Newton

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads. Thus I cannot endorse any, though some look mighty interesting. If you click on a link, Google may send me money. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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