New Year’s is usually welcomed in with the “bubbly,” champagne. And this makes me reflect on economic “bubbles.” I was a direct participant in the two, most notable economic “bubbles” of recent memory.

In 1996 I took a job with Dean Whitter on “Wall Street” which actually meant an office in the World Trade Center. I was a bit old for their usual entrant but I had easily passed their exam with a very high score. My intellectual capacity for the job was confrimed when I got 97% correct on the infamous New York “Series 7″ exam, the barrier that blocked most from entering the world of high finance.

But I didn’t stay long since the task assigned to me, along with the bright, young MBAs, was to bring in names, usually by spending hours on the phone. I explained that I wanted to sell only to my own list of contacts. But this was not the goal of that office. Little did I know that I was in a high pressure, go-go office with a very ambitious manager. I retreated into the world of currency trading with an outfit literally housed on “Wall Street.”

This was the high point of the “ bubble.” The stock market was rocketing powered by investments in computer based businesses. I had to convince my clients that currency trading was a better investment since you could make money by movements up, or down, in values. The trick was to know the direction. But it was a hard sell when practically any stock portfolio was increasing by 20% or more a year.

I was long gone from the business when the “bubble” burst and thousands, if not millions, lost bundles with their “dot-com” portfolios. I attribute the demise of the “” bubble to Allen Greenspan, who preached incessantly that it was a bogus market. He got his wish, the bubble burst.

I later found myself in the middle of the “credit” and “housing” bubbles. I sold property in Florida to buyers in Europe. All of my clients had “sub-prime” mortgages since, as non-residents, they were ineligible for “prime” rate mortgages.

It was easy to understand why investment in property was so attractive. As I explained in an article in 2008, buying a home allows you to invest with highly leveraged credit, i.e. you can pay as little as 5% down and even no downpayment in certain cases. This type of credit is not available for investing in stocks, bonds and commodities. Even more important, selling the investment in most cases does not incur a capital gains tax, since you have an exemption from this tax on the sale of your principle residence. And you can do this once every three years. As a bonus you get a new place to live.

Now I would be the first to state that housing values reached unsustainable levels. Easy to see this, when the average home price in an area exceeds the average income by a factor of three, you are running out of sufficient clients. The average price for homes in San Diego County in California was probably the most conspicuous example of home values run amok. The average home cost maybe five or six times the average income.

I can understand the collapse of the housing “bubble.” But this should not have translated into a collapse in the credit “bubble.” Not all securitized debt was based on mortgages. It was also used to bundle loans for all purposes into investment vehicles. As I have stated ad nauseam, the investment is the loan, not the collateral.

Much has been made of homes being “underwater” which means the mortgage on the home exceeds the value of the loan (we used to call this being “upsidedown”). This has been cited as the reason for devaluing the loan based on the property. But what about auto loans bundled into investments? All financed autos are “underwater,” since all autos lose value as soon as they leave the lot. No one argued for devaluing securitized auto loans.

I have seen my share of “bubbles,” from now on I will try to limit my bubbles to those I see in my champagne.