http://www.businesspundit.com/12-economic-bubbles-that-may-burst/ 1. Gun sales Anticipating anti-gun legislation, certain Americans are snapping up guns to hoard, collect, or safekeep. Some are even stockpiling for investment purposes. According a gun buyer mentioned in this Wall Street Journal article, a collection of âassault weaponsâ could triple in value if the federal government re-enacts a ban on their sale. Background checks on potential gun buyers increased by 27% in the past year, according to the article. Some guns have already appreciated. For example, European-made AK-47s doubled in price between September-December 2008. For savvy buyers, the right to bear arms is also bearing fruit. The question is: Whenâs this bubble going to burst? 2. Option ARMs Starting in May 2009, option adjustable rate mortgages (ARMs) have been causing âmore delinquencies and foreclosures than subprime mortgages,â according to a Wall Street Journal article written in July. Option ARMs allow homeowners to pay partial interest on their home loans for a predetermined period of time. In some cases, the unpaid amount of interest is added to the loanâs principal. Once the partial interest window expired, homeowners are left with potentially unaffordable payments. Combine that will falling property values, and you see yet another loan-inspired disaster. According to the Wall Street Journal, As of April, 36.9% of Pick-A-Pay loans were at least 60 days past due, while 19% were in foreclosure. In contrast, 33.9% of subprime loans were delinquent, with 14.5% of those loans in foreclosure. Option ARMs are concentrated in California, Florida, and other hard-hit housing regions, writes the WSJ. Wells Fargo, J.P. Morgan Chase, and the FDICâs insurance fund hold a large proportion of option ARMs, so a burst bubble will hit them especially hard. Itâs just a matter of time. 3. Cap & Trade In September, the Senate will vote on the American Clean Energy and Security Act, which should really be called the Clean Energy Securitization Act. The act will create a cap-and-trade market that will create new derivative-friendly asset classes, according to this Christian Science Monitor article. The government will, if the act passes, activate a market for carbon allowances and carbon offsets. The former are permits allowing companies to pollute; the latter, pollution permits that require companies to offset their carbon emissions elsewhere. That, writes Mother Jones reporter Rachel Morris, is just the beginning. Once permits hit the market, financial experts will convert them in derivatives with names like âoffset futuresâ and âallowance swaps.â Bubblemania will ensue if the government shies away from regulation and enables the same kind of chaotic, over-the-counter system that enabled the mortgage-backed securities crisis. The financial industry is currently lobbying for minimal regulation. If the bill goes through in September, and the government steps back from applying regulation, subprime carbon might not be too far away. 4. Incandescent Light Bulbs (EU) A pending EU-wide ban on incandescent (traditional) light bulbs is causing consumers to hoard the soon-to-be unlawful products. Manufacturers are enjoying massive sales as a result. The Spiegel article covering this bright bubble news didnât mention anything about people hoarding for investment purposes, as they are for guns, but that certainly remains an option. The bubble will burst in September, when stores no longer sell incandescent lighting, and it will really burst when CFL (compact fluorescent lightbulb) technology improves enough to make people toss out their old incandescent. 5. China Chinese stock markets have been surging, fed by easy credit from government-linked banks. The Shanghai Composite rose 16% in July alone. Banks extended $1.1 trillion in new loans during the first six months of 2009. Whatâs more, a Chinese company enjoyed the biggest global IPO of the year. China State Construction Engineering Corp. raised $7.3bn in one day. The Shanghai Composite Index dropped 5% as a result: Investors feared that the same speculation that had increased CSCECâs stock value by 56% was also overheating the market. Unfortunately, Chinaâs economy remains export-driven. The numbers are a smokescreen. The Chinese government is powerful enough to âmake the right numbers appearâ if it thinks the countryâs economy needs stimulating, according to Contrarian Edgeâs Vitaliy Katsenelson. â(T)he government is more than willing to artificially stimulate the economy, in the hopes of buying time until the global system restabilizes,â he says. China is experiencing âasset bubbles that look like economic growth,â writes Bloombergâs William Pesek. Will Chinaâs market manipulation survive the recession, as the government has planned, or will the bubbles all burst? 6. Gold To many investors, âquantitative easingâ is synonymous with âbuy gold as fast as you can!â The problem is that more money in the mint doesnât necessarily mean inflation. What if the Fed printed less money than was lost in the financial crisis? What if consumer demand remains low and producers canât increase their prices? Or if, after banks recapitalize, there isnât any extra money left? Or electronic money messes up the whole notion of quantitative easing? Gold will spike when in inflation hits, but if thereâs no inflation, speculators will be left empty-handed. Then again, ifâas some goldbugs claimâthe dollar weakens further, global financial systems collapse, and governments fail, itâll be nice to have some bullion on hand. 7. Higher Education Elite schools like Harvard and Yale have frozen some faculty salaries. What gives? Itâs a widespread endowment dry-up, according to The New York Timesâ Steven M. Davidoff. He explains that in recent years, endowments and tuition hikes have enabled universities to expand buildings, programs, and faculty, as well as increase salaries. With the economic crash, however, endowments have shriveled. The Harvard endowment, on which certain parts of the university heavily rely, used to enjoy handsome portfolio returns: Its private equity portfolio gained 28% during the past decade. Now, it is facing more than 30% losses, according to Davidoffâs calculations. He estimates that up to 40% of Harvardâs assets are illiquid, meaning that it will have to aggressively raise donations or increase its liquid returns to fund itself and its private equity obligations. âThis results in a spiraling decline in Harvardâs liquid assets as each year they go lower to meet these needs and more and more assets become tied up in private equity,â writes Davidoff. Ouch. Overdependence on endowments and private equity is bursting the higher education bubble, especially at the top tiers. 8. Trustafarianism Bubbles can be cultural, too. Just ask the hipsters featured in this New York Times article, who freeze in shock after being informed that full-time jobs last eight hours a day. For many, the parental bailout is a bubble that has either deflated or burst. 9. Alternative Energy The next decade marks the rising of a Brave Green World. Governments are limiting carbon emissions and pushing large alternative energy subsidies. Peak oil makes the search for alternative energy sources more pressing. Cap-and-trade, if it passes, will create a new market for energy-related derivatives, enabling speculation and asset price inflation. âThere must be significant government involvement designed to focus energy and capital on the specific industry â and clearly thatâs already happening,â writes Jeff Brady in this NPR article. A few pieces still have to fall in place for a bubble to form. These include a massive update of the national energy grid, as well as a new source of credit for green ventures, according to Brady. He says that a grid update is in the works. A new source of credit, in my opinion, is just a matter of time. When that happens, brace yourself for the green market overvaluationâerr, revolution. 10. Junk Bonds In late July, average junk bond yields fell into the single digits for the first time in more than a year, according to the LA Timesâ Tom Petruno. The KDP Investment Advisorsâ index, which covers 100 junk issues, hit a high of nearly 18% returns last December, Petruno reports. Record bond defaults havenât deterred investors from loading up on the risky bonds, but they have returns on their sides. Petruno says that âthe average junk fund is up 27.2%.â Those returns out-entice the prospect of massive defaults, which are bound to occur eventually. 42% of junk bond issuers have âhighly leveraged balance sheetsâmuch more than in previous years,â according to this CNNMoney article. Itâs a good time to be in junk bondsâif you can get out before the bubble bursts. ....more
........................................................................... 7) Education.....Needs to become internet based....and available to the willing.....not just to the rich and connected.... The cost should be miniscule..... 9) Alt Energy....Should enter the market because of price....When the "green price" is right....ok.... 10) Junk bonds, gold, short dollar.....just more crowded trades.... The "public" never gets rich....just a few individuals....this is never going to change....
I wouldnt say the public never get's rich. You know any stocks out there that hasnt gone up at least 100% in 09? Lot's of retail investors caught that move. The tricky part is knowing when to get of the train... That's the crux.
............................................................................... No.... Rich means "rich"..... ie BAC now wants to offer commodity products to all of its customers because "things that are real" are in vogue.... The "public" never gets rich by "market rule".... ie there will never be 200 million Warren Buffetts.... ........................................................................... Secondly....not many participated in the recent big win.... The psychology during the time of duress was extremely negative.... The public was not buying at the bottom ....they were suffering and puking....Very few bought the bottom.... ie One is just reading now....Paulson participated etc.... The "masses" never have or will get rich....not ever.... Who knows....maybe Obama will make the "public" rich....
Secondly....not many participated in the recent big win.... The psychology during the time of duress was extremely negative.... The public was not buying at the bottom ....they were suffering and puking....Very few bought the bottom.... ---------------------------- My take. Some did nothing, just riding it out neither buying or selling Some bought on the way down and they are underwater. Some who did buy around the bottom overtraded.
rich is relative. Today with flushing toilets, fridges, cars, heated homes, we live better than kings 100 years ago. But debt will be a problem. The public will always be in debt is more apt. Or the public will always fall behind in their finances is true too.
BBY - Best Buy. What a POS. I shorted it in April and am still making money. Retail investors who 'caught' the move, as in weren't down 60% before it happened, are few and far between.