Lets Brainstorm Whats The Next Bubble?

[ilconsiglliere]

I have been pondering this for over a year now. I am trying to figure out what the next big thing is going to be on Wall Street so as to take advantage of it.  In the past by the time you recognize whats going on its too late. I am hoping this time to be a head of the curve. Every bubble that has occurred has been the direct result of large amounts of money being slushed into the economy via low interest rates, government subsidies, etc...

Take a look at the recent real estate bubble. The real estate bubble was a direct result of the FedReserve keeping interest rates too low too long after the dot com collasped. After the dot com collasped the Fed lowered rates to almost nothing to jump start the economy. Never mind that the Fed raised the rates popping the dot com bubble, but will all this money sloshing around the economy, it had to go somewhere. That somewhere was real estate via Wall Street and the banks. Well as the real estate heated up the Fed started ratcheting up rates though a bit too late and eventually leading to popping the real estate bubble.

Well right now there is a ton of $ being sloshed into the economy AGAIN. You dont inject that kind of money with no effect. So whats the next big thing? Some writers have said its alternative energy. I am not so so sure. Its going to be in something, the question is what is it going to be.

But if we look back at the last 2 bubble there was a couple of mini bubbles buried in there as well. Here is what I am talking about:

Internet (pre-web)
Dot Com (web)
Real Estate
Web 2.0 (still going on)
Oil (mini bubble)
Defense (mini bubble - result of 9.11)

So that being said if we put our collective brains together lets extrapolate out what the next thing will be. Than we can all benefit. I can almost guarantee that the next bubble is already forming. It just not has appeared on the media's radar yet.

But its coming, make no mistake about it.

[The Gorn]

You see too many people entering health care as a "default" second career choice.

Everyone expects it to keep going up like a straight line.

Yet the entire economy is groaning under the weight of health care spending.

It has to change.

(I think I just came up with a haiku.)

[Aussie]

...is that if it's evident what it's going  to be, it gets factored in beforehand.  This is why expected good news often doesn't kick up a stock price on the day it's announced.  After all, as any revolutionary knows, a coup that is known about in advance is a coup that does not take place.  I think it's more about recognising a wave lifting beneath you than about seeing a line of breakers out the back.

[Origisaurus]

Triggered by an oil crunch and/or upheaval in the Middle East.

Prez addresses Congress and declares a 2, 3, or 6-fold expansion of nuclear powered electricity.  Gemini/Apollo like programs emerge.  Tons of research programs, companies going public on vaporware, etc.

[Aussie]

If they ever got fusion up and going, that'd do it.  But the damm thing is still '30 years away', same as it's been since the 1950's.  Contrary to what some folks think, fusion would still generate radioactive waste, but it would only take maybe 100 years for it to cool to manageable levels, unlike the 10,000 years associated with fission by-products.

[Origisaurus]

"fusion ... 30 years away".

Instead of tilting at that windmill, fission nukes (including waste storage) have been reduced to an engineering exercise, just as going to the moon has.  What's lacking is political will.

[John Masterson]

I work for medical companies, and they are already seeing cuts in Medicare reimbursements.

One large company laid of 2000 people because of "a change in spending habits of hospital purchasing groups now taking place in anticipation of healthcare reform".

Still, all us boomers retiring is going to create a huge upswing in healthcare demand.  But reimbursement rates will be lower for doctors and companies.

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I think to predict the next big thing you have to see what other people cannot see, as Aussie pointed out.

You have to see connections that are not obvious.

For example, when the automobile is invented and ownership starts to take off in the general population, you foresee the needs of suburban life, and price changes coming in land where suburbs must be built.

[Aussie]

"Still, all us boomers retiring is going to create a huge upswing in healthcare demand. "

I would think, however, that it's also going to create a sustained and accelerating downswing in many asset prices, as boomers draw down on investments to finance lifestyle in retirement.  Which woud presumably create a tightening downward spiral.  By analogy, if every farmer in the district brings his peas to market at the same time, the price is going to drop out of the market.

[I D Shukhov]

College enrollments are up because young people can't find jobs.  When all these people get out of college there still won't be any jobs for them because knowledge work can be done more cheaply in China and India where the top 10% or so of high-IQ people is greater than *all* employed knowledge workers in the US.

A better thing to do, unless you are really  in the elite of knowlege workers (e.g. can get admitted to a top tier college) is to spend the 4 years learning a high end repair trade or computer/network administration.

[John Masterson]

College enrollments are up because young people can't find jobs. When all these people get out of college there still won't be any jobs for them because knowledge work can be done more cheaply in China and India where   the top 10% or so of high-IQ people is greater than *all* employed knowledge workers in the US.  
 
  A better thing to do, unless you are really in the elite of knowlege workers (e.g. can get admitted to a top tier college) is to spend the 4 years learning a   high end repair trade or computer/network administration.

Wow. I hadn't made that calculation, but it's a bit frightening.

Yes, never go into a trade that can be easily offshored and does not require communication skill in English and American cultural understanding.

[Richardk]

And not due to the housing bubble. For a while now couples that have winter homes in Florida or Arizona have been telling me about their "retirement" communities becoming ghost towns because their neighbors are either too old / sick to travel or can't afford it anymore (depleted income / rising health care).

Without new retirees to snap up these properties plus the current housing bust, all these winter homes are just like your farmers all bringing in their peas at the same time.

[Richardk]

http://www.youtube.com/watch?v=cL9Wu2kWwSY

This is really mind blowing and ends with a darn good question. The video reminds me of approaching singularity.

I was told, but didn't verify that "Sony played this at their executive meeting this year."

Apparently this version has more info about it.

[The Gorn]

That damned video is going to give me a nervous breakdown. Or make me tighten my sphincter muscles until I can't breath. It just feels like a million threats being thrown at you all at once.

It makes me want to join an Amish order...

[ArnoldW2]

I learned how to recognize bubbles from the book "Trend Watching" by Ron Insana. He wrote:

**** Begin Book Excerpt ****
Four ingredients occur at the beginning and during the inflating of all bubbles. When the first three exist simultaneously, a bubble will inevitably emerge.

1) Eureka!! New discovery or invention (e.g., the internet or fancy new derivative securities)
2) Easy money: Low cost or highly available credit - the most necessary pre-condition for a bubble
3) Government Largesse: Subsidies, tax incentives or special treatment for particular industries
4) Auspicious economic conditions

One key ingredient in a bubble is some form of mass participation. Bubbles of epic proportions have always involved entire populations who were consumed by the desire to become wealthy without working.

Endings to bubbles do not come without warning. Big bubbles are always marked by an obvious deterioration in the positive factors that inflated them. Tight money or higher interest rates burst bubbles.
**** End Book Excerpt ****

Now, bearing in mind what he wrote, let's look at the economy.

The collapse of the housing bubble and the recent collapse of the stock market have wiped out the wealth of most of the population. They can't participate in bubbles right now. Therefore future bubbles will be smaller (the recent commodities bubble is an example of a smaller bubble). The current stock market bubble is inflated by government purchases of "toxic assets". Those purchases will eventually end and, several months after that, the bubble will pop.

While credit is scarce for small and medium businesses, there's plenty of money for big business.
Federal Reserve purchases of toxic assets give banks lots of money to speculate in commodities and securities (including the stock market).
Auto companies got some special treatment recently - though not enough to make much of difference yet.
There has been talk of subsidizing "green" industries that reduce CO2 generation, and for subsidizing infrastructure building and repair.

The next "Eureka!!!" will probably come from biotech, but that's probably a decade away.

[John Masterson]

That damned video is going to give me a nervous breakdown. Or make me tighten my sphincter muscles until I can't breath. It just feels like a million threats being thrown at you all at once.  
 
  It makes me want to join an Amish order...

G0ddard,

You can relax. Human fundamental needs haven't changed in centuries: love, something meaningful to do, and enough decent food to keep from being hungry.

You can create your own "Amish order" in your own home. Just believe what you choose to believe, and value what you choose to value.

The world of 1960 was amazingly different from the world of 1000 AD. But we had fun just the same.