Bubbles and Bursts

Bubbles and bursts should be no stranger to us. Millionaires and billionaires are dimes a dozen. And we have seen many of them lose everything overnight. Are we surprised or are we already too used to uninspiring stories of riches and rags? If we have ever gotten into a discussion of economics, you have probably heard me try to explain that there are many ways to make and lose money in today’s world.

At the turn of the decade, we saw the bubble in dot-com stocks. More recently, we have witnessed the same in real estate then in commodities, especially oil and food. Just as the bubbles grew, so does the risk and the impact when they burst. This is a simple scientific fact but greed has taken the rationality out of people.

Even bubbles have some foundations in reality. The Internet was the future and while the first few companies would profit tremendously, the market quickly becomes saturated. Likewise, adding China and India to the developed world is going to mean commodities get more expensive as demand grows exponentially. Then there are those who ride the waves and blew it out of proportion till the waves start crashing down.

So let’s examine what should happen in the foreseeable future and see if you can predict where the next bubble will come

1) The US dollar has been more resilient than most would expect and should be nearing the point of rebound, which is good news for the US real estate.

2) China and India will have an increasing middle and upper class looking for modernization. This will lead to growth in foreign exporters like Italy, France and Germany.

3) While oil prices rises, people look for cheaper alternatives. The hybrid car market is at present the most viable option and should see a sharp increase in demand. Meanwhile there are ongoing R&Ds on electric cars and should it succeed, a new generation in electric automobiles will take over.

4) Population growth will be declining and mortality rate will be increasing at an alarming rate as a result of higher costs of living.

5) And finally and perhaps most critical of all, global warming is running wild like a herd of off-track horses rampaging through anything that stands in their way. Anything green from now on should be getting hotter on the market.