What's the next big bubble?

[imirza]

RE: SHORTING CREDIT CARDS COMPANIES

I wouldn't short Mastercard or Visa since they just own the network. They are not banks or actually holders of the underlying debt. Discover and AMEX do hold the debt. So shorting DFS or AXP is an option. I wouldn't short AMEX since its near multi decade lows. And its favorite of successful investors like Buffett who is probably accumulating shares as we speak. Discover is a more viable short.

Personally I believed the risk reward for shorting financials is no longer favorable. Financials have lost nearly 2 thirds of their value over the last year. Shorting REITS might be more profitable since bankruptcies amongst retailers and other businesses will increase and a lot of malls and office buildings will lose tenants. Long SRS the 2 x inverse real estate fund is a good bet. Also short big REITS like VNO & SPG .

And speaking of the credit bubble, what we are currently witnessing is the bursting of this credit bubble. The whole economy over the last 20+ years has been created via cheap and easy credit. This credit bubble has extended to all asset classes including equities and real estate causing asset prices to increase beyond reasonable limits. Now we are witnessing a process called 'deleveraging' as debt is being destroyed and asset prices are thus coming down to more reasonable levels.

As for the next big bubble , look out for the foreclosure bubble :smxB:

 

[Jonleehacker]

i want to find a way to advertise directly to teens about going green and make some money!

Perfect topic and audience for a blog or a themed social networking site.

 

[servicefly]

How to invest in a forming bubble? 1st understand that if you intent solely to get into a forming bubble to make money, you will fail. I.E. mortgage brokers in the housing bubble. 2nd, lets take the Alternative medicine bubble into account to examine possibilities for investment.

If you have friends with a passion for their product or service which falls in the Alternative Medicine category, then simply offer to invest while they are small potatoes. Don't invest anything you can't afford. To really invest in a startup you must understand a few things; profit & Loss statements, break even points, burn rate and marketing strategies.

• A good startup has a mutually agreed plan to grow in the same direction by management.
• They have a business plan, no matter how good or bad it may look to you.
• They have a marketing plan.
• Management understands how to generate a profit & Loss statement with projections.
• An executive summary has been drafted.
• Management understands their Break Even Point & Estimated Burn Rate if investment capital exists.
• A strategy has already been drafted to get their customers before creating any overhead, or spending more than $1,000.

Why the above characteristics? If you understand the above, you can leverage your skills and experience above as investment into their new startup. Bringing the above elements to a startup is usually worth more than money, or you can simply invest in a startup that already has these elements (all of them).

Finally, if your new startup friends are conducting any kind of Regulation D because they have investors expecting this and they say you don't qualify as an Accredited Investor by government definition, they are right. Their is a loophole however; tell them you are a Sophisticated investor (because of your knowledge of the above elements) and their is 35 investment slots available for Sophisticated Investors (by government definition) for any Regulation D.

Another way is to become a middle man for any alternative health care product. Become a new startup's distribution line.

Another way is to invent technology or a product and create an infomercial.

 

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[china]

Isn't the next bubble going to be "money supply"? The government is printing money to save all these different industries. Debt is money.

 

[Runum]

In response to the thread about the possible oil bubble I decided to try this out.

In the late 80's we had the real estate collapse due to changes in the tax structure. This led to the development of the RTC and liquidation of large chunks of RE at fire sale prices. That lasted through the early 90's.

Then the late 90's had the tech bubble that burst in the early 2000's.

Then we had another round of real estate investing and another bubble.

Now we MAY have a commodities bubble that includes, food, oil and gold.

If it is a bubble and it pops, what would be your prediction on which way will all of that money go? Another RE bubble? Commercial RE? Tech?

Please feel free to add or correct where I am misinformed. Anyone care to give it a shot?:cheers:

 

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[Edge]

In response to the thread about the possible oil bubble I decided to try this out.

In the late 80's we had the real estate collapse due to changes in the tax structure. This led to the development of the RTC and liquidation of large chunks of RE at fire sale prices. That lasted through the early 90's.

Then the late 90's had the tech bubble that burst in the early 2000's.

Then we had another round of real estate investing and another bubble.

Now we MAY have a commodities bubble that includes, food, oil and gold.

If it is a bubble and it pops, what would be your prediction on which way will all of that money go? Another RE bubble? Commercial RE? Tech?

Please feel free to add or correct where I am misinformed. Anyone care to give it a shot?:cheers:

Certainly looks right now that the next bubble is/was US Treasuries. Treasuries have gone parabolic. I'm not ready to jump on the train, but I am very interested in where the money that is parked in treasuries will go next.

Sure, a US Treasuries bubble sounds pretty lame, but it will represent a huge transfer of wealth just like all other bubbles. Not sure how i'm going to position myself yet, but I will post it here and I am interested in hearing how others are viewing this.

 

[AroundTheWorld]

alternative energy and infrastructure.

 

[randallg99]

alternative energy and infrastructure.

This is an excellent point... I have wondered if the new administrations' plans (hopes) are to rejuvenate the economy will enable it to sustain itself after the cash infusions/programs have been created

Certainly looks right now that the next bubble is/was US Treasuries. Treasuries have gone parabolic. I'm not ready to jump on the train, but I am very interested in where the money that is parked in treasuries will go next.

Sure, a US Treasuries bubble sounds pretty lame, but it will represent a huge transfer of wealth just like all other bubbles. Not sure how i'm going to position myself yet, but I will post it here and I am interested in hearing how others are viewing this.

oh boy. if this shoe drops, we will have seen the mother of all bombs explode.... our economy relies on the treasury market much more than people realize.

I have traded in and out of TBT a couple of times successfully which is an inverse fund.... (no position in it now.)

 

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[Edge]

alternative energy and infrastructure.

Is this because you see the new administration stimulating alternative energy and infrasture investment? If so, I can certainly see that.

The problem I am having is getting excited about investing in alternative energy with oil at $40/bbl. Don't we need higher oil and NG prices to stimulate the demand for alternative sources?

our economy relies on the treasury market much more than people realize.

But doesn't the economy need the money parked in treasures to be put in circulation or invested in a matter that stimulates growth?

I'm not really talking about an implosion, just a mean reversion that looks like a healthy treasury market. Something other than everyone plowing everything into treasuries at 0% interest just for the percieved safety.

 

[AroundTheWorld]

Is this because you see the new administration stimulating alternative energy and infrasture investment? If so, I can certainly see that.

The problem I am having is getting excited about investing in alternative energy with oil at $40/bbl. Don't we need higher oil and NG prices to stimulate the demand for alternative sources?

Yes.

And.. Good point. I guess the question is - how long will oil stay this low?

 

[TaxGuy]

The problem I am having is getting excited about investing in alternative energy with oil at $40/bbl. Don't we need higher oil and NG prices to stimulate the demand for alternative sources?

nope just enough environmentalism hoopla and upper-middle class families that are interested in buying :smxB:

speaking of that there have been articles in the past few issues of Entrepreneur including the trends issue last month and this month's issue which stated that Chicago is the headquarters for The Chicago Green Exchange which is the first green mall in the US that has stores centered around green technology, some of which I'm sure are solar or energy efficient boutique stores.

 

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[jaytrader43]

Green energy is probably it. Oil production is being slashed, so eventually, price will rise again, and people care about the environment now...so yeah, I think green tech is gonna be the next bubble.

 

[Runum]

Is this because you see the new administration stimulating alternative energy and infrasture investment? If so, I can certainly see that.

The problem I am having is getting excited about investing in alternative energy with oil at $40/bbl. Don't we need higher oil and NG prices to stimulate the demand for alternative sources?

I agree that $40 oil is a disincentive for alternative energy development. Maybe the future admin will artificially raise the price of oil with taxes to increase that incentive. The increase in taxes could help pay for the infrastructure development as well. Just thinking out loud.

 

[yveskleinsky]

Seems to me that a bubble on the horizon is credit card debt/cards. The industry seems to be largely unsupervised coupled with the housing bust and job market in the toilet...it just seems like this is the next house of cards to come down.

 

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[andviv]

I thought the idea was to identify those bubbles that are about to grow... the credit cards are already inflated and about to pop officially.

 

[AroundTheWorld]

time to short then!

 

[andviv]

time to short then!

How do I short a credit card company these days? Financial companies are already extremely low, and have been shorted for the last year... maybe Edge can offer alternatives about this?

OTOH...

I went walking around the Capitol after lunch yesterday. Next to the U.S. Capitol is the U.S. botanic Garden.

Guess what they have in display there?

Two wind turbines.

Right there.

They are functional.

So, it is true, it is happening, alternative energy has arrived to the nation's capital.

It seems many here believe that is the next one.... so, how to we profit from it?

PS: I Should have taken a pic of it, with the stand they are building for the Jan 20th ceremony as background.

 

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[Edge]

How do I short a credit card company these days? Financial companies are already extremely low, and have been shorted for the last year... maybe Edge can offer alternatives about this?

XLF is probably the most liquid financial ETF, it's liquid enough to sell short or trade options on.
SKF is the ultra short ETF
FAZ - 3X inverse financial ETF

Sorry, I don't have any input on these, I really don't have any desire to trade financials in any direction right now.

Maybe Randallg will chime in, I think he follows financials closely.

 

[randallg99]

So, it is true, it is happening, alternative energy has arrived to the nation's capital.

It seems many here believe that is the next one.... so, how to we profit from it?.

there are a lot of start up companies involving in green energy and resusable resources.... getting in at the ground floor seems the most lucrative opportunity. Just in the past month I have heard a couple of proposals for new start ups involving this industry.

Seems to me that a bubble on the horizon is credit card debt/cards. The industry seems to be largely unsupervised coupled with the housing bust and job market in the toilet...it just seems like this is the next house of cards to come down.

keep in mind that banks are the bag holders (think Chase, Citi, Bank of Am) and have already mitigated risks by reducing their exposure (lots of people here got a letter in the mail that their line was reduced) and tapped the bailout fund....

the consequences of the credit card bubble bursting are probably going to have more of a severe impact on the overall economy since growth was primarily due to the credit markets and now that they're contracting, we are probably seeing a

Maybe Randallg will chime in, I think he follows financials closely.

I think financials are at a level where they are poised for growth (in a stock investors eye/perspective).... stocks are traded with a very forward mentality with a long term mind set. I think Edge and Kidgas can both agree with me on this....

That said, a lot of changes (lay offs, downsizes, write offs) have already been announced and are already showing on the balance sheets. The irony is that while this whirlwind of hell we read in the media is circling the financial companies, their balance sheets are going to look mighty healthy within a couple of quarters.

... all bets are off the table if there are more exposure risks that haven't been made public yet....

The easy money has already been made in shorting financial markets. That's behind us now.... maybe there are some specific banks that are more susceptible now, but I think we might actually see an increase in banks share prices going forward. (yes, this is an optimistic view, but a long term one)

If you are bearish on the markets as a result of the banks hoarding cash however, then you may want to look into SRS -(THIS IS NOT A RECOMMENDATION TO THIS FORUM. PLEASE DO YOUR DD) - as banks and large money groups hoard their cash and continue to be scared of risk, you can bet your bottom dollar that (Property) REITs (not be confused with Mortgage Back REITs - which I am largely bullish on) are going to get crushed. There are already signs of commercial real estate around the country being severely overbuilt and the REITs will have escalated risk.... but who knows how the bailout will play?

I personally see a large risk to retail REITs... they are bracing for a whole new world of pain. IMHO.

 

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[randallg99]

Is this because you see the new administration stimulating alternative energy and infrasture investment? If so, I can certainly see that.

The problem I am having is getting excited about investing in alternative energy with oil at $40/bbl. Don't we need higher oil and NG prices to stimulate the demand for alternative sources?.

this question wasn't thrown to me, but I think we're about to witness for the first time a very nationalized (our gov't is getting used to the process now) energy policy with their hands deep in private sector determining the outcome. Complacency at $40 bbl is an incredible deterrent for the private sector to pursue which is why gov't assistance/money is needed if this sector has a chance to explode....

2 main things the campaign highlighted- 1) reduction of foreign dependency and 2) elimination of emissions/carbon

these are very expensive propositions and have not been successful in years past even with large investments.

my contention is that we'll just have to follow the government money whereever it puts it and there lies where we can make the money from equities.

the unintended consequence is that this will be yet another bubble indeed

But doesn't the economy need the money parked in treasures to be put in circulation or invested in a matter that stimulates growth?

I'm not really talking about an implosion, just a mean reversion that looks like a healthy treasury market. Something other than everyone plowing everything into treasuries at 0% interest just for the percieved safety.

trillions of dollars are plowed into a "secure" and "safe" market thus raising bond values on the traded market and at auctions as much as 8% thus reducing yields to 0%

investors' expectations going into bonds are 2-4% return annually at face amount (par) But instead, they are experiencing extreme growth. not that this is terrible, but what's going to happen when these are cashed in? all of a sudden, people depending on a 3% yield are going to watch their values deflate by 7-8% and it will take a couple of years of coupons to recover their initial investment

But I think this crazy increase in the bond market is nothing more than a knee jerk reaction to the lack of faith in the equities markets.

more on the other part of your question/thoughts later. this phone is already glued to my ear... gotta run.

 

[kidgas]

To be perfectly honest, I have a difficult time identifying the next bubble. I think investor confidence (and specifically overconfidence) is a prerequisite for any bubble. Given the events of the last year, most investors, whether individual, institutional, or foreign, are shell-shocked. No confidence there. With all the deleveraging going on and the lack of investor confidence, I think we will see several years of tentative investing on all levels.

Furthermore, I have given up trying to predict irrational behavior of the markets and instead prefer to react to what is occurring using the collars that I use. I try to prevent substantial loss while leaving myself available to capitalize on the majority of gains. I don't need to predict tops or bottoms but let the market lead me, selling calls when it is up and buying more when down.

 

[TaxGuy]

2 main things the campaign highlighted- 1) reduction of foreign dependency and 2) elimination of emissions/carbon

these are very expensive propositions and have not been successful in years past even with large investments.

I found this interesting b/c it's an example that "throwing money at the problem" is not always the best solution and isn't this how the tech bubble burst and really why most once successful companies go under?

What I mean is that most companies are built through solid market research and minimal cash investment and ultimately take off when the demand is great and the time is right to start investing only to fall if they take their cash and ride the wave of success without doing what got them where they were in the first place- due diligence and more sweat equity prior to actual cash investment.

I know this is a trap I don't want to fall into myself, part of my plan is to always keep my head on a swivel and not start investing until I know that there is an adequate demand for my product/service, at the same time though I understand that a lot of this green technology costs plenty of money just to research as is the case with some electric and hydrogen cars that are only available by lease b/c the "green" components are so costly that to sell the vehicles outright would be near impossible without charging literally an arm and a leg, i.e. a Hyrdrogen Accord I read about that stated the fuel cell technology costs are in "NASA territory" and is why it is only available for lease with no purchase option.

 

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[memenode]

I'm not sure how you define a bubble, but the implication is that it is something that will "burst". It seems like you guys are so used to the whole cycle that you actually begun thinking of it as a "normal" market phenomenon. I personally doubt that.

The way I see it, a bubble means that a lot of people are operating under false assumptions, led by some sort of a delusion, ascribing value where there is none and employing groupthink mentality. Eventually the bricks start hitting the heads and the bubble "bursts". This is going on as we speak, and it's a huge one, yet you guys are anticipating the "next" one.

Honestly, I don't wish for the next bubble. The existence of the cycle of booms and busts is a sign of an unstable economy, no matter how long a given cycle lasts. Unfortunately, so long as you have a market so terribly mismanaged by government (sending all the wrong signals and creating imbalances which otherwise wouldn't exist), you will have booms and busts. But I can't get into the so called "politics" (or anti-politics) of that here so I'll leave it at that. I can only say: check out austrian economics (mises.com) for more.

So yeah, just wanted to chip in with that. Don't expect a bubble, and if there is one, you might want to consider NOT being in the popular herd applying a yet another mass-delusion to themselves. I doubt you need to blow bubbles to be fastlane.

 

[Runum]

I'm not sure how you define a bubble, but the implication is that it is something that will "burst". It seems like you guys are so used to the whole cycle that you actually begun thinking of it as a "normal" market phenomenon. I personally doubt that.

The way I see it, a bubble means that a lot of people are operating under false assumptions, led by some sort of a delusion, ascribing value where there is none and employing groupthink mentality. Eventually the bricks start hitting the heads and the bubble "bursts". This is going on as we speak, and it's a huge one, yet you guys are anticipating the "next" one.

Honestly, I don't wish for the next bubble. The existence of the cycle of booms and busts is a sign of an unstable economy, no matter how long a given cycle lasts. Unfortunately, so long as you have a market so terribly mismanaged by government (sending all the wrong signals and creating imbalances which otherwise wouldn't exist), you will have booms and busts. But I can't get into the so called "politics" (or anti-politics) of that here so I'll leave it at that. I can only say: check out austrian economics (mises.com) for more.

So yeah, just wanted to chip in with that. Don't expect a bubble, and if there is one, you might want to consider NOT being in the popular herd applying a yet another mass-delusion to themselves. I doubt you need to blow bubbles to be fastlane.

While I agree that I really don't like the economy being as unstable as it, it is what it is. Our American economy has spent the last 30 years going through some drastic cycles and the cycles appear to be getting sharper and shorter. Given our economy and what it is, it is usually more beneficial to be ahead of the crowd, to be the first in and first out. I do believe that is what the speculation on this thread is about, we are aiming to separate ourselves from the crowd.

Also, yes, I do expect more bubbles given our economy, the rules, the politics, and the available information. It's the nature of our society. If someone has a good thing going, everyone else wants a piece of it and now.

 

[andviv]

Honestly, I don't wish for the next bubble.

I don't wish for the next winter --or this one, or any, for that matter.

But winter does happen.

Even if I or we all together decided to wish it does not come.

It will happen.

So I rather try to understand how the cycles work, what triggers the bubbles, what pops them, and how can I play my hand given the conditions.

 

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[memenode]

Well, I can understand that. To be entirely honest I don't even blame primarily market actors for participating in bubbles and busts. It's simply individuals acting in pursuit of their self interest.

It's just that what dictates what is the next thing everyone will want a piece of are not actually the market forces themselves, but the forces that are alien to the free market; politics, regulation etc. It's like weighing two objects on a weighing tool and then pressing one of them with your hands ("just regulating, ya know"). The result is certainly not going to be the correct measure of neither of the two objects.

If you, however, left the objects to calm by themselves you would get a wholly different and correct, natural result. I guess what I'm saying is that booms and busts are actually not a market phenomenon, but a para-market phenomenon. It's caused by governments, not the market actors. They're artificial manipulation of market signals leading to interests that otherwise wouldn't be.

Again, I don't blame people for pursuing those interests, just reminding (if that's needed anyway) that we're talking about an ill phenomenon that should be dealt with carefully. There will be lots of losers though. In the boom bust games there always are, or else it wouldn't be a cycle.

Maybe I should ask.. to be more on topic.. What's the next big bubble so I can avoid it and make it big somewhere where nobody is looking?

Cheers

 

[Runum]

Maybe I should ask.. to be more on topic.. What's the next big bubble so I can avoid it and make it big somewhere where nobody is looking?

Cheers

There you go.:cheers:

 

[Woody]

wow have not posted here in a minute!

but i fully agree with the possibility of a "green" bubble. even at a high school level i am noticing a shift in traditional habits by my classmates. they seem to watch their driving (which may be directly affected by the price of fuel), throw away trash, carpool, and are more generally interested in helping the environment. to me it seems as the new, cool thing to do. i don't mind at all. now i just need to figure out a way to get to the top and get out before it bursts. this shift in attitude and outlook seems to be influenced from the top down. what i mean by that is my classmates see leaders, celebs, and other people they respect and they try and follow. recycling went from being a nerdy, stupid thing to do, to a respected, cool practice. i want to find a way to advertise directly to teens about going green and make some money!

ha ha thanks guys,

woody

 

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[servicefly]

As a self proclaimed student of economic history (history predicts the future) I would say that economic bubbles is really just a descriptor for a natural cyclical phenomenon of a semi to total free market. The first bubble was tulips before the 1900's. That said, if you need to identify the oncoming bubble forming; here is a few elements to understand:

1. These bubbles will happen whether the government is involved or not, but the government or any other large pool of money (Global Pool of Money perhaps) will influence it.
2. Bubbles start with unpopular investing which turns popular once the money backs them.
3. Follow the money.
4. If you listen to any media what so ever, you will never see the bubble until it is too late.
5. Bubbles help facilitate innovation.
6. Keynasian & classic economics can't handle global macroeconomics anymore.
7. Faster communications speed up bubble formation & bursting.

Conclusion - It is hard to see the bubble right now as the government & media have us all distracted by the bankrupting of the country were facing (oops did I say that aloud?). My educated guess is it will be alternative health care to include health care solutions outside of the mainstream. Money is tight everywhere, healthcare has become a bad word, or joke and people are angry and looking for solutions. Health in general will be reduced from financial stress and many alternative health care solutions will become available like vitamin water (snakeoil) to unique diagnostics (new technology driven by low tech costs) keeping people from having to visit the doctors. Doctors are resentful of their lessening status and common Americans can't afford the flu shot. Movies are constantly portraying pharmecuetical companies as evil (not sure this is far off) and western medicine is falling very short in curing problems. Please understand that I am just relaying the perception I've begun to recognize.

 

[Woody]

Perfect topic and audience for a blog or a themed social networking site.

you just gave me an awesome idea! speed++

 

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