Thread: Forbes: Seven looming Financial bubbles

Gold





Gold is up 300% over the last decade, in part because investors see it as a store of wealth during times of trouble and inflation. Look beyond the hype and you may see an asset with its best gains behind it. As an asset that generates no actual income, gold's price is purely a function of what others are willing to pay for it.

China





China has positioned itself as the factory for the world, pushing out everything from drywall to toys. It's growing in large part due to easy money. Its government is already on the hook for debt equal to over 70% of gross domestic product. By keeping its own currency artificially low, China has also pushed its citizens to invest at home, artificially inflating property and stock prices.

Emerging Markets





Investing in emerging markets was hugely profitable in 2009 as confidence in the U.S. waned. An ETF that tracks the Brazilian market has gained nearly 125% this year, but overall economic growth in Brazil has fallen short of forecasts. The main Russia ETF has gained more than 135% in 2009, even as the country's GDP shrank. Now is probably not a good time to be hopping on the notoriously volatile emerging-markets bandwagon.

Treasuries





Warren Buffett and Chinese Premier Wen ****** were among those who lamented the Treasury bubble in 2009 as the U.S. borrowed to fund its record budget deficit. Signs the bubble is at or near the bursting point: rates on short-term bills that have fallen to negative levels after inflation--meaning investors are paying the government to hold onto their money--and a growing national debt.

College Tuition





Over the last 20 years, college tuition has risen at double the rate of inflation. There are now more than60 colleges charging over $50,000 a year, and the average student now leaves school with $20,000 in education loans. With financially strapped parents reluctant to foot the bills, colleges may soon be forced to cut amenities--like gourmet dining hall food--introduced in boom times. And some ivy-covered doors are likely to close for good.

Exchange-Traded Funds





These index- and sector-tracking products were designed to provide investors the breadth of mutual funds on the cheap. They were a big hit in the wake of the last recession, jumping in number from 152 ETFs in 2004 to nearly 760 today. But this once pristine area is on the verge of being overrun by opportunists. Some investment companies have been hawking ETFs with expense ratios more than four times higher than those of their rivals. It won't be long before ETFs join the ranks of the dubious financial products they were supposed to replace.

Copper





Spot prices for copper spiked during the mid-decade housing boom, shooting from about $1,500 a pound in 2004 to nearly $4,000 a pound in 2007. Copper plummeted in 2008 to below $2,000, but prices are once again approaching boom-time levels. Some of the demand is coming from China. Another source is ETFs that let average investors buy commodities contracts that were once restricted to institutions, resulting in an oversubscribed investing idea.

source:http://www.forbes.co....hisspeed=25000

[quote name='michaelr' date='24 December 2009 - 11:23 AM' timestamp='1261671781' post='85418']

I will take financial advice from Forbes just as soon as hell freezes over.



The bubble that will effect all is the Bailout Bubble, when it goes, and it is showing signs that it wont take long, the creators of the bubble will fall.





The Bailout Bubble – the Bubble to End All Bubbles

[/quote]



Agree michaelr. From your link:



Phantom dollars, printed out of thin air, backed by nothing ... and producing next to nothing ... defines the Bailout Bubble



Obama keeps on printing, borrowing, and spending driving the debt to unsustainable levels. Very scarry stuff. We need to get fiscal responsibility back in Wash DC and fast.

[quote name='Blueneck' date='24 December 2009 - 12:35 PM' timestamp='1261676127' post='85459']

What you say about gold is pretty much the same thing they said about the real estate market. There definitely gets to be a point where things just aren't worth the price the demand creates.



A speculation driven economy doesn't work for the simple reason that it drives the price of everything up. Who wants to live like that?

[/quote]

Actually there is cumulative speculation on the other side that is driving the price up. The nominal price of world wealth assuming a multiplier of 10 and velocity of 5 would require at least $2 T for the value of monetized gold. Subtracting out decorative and industrial uses the most often quoted price I read is $3k/oz. Making allowances for the costs of storage and losses due to theft and deleveraging in the transition Gold as money has a value 30-60k/oz.