The Next Ten Investment Bubbles

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MarketWatch recently ran a piece titled The next 10 investment bubbles by Wallace Witkowski, and I thought this would make a nice follow-up to last week’s commentary on the Two-Term Presidential Curse where two-term presidencies appear to end in bubbles and busts.

Bubble # 1: U.S. Stocks: The U.S. bull market is now almost five years old with the S&P 500 up 170% since its March 2009 low. The last 10% correction ended in June 2012 and the S&P is up another 40% since… and while corrections normally reset markets, what’s different this time is the environment of extremely low interest rates and the $85 billion in monthly stimulus that’s fueling the rally in stocks. Of course, solid earnings have also reassured investors but talk of the Fed slowly ramping down its stimulus – is beginning to worry some market watchers. However, there are many like Warren Buffett who don’t think stocks are overvalued at current levels.

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Bubble # 2: Momentum stocks: Now – there most definitely are a few stocks such as Tesla Motors and Facebook, to name a few that have surged beyond fundamentals. Over the past year, Tesla is up about 336% and Facebook is up about 135% with many analysts in agreement that shares of momentum stocks such as these have risen to levels well above fundamental value.

Bubble # 3: Bitcoin: Some of you may have heard of Bitcoin – an alternative currency not controlled by central banks (which adds to its allure). As you would expect many, including the underworld, like Bitcoins as a nationless currency in which they can freely transact business away from government controlled banks. Believe it or not, bitcoin prices are up almost 2,500% in 2013, with a gain of nearly 76% in November alone to about $400 per Bitcoin… Even Internet giant Baidu (China’s Google) recently started accepting Bitcoins as payment for services. Several Bitcoin startups have also received significant venture funding – so something new is afoot here.

Bubble # 4: Investment Grade Scotch: Wow – who would’ve thought scotch whisky would make the list… but turns out investors have significantly bid-up prices of rare whiskies as a must-have collectible. A Scottish company that tracks whisky auction prices says prices have soared 170% since the end of 2008 with rare scotches fetching four- and five-figure sums per bottle! Of course, high prices have prompted many distilleries to release their own limited-editions that could push up supply and cool prices… but skeptics think prices could go even higher because newer limited editions may not meet connoisseurs’ high standards for a good scotch.

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