3 Possible Market Bubbles on the Horizon

3 Possible Market Bubbles on the Horizon

This is a guest post by The Financial Blogger: I’m working in the financial industry and I am specialized in personal finance. I’m always trying to find way to make money differently than receiving my pay check every two weeks. I recently hit a 6 figure income at the age of 28 and I am currently building my own online business while working 4 days a week at my day job.

Now that the stock market engine seems to be restarted for good (with a lot of volatility!), speculators are already trying to see which bubble will burst first! I am always surprised to see how quickly financial analysts are to predict that the stock market will crash again… I guess it is easier to predict the end of the world as sooner or later, it will happen and they could all say “I was right!”… only I was 5 years late….

So here are some of the bubbles that could burst at one point or another:

Precious metal, oh my so precious….

It’s been more than a year since we have seen gold push up from one record high to another. As many investors have enjoyed tremendous returns, more and more people are jumping on the bandwagon. I’d say that this is probably the first bubble to burst in the upcoming year. As far as historians remember (because the history of gold is way longer than any economic study), gold has always kept pace with inflation (but with much bigger fluctuations). In fact, an ounce of gold was good enough to buy a nice suit back in 2000 BC… and it is still good enough to buy a Hugo Boss today… after all this, the question remains: Do you really want to buy something that has already reached its peak? This is the case of gold in my opinion.

Canadian housing market to collapse?

As previously mentioned last week, the Canadian Government played with Canadian mortgage rules in order to reduce accessibility to the housing market. With these measures, it hopes to slow down the housing market and avoid a 2nd American nightmare…

Since the housing bubble didn’t burst in Canada back in 2007 and we are still navigating through a low interest environment for a while, the government felt the urge to modify a few mortgage rules. While they ignore the concept of bubble yet, it is very possible that making a few changes over time will slow down the housing market and calm the flurry of first home buyers. If they could threaten to increase rates significantly, this would definitely put an end to this madness. However, economics is not as simple as raising or dropping an interest rate ;-). This is why they opted for other alternatives.

Emerging markets ‒ can they hold it for long?

Since 2009, emerging markets (more importantly the BRIC) has taken the world on their shoulders and are slowly taking most countries out of the recession with their huge appetite for resources. However, they also have started to run into a few speed bumps such as 8% inflation in China and striking employees looking for better working conditions in India.

These countries could experience their own industrial revolutions as well and god knows what will become of it. There is a lot of hope invested in the BRIC but their stock markets are inefficient and not transparent at all. I guess this is why we have such risk of having the bubble burst from the “truth”.

Among the top 3 bubbles to burst, I’d put my 2 cents on gold… I really don’t like this precious metal. In fact, I don’t even like its color… I prefer silver!

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

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