Booms and Busts and Bubbles - What Can We Conclude About the Most Recent One We Are Recovering From?

Of course, predicting with any certainty what will happen economically is largely impossible. However, there are some facts we can glean from the last crisis that may offer some hints about where we should look next for a bubble in values.

First, what are some of the major business changing factors we can take away from the crisis:

Consumer credit standards have risen sharply and for practical and regulatory reasons are unlikely to loosen much for years if not decades to come. Prior to the crisis Congress had forced disadvantaged neighborhood and demographic lending on banking. This was a major contributing factor to the subprime debacle. With this erased there is little likelihood of a similar condition for years to come.
Consumers are shy of credit, tightening spending, and looking to save. The capacity of this group to become swept up in a bubble is still further lessened by this condition.
Small business and old line business is gun shy as well and will behave in a more conservative than usual manner for sometime to come.
The government's capacity to spend more is rapidly running against pure economic limitations because of the stimulus spending, bank failures, and other structural costs of the crisis.

We can safely conclude then that the next bubble will not be consumer driven. The likelihood is against traditional small business being in the mix as well. Also, bubble tend to develop in corners that appeared to thrive during periods of pain. These considerations suggest that good places to look for the next area could include some segment of the medical industry, some commodity product areas such as energy, or some segments of the information technology business.

Also, the one economic certainty we can be sure of is that while we may not be able to recognize the boom area now we can be equally sure that they will develop. From my perspective the most likely candidate will be the medical field as reform bill takes shape and distortions in the industry begin to develop. After medicine, the commodity areas that recovered most quickly are likely candidate as rebounding and growing demand from developing countries creates short term undersupply issues. Finally, energy seems a probable candidate. Hyper excitement over new developing technologies and alternating demand driven spikes on the petroleum side will drive this condition. In general the petroleum bubbles will revolve around marginal production sources like cracking shale for natural gas, tar sands, etc.

Gambling on bubbles is risky business, but these ideas are strong candidates for this over the next decade.