Five places to look for the next investment bubble

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: Dot-coms? Done that. Property? Oil? Corn? Been there, got the T-shirt and nursed the losses, as well. One thing we know for sure about today’s global economy is that there is always an investment bubble somewhere. If you get in early enough, you can make a fortune riding the boom.

So with property prices collapsing faster than a tent on a stormy day and with the oil-and-commodity bandwagon gone, where should investors be looking for the next big thing? There are five areas worth thinking about: Old Europe, automobiles, stockbroking, the dollar, and private islands.

Anyone looking at the financial markets over the last 20 years would have noticed one common thread: Something is always the flavor of the month. Investors spot a trend, and everyone piles in until valuations become overextended and the whole thing collapses in a heap of bankruptcies and lawsuits.

At the turn of the decade, we saw the bubble in dot-com shares. More recently, we have witnessed the same in real estate -- fueled by the availability of subprime mortgages -- as well as in oil, food and commodities.

We have seen buying frenzies in the much-hyped BRIC economies -- Brazil, Russia, India and China. And there have been bubbles in financial instruments, such as collateralised debt obligations, that helped trigger the subprime meltdown. Along the way, we have some minor bubbles in the things purchased by the people who made money out of the other bubbles. Look at how the price of art or English Premier League soccer teams has soared.

Basic truth

Of course, bubbles are never entirely ludicrous. The boom always has some basis in reality. The Internet was an important new technology, and a few companies would make a lot of money from it over time. The dot-com boom took that basic truth, and blew it out of proportion.

Likewise, adding China and India to the developed world is going to mean commodities get more expensive. And yet the natural-resources boom took that upward-sloping graph and assumed it carried straight on into the sky.

So where are the next bubbles? You need to find something where there are solid reasons for expecting good growth, but which can also be puffed up into a mega-trend once some smart investment bankers get to work on it.

Here are some places to start looking, bearing in mind that bubbles come in five basic types: places, industries, financing, currencies and luxuries.

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