No. of Recommendations: 11

I just got caught up on the BMWM board (it happens a couple of times a year). I enjoy reading most of it and it is one of the more educational and thought provoking forums in Fooldom. That being said, I guess I’ll write a post addressing this purely speculative question – What will be the next bubble?

I’ve actually been thinking about this for awhile. I’m convinced it will be in an area with government intervention that produces unintended consequences combined with speculative investment beyond what the ultimate benefits of the particular endeavor might be. Though there may be others, my belief that the next major bubble will occur somewhere in that vast universe we refer to as “green”.

It is already starting in the VC community. Money is still relatively tight, but any serious pitch for start-up money better have a few charts dealing with its “greenness”. Don’t get me wrong, this fledgling area and all it encompasses will also be an incubator of some of tomorrow’s great companies and will create many homeland based jobs to replace others that have been lost. I just feel the energy and almost fanaticism that will eventually lead to the excesses.

We’ve already seen some mini-bubble pops in related areas, beginning with ethanol plants a couple of years ago and solar companies later. These are kind of like the mud pots burbling on top of the volcano. Little warning signs but nothing that really points to the ultimate pressure point. Now, I would have a tough time detailing the “green” story behind turning corn food stocks into ethanol, but it was an early industry that was developed via government impetus that way too much speculative money jumped on. Solar will be a player in the end, but probably only a key bit player. The money in those stocks last year led one to believe that solar cells would be covering every stable land mass on the planet and that there was enough of the critical materials available to accomplish that.

These are just the early events however. The big money hasn’t started flowing. The exciting part is that there will also be real money to be made as this “green” industry emerges. So maybe, the best advice is to remain focused on fundamentals and be aware that excesses build slowly and take much longer to really create a debilitating bubble than you might think. That is the time to be very careful and not get lulled into a false sense of “this time it’s different”.

When I see packaged securities of various carbon “cap and trade” credits or whatever “green” currency emerges, being traded willy-nilly and without sufficient transparency combined with past government actions that create reality vacuums, then I’ll be worried. I hope I see it coming.

It’s good to be back to the BMWM community and I wish you all a prosperous 2009.

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