Bubbles Galore - Hang On to Your Pocketbook

Looking around the world it's easy to find price bubbles everywhere. Many international stock markets are in record territory. Markets in China, India, Mexico and Brazil have gone up faster than the Nasdaq did from 1995 through 2000. And remember that the Nasdaq was cut in half very quickly when its bubble burst.

Most mining stocks are on parabolic upsides that will not be sustained. Look at the vertical upside for Companhia Vale do Rio Doce (RIO), the huge Chilean mining company.

Prices of many soft and hard commodities are at or near all-time highs. The demand for Ethanol has caused corn prices to surge. Monsanto (MON), the seed company, is making all-time highs. And farm equipment maker John Deere (DE) is over extended.

Many solar-related stocks are stocks booming without making any profits. Some tech stocks are trading at very high multiples in anticipation of continued good news - Research In Motion (RIMM) has a price to earnings ratio north of 50.

Gold, silver and the platinum group are soaring to all-time highs. And don't overlook oil and the energy complex. Some traders are speculating that oil will head to $200 per barrel.

No bubble lasts forever and the current bubbles are no exception. Bursting bubbles are unforgiving - most recently the home building stocks have tumbled 50 to 90 percent from their all-time highs. And remember when the darlings of the Internet crashed over 90 percent in just a few months.

So hang on to your hat and your pocketbook. Rough times could be ahead for investors.

Related Articles:

Companhia Vale do Rio Doce Is Moving Lower
Hot International Markets Are Too Hot
Has Rio Tinto Peaked? - Two Chart Views
Price Patterns - A Bubble Top Is an Extreme Pattern
Track Metals from Aluminum to Zinc
When Will the Mining Bubble Burst?

Posted January 7, 2008.