What is the next economic bubble waiting to burst and what should we do about it?

Higher Education. The higher education bubble has many similarities to the housing bubble and proceeding collapse in 2008. Cheap credit coupled with widespread beliefs of ever-increasing returns on investment has caused college tuitions to vastly outpace inflation and family incomes. From 1976 to 2010 commodities prices rose 280% and homes prices rose 400% while private education rose an incredible 1000%. While the price of education has skyrocketed, the value of a degree has not kept pace. The increase in supply of degree holders has created an imbalance in the labor market . In 1940, only one in 20 Americans held a college degree. By 1977, that number had soared to one in four. Over the past 30 years, higher has gone from facilitating upward mobility to exacerbating inequality. For the first time in history, the majority of unemployed Americans attended college. Student debt is now greater than $1 trillion and many graduates are unable to secure employment sufficient to pay off these loans. As a result, students are increasingly beginning to default on these loans. I’m writing a book on the http://higheredbubble.com/highered.

Next big bubble? Metals. Primarily steel, iron, zinc and other metals that are used in the construction industry. China has been growing it’s infrastructure at a breakneck pace for a while and their economy is starting to overheat. I do not believe that they can continue scaling at this level for long. When the artificial demand drops I do not expect other industries to be able to pick up the demand as they have started to replace metal with composite parts (fiberglass, epoxies, plastics) due (ironically) to the high price of metals. There are a few other bubbles that will burst do to the same causes, but I am still working those out.

Bubbles come from credit and not from the industry to which the credit expands the most. Professional speculators tend to do this with much more capital than the typical individual can bring to bear. While individuals and companies do often make large amounts of money by riding a credit bubble, their lack of liquidity (ability to exit their positions quickly and cheaply) makes it a high risk prospect. For example, a guy who took out  mortgages on a dozen condos in Miami would have done tremendously well until 2007-8. He would have been too illiquid to get out of his investments in time when the market flipped. On the other hand, a hypothetical hedge fund with billions of dollars of assets under management could have hedged investments in real estate securities like REITs with out of the money put options against those same investments, locking in profits and preserving their liquidity even in the event of a catastrophic market decline. I don't rightly know the answer to this question. It's like asking how to survive an artillery bombardment in your neighborhood if you don't have a car. The little people just kind of get blown up. Get out of debt, accumulate capital, and deploy your money using methods you understand into an area that you know.

This is a great question, definitely a conversation that people should join, attempt to educate themselves on the matter and contribute to the debate! I don't foresee any specific bubbles being created right now.  At least, no bubbles like the housing bubble that led to the crash in '08. This is probably because the economy and all the many players within it still have not loosened their grip on their cash (rightfully so!) and there really are no signs of more money coming into circulation from any particular industries. A better question to ask yourself would be, "where are people spending/investing their money in which they are putting their money there based on a future value?" What I mean by that is, people started seeing property values skyrocketing with the housing market bubble last decade.  So, everyone began buying a house because they thought, "it was worth that much last year, it's worth this much more now! It's only going to keep rising and by next year it'll be worth this much!" People began buying things based on speculation of something's future value. Sometimes, it is difficult not to be seduced into such investments, but investing into something's future value is extremely risky.  The better way to invest is by attempting to invest into something that has an undervalued price its current market.  A perfect example of this, Facebook.  As Facebook prepares to go public, the speculation of its value could break the all-time record of IPOs.  But, Facebook still doesn't yet have a business model to show they are a truly viable company - like Groupon, they really don't show any fundamental way of making money beyond their advertisement. But, I guarantee people will go crazy for those shares just based off of the over-hyped speculation of what they are worth and what their future worth could be. People will be buying their stock because they are thinking, "Facebook has 850+ million users, they will keep growing, they're one of the biggest sites on the internet, and so forth." But, what money do they and can they generate is what to ask.

There may be a debt bubble/collapse. There will not be a student loan bubble/collapse.We might skate through just fine, but I think there’s a serious risk of a debt bubble collapsing. There’s more debt now than there was before the mortgage-triggered financial collapse in 2008.You don’t even have to know where the bubble will pop. Just consider China. Maybe it will grow at 6% this year, and forever, and resolve all its conflicts. Or maybe a number of big developers and local governments will default on their debts incurred to develop real estate. One big sector of debt defaulting will raise all interest rates and tighten credit restrictions, causing a snowball effect (i.e., the bubble pops).If there are widespread defaults and credit downgrades, that will be very deflationary. The central banks and national governments will probably print money to minimize the deflation, but there will still be a huge loss of wealth as bond holders experience the defaults. Deep recession, world wide.How do you prepare for it? If you’re a gambler, and see this scenario coming, then there are exotic things you could invest in… futures, options, leveraged ETFs betting on low interest rates. I don’t buy such things, so you’ll just have to google it, or ask a follow-on question in Quora. (Don’t ask how you can make money off “it” without specifying exactly what scenario you expect.) As I said, it’s a gamble. I’ve got most of my money in the US stock market (ETFs mostly). I prefer dividend paying stocks with low PE ratios. If there’s a financial catastrophe, I expect my portfolio to fall by 20 to 80 percent, and I’ll just watch it, rather than trying to “catch a falling knife.” It will recover eventually.++++++++++++Several answers have said student debt or higher education is a bubble. I think the amount we are spending on higher education is unsustainable and a large number of students will default. During the 2008 crisis, the housing market was such a mess that many home owners quit paying their mortgage and continued to live in the house for over a year, even though they could pay the bill. There was a widespread feeling of victimhood… it’s the banks’ fault, so the heck with them. Sue me.I think student debt may reach the same point. There may be widespread defaults, and a significant reduction in the number of loans, the amount being repaid, and even the number of people going to school. The brick and mortar university is a dinosaur and will only be able to fight Massive Open Online Courses for a few more years. The government, especially a Democrat president, will throw money at education and reduce the burden of student loans (transferring much of the debt to the federal government).But so what? I don’t see student loans causing a “bubble-burst” crisis. The students are hurting, the economy will suffer because the kids aren’t buying houses and starting families, but it will be just one more drag on the economy… not a crisis, which implies the need to do something NOW.

Public bonds may be the next bubble.   All the debt racked up by governments is going to burst eventually.  Look at Greece, Puerto Rico, Ireland, Spain, Portugal, etc... Cities and Counties will also go bankrupt....Also, regarding mortgage back securities, I'm of the opinion an intuitive level that mortgage backed securities should be made illegal.  Wall Street should not be playing with people's mortgages or businesses mortgages.  The wheeling and dealing with people's mortgages if rife with fraud and corruption.  The counties are supposed to record who exactly owns real estate and this ability apparently has been lost in the quagmire of mortgage back securities, credit default swaps, etc etc etc.

Mr Rich Dad Robert Kiyosaki has predicted the next burst in 2016. This is the year where more people turn 70 1/2 years. The 401k funds will go bankrupt and the further economy will breakdown. This combined with the real estate in China and the high value of the dollar will have a huge impact. I am just quoting mr Kiyosaki, he has predicted this in 2002 and is still convinced the grey 401k bubble will burst!

I believe any one of the following can be a bubble burst in maybe the next 4-5 years: Valuations. Facebook, WhatsApp, Instagram. Crazy valuations! Not to forget e-commerce companies like Flipkart, Amazon, etc. They've been getting enormous amounts of funding but most of them are in huge losses. Higher education. I thought only I saw this one but it's amazing to see that even Mike is of the same view. Also, his analysis is really good. Start ups. So many start ups mushrooming all over! Everyone wants to get into business with the newest of ideas and a lot of these so called venture funds have been investing in them. Haven't seen many start ups doing well actually. Success ratio of start ups seems too low to me.

And the answer is we should let the gamblers lose their money.  which is to say, do nothing at al.