Over the past decade investors were burned by three bubbles, dot-com stocks, housing prices and financial services. The question remains, will the coming decade be any different, it would be my opinion that this is not likely. Despite the many academic theories that state markets to be efficient and claim assets are given the price they deserve, Wall Street has a habit of inflating investment values until the bubble pops. The big question for long term investors is what potential bubbles to steer clear off over the next decade?

The Oracle of Omaha. Billionaire. The most successful investor in the world, Berkshire Hathaway chairman, Warren Buffett has recently dismissed gold as a “valueless asset”. Buffett has warned that gold was a self-inflating bubble, which was created by investors looking for a possible alternative to property and shares. Alex Zumpfe, a trader at Heraeus precious metals house said “Gold is facing some selling pressure after support levels didn’t trigger sufficient buying interest.” Could it be the case that the Oracle of Omaha has called it right once again? Gold rose over 400% since 2000, if this were to continue gold would be trading at over $8000/oz, looking at this would indicate signs of a bubble.

In the coming weeks I am going to investigate historical bubbles and what we have learned from them, if anything! I am going to look at the research behind bubbles; what defines them; what causes them; and how we can protect ourselves again them. Finally I will look at potential bubbles that it would be best for us to avoid.