Predict the Next Bubble

[Fingolfin269]

Student loans will likely pop. I don't have a problem with a general bailout there as long as we have to pay for it as a society. We're screwed either way. Ultimately though someone has got to start putting controls into place that stop this stuff. Loans should be tied to area of study or some other metric that makes sense. Getting 100k to go to med school? Great. Getting 100k to go to a private liberal arts school to learn about underwater basket weaving? Dumb.

 

[BurnItDwn]

Oil

 

[zinfamous]

Social Media? does that count?

:hmm:

 

[7window]

STUDENT LOAN.

So what do you think should happen and what do you see will happen?

 

[rudeguy]

Social Media? does that count?

:hmm:

thought that already did with facebook?

But I don't pay attention to legalized gambling.

 

[Train]

Oil

Impossible, unless we suddenly discover several hundred billion barrels worth of new reserves that also happen to be in a place that is easy to drill.

 

[midnight growler]

To me, I think a large part of the problem is the big increase of for-profit schools marketed towards adults.

http://consumerist.com/2012/07/30/r...dents-at-underperforming-for-profit-colleges/
also
http://consumerist.com/2013/03/15/1...ll-to-curb-advertising-by-for-profit-schools/

I'm not going to blame business for trying to cash in on trends, but this trend is taxpayer supported and has too much incentive to stretch the truth and outright lie.

 

[KlokWyze]

I study student loans quite a bit and while I agree that there is a bubble it is wholly different than the housing or tech bubbles.

1. About 85% of all student loans are owned by the federal government. There's just over $1tr in loans and only ~150bn are owned by private companies, largely Sallie Mae, Access, Keycorp and a few others. Of those the bulk of the new ones are co-signed (~90%).

2. By and large the irrationality, relative to other assets and within student loans, isn't there for student loans and have already shaken out. Loans like Direct-To-Consumer products offered by First Marblehead have already resulted in the bankruptcy and liquidation of TERI. The marked learned its lesson and stopped offering those.

However...

3. There is no underwriting to majors or ability to repay.

But...

4. Since the federal government owns 85% it is largely seen as a entitlement program and has almost unlimited support within Congress. After all, nobody wants to go on record for being the person who stopped people from seeking higher education. Even if the default rate on student loans approaches 20% (according to DOE we are ~16-17%, but that is revised up every release), its still not a big enough number to drive change. That's "only" $170bn in losses, but doesn't include interest revenue.

I read a lot of research out of DC and there is just no impetus to fix the problem. While the bubble won't take down companies or even the USG, it will be a massive drag on our economy since the loans cannot be discharged and you are creating a debt slave class which cannot hope to repay the loans. This will negatively impact household formation, parent retirement (nobody wants to retire if they have to pay on cosigned loans or have their kids live with them because they can't afford to live on their own)...etc which will be a *massive* drag on GDP cumulatively.

As far as dischargability - there isn't really any support for it right now nor do I see it in the near term. Perhaps in 5+ years, if the Dems take more control and the problem becomes too much to bear.

However, even then, it won't be easy since there will be some pretty large hurdles to getting it discharged.


As far as a bond bubble, I do think there is a small one but it isn't something that cannot be weathered.

So it will be a long term drag on many markets and the economy as a whole. I'm sure it will still be a bust for some companies.... if and when student loan spending starts to get reigned in, all those online degree peddlers will go under.

 

[mmntech]

Canada's housing may be bursting in progress.

Not according to the Financial Post. Everything is A okay. In fact prices are still steadily going up with no sign of ever stopping.
That is until the interest rates go up and the yuppies can no longer afford their half million plus dollar homes.

As for big failures, I think bitcoin is up there. I know a guy who's crazy about it but I just don't share his enthusiasm. Value is too volatile and it's very easy to hack.

The US government situation is certainly scary though. How often can they keep raising this "debt ceiling" before they can't do it anymore.

 

[moonbogg]

Student loans

Hmm, that's an interesting one. And why wouldn't they?

 

[rudeguy]

Not according to the Financial Post. Everything is A okay. In fact prices are still steadily going up with no sign of ever stopping.
That is until the interest rates go up and the yuppies can no longer afford their half million plus dollar homes.

As for big failures, I think bitcoin is up there. I know a guy who's crazy about it but I just don't share his enthusiasm. Value is too volatile and it's very easy to hack.

The US government situation is certainly scary though. How often can they keep raising this "debt ceiling" before they can't do it anymore.

when politician try to stop the borrowing, they are called terrorists for shutting down the government.

Its not hard. All they have to do is pass a balanced budget. But they can't even pass a budget, let alone a balanced one, let alone one that cuts the debt.

We are going to default. Its only a matter of time.

 

[zinfamous]

when politician try to stop the borrowing, they are called terrorists for shutting down the government.

Its not hard. All they have to do is pass a balanced budget. But they can't even pass a budget, let alone a balanced one, let alone one that cuts the debt.

We are going to default. Its only a matter of time.

terrorists hold people hostage and demand impossible, non-negotiable terms.

this is why the asshats are likened to terrorists.

 

[ultimatebob]

Bitcoin, Google/Amazon stock, hopefully government spending.

 

[rudeguy]

terrorists hold people hostage and demand impossible, non-negotiable terms.

this is why the asshats are likened to terrorists.

and what is it called when they hold people hostage and refuse to negotiate at all?

 

[foghorn67]

Hopefully the whole university system.
-Student loans
-outrageous tuition/fees/bs.
-Deans of state schools make more than POTUS, plus have furnished mansions.
-Universities can be greased as easily as a politician.
-Way too many students going degrees in the Arts.

 

[foghorn67]

terrorists hold people hostage and demand impossible, non-negotiable terms.

this is why the asshats are likened to terrorists.

It's non-negotiable because your dear leader doesn't negotiate. Narcissist.

 

[Kev]

So what exactly would happen if the student loan "bubble" popped?

 

[poofyhairguy]

How often can they keep raising this "debt ceiling" before they can't do it anymore.

However long the rest of the world will take payment in a form we can print.

 

[rudeguy]

So what exactly would happen if the student loan "bubble" popped?

people would freak out

Other than that...not much.

 

[Train]

So what exactly would happen if the student loan "bubble" popped?

Colleges that have tenured a lot of professors, built a lot of fancy new buildings (financed of course) based on current tuition rates.... will have a serious income problem once they have to lower rates just to keep students from going elsewhere.

Painful teacher layoffs, fights between tenured and non-tenured profs, research facilities will have to be shuttered. On campus construction projects frozen. Lecturers unions going apeshit, campus police, maintenance personell all facing layoffs, pay cuts, pension cuts, you name it. Paid graduate TA's? lol they will either become slave labor or disappear altogether.

Basically a lot of pissed off people.

 

[Tommy2000GT]

Housing. It's over inflated to 2008 levels again

 

[BurnItDwn]

Housing. It's over inflated to 2008 levels again

Where?

They are about 30% lower here .

 

[Imported]

Where?

They are about 30% lower here .

SF Bay Area feels like 2008 levels if not higher in some places.

 

[gorcorps]

Where?

They are about 30% lower here .

He's a kid, I think he just repeats buzzwords he hears from adults and the news.

 

[Exterous]

So it will be a long term drag on many markets and the economy as a whole.

Unless something changes really long term. We're already starting to see delays in major purchases like cars and houses from those recently graduated. If they are delaying cars and houses they are likely also delaying retirement savings during the best years to contribute so I wouldn't be surprised to see the effects follow them their entire lives.