What's the Next Bubble to Burst?
It's a question for a realist, not a pessimist.
What goes up must come down. It's one of the first rules of life children learn when they throw a ball or jump out of a tree--which may be why it's one of the last things grown-ups tend to remember.
For centuries, the business world has learned and relearned that painful lesson. A few examples: In 1636, the Dutch were paying extraordinary sums for tulip bulbs; in 1637, tulip bulbs were virtually worthless. In 1929, the stock market crashed, unleashing the Great Depression. In 2001, the dot-com bubble burst. Now it's the housing crisis, which due to the credit crunch is arguably breaking the bank for the credit card and auto industries.
So what's next? No one can know, of course, but anyone can hazard a guess--and we should be guessing. After all, after every burst bubble, we always look in retrospect at the clues that led to the burst. Here are some unscientific theories you can chew over to determine what industries, products and services may be poised for a fall.
Bubble waiting to be burst: Financial institutions specializing in retirement, nursing homes or services for retired baby boomers
When: It's already happened. It's just that nobody knows it yet.
Why: Coyne Partnership Inc., an executive counseling firm, released a study in May that revealed numerous banks and financial institutions are preparing for a wave of baby boom retirements that won't happen. It's been predicted that 78 million baby boomers will be retiring over the next 25 years, and because of that, many companies gearing up for an influx of new retirees may be severely disappointed. According to lead researcher Kevin Coyne, given the current trends of delayed retirement, the total number of retirees over the next quarter century will be below 43 million and possibly as low as 32 million. Coyne also predicts that the number of new retirees will be under 2.6 million every year through 2032.
Bubble waiting to be burst: Pet hotels
When: This summer
Why: A spokesperson for the Pet Care Services Association was recently quoted by a Scripps Howard News Service reporter, saying that business is "booming," and that the $2.9 billion industry has nearly doubled in the past five years. Right, because the travel industry has grown exponentially in the past several years as the country has distanced itself from the flying fears in the aftermath of September 11. But the travel industry is hurting now with the high gas prices affecting both drivers and fliers. People are still going to vacation, and they're going to need a place for their pets to stay, but logic seems to dictate that the industry is going to level off or grow more slowly than in previous years.
Bubble waiting to be burst: Limousines
When: This fall
Why: Harvey Hoffenberg, a veteran marketing and branding guru who has made a career of helping businesses survive slumping economic times, believes this is an industry about to go into some hard times. "With the gas prices surging, limo owners and drivers are already struggling to survive," Hoffenberg says. "Once we get past the spring and summer graduation and wedding season, the limo industry could take a serious financial hit." Of course, any industry dealing in gas-related products is hurting. SUV sales are down significantly, for instance, and how's the RV market? Fuhgeddaaboutit.
Bubble waiting to be burst: Health clubs and private clubs
When: For the next year or two
Why: If the economy is still in question in January 2009, health clubs should take a real beating. Since January marks the boom time of people who make resolutions to get into shape. As for health clubs, we have another theory proposed by Hoffenberg. "Why pay a fee when you can walk, or run for free?" And then Mark Lundquist, a turnaround management expert and co-founder of SellMyBusiness.com, observes that private clubs, regardless of whether it's an athletic or country club, "operate on relatively thin margins. Poor club leadership or poor management can put a club into a tight financial position." Lundquist feels that in the coming years, "only the best managed clubs will remain."
Bubble waiting to be burst: Businesses that survive on China's low cost of doing business
When: July 14 at 2:33 p.m., EST. OK, nobody can know, but the bubble has been leaking air since May 2007, when Chinese imports began rising slowly but steadily
Why: Energy costs have been climbing in China, and so have raw material costs, and our weakened dollar doesn't buy what it once did. Meanwhile, all of those recalls from China-made products led to a lot of regulatory policies designed to make sure there isn't a repeat of that. That's a good thing, but it's yet another reason that China isn't the inexpensive utopia it once was for entrepreneurs looking to cut manufacturing costs. Mark McNally, CEO of YourBuyer Worldwide, which works with companies doing business overseas, predicts that in coming years, several countries will replace China as the bargain manufacturing capital of the world, including Indonesia, Malaysia and Vietnam.
Bubble waiting to be burst: Cell phones
When: For the rest of the year
Why: Nobody's predicting that cell phones aren't going to be made, just like no one's predicting that people are going to stop building houses. But for the first time since market research firm the NPD Group began watching mobile phone sales, mobile phones went down during the first quarter of this year, dropping 22 percent. That suggests that people aren't buying new cell phones right now and hanging onto what they have. It's also the case of just about any product you can imagine that's manufactured--sofas, lamps, video games and towels, for instance. If it isn't a necessity and the current product hasn't been worn out, a replacement can probably wait.
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