It's a lot easier to slap the "bubble" label on an investment than actually call the top.
After all, let's look back quickly on several of the popular picks for bubble status at the end of 2009: Apple Inc. shares (up 50 per cent in 2010); U.S. Treasuries (we're still waiting); gold (you know the rest).
So with a tip of the hat to J.P. Morgan, who supposedly said he made his riches because "I sold too early," let's pick a handful of investments that pose a high risk - not a certainty - of bubble-bursting in 2011.
Buy now, and you might still get another double-digit gain next year. For the longer term, however? Just be wary of the investing wisdom of Rudyard Kipling: "He who rides the tiger finds it difficult to dismount."
Cloud computing stocks
Investors are trying to get in early on the dominant companies of the emerging "cloud computing" era, where installed software is passé and applications get accessed via the Internet and are stored on somebody else's servers. As a result, the stocks of the major players have been driven … wait for it … sky high.
Some, like SalesForce.com whose customer-relationship management services are indeed delivered from the "cloud," or Netflix Inc. which gets included in this club because of its strategy shift from DVD-by-mail to video-streaming, have pulled back from 52-week highs in recent weeks.
Does that make them cheap? Sample some of these metrics: Salesforce.com trades at about 250 times trailing earnings, 100 times forward earnings, and more than 11 times trailing revenue, according to Standard & Poor's Capital IQ. By comparison, Netflix looks like a bargain at 68 times trailing earnings and 50 times forward earnings.
Other high fliers in the sector: F5 Networks Inc. trades at more than 70 times trailing earnings and 40 times forward earnings. VMware Inc. is priced at 125 trailing earnings and 52 times forward earnings.
Investors who put together a portfolio of these stocks might have one or maybe two of the emerging tech giants. Or at least two, maybe three, giant busts.
Gold
If gold was overvalued at $1,100 (U.S.) an ounce, well, surely it's a bubble a $1,400, right?
Gold bulls will certainly point to 2010 as evidence that bullion bears have got it wrong, wrong, wrong, and the precious metal is just making briefs stops on its inexorable rise to $2,000 or more per ounce.
But what's gold really worth? The days of the central bank gold standard have long passed, and the primary users of gold - the owners of jewellery - are actually cashing in, offering to cash in and melting down their holdings to satisfy investor demand. The new gold consumer is the individual investor, who can more easily load up on the precious metal now that exchange-traded funds take physical possession of the heavy stuff.
Bloomberg News noted last week that the 10 biggest global gold funds now hold a combined 2,113 tonnes of gold, "more than the official reserves accumulated by every country in the world save four: the U.S., Germany, Italy and France."
Inflation and instability-fearing investors who were previously distracted by the bright shiny object suffered three decades of poor performance. Say "this time it's different" at your own peril.
Chinese IPOs
Youku? Tudou? At these prices, youlose.
Chinese companies have been the prime movers on American exchanges in 2010; roughly half the top IPO performers listed headquarters in the Middle Kingdom.
This month has seen two of the craziest new listings: Youku.com described by some as the "Chinese YouTube," rose 161 per cent in its first day of trading on Dec. 8. (Tudou, another Chinese video-sharing site, has its IPO waiting in the wings.)
E-Commerce China Dangdang an online bookseller - yes, described as the "Chinese Amazon" - also made its debut Dec. 8, and rose a mere 87 per cent in its first session.
Let's be fair for a moment. If these businesses are indeed the Chinese counterparts to some of the most successful U.S. Internet sites - well, extrapolate YouTube and Amazon.com's U.S. audience and market penetration to the billion-plus Chinese consumers, and there's an awesome investing opportunity.
But as Herb Greenberg , a commentator at U.S. business cable channel CNBC says, "I think I figured it out with these Chinese IPOs … we need to be asking: 'How's biz?' and at Youku … it ain't so hot." The actual numbers for Youku, Mr. Greenberg notes, include just $35-million in revenue for the first nine months of 2010, a growing net loss to $24.9-million in the same period, and a negative gross margin for all of 2009.
And a market capitalization of more than $3-billion on the New York Stock Exchange. The only way you'll end up on the ground floor at Youku is if you get on now and take an elevator ride down.