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Sunday, February 10, 2013

The Next Economic Bubble

By Mark Collier

I was a Financial Advisor right out of school. Probably my favorite and most challenging part of the job was trying to plan for trends or foresee potential trouble on the horizon. I got firsthand experience with that during the bursting of the housing bubble in 2008. Money was cheap. Qualifying for a home loan was far too easy. Greed among financial institutions, financiers and people was plentiful.

I distinctly remember the day in 2007 when the Dow got to its all-time high of near 14,000. It was far too inflated. My company was one of the main traders in collateralized mortgage backed securities, one of the main culprits in cutting that 14,000 mark in half by spring of 2009. Because of that knowledge with those investments, I was able to steer my clients into what safe havens were left after the housing aftermath. It was a very stressful time for Financial Advisors and investors, alike.

While I'm no longer in the business, I still love tracking economic trends. The consensus is that the next economic bubble will be involving student loans.  Since 2005, there have been significant factors that point to this oncoming crisis.

  1. The college lending market is now larger than credit card and car loan debt. 
  2. The delinquency rate has increased 47%.
  3. 2005: 12 million had at least 2 student loans. 2013: 26 million have at least 2 student loans. 
  4. 2005: average student debt $17,000. 2012: average student debt: $27,000.
  5. Consumers with over $100,000 in that time period has quadrupled.

As more people default on their student loans, their credit ratings will drop, making it harder for them to access new credit and help grow the economy. Even people who stay current on their student loans are dealing with very large debts, which reduces the money they have available to spend elsewhere.

That, coupled with more strict lending practices, will make home buying for new buyers that much harder. Even in that environment if one could qualify, it may not make fiscal sense to buy, making renters more plentiful and more long-term.

So this is me putting on my Financial Advisor hat. If you can, go buy property. Particularly in Fort Thomas, where values have been increasing. Besides owning Bowman's Framing, Ken Bowman is a Realtor with Huff.

We'll be spotlighting some of his properties on FTM. Give Ken a call. Today's listing is 57 Altamont. At 109,000 it's the ideal investment property to capitalize on this next bubble.


  1. The biggest driver of the student loan market is for-profit institutions. They target (prey?) on poor students who qualify for federal aid. They offer high prices and marginally useful degree problems. Most of their students never get a useful degree and end up with student loan debt much higher than they would have from a state school (like NKU). With few job prospects, the default rate is very high. It's great for the owners of these institutions, but a terrible deal for the economically disadvantaged students and taxpayers. on The Next Economic Bubble

  2. @cn2Alessi: Bill allowing Ky Higher Ed Loan Corp to garnish wages of students who default on loans (HB49) passes House Ed panel unanimously. #kyga13