The WSJ suggests it may be in emerging markets:
Now that the fallout from the downturn of the housing-loan market has prompted the Federal Reserve to cut interest rates, the race is on to find the next bubble.
Emerging markets are a popular answer.
Stock markets around the world rallied in response to the Fed's half-percentage-point cut on Tuesday, with shares in emerging markets -- generally defined as countries that have modest incomes but are growing fast -- posting the biggest gains. Mexico's benchmark IPC index on Tuesday rose 2.8% and Brazil's Bovespa rose 4.3%, trumping the Dow Jones Industrial Average's 2.5% gain.
Yesterday, Asian markets, which had been closed when the Fed announced its rate cut, joined the party, with India's Bombay Sensex climbing 4.2% to cross 16000 for the first time.
The rush into emerging-market stocks is in part because of a belief that the Fed's rate cut, as well as easier policy stances at the European Central Bank and the Bank of England, will end up bolstering fast-growing emerging-market economies more than any others. Proponents of this view say that in 1998, easy money flowed into fast- growing technology stocks following the Asian financial-market crisis and collapse of the hedge fund Long-Term Capital Management. The belief that tech stocks were immune to any downturn helped fuel the dot-com bubble.
"It's like 1998 in reverse," says Michael Hartnett, an emerging- markets strategist at Merrill Lynch. "A bubble is more likely than not. But I think we're only at the beginning of that process." He is bullish on emerging markets as a result.
Mr. Hartnett isn't the only one to draw the 1998 analogy, or point to the possibility of a bubble developing.
A month ago, Morgan Stanley emerging-markets strategist Jonathan Garner wrote that the current market environment is "the mirror image of 1998." In early August, Christopher Wood, a Hong Kong-based analyst at CLSA Group, wrote that "just as, first, American tech stocks and then American housing finance were bubble beneficiaries of Fed easing post-LTCM and post-Nasdaq collapse, so Asia and emerging-asset markets will be the likely bubble beneficiaries of the coming Fed easing."Of course, I don't mean to imply that the Fed has/is creating serious moral hazard problems, but.....
What is striking, says Investment Technology Group economist Robert Barbera, is that the idea that there could be a bubble on its way in the emerging markets is a cause for glee rather than caution. "Very few people are saying, 'Oh my God, it's a bubble,'" he says. "They're saying, 'Whoopee, it's a bubble.'"