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Merryn's Blog

The next bubble will be in biotech – here's when to invest

We've had the tech bubble, the property bubble, we may now be seeing the government debt bubble – so which asset class will inflate next? According to one investment guru, it's going to be biotech.

We've had the tech bubble, the property bubble, we may now be seeing the government debt bubble so which asset class will inflate next? According to John Mauldin, founder of Texas-based Millennium Wave Investments and best-selling author of Bull's Eye Investing, it's going to be biotech.

"When we see the next serious correction in the market, I'm going to start buying biotech stocks. Just like some people buy gold every month, I'm going to start buying biotech because [that's where] I think the bubble will be over the next decade and I want to participate", he told me in a phone interview yesterday.

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Mauldin thinks we're headed for a 'double-dip recession', with GDP set to start shrinking again after perhaps a couple of quarters of positive growth. So he's not planning to buy until as he says, the 'third recession' since 2000 is over. That'll be sometime around 2011.

So there's a while to wait. But it'll be worth it, reckons Mauldin. "We're going to see some amazing technological events, stuff that's just so powerful in terms of stem cell research, and genetic research drug therapies that will start reducing cancer and helping us rebuild cartilage in hearts. And people are just going to go 'wow!'"

And of course, that's how bubbles start. "Some of these companies are going to be massively profitable. Based on that, people watching these things happen will start putting more money than they should into it. But hey, that's what makes a horse race!"

Sounds good. But if you can't wait until 2011, my colleague Eoin Gleeson recently picked out some of the best bets in the medical sector in MoneyWeek magazine. You can read the piece here: Cash in on medical breakthroughs. And if you're not already a subscriber to MoneyWeek magazine, you can subscribe to MoneyWeek magazine.

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