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The bubbles to look for, thanks to baby boomers

Bubbles on a black background

Jeremy Hobson: The second largest daily coupon website Living Social has reportedly been meeting with bankers to talk about going public later this year. If it does it would join a growing list of online companies going public. Some are even talking about a tech bubble.

But Marketplace Economics Correspondent Chris Farrell says there are other bubbles that we should be paying attention to. He joins us now. Good morning Chris.

Chris Farrell: Good morning, Jeremy.

Hobson: Well give us the latest from bubbleland, Chris. What are you watching for?

Farrell: As the kids of boomers go off to college, I just want to paraphrase Shakespeare -- they'll be reading Shakespeare, or maybe I'm going to abuse Shakespeare -- but it's "Bubble bubble, toil and trouble."

Hobson: Yeah.

Farrell: Here's what's happening: you know, the past quarter-century, tuition and fees risen three times -- three times -- the rate of individual family income. And we've been making up that gap more and more, particularly when it comes to private, independent colleges and public universities with debt. And I've got to tell you Jeremy, the lesson of the past several years is: too much debt, too little income equals financial trouble. College education will still pay off in the future. The question is: how much debt do you use to finance it? And I think people need to retreat from that. That bubble is going to burst.

Hobson: So maybe a bubble there with the boomers having driven up the cost of college and now it might come down. What other bubbles are you watching, especially when it comes to the boomers or their kids?

Farrell: Well, I think we've seen two other bubbles that may burst. Retirement for everyone! Social Security, Medicare -- buy that RV, head down south. What is the lesson of two bear markets in two recessions in less than a decade? It says you're going to work a lot longer. Forget the RV, get yourself back to work.

Here's the other bubble: this bubble is, when the boomers retire -- we've been adding stocks, we've been buying stocks, we've been told to have stocks in our 401k plans. We'll retire, we sell it, and the stock market goes bust.

Hobson: So you see these bubbles all busting soon?

Farrell: The last one, I don't see it. Here's why: a billion Chinese, they're going to buy our stocks. The Indians, they're going to buy our stocks. The emerging markets is going to bail out the baby boomer when it comes to their stock portfolios.

Hobson: Marketplace's economics correspondent Chris Farrell, thanks so much.

Farrell: Thanks a lot.

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