Many economists believe that it’s impossible to recognize bubbles before they pop. However, Alberto Gallo of Algebris Investments has compiled a list of the largest potential bubbles around the world today, ranked by degree of risk based on size, duration, percent appreciation, valuations, and the types of irrational behavior driving them higher.

Financial Sense spoke with him last week to discuss his research, the areas he believes are highest at risk, and how he’s approaching the current investment environment.

For related podcast, hear Alberto Gallo on Today’s Biggest Market Bubbles

Bubble Characteristics

Right now, the risk is high in a variety of assets around the world.

“We’re in a world where most assets are overvalued,” Gallo said, which means “in a world where almost everything looks like a bubble, the definition of a bubble has to be changed.”

To do this, Gallo widens his definition beyond valuations and lists 10 other characteristics typically present. They are:

“It’s not just about valuations,” he said. “It’s also about irrational behavior.”

For example, when it comes to how skewed things have gotten, investors are effectively buying stocks for dividends and buying bonds for capital gains. This is not normal, Gallo pointed out.

Where are the Bubbles Biggest Right Now?

Gallo is very about the negative-yielding parts of the bond market, which amount to around $8 trillion, particularly shorter-term German bonds.

But, in terms of the largest bubbles he sees, the most concerning are property markets in Australia, London, and Hong Kong.

“Sometimes, the most dangerous types of bubbles develop in property assets,” Gallo said. “They affect almost the entire population of a country, while financial assets may only be important for a smaller part of the population.”