By Brian Swint and Mark Barton
Nov. 4 (Bloomberg) — Jim Rogers, the investor who predicted the start of the commodities rally in 1999, said that Nouriel Roubini is wrong about the threat of bubbles in gold and emerging-market stocks.
Many commodities are still down from record highs and equity markets aren’t on the brink of collapse, Rogers, chairman of Singapore-based Rogers Holdings, said in an interview on Bloomberg Television today. The price of gold will double to at least $2,000 an ounce in the next decade, he said.
Roubini, the New York University professor who warned in 2006 about the coming financial crisis, said on Oct. 27 that investors are borrowing dollars to buy assets and creating “huge” asset bubbles. Rogers said that he’s not buying stocks now, though he may buy more gold.
“What bubble?” Rogers said, when asked if he agreed with Roubini’s view. “It’s clear Mr. Roubini hasn’t done his homework, yet again.”
Roubini told a conference in South Africa last month that investors were doing “the mother of all carry trades” by buying assets with borrowed dollars. He said emerging-market equities are showing a bubble, that gains in some developing- nation currencies are becoming “excessive” and that the rally in oil is “not justified by the fundamentals.”
The MSCI Emerging Markets Index has gained 62 percent this year and crude oil has risen 47 percent.
‘That’s a Good Year’
Rogers countered Roubini’s arguments by saying that Chinese stocks and sugar, silver, coffee and cotton have all dropped from their historical highs by at least 50 percent.
When asked if gains made this year pointed to a bubble, he said: “It’s not a bubble if something is up 100 percent this year, but down 70 percent from its high. That’s not a bubble, that’s a good year. That’s a great year. Maybe it’s too high for this year, but that’s not a bubble.”
Gold climbed to a record $1,095.40 an ounce in London today, a 24 percent gain this year. Gold also reached a record in New York as the dollar fell and India’s central bank added to its bullion reserves.
“I suspect it’s going to go over $2000 some time in the bull market, but depending on what happens in the world it could go much, much higher,” Rogers said. “The old high, back in 1980 adjusted for inflation, would be over $2000 now, just to get back to the old high. So we’ll certainly get there some time in the next decade.”
Rogers agreed with Roubini that the dollar’s decline was encouraging investors to buy more commodities and assets. The U.S. currency has dropped 13 percent since the start of March against a trade-weighted basket of currencies.
“Right now, everybody including me is pessimistic on the U.S. dollar,” Rogers said. “That usually leads to a rally, whatever the asset is, and I would just suspect it’s going to happen again this time.
“How long will it last? I don’t know,” he said. “It depends on how the world evolves. Somewhere along the line, I expect I’ll have to sell the rest of my dollars.”
“I don’t know any emerging market stock markets that are so high I’d call them a bubble,” Rogers said. “They’re certainly all up a lot, maybe they’re too high, but being too high is not a bubble for anyone who knows financial markets.”
In contrast to Roubini, Rogers said the only bubble he sees in the Western world now is in U.S. bonds.
“I cannot conceive of lending money to the U.S. for 30 years,” he said. “Other than that, I don’t see any bubbles going on, unless he knows something the rest of us don’t know.”
To contact the reporters on this story: Brian Swint in London at firstname.lastname@example.org; Mark Barton in London at Barton1@bloomberg.net.
Last Updated: November 4, 2009 06:58 EST