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 arenât 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 âhugeâ asset bubbles. Rogers said that heâs not buying stocks now, though he may buy more gold.
âWhat bubble?â Rogers said, when asked if he agreed with Roubiniâs view. âItâs clear Mr. Roubini hasnât done his homework, yet again.â
Roubini told a conference in South Africa last month that investors were doing âthe mother of all carry tradesâ by buying assets with borrowed dollars. He said emerging-market equities are showing a bubble, that gains in some developing- nation currencies are becoming âexcessiveâ and that the rally in oil is ânot justified by the fundamentals.â
The MSCI Emerging Markets Index has gained 62 percent this year and crude oil has risen 47 percent.
âThatâs a Good Yearâ
Rogers countered Roubiniâs 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: âItâs not a bubble if something is up 100 percent this year, but down 70 percent from its high. Thatâs not a bubble, thatâs a good year. Thatâs a great year. Maybe itâs too high for this year, but thatâs not a bubble.â
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 Indiaâs central bank added to its bullion reserves.
âI suspect itâs 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,â Rogers said. âThe old high, back in 1980 adjusted for inflation, would be over $2000 now, just to get back to the old high. So weâll certainly get there some time in the next decade.â
Rogers agreed with Roubini that the dollarâs 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.
âRight now, everybody including me is pessimistic on the U.S. dollar,â Rogers said. âThat usually leads to a rally, whatever the asset is, and I would just suspect itâs going to happen again this time.
âHow long will it last? I donât know,â he said. âIt depends on how the world evolves. Somewhere along the line, I expect Iâll have to sell the rest of my dollars.â
âI donât know any emerging market stock markets that are so high Iâd call them a bubble,â Rogers said. âTheyâre certainly all up a lot, maybe theyâre too high, but being too high is not a bubble for anyone who knows financial markets.â
In contrast to Roubini, Rogers said the only bubble he sees in the Western world now is in U.S. bonds.
âI cannot conceive of lending money to the U.S. for 30 years,â he said. âOther than that, I donât see any bubbles going on, unless he knows something the rest of us donât know.â
Mr. Paulson made a calculation: The supply of dollars had expanded by 120% over several months. That surely would lead to a drop in its value, and an eventual surge in inflation. "What's the only asset that will hold value? It's got to be gold," Mr. Paulson argued.
Paulson & Co. had never dabbled in gold, and had no currency experts. He was also one of many warming to gold investments, worrying some investors. Some investors withdrew money from the fund, pushing his assets down to $28 billion or so.
Mr. Paulson acknowledged that his was a straightforward argument, but he paid the critics little heed.
"Three or four years from now, people will ask why they didn't buy gold earlier," Mr. Paulson said.
He purchased billions of dollars of gold investments. Betting against the dollar would be his new trade.
Adapted from "The Greatest Trade Ever" by Gregory Zuckerman, to be