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Tuesday, November 10, 2009

Roubini's market calls





And Jimmy Rogers take on the good professor:


Damien Hoffman: Jim, you were in the media a few times last week and I want to follow up on a few points you made. You said on Bloomberg that Nouriel Roubini did not do his homework regarding the asset bubbles about which he is now warning. Can you explain what homework he did not do?

Jim: All of it. How can you talk about a bubble when assets such as silver are 70% below their all-time high? Same for coffee, sugar, cotton, natural gas, and many more. I have a problem talking about a bubble when assets are this depressed from their all-time highs.

A bubble is when assets are screaming to new highs everyday, everyone is talking about them, and everyone owns them. Right now, virtually no one owns commodities. So for Mr. Roubini to talk about a bubble in commodities defies comprehension. It proves he does not understand markets.

I am flabbergasted at Mr. Roubini’s comment about bubbles because there is not a single market in the world making all-time highs except Gold, US Government Bonds, Cocoa, and the Sri Lankan stock market. That’s hardly reason to call for a bubble. So, I am most perplexed about this alleged bubble which is out there.

If an asset rises 100% in one year, that’s a great year, but not necessarily a bubble. Look at oil. It’s up huge off the bottom but nowhere near it’s old highs. Look at Citigroup. The stock is up 3 or so times off the bottom …

Damien: … and I doubt long term shareholders feel like they are in a bubble.

Jim: Exactly. And since Mr. Roubini thought oil would stay below $40 a barrel for all of 2009, I would love for him to tell me and the rest of the world exactly where are all the oil supplies because the International Energy Agency (IEA) — which has the best global data set on energy supplies — has no idea where is the oil. Mr. Roubini should tell us where this price suppressing oil supply is hidden. All the oil possessing countries in the world have declining reserves. All the oil companies have declining reserves. So Mr. Roubini must know something the rest of us don’t.

Damien: On another note, Gold has been reaching new all-time highs, although not inflation adjusted. You said Gold may reach $2,000 an ounce over the next decade. Can you explain what variables will push Gold to $2,000?

Jim: First, I hope you will keep Mr. Roubini’s statement where he said Gold going to $2,000 an ounce by 2019 is “utter nonsense.” I think you’re going to get a chance to call him before 2019 to ask him what he thinks of Gold at $2,000 and why he thought it was “utter nonsense.”

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