Roubini and Rogers spar on asset bubble issue

A war of words erupted between New York University economist Nouriel Roubini and commodities bull Jim Rogers on the issue of whether bubbles are building in asset classes like emerging market equities and gold. Emerging market stocks or commodities have rallied too far, too fast and the global economy will experience an anemic recovery rather than the hoped-for V-shaped recovery, Roubini said. Investors worldwide are fueling huge bubbles that may spark another financial crisis by borrowing dollars in the mother of all carry trades, Roubini said. A forecast by billionaire investor Rogers that gold will double to at least US$2,000 an ounce is utter nonsense, Roubini said. There is no inflation or near-depression to drive gold prices that high, he said at the Inside Commodities Conference in New York. "Maybe it will reach US$1,100 or so but US$1,500 or US$2,000 is nonsense," Roubini said.

But, Rogers, the investor who predicted the start of the commodities rally in 1999, said that Roubini is wrong about the threat of bubbles in gold and emerging-market stocks. "What bubble?" Rogers said. "It’s clear Mr. Roubini hasn’t done his homework, yet again." Many commodities are still down from record highs and equity markets are not on the brink of collapse, Rogers, chairman of Singapore-based Rogers Holdings, countered Roubini. Gold rose to a record US$1,098.50 in New York on speculation that central banks and investors will buy more of the precious metal to hedge against a declining dollar. Gold, up 24% this year, has outperformed US stocks and bonds.

Separately, Arnab Das of Roubini Global Economics said that emerging markets are poised to extend their biggest rally in a decade as investors borrow dollars to buy stocks, bonds and currencies in the world’s fastest growing economies. Richard C. Kang, chief investment officer with Emerging Global Advisors LLC, said that Gold will climb to US$1,350 an ounce and oil will top US$100 a barrel in the next six months, driven by a "herd mentality" fueling an investment boom.