Notable investor Jim Rogers had an interview with Wall Street Cheat Sheet dot com that was quite interesting. The following quote was taken from the interview.
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.
I’m not saying there are price bubbles in any of the mentioned markets, but since when does [not a bubble = a price not being at (or near) an all-time-high]?
Let’s take a look at light, sweet, crude oil as an example. The price tag of $150 a barrel in 2008 was definitely unreasonable, but who is to say that $100 is fine just because it’s $50 off its all-time high price of $150?
Another example is home prices. It has fallen, on average, 10-12% from its peak; however, prices could still be at a bubble level. Actually, if it wasn’t for all the tax credits and Fed programs propping up the housing market, it would likely be a lot lower.
Lastly, I thought a bubble refers to when an asset trades at a price much higher than its intrinsic or fundamental value, regardless of whether it’s at an all-time high or not.
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For something such as Gold which is hard to quantify “intrinsic value”, I take the cue that a bubble may be forming when Fox News show hosts such as Glenn Beck is fear-mongering by talking about Gold (and viewers are probably buying by the boat loads).
| The Daily Show With Jon Stewart | Mon – Thurs 11p / 10c | |||
| Beck – Not So Mellow Gold | ||||
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