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  • ValueInvestor: 
  • Comments (228)
  Rogers is getting silly now. He shouldn't compare current prices to their all-time highs, he should compare it to their all-time averages, means or other normal levels.
  
  Just because something isn't back to an all-time high doesn't mean it isn't a bubble.

  Nov 09 02:53 PM | Link | Reply
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  • David White: 
  • Comments (1375)
  •  • Instablog (67)
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  I tend to think both Jim Rodgers and Roubini are correct. Currently there is no huge demand for commodities. They are as over produced as everything else at the moment. We will likely see a problem in China before too long because of the extra industrial production growth due to their stimulus. That production has no where to go in the short term. We are already seeing evidence of China dumping in the US and Europe.
  
  This over production problem, especially in China, should bring commodity prices down to earth. The US will meanwhile keep its consumption low with 10.2% unemployment figures as a testament to that likelihood. Hence Dr. Roubini's bubble has some merit.
  
  Longer term Jim Rodgers is correct. If the stumulus works as intended, the world economies will ramp up. Demand will increase. Prices will rise. So far we have just been staving off deflation. Mr. Rodgers seems to skip over this item. Eventually what he says will be true though (or at least I hope the world economies will recover). The growth so far is uncertain, and it may even be an illusion to a large degree. We will need another 6 months at least to be relatively certain that we actually have a recovery. Until then commodity prices should not take off. If people bid them up too much too quickly, they will only derail the recovery. If excessive speculation pushes them up, we will see another crash. No one wants to see this. I hope not even GS, although they may think they can profit from it.

  Nov 09 03:05 PM | Link | Reply
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  • Tack: 
  • Comments (447)
  Rogers isn't silly at all because most asset prices --especially, real estate-- are priced below averages, means or any other trendline one wishes to choose. When this is considered in the context of the avalanche of fiat currencies printed around the world --which really are at all-time highs, by miles-- we're just on the front end of an extended inflationary cycle.
  
  Bubble? We haven't even gotten started yet.
  
  The "deflationists" all tell us that money printing is being offset by reduced lending, but that's an extremely short-term and shortsighted view. Vast amounts of inflationary capital are poised to re-enter the economic system, in the form of printed capital being held by banks, temporarily, to insure against capital requirements and disguised in the form of loan-loss reserves, which as the economy improves will find themselves reversed and thereby freed up to flow back into the economic system.
  
  The only hope --and, it's a rather remote one-- would be if worldwide governments reined in their excessive spending and gathered back the currency largesse they've loosed on the system. History suggests that they're never good at reeling back economic stimulus and money supplies, always erring on the side of spending, which makes politicians happy, and in having excessive capital in the banking system, out of persistent residual fears of reversals that don't materialize.
  
  The probability of significant inflation appears to be a virtual certainty; it's just the exact timing and severity that remain uncertain.
  
  
  On Nov 09 02:53 PM ValueInvestor wrote:
  
  > Rogers is getting silly now. He shouldn't compare current prices
  > to their all-time highs, he should compare it to their all-time averages,
  > means or other normal levels.
  >
  > Just because something isn't back to an all-time high doesn't mean
  > it isn't a bubble.

  Nov 09 03:11 PM | Link | Reply
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  • taojaxx: 
  • Comments (72)
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  Not yet tired of that "loads of printed money being unleashed in the system"?
  That money so far sits on central banks' bloated balance sheets as banks don't lend.
  When they start lending and the economy picks up, central banks will have all the time they need to hike interest rates to ensure no bubble inflates.
  Not saying they will do it, as there will be (there already is) pressure against higher interest rates. But they have all the tools to do it. Those printed trillions are only as dangerous as we allow them to be. No foregone conclusion yet.
  What Gold tells us is that China/India move away from the dollar as they realize that the US debtor can harm his creditors more than they can harm him.

  Nov 09 05:17 PM | Link | Reply
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  • User 404862: 
  • Comments (2)
  "a gigantic amount of money being printed and it has to go somewhere." = "bubble". Equilibrium is Supply=Demand.

  Nov 09 05:27 PM | Link | Reply
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  • surfgeezer: 
  • Comments (112)
  You are underestimating the losses the banks have taken. There is a tremendous amount of "liquidity" that is really mark to market losses. The banks are in a race, every foreclosed home is an immediate loss partially offset by down payment and interest payments. Interest payments on non foreclosed houses are almost all profit with todays interest rates.
  These "sponges" are soaking up a tremendous amount of "liquidity" and it will not go into the system.
  We still have a tremendous amount of under utilization on almost all fronts, so price appreciation is unlikely
  
  
  On Nov 09 05:27 PM User 404862 wrote:
  
  > "a gigantic amount of money being printed and it has to go somewhere."
  > = "bubble". Equilibrium is Supply=Demand.

  Nov 09 11:08 PM | Link | Reply
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  • Tack: 
  • Comments (447)
  Those "sponges" were soaking up all the liquidity because banks had deficient capital ratios. Now, those ratios are expanding quickly with market recovery and incipient economic recovery, abetted by every profitable bank quarter.
  
  Soon, we will see banks --especially, the large ones-- trending toward overcapitalization, and that will result in the liquidity beginning to flow into markets, amping up the process even further and faster.
  
  
  On Nov 09 11:08 PM surfgeezer wrote:
  
  > You are underestimating the losses the banks have taken. There is
  > a tremendous amount of "liquidity" that is really mark to market
  > losses. The banks are in a race, every foreclosed home is an immediate
  > loss partially offset by down payment and interest payments. Interest
  > payments on non foreclosed houses are almost all profit with todays
  > interest rates.
  > These "sponges" are soaking up a tremendous amount of "liquidity"
  > and it will not go into the system.
  > We still have a tremendous amount of under utilization on almost
  > all fronts, so price appreciation is unlikely

  Nov 10 09:33 AM | Link | Reply