INTERNATIONAL. Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers hardly sees how silver could be a bubble when, even at its top, it's still below its all-time high.
Last week's plunge in prices was good for the market especially for silver which needed a set back and consolidation, according to Rogers who was hoping prices would go down so he could buy some more.
Speaking to Alix Steel in a TheStreet interview, Rogers said: "When something goes up 25%-30% in a month, that's something to worry about a great deal. I don't know what caused it maybe it was short covering, maybe it was rumors. I have no idea. I know that 25% in a month is dangerous".
"Silver went down a great deal but if you raise margin requirements 150%-200% you would expect something to collapse," he added.
Asked if this was a bubble that burst, Rogers said: "I hardly see how silver could be a bubble when, even at its top, it's still below its all-time high. That's not much of a bubble," adding a bubble is "when things are screaming up every day and they go to new highs, two to three times their old highs".
"We'll have a bubble, we'll have a bubble in commodities, we're not there yet," he said.
Last week, silver futures plunged the most since at least 1983 after the Comex exchange in New York boosted margin costs by 84%. The price rebounded 9.1% in the past two days. On April 25, the metal reached US$49.845, the highest since the Hunt Brothers tried to corner the market in 1980. In that year, the commodity climbed to a record US$50.35.
Silver recovered a third of its 30% plunge from end-April's 31-year high, hitting US$39.18 per ounce at today's London Fix.
So was it a parabolic rally?
"I'm not sure I would call it parabolic, I would certainly call it a spike, it didn't quite reach parabolic status in my view, but it certainly was a gigantic crazy spike," Rogers told Steel.
Uptrend not broken
"You're still in an uptrend, despite the sharp sell-off" as shown by an intermediate-term trend from the lows on August 24 and January 28," Mary Ann Bartels, the head of US technical and market analysis at Bank of America Merrill Lynch in New York, told Bloomberg yesterday in a telephone interview. "The uptrend was not broken."
Futures will face so-called resistance around US$45 before topping US$50, a "very important number" that "called the end of the bull market in commodities, with the Hunt Brothers getting squeezed out of silver" in 1980, Bartels said.
The metal may rise to US$80 in three to five years, she said.
"I was hoping it would go down so I could buy more", agrees Rogers.
"I hope at some time in the next month or two if it goes down or stays down then I will get the energy to go around and buy some more silver," he told Steel, adding "or maybe it will go to US$25, I don't know".
Oil prices are likely to continue rising because the world's oil reserves are dwindling, the contrarian investor said.
"There have been no new elephant discoveries in over 40 years. All the great oil fields in the world are in decline now and unless we find a lot of oil quickly then we're not going to have any oil at any pric," he added.
"The International Energy Agency is going around saying the world is running out of known reserves at 6% a year. Well, say its 4% a year, say they're wrong. I mean in 25 years we won't have any oil at any price unless someone does something very quickly," Rogers forecasted.
"If reserves are going to continue to climb at 4%, 5% or 6% a year, in 10 years there is going to be very little oil left. Now we would have brought in alternate sources such as natural gas and other things but we are still going to be in a bad bind. Prices are going to be very high," he stressed.
Eventually prices will go so high that people will probably start finding new oil, Rogers suggested.
"If oil goes to US$200, they'll drill on the White House lawn, at US$300 they'll drill at Buckingham Palace," he said
"Hopefully, someday, we'll find more oil, or more sources of energy and people will cut back at the same time".
Notes: Rogers has spent a career being one step ahead of mainstream investment thinking. Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%.
Rogers retired from Quantum in 1980 and became a guest professor of finance at Columbia University Graduate School of Business and in 1989 and 1990, the moderator of The Dreyfus Roundtable and The Profit Motive with Jim Rogers.
Underscoring his convictions that future prosperity will come from China, Rogers' two young children speak Mandarin.