Tags: Roubini | dollar | gold | US

Roubini: Time to Be 'Overweight' US Equities

By Michelle Smith   |   Tuesday, 24 Sep 2013 11:18 AM

New York University economist Nouriel Roubini has a positive outlook on the U.S. economy and the dollar, and, therefore, advises investors to fatten their portfolios with U.S. equities.

The United States is the headliner in this anemic global recovery, Roubini explained at IndexUniverse's Inside Commodities Conference in New York.

Roubini said the United States is definitely recovering, though he admits the nation has "severe" fiscal problems. Still, on a relative basis, those problems are "not as severe as in Japan, the eurozone and the UK," he said during the keynote address, IndexUniverse reported.

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The United States is more attractive than other parts of the developing world are, particularly Europe, he said.

"The U.S. is much more advanced and has much more success than other economies. The growth in the U.S. is going to be much faster than Europe, the U.K. and Japan," Roubini stated, according to CNBC.

And, "the Fed will exit the zero-interest-rate policy faster than the BOJ [Bank of Japan], BOE [Bank of England] and ECB [European Central Bank], and the dollar will strengthen," he noted.

"You probably want to be underweight in bonds, and overweight in equities, mainly in the U.S.," he advised the crowd.

Roubini dismissed the recent pop in emerging markets as a "temporary rally," MarketWatch reported.

He warned investors not to get caught up in markets like India, Brazil and Turkey.

"We remain cautious about these emerging markets that are very fragile in many ways," he said.

He also offered a reality check about commodities, predicting that the commodity supercycle is approaching its end.

"Most commodity prices over the next couple of years are going to be lower rather than higher," Roubini explained.

He expects gold to be one of the markets that deteriorates. There are several reasons Roubini is bearish on the metal. Higher interest rates and a strengthening dollar are expected to be sources of pressure for gold. Meanwhile, dwindling tail risks for the global economy will continue to undermine safe-haven demand.

Roubini dismissed the projection of "dollar doomsday folks." A supporting story line for gold is that central banks are destroying their currencies with untraditional monetary policies, such as quantitative easing. Eventually, rampant inflation is supposed to set in, essentially stealing a large portion of people's wealth, if not rendering their paper money completely useless.

"The dollar is likely to become stronger rather than weaker," CNBC said he forecasted.

"Those worried about inflation worry about all the money printing leading to that inflation," CNBC said Roubini noted. "Inflation in advanced economies is going to be the least of problems developed economies will face in the next two or three years," he added.

At this point gold is "an ugly investment" that's only attractive in yen terms, said Dennis Gartman. The editor and publisher of the Gartman Letter was speaking at the same event and delivered a harshly bearish assessment of the metal.

"Gold is not a safe haven, and anyone telling you that is a charlatan, liar and a cheat," Gartman said.

"I am not a gold bug. I don't like gold bugs; the world isn't going to end tomorrow," IndexUniverse said he concluded.

Gartman projects a steep decline for the metal, which he sees at $1,000 by the end of 2014, compared to its current price around $1,315.

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