November 14, 2009

(BN) Hyperinflation Worries? Buy My Jewelry, Richemont Billionaire Rupert Says


Nov. 13 (Bloomberg) -- South African billionaire Johann Rupert suggested investors stock up on bespoke Cartier necklaces or Van Cleef & Arpels rings if they're concerned that economic stimulus programs and government debt will fuel inflation.

"If we enter hyperinflation, you're going to be so glad that you bought that stuff two months or six months ago," Rupert told investors on a call today that followed results from Cie. Financiere Richemont SA, which is controlled by his family. "If inflation picks up, you're going to see people running into your stores, buying high jewelry."

Rupert will take on the chief executive's role at Richemont when Norbert Platt steps down due to illness next year. Known as "Rupert the Bear" for his negative outlook on economic trends, analysts including Kepler Capital Markets' Jon Cox said the billionaire's remarks were less pessimistic than opinions offered in May, when he predicted social unrest and no signs "green shoots" of recovery were sprouting.

"I've never seen a period like the last year and up to today where highly, highly intelligent people have diametrically opposed views," Rupert said today. Opinions range from "the recession turning into something worse on the one side, and on the other side, fears of a hyperinflation. Both arguments are very persuasive. So we try and manage the business in order to survive and do well given both scenarios."

Depression-era products of Richemont's luxury brands have held their value following a worse economic crisis than that seen today: a 1936 Van Cleef & Arpels custom jewelry piece with a "Mystery Setting" hidden behind the gems was sold for $326,500 by Christie's at a New York auction last month.

Growth Recovery

Richemont is the second-largest luxury goods maker in the world, trailing only LVMH Moet Hennessy Louis Vuitton SA. Today, it beat analysts' earnings estimates and predicted "normal growth" as luxury sales recover in November and December.

In May, Rupert predicted the crisis would lead to inflation as governments print money to reduce debt burdens. Today, he said the Federal Reserve may surprise investors by raising interest rates, boosting the dollar, while the U.S. economic system's resilience may surprise European observers.

"The Fed is not going to put an orange light between the green light and the red light," Rupert said. "If one day they do something, that dollar could go the other way, and serious disruption could take place with all of these carry trades.

"The United States will be back quicker than most people think. I will never bet against the United States of America. A lot of people have gone bust that way. Whilst things are perhaps in turmoil while they're cleaning up their economy, it's a very industrious, vibrant country that can adjust."

Rupert has become increasingly outspoken since he assumed sole control over Richemont following the death of his father Anton three years ago. A year ago, he said investment bankers too young to remember a serious recession helped cause the financial crisis.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net .

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