HOUSTON – Now that junior miners have already been crushed as much as 45% from their 2011 highs (as measured by the Market Vectors Junior Gold Miner’s Index ETF or GDXJ); and the advanced exploration companies have already been cast overboard by the fearful to the tune of -53% for the same period (as measured by the Global X Gold Explorers ETF or GLDX), apparently popular newsletter writer and frequent guest on televised financial media Mr. Dennis Gartman is advising his large and high-paying clientele to “abandon” them because even when gold rallies they don’t rally. Gartman caps his comments with a flourish, saying the juniors are “a mugs game if ever there was one,” in The Gartman Letter installment for Monday, April 16, 2012.
Mr. Gartman, who is also sour on large mining shares and gold (except for a small “insurance position” he says he’d rather not have, but allows him to have a foot in both the bull and bear camp), can apparently drive focused on the rearview mirror with the best of them.
He (Gartman) may be right; the junior miners and explorers, the GDXJ and the GLDX (or for that matter the HUI), might not be done with their respective liquidity vacuums; they certainly could be headed lower and maybe much lower. Nothing prevents any market from trading to extremes in either direction. But perhaps there is more to the story than just an offhand remark from a well-read (and often “poached”), extremely busy newsletter writer, fund operator and TV talking head.
Not that Mr. Gartman actually follows the junior mining space – he doesn’t as far as we can tell. Not that Mr. Gartman has a “dog in the hunt” one way or another – we don’t believe he is short the GDXJ or the Big Miners; at least he has not disclosed it if he is. Not that Mr. Gartman has any interest in taking a future position in the small miners – at least we suspect he will not join what he calls a “mugs game.”
No, in a bizarre way we believe Mr. Gartman believes he is performing a “noble” dual-purpose “public service” for his high priced clientele while at the same time thumbing his familiar proboscis (the fleshy protrusion just above his salt and pepper facial hair) at what he terms “Gold Bugs.” Anyone who is familiar with the story knows Mr. Gartman enjoys knocking the gold camp when he is (mostly) out of the gold market, while at the same time professing his “friendship” with some members of it.
Gartman fancies himself a “mercenary” in all markets, a laudable and correct sentiment for a short-term trader, which we applaud. But it is his propensity to gamely hurl insults (thinly disguised in mock-gentlemanly prose, as “loveable” as that might seem) at his perceived “adversaries,” as well as his innate sense of what has already happened that just might be of most value to his high-powered, deep pocketed clientele. It certainly has become very valuable to the gold camp in a contrary sense, so why shouldn’t it also become so for the frequent traveler’s paying customers?
Mr. Gartman may be right about gold equities big and small cratering further, of course, he really might – no one can see the future and as we said, Mr. Gartman can see the rearview mirror with the best of them. His call on Monday for people to abandon the “junior mining mugs game” well after the mining share barn has burned to the ground is not, we reckon, just Mr. Gartman’s add-insult-to-injury-in-a-faux-gentleman’s-way of sticking a figurative knife in the gut of long suffering mining shares holders. No, sir, that would be untoward and droll.
But, if the small and large mining shares are as close to capitulation and reversal as the faithful believe they are, could Gartman’s call to summarily dump them after they have already been crushed be any more timely? (In the same contrary sense, of course.)
Right or wrong, now that our “friend” Dennis has finally noticed the bloody carnage that has befallen the junior mining shares – enough so that they have entered his gentlemanly, but nevertheless caustic commentary sights; now that Gartman has chosen to use them as another hole-digging, Gold Bug-hammering punch line, we have to say that, strangely, we have not felt this good about them in a contrary fashion since, oh, early 2009 or so.
Indeed, oddly enough, on a relative to gold basis, the juniors are not far from where they were in the depths of the 2008 panic. We can see that in the relationship of the Canadian Venture Exchange Index or CDNX relative to gold.
Advising folks to avoid a market that has already been cut in half is indeed something we’d expect from a mercenary short-term trader, gentleman or otherwise. We sure hope Mr. Gartman doesn’t wait as long to pull the rip cord when he is skydiving, though.
We understand the ground can be pretty unforgiving at times.
That is all for now, but there is more to come.
Dennis Gartman will keynote the New York Hard Assets Investment Conference on Tuesday, May 15.