Trader, economist and The Gartman Letter publisher Dennis Gartman knows when he is wading into a hostile crowd. He brought up gold in his keynote address to many of the approximately 1,500 attendees at the New York Hard Assets Investment Conference this week and immediately acknowledged his contrarian views:
“What should money be doing?” he asked.“You’ll not like me for this. Don’t put it in gold. It’s not going up any more. It was a great trade for three years. It was a wonderful, ebullient, beautiful, marvelous trade for three years. Ain’t been so good now for the last year and a half. It sucks. There’s a really insightful economic perspective. It’s making new lows, doesn’t make new highs, keeps falling, everybody you know wants to buy some. It’s not a safe harbor. And I object when I hear people – they actually interviewed me on TV today and said, 'Mr. Gartman, what do you think about gold? Is it a safe harbor?' I said, 'It never was.' Safe harbors don’t move three and four and five and eight and 12 and 15 percent a year up and down. Safe harbors are safe. Gold ain’t safe. It’s a currency. It’s something you trade. Sometimes it goes up, sometimes it goes down. But to get married to it is ludicrous and is wrong. Don’t fall for that. Right now if you look at a chart of gold each low is lower. Each high is lower. It will continue – mark this down – until it stops. But right now anybody who‘s bought gold in the past 15 months feels horrid about it. Don’t buy gold.
“Where should you go? Who are the beneficiaries in the modern world. It’s simple: English speaking currencies ... Whether you like it or not, people are going to still tell you the United States dollar will cease to be the reserve currency of the world sometime in the future. Yes, it will – 150 years from now. I’ll be long dead. I don’t care, at that point. But who does the reserve currency status always inure to? Who is the reserve currency country through history? No question, always is the same thing: the dominant military power. Period. End of discussion. And we are, we are now, we shall be, and as far as the eye can see we will continue to be the dominant military power.”
Gartman departed after his keynote address to the conference without taking questions while wishing his audience “good luck” with their trading.
But his view came back later when analysts gathered for a “Bulls and Bears Debate” keynote panel.
“It was wonderful to see the anger, angst and depression through the room,” said panel moderator Rick Rule, founder of Global Resource Investments Inc, a unit of the Sprott Group. “I always enjoy a speaker who makes an impact on the audience, irrespective really of the nature of that impact. So who of you wants to be the anti-Gartman. I know for sure who’s going to take the Gartman case, so I’ll ask him later but who would like to be the ant-Gartman, any of you?
Ian McAvity, editor of Deliberations on World Markets: … I’m as bullish as can be, in large part because I’m seeing such extraordinary negativity and I’m also seeing the speculation as having been wrung out of not only gold but also silver and the mining stocks …The only missing ingredient that we've had is what I call a diaper change moment in the S&P that lets the margin clerks butcher the stocks down to what I think will be the buying opportunity the likes of which we haven't seen since the fourth quarter of 2008,
Rule: I have two questions for you. We’ve just been through our own mini diaper change moment. What would you say about the fact that we've experienced ours and they haven't experienced theirs yet;
McAvity: By a diaper change moment I'm talking something on the order of a thousand point down day in the Dow. We haven’t seen anything like that volatility yet and the only question in my mind is whether it's originating from the potential evaporation of the euro or from somebody dropping some nasty stuff in Iran.
Rule: I take it then – before I turn Paul loose on you – that the part of the thesis that Mr. Gartman propounded which was in some fashion recovery is nigh is not something you have any particular truck with.
McAvity: Well the economic recovery only shows up in two data series I track. That’s the issuance of food stamps and the growth of the national debt. If you look at housing starts and unemployment there is no evidence that Joe Sixpack is experiencing a recovery.
Rule: Paul, I know when Mr. Gartman was leaving there were various people looking at his necktie trying to figure out if they could fashion a noose in the same dimension and perhaps you'd like to slip into his collar.
Paul Van Eeden, president of Cranberry Capital: You’ll notice, I’m not wearing a necktie.
Rule: But the others will find you one. Go ahead.
Van Eeden: Unfortunately I did not hear Dennis’ presentation and I regret that now.
Rule: It would sound familiar to you except with a different accent….
Van Eeden: Exactly. It’s curious that in my presentation this morning that I said I think gold’s going to $1,200 and Dennis thinks gold’s going to $1,200 and I don’t think necessarily either one of us is right because we have no idea where gold is really going. But I think that the United States is in much better shape right now than what Europe is, particularly if you’ve watched today’s news in Europe. Things are getting worse in Greece and on a relative basis I think the dollar is ready for a rally which is going to take the gold price and make it softer. What we have to do is keep in mind is that some of us like to do fundamental analysis to understand things in principle and get fundamental values of things. But the market in general trades on a relative basis and on a relative basis I think the US is in better shape than many of the countries out there in the world.
Rule: Is that something like comparing malaria and AIDS or do you think the United States is actually in good shape? This relative part – as I get older I understand more about relativity and there is less of it that I like.
Van Eeden: How about comparing malaria and sickle cell anemia?
Van Eeden: Sickle cell anemia prevents malaria from occurring and so in many ways if you have sickle cell anemia you and live in a malaria prone environment you’re better off.
Rule: But if you use that analogy to compare the United States and Europe, is either side healthy enough to justify something that we would call recovery?
Van Eeden: I believe it is. I think the environment in the United States is a absolutely ripe for recovery. We've got the lowest – probably the lowest wholesale electrical cost United States with a high availability of labor. We’ve got the lowest cost of money. We've got a recovery that’s already starting in the United States. I agree with you that it is not strong and it doesn't look robust. But it is a hell of a lot better than what Europe is looking, it’s better than China is looking and in that sense if we look at which major economy is going to grow first into the next boom cycle, my bet’s on the United States. I'm a US bull right now.
Adrian Day, chairman and CEO, Adrian Day Asset Management: You know it’s really funny what you can do with words. Paul says the US has the availability of labor. Hmm. A lot of people are unemployed. He says we have the lowest cost capital, the lowest cost of money. Hmm. That means the Fed is going crazy printing this stuff and destroying the value of the dollar. We’ve got to be careful with words…
Van Eeden: You’re absolutely correct, Adrian, but you know in economics the one thing that people forget is that for everything that is in the economy there is something that offsets that. I’ll give you an example. A lot of people say a weak currency is great for the economy because it’s great for for exports and it's true, a weak currency is good for exporters. But what about importers and what about consumers? A weak currency is terrible for people who import and it's terrible for people who consume imported goods, In fact they are just about equally offset. I totally admit unemployment is not good for those who are unemployed but it's good for those who are seeking to employ. In economics that’s always the case. For every good there’s a bad and for every bad there’s a good.
Rule: You real realize ladies and gentlemen that history is being made tonight, In the 20 years of the 25 years of the Bull and Bear panels it's always been the more Bull panel. We actually have dispute on the dais. I'm delighted to see that."
Phil Burgert is managing editor of ResourceInvestor.com. He can be contacted at firstname.lastname@example.org.