Wondering where to put your money next? Is gold headed even higher, or is your portfolio going to do better if you look at equities instead? And how about that loonie?
Trading guru Dennis Gartman, author of the influential Gartman Letter, took your investment strategy questions at noon (ET) on Monday in an online discussion.
Mr. Gartman has been directly involved in the capital markets since August of 1974, after his graduate work at the North Carolina State University. He was an economist for Cotton, Inc. in the early 1970's, analyzing cotton supply/demand in the US textile industry. From there he went to NCNB National Bank in Charlotte, North Carolina where he traded foreign exchange and money market instruments. In the late 70's, Mr. Gartman became the Chief Financial Futures analyst for A.G. Becker & Company in Chicago, Illinois. Mr. Gartman was an independent member of the Chicago Board of Trade until 1984, trading in treasury bond, treasury note and GNMA futures contracts. In 1984, Mr. Gartman moved to Virginia to run the futures brokerage operation for the Sovran Bank. He has lectured on capital market creation to central banks and finance ministries around the world, and has taught classes for the Federal Reserve Bank's School for Bank Examiners on derivatives.
In 1987 Mr. Gartman began producing The Gartman Letter on a full-time basis. The commentary covers all financial markets, with particular emphasis on fixed income, foreign exchange, equity indexes, precious metals, energy and agricultural commodities. Clients of The Gartman Letter, L.C. include many of the leading banks, broking firms, mutual funds, hedge funds, energy trading companies, and grain trading companies.
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Sonali Verma, Globe Investor: Hello, everyone, thanks for joining us. Let's get started with a few questions on currencies:
Kevin Morris writes: For years you posited that the Canadian dollar would reach parity with the US dollar, much to people's ridicule. Do you see the Canadian dollar returning to parity anytime in the near(er) future?
Dennis Gartman: Yes I do indeed still believe that the Canadian dollar will trade to parity… and beyond… with the US dollar. When I began that position many years ago, with the C$ trading 1.6000 (.6250 approximately) I was laughed at. Few laughed as it went through parity and beyond, and indeed it was the same people laughing at me when I chose to stand aside as the C$ was trading well through par who laughed as I chose to move to the sidelines. Now with the C$ trading back toward 1.15 Canada/US, it see the world looking to Canada as a country of stability; of reasonably stable financials; of a stable banking environment and as an exporter of the things the world needs. So, yes, Parity is again in the works.
Robert writes: Could Mr. Gartman suggest a ten year investment in a foreign currency or a foreign exchange that will do well by not being tied into US dollar fluctuations.
Dennis Gartman: A ten year investment? I cannot and I will not do that, for looking out beyond six months is quite beyond my ken… and beyond that of almost anyone else. I am a trader; I am not a clairvoyant.
Chris writes from Brokline, MA: I'm a US resident planning a move to Canada but I'm waiting for a favorable exchange rate. I have several hundred thousand US dollars in cash and almost pulled the trigger in March, but didn't, and now I'm kicking myself. What with an ever increasing deficit, exploding unemployment, growing stimulus demands, and the pressure that a high CA dollar puts on exports, I think there's some hope of it going down again, possibly due to "quantitative easing". What do you think?
Dennis Gartman: Chris, I am afraid you have no choice but to pull the trigger at 1.1500 Canada/US and make the swap for at least half of our several thousand dollars, for I think that the major trend is still in Canada's favour.
R.A. Rahim writes: Are you still bullish on Canada, Australia and Brazil and their currencies?
Dennis Gartman: Rahim… yes I am still bullish on the currencies and the stock markets of Canada, Brazil and Australia relative to the US dollar and stock market. Canada, Brazil and Australia are net exporters of "stuff," and the world will need these things: grain; energy; water; et al.
Ian writes: I know you're not a gold bug.. nether am I.. but I can't help but come to the conclusion that with some $2 Trillion this year in deficit and perhaps another $3 trillion or more on its way before the US turns things around and erases their deficit that Gold will inevitably see a sharp rise. I'm thinking firm support aound $1200.. perhaps peaking at 1500.
Dennis Gartman: Ian…. I have owned gold; I have been neutral of gold… and I am not tied to gold in any fashion other than as a trader, with the general thesis that the trend is quietly upward. Someone or something is leaning on gold at $980-$1000 and I'll let that seller be sated before I venture back to the long side. So will I sell gold short? No.
How will it unfold? I've not the faintest idea other than we shall all be surprised when it does unfold. If nothing were to change, then the Chinese shall quietly swap bonds for gold and gold companies, but only at the margin and not aggressively.
Dheeraj Mohnia writes: Are the crazy levels like $5000 /ounce possible for gold? Even with hyper inflation? Thanks.
Dennis Gartman: Dheeraj…. $5000/ounce gold? Not in my lifetime.
Zoran writes: Can we see gold about 700 USD on the end of this year?
Dennis Gartman: Can gold trade to $700/oz. this year? I doubt it. Strong support shall be evident at $840 and it will take amazing news to take that support out.
Sonali Verma, Globe Investor: We also have some questions on your outlook for natural gas as well and how best to play it.
Dennis Gartman: The outlook for nat gas is strong, but supplies are even stronger. The trend is down, and until the trend changes…. And with a demonstrably cooler summer it is not likely to change soon since the demand for air conditioning is lower than last year… those who are bullish shall have to wait for the winter. Even then, those owning futures have a huge "contango" to overcome, and that is just not likely to happen.
Jab Along writes from Bukit Tinggi, Indonesia: Mr Gartman, what is your outlook over the near and medium term for natural gas and uranium? Can you recommend any investment vehicles in North America or further abroad for these two commodities? Any thoughts on the United States Natural Gas Fund and Uranium Participation Corp?
Dennis Gartman: Jab, when I trade nat-gas from the long side… which may be some while into the future… I'll trade the nat-gas trusts so I have a stream of income that should be reasonably protected. As for uranium, I am utterly uninterested in that too speculative vehicle. I'll let other wiser or more courageous or sillier than I trade there.
Mohamed Thaver writes from Mississauga, ON: Looking to short Oil with an inverse ETF and go long on natural gas ETF, would like your opinion, I think the market is out whack here.
Dennis Gartman: The market is out of whack, and it has been out of whack for months, and the smartest minds in the business have had the trade on long of nat-gas short of crude and have lost tens of millions of dollars. It is likely to get even more out-of-whack… until such time as no one wants to be involved. I was on your side months ago; it cost me time, money and mental capital, and I got out… months and months ago. Oh, it was out of whack then, too.
Tim Stinson writes: What is Gartman's outlook on natural gas? What is the best way to play natural gas?
Dennis Gartman: The best way to play natural gas is not to play at all.
Kurt Weare writes: Hi, I was wondering if I could get Mr. Gartman's take on the 1 to 2 year outlook on natural gas prices.
Dennis Gartman: Natural gas is cheap… very very cheap; it was cheap at $6 and it was cheap at $5 and it is cheap at $4… and there's a trend at work here. It keeps getting cheaper.
Vaidyisa Bala writes: What are some of the best dividend growth stocks in Canda for long term (5 to 10 years ) investment you recommend? This could be in any stable sector.
Dennis Gartman: Dividend stocks for 5-10 years? I'd say probably the same dividend stocks that were good for the past 5-10 years, which is none. I've no ability to look out 5-10 years, and anyone who tells you they can is a charlatan and/or foolish. Perhaps a year or so is reasonable, and to that end I'd buy raw materials manufacturers and miners: steel; copper; zinc; grain growers; water… these are where I'd put my money… with stops on everything.
Susan Campbell writes: As in another question to you, I too, am invested in rising dividend paying companies that provide essential services, balanced with some excellent corporate bonds. Since I am nearing retirement, I will need the income from these stocks in about 5 years. I still have some cash to deploy-is this a good time to put it to work adding to my dividend paying stocks, or would you wait?
Dennis Gartman: As noted just above, I'd own the makers of steel, copper, zinc, grain and water. I'm not wise enough to know anything beyond the fact that the world needs all of these things; always had; always will. Steel looks cheap to me and has stopped falling; the base metals look cheap to me and they've stopped falling. Eventually, when nat-gas stops falling, I'll recommend owning nat-gas trusts again; but not until months have passed and a clear bottom has been made. Be patient...
John writes: I am 46 years old, about 15 years from retirement. I have a portfolio of 25 dividend-paying stocks, and at present I am 100% in equities. I am comfortable with this level of risk, as dividend growth investment can be advantageous whether markets are rising or falling. I have been overweight financials and telecoms since the year started, and underweight energy, materials and staples. My question is this: I will have some money to invest in the coming weeks and months, and I should like your opinion as to where it might be best allocated. I can appreciate that individual stocks may be hard to identify, but I'd be happy to hear your favored sectors, bearing in mind that I remain committed to dividend growth investing.
Dennis Gartman: John, as noted several times already, I want to own the movers and makers of "stuff." Grains; water; base metals… that sort of thing.
David Noseworthy writes: Is it time to get back into U.S. banking stocks? If not, what should we be looking for before getting in to this sector?
Dennis Gartman: Yes, one can own the bank stocks, but why risk U.S. banks; own Canada's banks…. They are in much better shape, and they've the same benefit of the positively sloped yield cuve that the U.S. banks enjoy. Why venture abroad when home is so strong?
Andrew Leung writes: I was just wondering what kind of signals we should be looking for before entering bull-market products such as Potash Corp. I'm aware that you are (as of late last week) short of the company.
Dennis Gartman: Potash… I am short and I am wrong, so asking me about POT is an error. I have been covering it in this morning but I'm not finished yet. When the market tells me I'm wrong, I waste little time in trying to fix it.
Sunil Dhall writes: When do you think the stock markets will crash ?
Dennis Gartman: The markets will crash when no one expects them to; markets crash from highs not from lows. Right now, everyone is looking for a crash of some sort, and I'm not.
hd_12 writes: With all the monetary easing and printing of Money in the US, when do you think inflation will become a serious problem. Do we not have to clear excess capacity in the economy completely before we see an inflationary effect?
Dennis Gartman: We will see inflation in raw materials prices sooner rather than later; but we'll continue to see deflation in wages… with the net result to the consumer as very little price movement. Oh, tuitions will probably rise; and health care costs will probably rise, but auto prices probably won't; nor will housing prices… given the labor intensive nature of production. So when asked, "Will we have inflation or deflation?" I answer, "Yes."
BlaqueJacqueShallaque writes: Another question on inflation... everyone says "buy gold" when inflation is coming. But surely that's not a complete investment strategy. Are there are reasonable inflation-safe investments? Also, it seems unlikely that stocks can increase in market value at a rate that keeps up with 10-20% inflation... should we be dumping equities?
Dennis Gartman: I am with you: equities + gold are the better inflation hedge. Indeed, equities (in raw materials manufacturers or miners) + gold + TIPS is probably the best combination of all.
Lantzvillain writes: How would you recommend the nervous investor protecting himself against currency devaluation as nations crank up the printing presses? Are real estate, materials, utilities and consumer staples and services the better choice? Thanks for guidance.
Dennis Gartman: Real estate is a non-starter, for we've no learned that a house is nothing more than a means to keep the rain off. Commercial real estate may be a better investment, but I hate real estate for the simple reason than when you need a bid to sell, there is never one. I much prefer owning the home builders, the miners of copper, zinc and aluminium, and perhaps even the utilities.
Mythbuster writes: Good morning Dennis. I would like to know your thoughts on the likelyhood and consequences of the "new" BRIC economic group seriously taking action to move away from US dollars as a reserve currency. China is taking steps to reduce their exposure to the US dollar and continues to push for a new international reserve currency to replace it. Do you think that has any possibility of happening ?? And if the US dollar continues to drop, what will that do to China considering the amount of US dollar debt that it holds ??
Dennis Gartman: The BRICs … in my lifetime… and I'm only 58… will not move away from the US dollar as the world's reserve currency, for until the US relinquishes its position as the world's most important military power AND as the world's largest economy there is no choice but to use the dollar for most transaction purposes. They will complain and bemoan their fate, but there is no rival at present for the dollar, as much as the BRICS would like there to be. As much as they'd like to move away, they cannot…. Not for many years anyway.
But do remember, all reserve currencies eventually are replaced. That is their fate… inevitably; the question is when, and the answer is not for a very long while yet… certainly not for a decade or more.
Joe Vechter writes: In just over one year, American politicians will be advertising for votes. If the American economy continues to lose jobs and a protectionist Congress legislates or threatens trade barriers (read GM or Chrysler continue to falter), what do you see as the likely outcome for the American currency? And do you see trade protectionism as a real threat going forward?
Dennis Gartman: Joe, I see protectionism lurking everywhere, and it is especially problematic in election years... especially amongst members of the House of Representatives... so yes, it is going to be ugly. This cannot be construed as positive for the US dollar and all things otherwise begin equal it would be a reason to be a seller. Protectionism never works, and I see men such as Lou Dobbs and others as being the most dangerous men on the economic and political horizon. That's why the story of the Governor of S. Carolina is so sad for he was one of the few politicians who stood up for free trade in a state... S. Carolina... notoriouis for anti-free trade philosophies.
Alex Lee writes: Dennis, how much do you believe in the outlook from people like Peter Schiff and Gerald Cilente? Please qualify your answer as to why you answer the way you did.
Dennis Gartman: Alex I put no credence whatsoever in what Peter Schiff has to say, for he has been singing the same bleak song for years and was wrong for a decade or more. Plus, Peter is terribly hot headed and is prone to loud, ungentlemanly screaming at debates. There are others on his side whose positions I may listen to, but I've no reason nor interest in listening to Mr. Schiff.
Sonali Verma, Globe Investor: Dennis, thank you very much for joining us and for sharing your expertise with us. We really appreciate it.