An Inside ETFs session with Dennis Gartman and Mark Yusko called The Great Fed Debate contained surprisingly little disagreement but many astute insights.
Europe needs QE in a "massive fashion," Gartman says.
Investors are ever seeking to discover what the smart money thinks, but typically obtain the information from legally mandated portfolio holding disclosures that are out of date.
The two panelists, Dennis Gartman and Mark Yusko, could not have been more cordial, and disagreement was nary to be heard.
But because the dynamic duo were brimming with investment insights, the session did have the feel of listening in on the thoughts of particularly astute investors.
Readers can form their own judgments as to whether their ideas are of value. Even smart people make poor portfolio decisions. But few would question the two men’s intellect. Subscribers pay handsomely for Dennis Gartman’s Gartman Letter, whose alpha-seeking author runs his own money and manages some AdvisorShares currency funds. And followers of Mark Yusko’s tactical strategy are apt to pay up for his AdvisorShares Morgan Creek Global Tactical ETF (GTAA).
While the stock market took a huge beating Tuesday as corporate profits fell, largely on the greenback’s strength, the two investors were unbowed by the might of the dollar.
“Strong currencies make manufacturers more efficient,” Gartman said, pointing to the experience of Japan in the 1980s.
What’s more, he added, corporate treasurers from around the world will be keeping the vast majority of their funds in dollars.
In an environment of currency debasement, the investors like gold. But the smart money says there’s a smarter way to buy it: buy yen-denominated or euro-denominated gold rather than the typically dollar-denominated commodity.
“You want to be long gold and short the currency that will fall,” said Yusko, puting in a plug for his interlocutors, Gartman Gold/Yen ETF (GYEN) and Gartman Gold/Euro ETF (GEUR).
“The yen will be lower the rest of your life,” Yusko said, predicting it wil be at 140 to the dollar by the end of the year.
“They have no way out other than to devalue,” he says.
The original prompt for “debate” ended up a unanimity fest.
“Bernanke stood at the edge of the precipice and looked down at abyss and said, ‘I don’t want to go there.’ So he did something. But Draghi is a talker, not a doer.” Gartman noted that Europe’s mutually distrusting governments make Draghi’s job more difficult. If he were to buy German bonds, the Italians would quibble he’s not buying more of theirs, and so on among all the other countries.
As for the Fed, Yusko made a startling prediction about its current chairwoman, Janet Yellen, to which Gartman assented: that though the bond-buying has stopped, Yellen will eventually begin buying equities.
The problem is not the stocks, Yusko opined, but the currency. Believing that Russia will still be around 10 years from now, he sees the current difficulties of the ruble as a huge buying opportunity, citing Market Vectors’ RSX ETF as a convenient way to play Russia.
While Gartman quipped that emerging markets are markets from which you can’t emerge in an emergency, he said that that dictum would apply to Croatia, not India, a market he regards as sufficiently liquid.
Yusko called WisdomTree’s EPI ETF a convenient way to invest, but said investors could drill more deeply into the domestic economy with Emerging Markets Domestic Demand (EMDD).