He is best known for his daily newsletter, The Gartman Letter, which is read with morning coffees by countless Wall Street operators. In short, Gartman is an underground investor par excellence.
Gartman recently gave an interview with Canada’s The Globe and Mail. In it, he reveals his stance on the inflation/deflation argument and how to best hedge against an inflationary outcome.

Gartman is not your typical inflation hawk. He sees deflation and inflation taking hold in the future: inflation in raw materials prices “sooner rather than later” and deflation in wages. When asked, “Will we have inflation or deflation?” his answer is “Yes.”

For those who want to hedge against inflation, however, Gartman has perhaps the best hedge combination we’ve seen thus far here at Notes. This is a remarkably simple, yet we believe effective way of preparing your portfolio for an inflationary cycle, albeit one that doesn’t affect asset classes across the board (Gartman sees health-care costs rising for instance, but not car prices or house prices).

Gartman’s formula is as follows: equities (in raw materials manufacturers or miners) + gold + TIPS.

(We told you it was remarkably simple!)

Gartman is singularly measured in his approach to investing. He is conservative in his approach and has little time for the histrionics often displayed by the talking heads on TV. (He is dismissive, for instance, of popular dollar bear Peter Schiff, who he believes is “terribly hot headed and is prone to loud, ungentlemanly screaming at debates.”) What follows are some other Gartman gems that come out of his interview with The Globe and Mail.

• The dollar will trade “to parity… and beyond” with the US dollar. That’s because Gartman sees 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.”
• Gartman is bullish on the currencies and the stock markets of Canada, Brazil and Australia relative to the US dollar and US stock market. According to Gartman, “Canada, Brazil and Australia are net exporters of ‘stuff,’ and the world will need these things: grain; energy; water; et al.”
• The trend for gold is “quietly upward.” Gartman doesn’t believe the yellow metal will reach $5,000 in his lifetime. Nor does he see gold dipping below $840 an ounce. According to Gartman, “Someone or something is leaning on gold at $980-$1000.” He says he’ll let that seller be sated before he ventures back to the long side.
• The trend for nat gas is strong, but supplies are stronger. Those who are bullish, says Gartman, will have to wait for winter as a cooler summer means demand for air conditioning is unusually low. When Gartman does go long nat gas he will invest in the nat-gas trusts to ensure a “steady stream of income.”
• Gartman is cautiously bullish on raw materials manufacturers and miners: steel; copper; zinc; grain growers; water.
• Canada’s banks are in “much better shape” than their US counterparts and they enjoy the same benefit of the positively shaped yield curve.
• The dollar will remain the world’s reserve “until the US relinquishes its position as the world’s most important military power AND as the world’s largest economy.”
• Protectionism is “lurking everywhere and it is especially problematic in election years.” This is bad news for the US dollar.

The tiny silver rally in London didn’t last long, and the lights really got turned out the moment that the traders on the Comex got going. There was certainly more stop-loss selling yesterday…and maybe even some new shorting…which we’ll find out about later this morning.

Of course, the continuing softness in all other commodities…and the dollar rally…did nothing to help things for either gold or silver. They just got sold off with everything else.

Open interest in gold and silver went in different directions once again on Wednesday. Gold o.i. rose 2,244 contracts, but silver went the other way…down a fairly substantial 2,663 contracts. From looking at the charts for both metals, we are fast approaching the critical 200-day moving averages, which are now a chip shot away, considering what happened yesterday. The RSI and MACDs for both metals are quickly approaching hugely oversold. Is there room to go lower? Certainly…but not much. Just check out the 3-year chart for gold, which is here.

The silver chart is here.

You will note that these declines look suspiciously familiar to the declines in 2006 when the bottom was reached the moment that both gold and silver touched their respective 200-day moving averages in mid-June of that year.

I note from Dennis Gartman’s commentary very early yesterday morning (before the Comex carnage began) that he expects central bank selling to block any recovery in the price. I wouldn’t bet money on that, but here’s what he had to say nevertheless…”We do not expect this rally to last long, and suspect that there shall be material selling in spot gold between $875-881. We look for the legacy central banks to ramp up their gold sales on this strength, for they’ve got gold to sell en masse if they wish to meet the total they are allowed to sell under the Washington Agreement.”

This too, as they say, shall pass. I had a little money in my account yesterday and I put it to work. If this isn’t the bottom, it’s only a few days off…so take heart.

Today’s commentary comes (once again) from James Turk over at goldmoney.com. His latest offering is entitled “A 4-Month Review”. Considering what’s going on right now with the prices of all natural resources…including our two favourite metals…this is required reading. Click here.

Joint intervention in gold sales to prevent a steep rise in the price of gold (in the 1970s), however, was not undertaken. That was a mistake. – Former Federal Reserve Chairman Paul Volcker (writing in his memoirs)

It was bad news across the board again on Thursday. But that didn’t matter. The Dow is back over 13,000 and the S&P is above 1,400…so happy days are here again. Everything is fine. Fridays are always interesting…and I expect this one to be no different.

Have a great weekend, and all of us at Casey’s Daily Resource Plus will see you here tomorrow.

Gold went on a very wild ride on Tuesday, falling as low as $912 just before London trading opened, then rising to $920, getting sold off during the first hour of the New York session, shooting higher and peaking above $924 at the noon hour, and finally pulling back sharply through the Access Market and finishing at $916.20, down 90 cents. Overnight, gold has edged lower.

Platinum noodled around between $1980 and $2000 until the second hour of New York trading, then pushed higher until noon, after which it leveled off to end at $2025/oz., up $13. Overnight, platinum is trending lower.

Silver wasn’t quite as volatile as gold, but it too rose sharply until noon, peaking above $17.80, before retreating to a close at $17.51, up 9 cents. Overnight, silver has been flat.
(Click here for charts)

It was surely another disappointing day for metals investors as the big stars—sinking dollar and rising oil—once again lined up in their favor, suggesting a knockout day that never materialized.

That the metals didn’t react more powerfully is puzzling, and adds some credence to the view that the market is being heavily manipulated in order to make the collapse of the dollar seem less awful than it really is.

Nick Ruggiero, a trader at Eagle Futures in New York, noted the support from oil and the buck, and said sarcastically that, “Possibly by the end of the year, we’ll see metal prices catch up.”

A bit more optimistic is Mark O’Byrne, executive director at Gold and Silver Investments Ltd., who wrote that, “Gold continues in a tight range between $910 and $930, but the path of least resistance looks to be to the upside. . .”

But Dennis Gartman, editor of the Gartman Letter, has had enough. Gartman wrote that “good bull markets” don’t fall in the way that gold fell on Friday.

Gold “has broken this well-defined bullish trend line and it failed miserably on Friday,” Gartman wrote. “It has bounced today [Monday], and we shall sell that bounce and exit entirely!”

Gartman contrarians will note that this is not the first time his patience has been tried, and are probably aware that even the strongest bull markets do indeed turn up and down sharply, sometimes on a dime. Those folks likely can’t wait for a dip below $900 to buy in.