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.

This from Fleet Street Daily:

Investors tend to fixate on the stock market as a way to make money. When stock markets are in chaos, they see no way out. I’m surprised that so few investors pay attention to the currency markets. After all, in terms of volume and value, the Forex dwarfs the equity markets. But I get the feeling that’s going to change.

Currency stories are all over the financial pages at the moment — and investors are starting to realise that there’s a way to play it. For the more adventurous investor, spread betting offers easy access to a once out-of-reach market. But then not everyone is into that kind of leveraged speculation.

There are safer ways to play this new-found interest in the currency market. I’ll introduce you to a colleague who’s found a conservative way to do it in a moment. But let’s just talk a bit about context first.

The Bank of England has little choice but to cut interest rates and cut them aggressively. We could even see an emergency cut ahead of the next scheduled meeting on 5th/6th November.

That’s bad news for the pound. Money chases yield. So if the UK base rate falls from the current 4.5% to, say, 2%, then sterling becomes a lot less attractive to yield chasers.

The pound was worth two dollars in August. It’s now worth not much more than 1.5. I’ve even seen calls for year-end pound-dollar parity — one pound for one dollar. And why not? I mean already in just the last three months, the pound has fallen almost 50 cents. Why shouldn’t it fall a further 50 cents in the next two months?

When Forex trends take hold, they can run and run. And they can overshoot, just like all markets tend to overshoot. With the picture as bleak as it is for the UK economy right now, it’s got every chance of doing that.

We’ve got rapidly rising unemployment. We have a burgeoning trade deficit. The housing market will continue falling. And the whole financial crisis is drawing investors away from the UK.

“Sterling has long been particularly vulnerable because the imbalances in the UK economy — notably the dire state of households finances and the large external deficit — are just as severe as those in the US,” said Julian Jessop, chief international economist at Capital Economics.

And we should remember that UK rate cuts are likely to be much more aggressive than in the US. That’s because we have more room to cut. Our base rate is at 4.5% compared to the current 1.5% in the US.

Of course, this is largely priced into the cable rate already. Even so, sentiment is against the pound. We’ve seen what sentiment has done to stock markets recently. In these extraordinary times, we could quite easily see extraordinary moves.

Pound/dollar parity is certainly a bold call. But then so, it seemed, was calling the FTSE at 3,500 just a few months ago — and it’s not far away from that level right now. And colleague, Bill Bonner’s “Dow 5,000″ call suddenly looks very “on the money”.

The last time the pound came close to parity with the dollar was in February 1985, Back then, cable touched $1.02 at one point during trading. It might not get there this time, but it could certainly have another go.

Source: When Stock Markets Are In Chaos…

So… The euro reached a new record high overnight of 1.6038! WOW! This was reached based on the fears that credit problems in the U.S. are going to put the kyboshes on what little economic growth we now have. But the shine on the euro was rubbed out by a very weak ZEW… German Investor Confidence as measured by the think tank, ZEW, fell to a record low this month on the surging inflation problems, and rising interest rates. So for now, the euro is back below 1.60, but hear me now and listen to me later… This ZEW will soon be in the rear view mirror, and the euro won’t have that albatross around its neck as it revisits its overnight high…

And don’t look now, but the Aussie dollar is up to 98-cents! WOW! I’ve said for about 8 months that I wouldn’t be surprised to see the A$ at parity to the green/peachback… It certainly has that parity look about it does it not? The last time the A$ was 98-cents was 1983… 25-years ago… 1/4 of a century, and all that!

The U.K. pound sterling is back to $2, which seems totally unlikely an event as possible, but it has happened, so, go on and crow if you thought I was wrong to say the pound was going to have problems once the Bank of England (BOE) started its rate cut cycle…

And the Canadian dollar / loonie has crept back to parity! It’s been a long, time coming… It’s going to be a long, time gone… (a little CSNY)…

And, the poor, downtrodden, Japanese yen, is at the bottom of the 105 handle, and looking like it wants to trade with a 104 next to it! I had to laugh at a story I saw flash across the screen… The title was… “Yen may gain as Bank of Japan (BOJ) is more likely to raise rates than the Fed”. Now that’s funny! Ok, stay with me on this… A month ago, the dollar was getting bought like Pet Rocks because Fed Chairman, Big Ben Bernanke hinted that he was going to be an inflation fighter, thus interest rates would go higher… But here we are a month later, there’s been no sign of Big Ben the inflation fighter, and now it’s deemed that the BOJ could raise rates before the Fed!

And the dollar bulls wonder why their currency is getting sold like funnel cakes at a state fair? Why don’t the dollar bulls give Big Ben a call on the telly, and see if he can’t help them out? Oh… That’s right, Big Ben doesn’t take calls from just anyone… According to our friend, Jim Rogers, on his Bloomberg TV interview yesterday morning… “Ben Bernanke and Paulson only take calls from their Wall Street Buddies”… HA!

Speaking of Jim Rogers… He was full of you know what and vinegar yesterday morning… He didn’t pull any punches and said what was on his mind… You should have seen me here at the trading desk, Jim Rogers would say something, and I would clap and hoot and holler! At one point, Rogers said that the Gov’t’s plan to rescue Freddie and Fannie was “an unmitigated disaster”…

So… Remember early in the year when I kept telling you that there would be another “risk event” this year, and then we had the Bear Stearns meltdown, but that wasn’t it for the “risk events” , and I kept harping that there would be more? Well… It’s not like I was wishing, and hoping and thinkin’ and praying for these things to happen… I was simply pointing out that the world today has too many “risk events” all over, and with the credit woes in the U.S. and the housing and mortgage meltdowns, I just figure it would touch here a few times.

Anyway… What I’m trying to get at here is simply that these are the things I kept telling people to protect themselves from by diversifying into currencies and precious metals… I also, recall, the wink, wink, I gave you when Gold was trading below $900 about a month ago… Today, Gold is $983!

OK, enough with all the “I told you so” talk! Let’s talk about today… Well, today has “risk” written all over it! Big Ben goes to the “hill” to talk to lawmakers about the economy and Fed direction… You have to think that before the Meltdown last week of Freddie and Fannie (see more talk about them, I just can’t leave them on the side of the road!), that Big Ben would go to the “hill” and talk the inflation fighter talk… But now… Not now… Not with the financial sector in meltdown mode… So this is a double-edged sword… If he doesn’t go and sound hawkish, then the markets will take that as no rate hike is coming and take the dollar to the woodshed again… (you would think by now that the dollar would have gotten used to these beatings!)

Besides Big Ben, we get a ton-o-data today… PPI for June… Retail Sales for June… And Business Inventories for May… Retail Sales is the Big Kahuna of data today… And I would think that given the tax rebate checks that were still being mailed in June, Retail Sales would remain somewhat robust… Wait till July’s number, I saw all the shopping bags from my beautiful bride’s trip to Chicago this morning! But that’s for next month! For now, PPI poses a treat to future Consumer inflation, so this one plays big too…

If any of this stuff comes in worse than expected, we could see the dollar not only get taken to the woodshed, but told to go pick the switch that it will get beaten with.

Source: Credit Woes Sink The Dollar!