Trading legend Dennis Gartman is one of the most influential market commentators out there. He is what we like to call here at Notes an “investor’s investor.” That is, he’s a market veteran who speaks directly to other traders and investors.

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.