The View from Las Vegas: Quiet Buying? Aggressive Buying?

The View from Las Vegas: Quiet Buying? Aggressive Buying?

On Sept. 24, the 9th Annual Inside Alternatives and Asset Allocation event convenes at Wynn Las Vegas, with CAIA sponsorship. The purpose of the event: to look beyond traditional alternative investments and strategies, to take the measure of a new breed of alternatives, including impact/SRIs, cryptocurrencies, and the application of artificial intelligence to asset allocation.

Dennis Gartman is one of the participants. On Tuesday at lunchtime he’ll engage in a discussion of the past 10 years, the period since the global financial crisis, with Mark Yusko of Morgan Creek, moderated by Evan Simonoff Financial Advisor magazine. Mr. Gartman has been publishing a daily commentary on global capital markets, unsurprisingly known as The Gartman Letter, for more than 30 years.

Gartman spoke to AllAboutAlpha shortly before the conference. We discussed the range of assets available to long-term investors, traders, and for that matter wild-eyed speculators in 2018, from the most traditional to the traditional alternatives to the alternative alternatives.

Many years ago, Gartman laid out a list of what he called “ridiculously simple rules for trading.”  We began by asking him about two of those rules. And we started with the application to two of the most traditional of asset classes—listed equities and currencies.

AAA: Your second rule says that traders should not aim to “buy low, sell high but to “buy high, sell higher.” They should buy into an ongoing rally. Looking at listed equities today, where there has been an ongoing rally since 2009, is this still a good time to buy into it. Or might not reasonable investors worry that we’ve not only gone past “high,” we’ve gone past “higher”?

Gartman: This is still a bull market. Yes, it is an old bull and one should not be buying aggressively One should buy selectively, quietly. But if you’ve missed out on this bull you have no choice but to buy. And if you haven’t missed out, you may still find opportunities.

AAA: Another rule tells traders to think like “guerilla warriors” and join the winning side. From headlines in recent days it appears we’re looking at a crunch point for the pound in relation to the euro and in the face of Brexit. Is this something on which a guerilla has a play?

Gartman: I suspect that the worst is behind us as far as the GBP is concerned. Mrs. May finds herself in a precarious position heading into the big Tory conference [the Conservative Party will be meeting in Birmingham on Sept. 30, and some rebellion against her leadership, especially from those who claim she is too reluctant a Brexiteer, is certain.]

But there is reason to hope that there will be a “soft” rather than a “hard Brexit, and that cool heads will prevail on both sides.

Northern Ireland seems to be the sticking point. Still, if I had to either buy or sell the pound now I would be a buyer.

AAA: What is your take on the US dollar vis-a-vis gold? Gold was at $1,375 this spring; and is now in the $1,200 neighborhood. Is this a normal consolidation within a bull market, or might the reasonable investor have turned bearish on gold already?

Gartman: As a general observation: everybody should own some gold among their assets.

At the moment, the price of gold is in a correction, but we are still within a bull market. On balance, I’d rather be a buyer of gold than selling it.

AAA: Does it make sense for the retail investor to seek exposure to alternative strategies by way of alternatives ETFs? Or is it wiser to leave such strategies to hedge funds and their qualified investors?

Gartman: ETFs are absolutely appropriate for the average investor. There shall come a time when there will be a bear market in the ETFs, and when it comes it will be ugly. Will that be two years from now Five? I can’t say, but what we can say is that ETFs are not a problem until they become a problem, and when they do … they will be a problem.

AAA: In the face of the steady decline in the value of cryptocurrencies since December 2017, do you think there is a continuing market for cryptos as part of a portfolio, that they will eventually settle into niche market status? Or might they go the way of Beanie Babies?

Gartman: No, I don’t think they have any niche. They face an inherent problem. On the one hand, they’re supposed to be limited—the algorithms behind each “coin” are supposed to limit supply. On the other hand, as a class they aren’t limited at all because they’re making new ones every day. The supply is in effect infinite.

I think it’s regrettable that “cryptocurrencies” have become synonymous in the public mind with “blockchains.” The blockchain is a critical technological advance. It just happens to have emerged out of the crypto world, but it has endless applications. It will change how we do and trade everything. It will change the trading of bananas; the containers the bananas come in; the ships those containers are loaded onto—everything.

AAA: So is there a way to invest in the technology without investing in the cryptos?

Gartman: Not so far as I know. Not yet. There should be, and eventually there will be.

AAA: Finally, let me ask you about emerging market debt. There has been a correction in EM debt of late, but some experts say that this has been an over-correction, and that the fundamentals are still sound. Investors should not necessarily move big into EMs, but they should be in a position to benefit should there be a rebound. Do you subscribe to this school of thought?

Gartman: I subscribe to the view of Don Coxe, who has said “an emerging market is one from which you cannot emerge in an emergency.”

Will the assets of emerging markets be of more value 20 years from now than today? Yes. But you have to have a very long time horizon and of lot of tolerance for volatility and illiquidity to invest in the EMs.

AAA:  Aren’t there important differences among the EMs? For example, between China on the one hand and Turkey on the other?

Gartman: Of course there are differences. India is a standout among the EMs. They have the benefit of the rule of law. The Indians, for lack of a better expression, ‘get it.’

And as ugly as things have gotten for Turkey of late, Turkey will survive and recover. Everything is a matter of the time horizon involved.

AAA: Thank you very much for your time!


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