WEBVTT - Futures Climb on China Recovery Bets (Audio) 0:00:03.760 --> 0:00:07.800 And it's now time to check in with Dennis Gartman, 0:00:08.480 --> 0:00:12.119 chairman of the University of Akron endowmentn Investment Committee, former 0:00:12.160 --> 0:00:16.240 publisher of the Gartment letter. As we get three started. 0:00:16.280 --> 0:00:19.880 Happy new year, Dennis, it seems like investors are happy 0:00:19.920 --> 0:00:23.640 to put two behind them. Is that kind of explains 0:00:23.720 --> 0:00:26.520 the gains we're seeing across the board this morning. Well, 0:00:26.520 --> 0:00:28.600 it's interesting, Nathan, this is one of those rare days 0:00:28.600 --> 0:00:31.200 when you have gold higher, bonds higher, in stocks higher. 0:00:31.240 --> 0:00:33.520 One of them has to be wrong. Normally they cannot 0:00:33.560 --> 0:00:36.240 move all and tandem one with the other. But perhaps 0:00:36.320 --> 0:00:37.760 it's just the fact that it's the start of the 0:00:37.800 --> 0:00:40.440 new year. We always see an influx of money coming 0:00:40.479 --> 0:00:41.960 in the first of the month of the first of 0:00:41.960 --> 0:00:44.320 the year. That happened exactly the same last year. The 0:00:44.360 --> 0:00:47.440 first day of the year was a was a rather 0:00:47.479 --> 0:00:50.040 substantive rally, and then it ended up being a bear 0:00:50.159 --> 0:00:52.840 market the day after. But it is rare to see 0:00:52.840 --> 0:00:56.800 both to see gold, stocks and bonds all all higher, 0:00:56.840 --> 0:00:59.720 and rather sharply higher. So, as I said earlier, one 0:00:59.760 --> 0:01:01.840 of them probably is wrong. I think that stocks are 0:01:01.880 --> 0:01:03.880 probably the one that is wrong. But we'll see. Time 0:01:03.920 --> 0:01:06.800 shall tell. Well what makes you say that, Dennis, I mean, 0:01:06.840 --> 0:01:09.039 you were one of the first to call this a 0:01:09.080 --> 0:01:13.200 bear market shortly after the SMP five hundred made its 0:01:13.240 --> 0:01:18.080 peak one year ago. Today was its last closing record. 0:01:18.840 --> 0:01:21.119 What makes you think things are going to be the 0:01:21.160 --> 0:01:23.319 same as they were last year? Is? Is that what 0:01:23.360 --> 0:01:25.959 you're saying? Yeah, that's basically what I'm saying. I think 0:01:25.959 --> 0:01:28.160 this is just the fact that we had. It's the 0:01:28.160 --> 0:01:29.560 start of the year, the start of the month, and 0:01:29.600 --> 0:01:33.000 there's always an influx of capital that comes in exactly 0:01:33.000 --> 0:01:36.399 a replication of what happened last year. The problem is 0:01:36.400 --> 0:01:39.080 that we have stock prices I think have had an 0:01:39.120 --> 0:01:41.520 inordinately high, large rally in the course of the past 0:01:41.560 --> 0:01:46.240 month and a half, predicated upon the Fed uh pivoting 0:01:46.360 --> 0:01:48.960 from its tightening monetary policies, and I think that that's 0:01:48.960 --> 0:01:50.960 ill advised to consider that fact. I think the Fed 0:01:51.040 --> 0:01:53.840 is going to continue to allow the overnight not allow, 0:01:53.960 --> 0:01:56.400 but but move the overnight said funds right to five 0:01:56.400 --> 0:01:58.000 to five and a quarter percent over the course of 0:01:58.000 --> 0:02:00.240 the next several months. We'll see when we get to 0:02:00.240 --> 0:02:04.680 the first f MC meeting in February, but time shall tell. 0:02:05.160 --> 0:02:07.600 The The I m F has said that we're going 0:02:07.640 --> 0:02:09.000 to have that one third of the world is going 0:02:09.040 --> 0:02:10.560 to be in recession over the course of the next 0:02:10.800 --> 0:02:13.760 year or two. I think that that will will weigh 0:02:13.800 --> 0:02:17.360 upon stock prices eventually. So again, it's unusual to see 0:02:17.400 --> 0:02:20.240 that we have stocks, bonds, and in gold rallying and 0:02:20.320 --> 0:02:22.920 on all on the same day. One of them has 0:02:22.960 --> 0:02:24.680 to be wrong. And as I said, I think it's 0:02:24.680 --> 0:02:26.320 the stock market that is wrong. I think we're going 0:02:26.360 --> 0:02:28.880 to see a replication of what happened last year. Yeah, 0:02:28.919 --> 0:02:32.520 you mentioned that call from the the director of the 0:02:32.560 --> 0:02:34.200 i m F that will third of the world is 0:02:34.200 --> 0:02:37.240 going to be in a recession this year. Uh, do 0:02:37.280 --> 0:02:41.239 you include the US in that third of the world. Basically, 0:02:41.240 --> 0:02:43.280 I think the US is going to have a slowing economy. 0:02:43.280 --> 0:02:46.519 I'm not sure they will have an official recession two 0:02:46.520 --> 0:02:49.080 consecutive quarters of negative GDT growth such as what we 0:02:49.120 --> 0:02:51.320 had at the beginning of last year. But I think 0:02:51.360 --> 0:02:53.680 that the U s economy is going to be continuously 0:02:54.240 --> 0:02:56.919 slower than had been hoped for. And they said will 0:02:57.040 --> 0:03:00.280 will will probably tighten for far too long. It's the 0:03:00.320 --> 0:03:02.560 tennessee of the FED is to be too too late 0:03:02.560 --> 0:03:04.680 and in tightening too late, and early or too early 0:03:04.680 --> 0:03:07.240 in easying or too late and easing. And I think 0:03:07.240 --> 0:03:09.679 that that's going to be the same circumstances this year, 0:03:09.760 --> 0:03:12.280 So we'll have a I don't think we'll have a 0:03:13.000 --> 0:03:17.880 recession by normal textual uh definition, but I think we're 0:03:17.880 --> 0:03:21.040 gonna see a weekly economy. Housing prices clearly are are weakening. 0:03:21.040 --> 0:03:23.760 Housing the man is clearly weakening, and housing is a 0:03:24.320 --> 0:03:26.400 dominant force in the US economy. And I think that 0:03:26.400 --> 0:03:28.520 that's going to be the major thing, the major problem 0:03:28.520 --> 0:03:29.760 that will have to deal with over the course the 0:03:29.840 --> 0:03:32.679 next several months. If I remember rightly the last time 0:03:32.680 --> 0:03:35.920 we spoke, I think you've said that, along with consensus 0:03:35.960 --> 0:03:39.120 that the FED is probably going to peak at five 0:03:39.160 --> 0:03:41.800 to five and a quarter per cent. Is that still 0:03:41.840 --> 0:03:45.680 your call? And do you think that the FED? I 0:03:45.680 --> 0:03:47.480 mean you already said that you think the FED should 0:03:47.480 --> 0:03:51.360 probably be pivoting sooner than expected. When do you think 0:03:51.440 --> 0:03:58.960 the FED should start thinking about reducing the the terminal rate? Actually, 0:03:59.000 --> 0:04:00.600 I think what I said is the said will be 0:04:00.600 --> 0:04:03.480 slow to to to go to a pivot. If I've 0:04:03.520 --> 0:04:05.480 learned anything in forty five years of being in the market, 0:04:05.480 --> 0:04:07.880 is so when the sad begins to tighten monetary policy 0:04:07.920 --> 0:04:11.720 after easing, or easing policy after tightening, it takes rates 0:04:11.760 --> 0:04:14.600 far farther, far higher or far lower, and for a 0:04:14.640 --> 0:04:16.720 longer period of time than even the most radical among 0:04:16.760 --> 0:04:18.839 us want to believe. So I think the fact that 0:04:18.880 --> 0:04:23.039 the said will pivot eventually will be in three and 0:04:23.040 --> 0:04:25.320 if it's four, it will probably late in the year 0:04:25.360 --> 0:04:28.360 the FED will be The FED is slowed to change policy, 0:04:28.480 --> 0:04:30.760 and once it changes, it keeps that new policy in 0:04:30.800 --> 0:04:32.760 the in effect for a much longer period of time 0:04:33.120 --> 0:04:35.719 and takes rates much farther than anybody wants to anticipate. 0:04:35.760 --> 0:04:37.640 So it will be along a long period of time 0:04:37.640 --> 0:04:41.480 before the TED pivots. About thirty seconds left in this segment, Dennis, 0:04:41.480 --> 0:04:43.839 But you said that the that you don't expect that 0:04:43.880 --> 0:04:47.599 there's going to be a technical recession for the US. 0:04:47.680 --> 0:04:50.479 How do you square that with the possibility that the 0:04:50.520 --> 0:04:55.640 FED could keep rates higher for longer? That that is 0:04:55.680 --> 0:04:59.320 the the prime question, isn't it. Time shall tell what happens, 0:04:59.320 --> 0:05:01.880 how that how plays out. But again, I think it'll 0:05:01.880 --> 0:05:03.599 be a long period of time before the FED begins 0:05:03.640 --> 0:05:07.760 to pivot to to lower rates at little it'll manufacture 0:05:07.800 --> 0:05:09.800 higher overnight and said funds rate to five five and 0:05:09.839 --> 0:05:11.720 a quarter or five and a half percent, and then 0:05:11.760 --> 0:05:14.039 they'll stay stay at that level for a long period 0:05:14.080 --> 0:05:16.520 of time, just as they did when they ease and 0:05:16.600 --> 0:05:18.400 capt rates at the low level for a long period 0:05:18.440 --> 0:05:20.480 of time. They'll do the same with high rates. They'll 0:05:20.520 --> 0:05:23.359 want to make sure that they see real definitive action, 0:05:23.640 --> 0:05:28.440 real definitive recessionary circumstances before they begin to begin to pivot. 0:05:28.440 --> 0:05:31.279 It will be a long period of time, so be patient, Dennis. 0:05:31.320 --> 0:05:34.080 If stocks are wrong, how much further do they have 0:05:34.360 --> 0:05:37.320 downward to go? I think they make a new low 0:05:37.440 --> 0:05:40.200 for the year, taking out less taking out the load 0:05:40.240 --> 0:05:42.400 that was made to the one in late September early October. 0:05:42.839 --> 0:05:44.680 I don't think they'll go much below. They're ten to 0:05:44.760 --> 0:05:46.720 fifteen percent from down from where we are right now, 0:05:46.760 --> 0:05:49.640 would probably be sufficient to turn me from being barish 0:05:49.680 --> 0:05:52.919 of equities to being at least neutral, perhaps even bullish. 0:05:52.920 --> 0:05:55.200 So let's call attend to fifteen percent from where we 0:05:55.200 --> 0:05:57.800 are right now. It's a it's interesting, as we talked earlier, 0:05:58.240 --> 0:06:01.240 it's an unusual circumstances to see on stocks and gold 0:06:01.600 --> 0:06:03.719 all rallying on the same time the same day. At 0:06:03.760 --> 0:06:06.159 the same time, they're doing it in almost exactly the 0:06:06.200 --> 0:06:09.279 same amount, about eight eight tenths of one percent across 0:06:09.279 --> 0:06:12.159 the board. So it's unusual and strange, and one of 0:06:12.200 --> 0:06:15.400 them has to be wrong. What's the catalyst that turns 0:06:15.640 --> 0:06:17.960 stocks from a bear market to a ball market for you? 0:06:18.839 --> 0:06:21.000 The FED changing monetary policy, and that's gonna be a 0:06:21.080 --> 0:06:23.240 long period of time before that happens again. As I 0:06:23.240 --> 0:06:25.400 said earlier, in the forty five years I've been in 0:06:25.440 --> 0:06:28.400 the markets and and since graduate school, the one thing 0:06:28.400 --> 0:06:30.680 I've learned is that when the FED changes monetary policy, 0:06:30.760 --> 0:06:33.200 moves from easing to tightening or tightening to easing, it 0:06:33.279 --> 0:06:35.400 takes rates much farther and for a longer period of 0:06:35.400 --> 0:06:37.360 time than the most radical among us want to believe. 0:06:37.839 --> 0:06:40.560 The FED changed policy last year, It's going to take 0:06:40.760 --> 0:06:45.080 at least until late probably early before the FED begins 0:06:45.120 --> 0:06:48.120 to pivot, and pivot means that they change from from 0:06:48.160 --> 0:06:50.480 tightening to easing and actually let rates go lower. That's 0:06:50.520 --> 0:06:52.080 gonna be a long period of time into the future. 0:06:52.160 --> 0:06:56.480 So I'm gonna be barished on stocks were probably quite 0:06:56.480 --> 0:06:58.400 some more protected period of time. I've been barised since 0:06:58.440 --> 0:07:02.320 January last year, had the university move a good ten 0:07:02.400 --> 0:07:05.000 to fift of its portfolio out of out of stocks 0:07:05.000 --> 0:07:07.960 into two year notes. And that's we we got. Let's 0:07:07.960 --> 0:07:10.880 call it, let's say we got very lucky. Are you 0:07:10.920 --> 0:07:13.480 looking for further inversion in the yield curve? Then? With 0:07:13.560 --> 0:07:16.480 that view, why what's your outlook for treasuries? I think 0:07:16.520 --> 0:07:18.800 two s tens goes back to eight basis points again, 0:07:19.040 --> 0:07:21.960 it'll test that level. It seemed that there was, for 0:07:22.040 --> 0:07:24.559 lack of a better term, resistance at about two basis 0:07:24.640 --> 0:07:26.560 points in the in the inversion of twos to tens, 0:07:26.560 --> 0:07:27.840 and I think we try to go back to that 0:07:27.920 --> 0:07:30.440 level before it's before we're done, before the Fed has 0:07:30.440 --> 0:07:33.920 done tightening monetary policy. In our last minute here, Dennis, 0:07:33.960 --> 0:07:37.400 gold hasn't really been the inflation hedge that it's been historically. 0:07:37.800 --> 0:07:40.800 Uh do you see that changing in twenty three? Well, 0:07:40.960 --> 0:07:42.840 first of all, gold has been moving from the lower 0:07:42.880 --> 0:07:44.680 left of the upper right. It's broken out. It's done 0:07:44.720 --> 0:07:48.360 something unusual. In November, it had an outside reversal month, 0:07:48.600 --> 0:07:51.160 a new low and taking out the previous lows for 0:07:51.200 --> 0:07:53.840 the year, and then closing higher for the month, taking 0:07:53.840 --> 0:07:56.480 out the previous months high at the same time. Outside 0:07:56.480 --> 0:07:59.960 reversal days are important. Outside reversal weeks are more important 0:08:00.040 --> 0:08:02.480 side of reversal months for technicians. And I'm not always 0:08:02.520 --> 0:08:05.560 a technician, but I watched the technical circumstances are amongst 0:08:05.600 --> 0:08:08.800 the most important technical circumstances that you see. So I 0:08:08.840 --> 0:08:11.840 think gold has broken out to the upside, and I think, uh, 0:08:11.920 --> 0:08:13.760 in my own account, I'm long gold and short to 0:08:13.800 --> 0:08:17.280 stock market. Today I'm I'm breaking even. But over the 0:08:17.320 --> 0:08:18.600 course of the past month and a half, it's been 0:08:18.640 --> 0:08:21.040 the proper trade, and I'm gonna any any correction in that, 0:08:21.080 --> 0:08:22.880 I'm going to add to it buying more gold, selling 0:08:22.880 --> 0:08:26.000 more stocks. It's always good to get your thoughts. Dennis 0:08:26.240 --> 0:08:30.360 Happier Returns for three was Dennis Gartman, former publisher of 0:08:30.400 --> 0:08:33.240 the Gartment Letter, now chair of the University of Akron 0:08:33.360 --> 0:08:34.800 Endowment Investment Committee.