Speaker 1: And it's now time to check in with Dennis Gartman,
Speaker 1: chairman of the University of Akron endowmentn Investment Committee, former
Speaker 1: publisher of the Gartment letter. As we get three started.
Speaker 1: Happy new year, Dennis, it seems like investors are happy
Speaker 1: to put two behind them. Is that kind of explains
Speaker 1: the gains we're seeing across the board this morning. Well,
Speaker 1: it's interesting, Nathan, this is one of those rare days
Speaker 1: when you have gold higher, bonds higher, in stocks higher.
Speaker 1: One of them has to be wrong. Normally they cannot
Speaker 1: move all and tandem one with the other. But perhaps
Speaker 1: it's just the fact that it's the start of the
Speaker 1: new year. We always see an influx of money coming
Speaker 1: in the first of the month of the first of
Speaker 1: the year. That happened exactly the same last year. The
Speaker 1: first day of the year was a was a rather
Speaker 1: substantive rally, and then it ended up being a bear
Speaker 1: market the day after. But it is rare to see
Speaker 1: both to see gold, stocks and bonds all all higher,
Speaker 1: and rather sharply higher. So, as I said earlier, one
Speaker 1: of them probably is wrong. I think that stocks are
Speaker 1: probably the one that is wrong. But we'll see. Time
Speaker 1: shall tell. Well what makes you say that, Dennis, I mean,
Speaker 1: you were one of the first to call this a
Speaker 1: bear market shortly after the SMP five hundred made its
Speaker 1: peak one year ago. Today was its last closing record.
Speaker 1: What makes you think things are going to be the
Speaker 1: same as they were last year? Is? Is that what
Speaker 1: you're saying? Yeah, that's basically what I'm saying. I think
Speaker 1: this is just the fact that we had. It's the
Speaker 1: start of the year, the start of the month, and
Speaker 1: there's always an influx of capital that comes in exactly
Speaker 1: a replication of what happened last year. The problem is
Speaker 1: that we have stock prices I think have had an
Speaker 1: inordinately high, large rally in the course of the past
Speaker 1: month and a half, predicated upon the Fed uh pivoting
Speaker 1: from its tightening monetary policies, and I think that that's
Speaker 1: ill advised to consider that fact. I think the Fed
Speaker 1: is going to continue to allow the overnight not allow,
Speaker 1: but but move the overnight said funds right to five
Speaker 1: to five and a quarter percent over the course of
Speaker 1: the next several months. We'll see when we get to
Speaker 1: the first f MC meeting in February, but time shall tell.
Speaker 1: The The I m F has said that we're going
Speaker 1: to have that one third of the world is going
Speaker 1: to be in recession over the course of the next
Speaker 1: year or two. I think that that will will weigh
Speaker 1: upon stock prices eventually. So again, it's unusual to see
Speaker 1: that we have stocks, bonds, and in gold rallying and
Speaker 1: on all on the same day. One of them has
Speaker 1: to be wrong. And as I said, I think it's
Speaker 1: the stock market that is wrong. I think we're going
Speaker 1: to see a replication of what happened last year. Yeah,
Speaker 1: you mentioned that call from the the director of the
Speaker 1: i m F that will third of the world is
Speaker 1: going to be in a recession this year. Uh, do
Speaker 1: you include the US in that third of the world. Basically,
Speaker 1: I think the US is going to have a slowing economy.
Speaker 1: I'm not sure they will have an official recession two
Speaker 1: consecutive quarters of negative GDT growth such as what we
Speaker 1: had at the beginning of last year. But I think
Speaker 1: that the U s economy is going to be continuously
Speaker 1: slower than had been hoped for. And they said will
Speaker 1: will will probably tighten for far too long. It's the
Speaker 1: tennessee of the FED is to be too too late
Speaker 1: and in tightening too late, and early or too early
Speaker 1: in easying or too late and easing. And I think
Speaker 1: that that's going to be the same circumstances this year,
Speaker 1: So we'll have a I don't think we'll have a
Speaker 1: recession by normal textual uh definition, but I think we're
Speaker 1: gonna see a weekly economy. Housing prices clearly are are weakening.
Speaker 1: Housing the man is clearly weakening, and housing is a
Speaker 1: dominant force in the US economy. And I think that
Speaker 1: that's going to be the major thing, the major problem
Speaker 1: that will have to deal with over the course the
Speaker 1: next several months. If I remember rightly the last time
Speaker 1: we spoke, I think you've said that, along with consensus
Speaker 1: that the FED is probably going to peak at five
Speaker 1: to five and a quarter per cent. Is that still
Speaker 1: your call? And do you think that the FED? I
Speaker 1: mean you already said that you think the FED should
Speaker 1: probably be pivoting sooner than expected. When do you think
Speaker 1: the FED should start thinking about reducing the the terminal rate? Actually,
Speaker 1: I think what I said is the said will be
Speaker 1: slow to to to go to a pivot. If I've
Speaker 1: learned anything in forty five years of being in the market,
Speaker 1: is so when the sad begins to tighten monetary policy
Speaker 1: after easing, or easing policy after tightening, it takes rates
Speaker 1: far farther, far higher or far lower, and for a
Speaker 1: longer period of time than even the most radical among
Speaker 1: us want to believe. So I think the fact that
Speaker 1: the said will pivot eventually will be in three and
Speaker 1: if it's four, it will probably late in the year
Speaker 1: the FED will be The FED is slowed to change policy,
Speaker 1: and once it changes, it keeps that new policy in
Speaker 1: the in effect for a much longer period of time
Speaker 1: and takes rates much farther than anybody wants to anticipate.
Speaker 1: So it will be along a long period of time
Speaker 1: before the TED pivots. About thirty seconds left in this segment, Dennis,
Speaker 1: But you said that the that you don't expect that
Speaker 1: there's going to be a technical recession for the US.
Speaker 1: How do you square that with the possibility that the
Speaker 1: FED could keep rates higher for longer? That that is
Speaker 1: the the prime question, isn't it. Time shall tell what happens,
Speaker 1: how that how plays out. But again, I think it'll
Speaker 1: be a long period of time before the FED begins
Speaker 1: to pivot to to lower rates at little it'll manufacture
Speaker 1: higher overnight and said funds rate to five five and
Speaker 1: a quarter or five and a half percent, and then
Speaker 1: they'll stay stay at that level for a long period
Speaker 1: of time, just as they did when they ease and
Speaker 1: capt rates at the low level for a long period
Speaker 1: of time. They'll do the same with high rates. They'll
Speaker 1: want to make sure that they see real definitive action,
Speaker 1: real definitive recessionary circumstances before they begin to begin to pivot.
Speaker 1: It will be a long period of time, so be patient, Dennis.
Speaker 1: If stocks are wrong, how much further do they have
Speaker 1: downward to go? I think they make a new low
Speaker 1: for the year, taking out less taking out the load
Speaker 1: that was made to the one in late September early October.
Speaker 1: I don't think they'll go much below. They're ten to
Speaker 1: fifteen percent from down from where we are right now,
Speaker 1: would probably be sufficient to turn me from being barish
Speaker 1: of equities to being at least neutral, perhaps even bullish.
Speaker 1: So let's call attend to fifteen percent from where we
Speaker 1: are right now. It's a it's interesting, as we talked earlier,
Speaker 1: it's an unusual circumstances to see on stocks and gold
Speaker 1: all rallying on the same time the same day. At
Speaker 1: the same time, they're doing it in almost exactly the
Speaker 1: same amount, about eight eight tenths of one percent across
Speaker 1: the board. So it's unusual and strange, and one of
Speaker 1: them has to be wrong. What's the catalyst that turns
Speaker 1: stocks from a bear market to a ball market for you?
Speaker 1: The FED changing monetary policy, and that's gonna be a
Speaker 1: long period of time before that happens again. As I
Speaker 1: said earlier, in the forty five years I've been in
Speaker 1: the markets and and since graduate school, the one thing
Speaker 1: I've learned is that when the FED changes monetary policy,
Speaker 1: moves from easing to tightening or tightening to easing, it
Speaker 1: takes rates much farther and for a longer period of
Speaker 1: time than the most radical among us want to believe.
Speaker 1: The FED changed policy last year, It's going to take
Speaker 1: at least until late probably early before the FED begins
Speaker 1: to pivot, and pivot means that they change from from
Speaker 1: tightening to easing and actually let rates go lower. That's
Speaker 1: gonna be a long period of time into the future.
Speaker 1: So I'm gonna be barished on stocks were probably quite
Speaker 1: some more protected period of time. I've been barised since
Speaker 1: January last year, had the university move a good ten
Speaker 1: to fift of its portfolio out of out of stocks
Speaker 1: into two year notes. And that's we we got. Let's
Speaker 1: call it, let's say we got very lucky. Are you
Speaker 1: looking for further inversion in the yield curve? Then? With
Speaker 1: that view, why what's your outlook for treasuries? I think
Speaker 1: two s tens goes back to eight basis points again,
Speaker 1: it'll test that level. It seemed that there was, for
Speaker 1: lack of a better term, resistance at about two basis
Speaker 1: points in the in the inversion of twos to tens,
Speaker 1: and I think we try to go back to that
Speaker 1: level before it's before we're done, before the Fed has
Speaker 1: done tightening monetary policy. In our last minute here, Dennis,
Speaker 1: gold hasn't really been the inflation hedge that it's been historically.
Speaker 1: Uh do you see that changing in twenty three? Well,
Speaker 1: first of all, gold has been moving from the lower
Speaker 1: left of the upper right. It's broken out. It's done
Speaker 1: something unusual. In November, it had an outside reversal month,
Speaker 1: a new low and taking out the previous lows for
Speaker 1: the year, and then closing higher for the month, taking
Speaker 1: out the previous months high at the same time. Outside
Speaker 1: reversal days are important. Outside reversal weeks are more important
Speaker 1: side of reversal months for technicians. And I'm not always
Speaker 1: a technician, but I watched the technical circumstances are amongst
Speaker 1: the most important technical circumstances that you see. So I
Speaker 1: think gold has broken out to the upside, and I think, uh,
Speaker 1: in my own account, I'm long gold and short to
Speaker 1: stock market. Today I'm I'm breaking even. But over the
Speaker 1: course of the past month and a half, it's been
Speaker 1: the proper trade, and I'm gonna any any correction in that,
Speaker 1: I'm going to add to it buying more gold, selling
Speaker 1: more stocks. It's always good to get your thoughts. Dennis
Speaker 1: Happier Returns for three was Dennis Gartman, former publisher of
Speaker 1: the Gartment Letter, now chair of the University of Akron
Speaker 1: Endowment Investment Committee.