Investors are ever seeking to discover what the smart money thinks, but typically obtain the information from legally mandated portfolio holding disclosures that are out of date.
Financial advisors at ETF.com’s Inside ETFs conference got some of that info in real time Wednesday morning in a well-attended morning session mistakenly titled “The Great Fed Debate.”
The two panelists, Dennis Gartman and Mark Yusko, could not have been more cordial, and disagreement was nary to be heard.
But because the dynamic duo were brimming with investment insights, the session did have the feel of listening in on the thoughts of particularly astute investors.
Readers can form their own judgments as to whether their ideas are of value. Even smart people make poor portfolio decisions. But few would question the two men’s intellect. Subscribers pay handsomely for Dennis Gartman’s Gartman Letter, whose alpha-seeking author runs his own money and manages some AdvisorShares currency funds. And followers of Mark Yusko’s tactical strategy are apt to pay up for his AdvisorShares Morgan Creek Global Tactical ETF (GTAA).
Herewith, some of the issues the two men discussed, and generally agreed on:
Yusko called the greenback “the most important decision that anyone has to make.”
The key data point, as Gartman put it, is that “we’re just in the third inning of a nine-inning game on the strength of the dollar.”
While the stock market took a huge beating Tuesday as corporate profits fell, largely on the greenback’s strength, the two investors were unbowed by the might of the dollar.
“Strong currencies make manufacturers more efficient,” Gartman said, pointing to the experience of Japan in the 1980s.
What’s more, he added, corporate treasurers from around the world will be keeping the vast majority of their funds in dollars.
Yusko, for his part, said he is 100% sure the yen and euro are going down, concurring with Gartman that “we’re just the least bad of developed country markets, which are in a race to debase.”
In an environment of currency debasement, the investors like gold. But the smart money says there’s a smarter way to buy it: buy yen-denominated or euro-denominated gold rather than the typically dollar-denominated commodity.
“The yen will be lower the rest of your life,” Yusko said, predicting it wil be at 140 to the dollar by the end of the year.
“They have no way out other than to devalue,” he says.
The original prompt for “debate” ended up a unanimity fest.
On European Central Bank President Mario Draghi:
“He’s a great user of rhetoric, but he has done nothing,” Gartman says, adding “he had better do something; Europe needs QE in a massive fashion.”
(Draghi announced the beginning of a 1 trillion-euro bond buying program on Thursday.)
This contrasts with former Federal Reserve Chairman Ben Bernanke, of whom Yusko says, citing a friend who worked with him:
“Bernanke stood at the edge of the precipice and looked down at abyss and said, ‘I don’t want to go there.’ So he did something. But Draghi is a talker, not a doer.” Gartman noted that Europe’s mutually distrusting governments make Draghi’s job more difficult. If he were to buy German bonds, the Italians would quibble he’s not buying more of theirs, and so on among all the other countries.
As for the Fed, Yusko made a startling prediction about its current chairwoman, Janet Yellen, to which Gartman assented: that though the bond-buying has stopped, Yellen will eventually begin buying equities.
The problem is not the stocks, Yusko opined, but the currency. Believing that Russia will still be around 10 years from now, he sees the current difficulties of the ruble as a huge buying opportunity, citing Market Vectors’ RSX ETF as a convenient way to play Russia.
The two investors waxed enthusiastically about the long-term promise of India and fawned over its central bank governor, Raghuram Rajan, with Yusko calling him a “stud.”
While Gartman quipped that emerging markets are markets from which you can’t emerge in an emergency, he said that that dictum would apply to Croatia, not India, a market he regards as sufficiently liquid.
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