Dennis Gartman is the man behind The Gartman Letter, a daily newsletter discussing global capital markets. For almost 30 years, The Gartman Letter has tackled the political, economic and social trends shaping the world's markets. ETF.com recently spoke with Gartman to discuss the latest developments in the financial markets.
ETF.com: We've seen an incredible run in the stock market. Some are even calling it a “melt-up.” Do you think it will continue?
Dennis Gartman: Are stock prices overvalued? Yes. Are they high based on price-to-earnings multiples? Yes. Are stocks high in terms of stock prices versus book values? Yes. Are investor psychologies extended to the upside? Yes. Is it still a bull market? Yes.
The best one can say is that it’s been a bull market; it’s still a bull market; and it's likely to continue to be a bull market. It will be a bull market until it stops.
I thought it was overextended a year ago. I thought it was overextended even more six months ago. I thought it was ridiculously overextended two weeks ago. And it continues to get more and more overextended. It's amazing. Any time you say, "This is the top," it's been proven wrong.
ETF.com: Is it possible to put a price target on the S&P 500?
Gartman: It's impossible to put a price tag on the S&P 500. Any time you try, you look comical in retrospect. The best one can say is it's been a bull market and it will continue until it stops.
ETF.com: A lot of people are talking about the rise in bond yields. Do you think the 10-year Treasury yield is going to break 3% this year?
Gartman: I'm not sure it'll break 3%, but I do think we've ended the 35-year bull market, and people don't want to recognize the fact that the bear market began almost 16 or 17 months ago, in June 2016, when bond futures made their high and bond yields made their low.
Bond futures prices continue to make lower lows and lower highs since early summer 2016. We’ve entered into what's going to be a protracted decade- or multidecade-long bear market in bonds.
Even if you feel you've missed the first year and a half, it's still early. Bond yields are going to go higher for years into the future. But during these first years of rising rates, they’ll rise at a very slow pace.
ETF.com: Gold quietly rose last year despite a lot of head winds. What’s your take on the yellow metal?
Gartman: It’s important to understand that inflation is beginning to show up in the commodity markets in general. We’ve begun a multiyear rise in commodity prices.
That probably means we're going to see a multiyear rise in gold values. But just like I told you that bond yields are going to rise rather slowly during the next few years, so too will commodity prices rise rather slowly in these first years of a new bull market. It'll be a long time before we see things move parabolically higher.
ETF.com: Is that the same for oil, which has surprised many people with its rally to almost $65 for WTI and $70 for Brent?
Gartman: If you made me take a bearish position on any one commodity, it would be the crude oil market, for the simple reason that, at these prices, any fracker in almost any area—whether it's the Permian, the Bakken, the Eagle Ford, whether it's the SCOOP in Oklahoma—is making enormous sums of money.
Odds are it's going to be very difficult for crude to rally more than $2 or $3 from these levels. It’d be relatively easy for crude over the course of the next several years to fall $10 or $15.
I may be bullish of wheat. I may be bullish of cotton. I may be bullish of gold. I might be bullish of copper. I can be bullish of tin. I can be bullish of zinc. I can be bullish of livestock. I won't be bullish of the crude oil market.
ETF.com: It’s been interesting that even though we’ve had record-breaking cold across a lot of the U.S., natural gas hasn’t rallied much. Is that surprising to you?
Gartman: No, not really. There’s so much natural gas being drilled for. Think about the Marcellus shale. It's a huge shale formation that extends from West Virginia up into New York, all the way up to the St. Lawrence Seaway.
There was so much natural gas production there that, this past summer, for a protracted period of time, natural gas was selling at negative numbers.
It's going to be difficult given the amount of natural gas we're finding every day for prices to get much above $4 for a million British thermal units, and that’s only in panic situations. More than likely, it's going to find huge resistance anywhere between $2.80 and $3.25.
ETF.com: The big story of last year was the huge rise in cryptocurrencies. Are you a believer in the rally?
Gartman: It’s one of the great bubbles of all time. It rivals—and arguably has surpassed—the tulip mania of several hundred years ago. It's surpassed the South Sea island mania. It's surpassed that of the dot-com era. It’s comical. It makes no sense. And it’s a speculative bubble that will end, and it'll end badly.
Am I believer in the blockchain? Absolutely. There is such brilliance in the blockchain; it will change the manner in which we trade anything and everything. But is there any sense at all in the cryptocurrency craze? None.
I'll let other people trade it. I think the whole thing is just almost preposterous in its lunacy.
ETF.com: What's your favorite trade of 2018? And what trade would you avoid at all costs?
Gartman: If I could only buy one thing, the thing that looks cheapest out there is wheat. We’ve planted the smallest crop of hard red and soft red winter wheat in 100 years.
The crop is under duress due to the frigid cold temperatures and the lack of a snow blanket. So, you have a small crop and one that's probably been damaged at the margins, which makes me a buyer.
What would I avoid? Bitcoin.
Sumit Roy can be reached at [email protected]