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Gartman Covers His Market Short, Goes Long

With the Dow Jones flirting around 20,000 for the better part of the past two weeks, one prominent commentator remained skeptical: Dennis Gartman was "marginally net short." Well, no more.

STOCK PRICES AROUND THE WORLD ARE STRONGER AGAIN as our international Index has risen another 58 “points” or a bit more than 0.5% and although we are suspicious of this continued strength and although we are certain that a correction of some consequence shall happen “of a sudden” and only when it is obviously very least expected, one cannot take an overtly bearish stance for that would be folly. Again we shall simply suggest that this remains a bull market and that in a bull market that one is suspicious of one shall do best by being neutral of equities on balance, and so we are.

 

In our retirement funds here at TGL we entered the day yesterday marginally net short of equities via derivatives positions, but having broken our own rules in so doing we quickly hoved to the sidelines; that is we moved back into steel once again, buying sufficiently to fully offset the sum of derivatives in beta terms that we had been short of. Having done that, we stopped, holding our positions in the Australian/New Zealand short term bond fund and of course holding our positions in gold predicated in EURs and Yen. We are acting as a good “hedged” fund would act, being long of the things we like while being hedged against broad market risk at the same time.

 

Appearing on CNBC’s “Fast Money” last evening we again said that we wish to own the “things that if dropped on your foot shall hurt.” That is, we wish to own the simple things incumbent in economic growth: steel; ball bearings manufacturers; railroads that move “stuff” and the like. This is an old story; but it is nonetheless a very good one. If auto sale are as strong as they are domestically…as noted above… and if they are stronger still in China and Asia, then steel demand shall remain strong. Further, if the Chinese government wishes to crack down upon manufacturers there because of air pollution concerns, steel manufacturing in China may slow, with global demand still remaining rather high and thus forcing steel buyers to the US or perhaps to India. Sometimes, simple makes sense and in this instance, fully hedged “simple” might make the most sense of all.

As for oil...

Short of One Unit each of March WTI and March Brent crude: We said here yesterday… Wednesday, January 4th… that if March WTI was able to reach $54.05 we’d sell both WTI and Brent at that time. That would suggest March Brent at or near to $56.25. Prices did rally to those levels and just beyond in early afternoon trading and we are not short from those prices. For the time being, the highs made Tuesday will serve as our stop.

Trade accordingly.