Investment legend Dennis Gartman weighed in on the recent market weakness, the Fed actions, the prospects for stocks and the reason why he loves gold. Here are some excerpts from the interview:
They've signaled now that when they meet in September they will vote to move the Fed fund rate down for the first time in a very, very long time and it's long overdue. What I've learned in a mere 35 years of watching the Fed is that when the Fed changes direction it moves in that new direction for a long period of time and takes rates much farther than anyone wants to anticipate.
Will they move in December? That's not the important question.
The important question is that their next move, after they ease rates in September, will be to ease again. The move after that will be to ease again and the move after that will be to ease again. You can rest reasonably assured that the Fed funds rate will be markedly lower a year from now than it is now.
Right now I am short of stocks, and got that way yesterday, and I am long of gold, and I intend to stay that way. I think the Fed has responded to disconcerting economic news by easing monetary policy and that disconcerting news in the mortgage market is not going to go away anytime soon.
A 25, 50, 75, or 100 basis point decline in Fed funds is going to be a very immaterial consequence to the reset home mortgage owner who's watching his teaser rate go from say, three percent to eight percent. Maybe it goes from three percent to seven percent, but that's not going to stem a large sum of foreclosures in the mortgage market next year.
The Fed has a big job ahead of it to take care of that problem.
I've been bullish on gold for some period of time simply because of reserve adjustments by the Central Bank of China and the Central Bank of India, Thailand, and Malaysia, all of whom are running large trade surpluses. They find themselves with rather more reserves of euros and dollars than they would like and rather fewer reserves of gold than those held by the central banks of the industrialized world, so they're going to be moving in that direction.
