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Monday, February 4, 2013
Dennis Gartman issued a MAJOR prediction at the MoneyShow last week...
Gartman probably needs no introduction... You might have seen him on CNBC. The network relies on him as an expert in trading in both the currency and commodity markets.
But you might not know that Gartman has been at this for four decades... that he's taught classes to the Federal Reserve... and that his daily Gartman Letter has been required reading every morning on most major trading desks for a quarter-century.
In short, in the world of currency and commodity experts, Gartman ranks near the top. So I was a bit shocked at the bold prediction he made in Orlando...
Gartman told the MoneyShow audience, "The Japanese yen is going to ONE FIFTY."
"Wow," I thought. "Did he just say 115... or 150?"
Compared to stocks – big currencies typically move at a sloth-like pace. The Japanese yen is at 92 to the dollar now. A move to 115 is still big. A move to 150 – which would be a nearly 40% drop in value against the dollar – is enormous.
So was Gartman really predicting the yen would weaken from today's level of 92 all the way to 150? Actually, yes...
He said: "I remember when the yen was around 250 in the mid-1980s," implying that a move to 150 wasn't as big as you might think.
"Since [Japanese leader Shinzo] Abe took over, the yen has moved six points," Gartman explained. "All this bluster from Abe, and we've only gotten six points so far," he continued. "There's much more to come!"
Gartman explained how governments typically can't do most things well... but printing money is one thing they are usually pretty good at.
"Abe is ALL IN," he said. "The administration in Japan has made it very clear... It will force the Bank of Japan to print 'unlimited sums' of money."
He also explained how there's not much else that Japan can do to grow its economy, except to try to grow its exports. And the surest path to more exports is a dramatically weaker Japanese yen.
"You want to be short of yen," Gartman concluded. That's an understatement. If Gartman is right, you can make some serious gains betting against the yen.
The easiest way to follow Gartman's advice through the stock market and make some real money betting against the yen is to buy shares of the ProShares UltraShort Yen Fund (NYSE: YCS).
YCS attempts to return twice the inverse of the daily move in the Japanese yen. In plain English, that means if the yen weakens by 1% in a day, this fund should be up 2% that day.
Of course, the opposite is true. And there are no guarantees it will fulfill its mission. But over the past two years, it's done a pretty good job. The yen is down about 12%. YCS is up about 22%.
If Gartman is right – and he has been at this currency game a very long time – there could be much bigger gains to come.
NEW HIGHS OF NOTE LAST WEEK
American International Group (AIG)... insurance
Berkshire Hathaway (BRK-A)... insurance
Travelers (TRV)... insurance
Oracle (ORCL)... software
eBay (EBAY)... Internet auctions
Google (GOOG)... Internet search
Cisco (CSCO)... Internet "plumbing"
Ericsson (ERIC)... mobile Internet
Medtronic (MDT)... medical devices
Pfizer (PFE)... Big Pharma
Johnson & Johnson (JNJ)... Big Pharma
Bristol-Myers Squibb (BMY)... Big Pharma
Gilead Sciences (GILD)... Big Biotech
PepsiCo (PEP)... Big Soda
Hershey (HSY)... Big Chocolate
ConocoPhillips (COP)... Big Oil
Schlumberger (SLB)... oil services
Blackstone (BX)... a housing bet
Home Depot (HD)... home improvement
Colgate-Palmolive (CL)... household goods
Procter & Gamble (PG)... household goods
Simon Property Group (SPG)... shopping malls
Automatic Data Processing (ADP)... money shuffling
JPMorgan Chase (JPM)... money shuffling
Goldman Sachs (GS)... money shuffling
MasterCard (MA)... money shuffling
Honeywell (HON)... manufacturing
3M (MMM)... manufacturing
Calpine (CPN)... natural gas power plants
Cheniere Energy (LNG)... natural gas infrastructure
Enterprise Products Partners (EPD)... natural gas infrastructure
Chicago Bridge & Iron (CBI)... natural gas infrastructure
The Nikkei... Japanese stocks
NEW LOWS OF NOTE LAST WEEK
AngloGold Ashanti (AU)... gold miner
Barrick Gold (ABX)... gold miner
Iamgold (IAG)... gold miner
Newmont Mining (NEM)... gold miner
The Yen... Japanese currency
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