Curious who else got slammed in Friday's junk bond debacle? The answer - everyone's favorite CNBC commentator, "world renowned commodity trader" Dennis Gartman. From his latest letter:
Our bond fund took a sizeable “hit” on Friday following the news of the refusal on the part of the Third Avenue fund to allow for immediate redemptions where those unable to sell their positions in Third Avenue sold what they could and where they could to gain access to liquidity. There are times, amidst panic, when such illogical-in-the-long-run selling takes place and this one such time. As Lord Keynes reminded us, “The market can remain illogical far longer than we can remain solvent:”
That said, with US futures snapping what appeared to be the now conventional overnight low volume levitation and sliding to fresh lows as both crude and natgas plunged to fresh multi-year lows, bulls may have one final trump card up their sleeve: Gartman is now actively adding to shorts.
SHARE PRICES HAVE FALLEN VERY, VERY SHARPLY since we marked them here on Friday and as our old friend Doug Kass likes to say, “Risk happens fast.” Risk has indeed happened very fast as one major trend line after another in one market after another has been broken through materially and importantly. Nine of the ten markets comprising our International Index have fallen and only the market on the mainland in China has risen, with eight of those nine having fallen by more than 1% and with two of those nine having fallen by more than 1%. Our Index has lost 153 “points” since Friday or 1.6% and for the year-to-date, stocks in global terms are now down 481 “points or 4.9%, while the S&P is 48 “points” or 2.3%.
On Friday we said that we were considering adding short hedges to our retirement funds in order to protect against the downside, but we failed to act; that is we did not make that an “official” recommendation and indeed we did not take any such action on our own. Clearly we should have. Clearly things were coming apart at the edges of the markets and clearly, in retrospect, we should have taken action. We’ll do so today on any minor intra-day strength that might evolve and as we write stock index futures are trading 12-13 “Big Figures” higher and that might serve as enough intra-day strength into which to sell.
It not quite clear just how this works considering one of Gartman's recommended trades remains to be "Long of One Unit of the S&P/short of One Unit of the EUR Stoxx 50", but we'll let that slide.
As we have said before, perhaps instead of hiking, the Fed should just urge Gartman to remain bearish in order for Yellen to comfortably achieve her "rising equity market prices" mandate.
