Yesterday, ahead of the furious market selloff, we noted that even Gartman was calling for a bounce in stocks, a development which we cautioned likely meant the selling was about to resume in earnest. It did.
So one day later, in his latest letter to clients, Gartman is out explaining that "we were rather clearly wrong in that short-term instance", but he clarifies "we trust we were clear when we said that that strength… if it were to evolve…was to be seen an opportunity to reduce long positions and/or to be short of equities. As we said further in high-lighted form."
Why? Because as he further explains "this is a bear market and that periods of strength can be and indeed must be used to sell into… to lighten up existing long positions if one is still reasonably long and to sell short if one is of that mind. We stand by that thesis."
Here is the key excerpt:
To show the seriousness of this bear market here in the States, once again we note that the “internals” are horrifically skewed bearishly as 4,969 different companies’ shares traded in aggregate on the NYSE and the NASDAQ fell yesterday while a scant 1,168 companies’ shares advanced. Further, there were 6.663 billion shares in volume trading to the downside on the two exchanges while 0.995 billon shares traded higher. Finally, 1,048 different companies’ shares traded to new 52-week lows while a mere handful… well, actually 46… traded to new 52-week highs. Let’s not mince words here: this is in every deed and fact a fully-fledged, serious, in-your-face, died-in-thewool, take-no-prisoners, we’re all-going-to-lose-money bear market of very real consequence. We had hoped that we might see a bounce of some sort from the lows made earlier this week and indeed we said the following yesterday:
we do see this as a very short-term buying opportunity and shall not be surprised to see the S&P and the other broad indices bounce… and bounce perhaps rather steeply… from [Tuesday’s] lows. [However,] in the case of the US market, it has already completed a good deal of that bounce given that the Dow Industrials rallied a very significant 500 points from their low.
We were rather clearly wrong in that short-term instance… but we trust we were clear when we said that that strength… if it were to evolve…was to be seen an opportunity to reduce long positions and/or to be short of equities. As we said further in high-lighted form.
And then, just a few weeks after Gartman once again said we are in a bull market he has again reversed:
We have maintained…and still maintain… the same philosophy that we’d adopted for these past several weeks and months: that this is a bear market and that periods of strength can be and indeed must be used to sell into… to lighten up existing long positions if one is still reasonably long and to sell short if one is of that mind. We stand by that thesis.
This is a bear market and as we had said for years while the bull roared, in a bull market an investor can have only one of three positions: aggressively long of; modestly long of or neutral of shares. In a bear market, one can have but one of three positions in the obvious opposite direction: aggressively short of; modestly short of or neutral of shares. Finally, again we shall reiterate something that shall ring louder and louder over the coming days, weeks and months: In a real bear market everyone will lose money… everyone!... and the winners shall be those who lose the least.
To prove the merits of our comment that in a bear market it shall be he or she who loses the least amount of money that shall be the winner, in our retirement account we are and we have been long of bonds and/or bond-like funds and long too of gold, with a small position in wheat; however, even the non-government bond market has fallen sharply.
In bear markets there is no place to hide as the margin clerks liquidate what they can, where they can and as quickly as they can to protect their own businesses. We have lived through such panic situations before, remembering as we do the “Crash” of ’87; the Russian Panic a few years later and the depths of the “Great Recession” of ’07-’09 and we remember how seeming illogic can prevail for days… even weeks… at various times. Gold and bonds… the very definitions of safe harbor investments… suffer as margin clerks sell. But at least the losses are smaller… at least that.
Mark our words here there: there shall be praise for those who out-perform their benchmarks in the days, weeks and months ahead, for many money managers will do exactly that; they will indeed “outperform,” but they will do so by losing less than their benchmarks lose. It shall be the faintest of praise.
And now stocks can rebound in earnest.