Tags: Fed | yen | Gartman | tech

Gartman Calls Again for Yen Short

By    |   Tuesday, 02 June 2015 10:49 AM

Dennis Gartman, editor of The Gartman Letter, reaffirmed that a breakout of the yen from 124 means it will move up to 175 during the next two years. Furthermore, he predicts that the yen will weaken against all of the currencies in the English-speaking world, and that this also implies weakening against gold and the Nikkei.

David Bloom, global head of foreign exchange strategy for HSBC, seems to have a different view from Gartman on the outlook for the dollar, although it must be noted that Gartman was talking specifically about the dollar-yen trade. Bloom is looking at dollar-euro and saying that 105 is just about as low as the euro will go. This writer would note that other commentators have predicted parity, but they also see the dollar as moving lower against the euro from that point. The premises for Bloom's view are a positive outlook for staving off the Grexit and the lack of a catalyst for any further strength in the dollar.

A more sober outlook comes from William White, chairman of the Economic Development and Review Committee at the OECD, who credits Europe's quantitative easing (QE) with only a "marginal" effect. The interviewer stressed the "experimental" nature of QE and asked what would be the "end game" and the cost at the end of the day. White responded that the hope is that QE will spur sustainable aggregate demand, but he warned that it may not have the desired effect on spending, "but it will lead to a cumulative increase in imbalances of various sorts, across the globe, that in the end could be very counterproductive." In sum, White is "more worried about the downside than are many others." White stated the issue as whether the Federal Reserve will raise rates in the context of economic performance that confirms the "high valuations" in equities, home prices and junk bonds. He is worried about the potential for disorderly markets once rates are increased, given that there are already signs of scarcity of collateral and liquidity. This writer has questioned all along whether the Fed will actually raise rates in the face of the approaching election and whether if it does, it can deliver a smooth adjustment. More likely is that the market will move on its own, one or more of the bubbles the Fed has fostered will burst and the Fed will respond with still more intervention to support markets through the election.

As noted yesterday, the tech bubble, if that's what it is, appears to remain intact. Therefore, it is helpful to have five trading ideas from the CNBC Fast Money panel. Tim Seymour suggests owning Apple (AAPL), noting that while it's not cheap it can be owned at this level. Guy Adami recommends Tesla (TSLA) as still having tailwinds, and Dan Nathan proposes Juniper Systems (JNPR), with an entry level below $27. Adami observes that GoPro (GPRO) "has got its mojo back," and Seymour recommends Pandora (P), which he calls "a very volatile stock," showing strength in the local advertising market. This writer would add that the Fed can be expected to continue to support the stock market heading into the 2016 elections.

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Dennis Gartman, editor of The Gartman Letter, reaffirmed that a breakout of the yen from 124 means it will move up to 175 during the next two years.
Fed, yen, Gartman, tech
Tuesday, 02 June 2015 10:49 AM
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