HardAssetsInvestor

Written by Drew Voros  |

May 24, 2012

Best Of 2012: Dennis Gartman Says Gold Puts In Short-Term Low, But Not A Safe Haven

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HAI: Let’s talk a little bit about emerging markets. Is there a country in there that you like in particular, or is China really going to dictate what happens in that regard?

Gartman: China tends to dictate what happens everywhere these days. And I’m OK with that. You know, it’s 3 billion people, or however many billions of people it is. As a friend of mine once said, “We must remember out of the last 30 centuries, China was the largest economy in the world for 27 of them.” It’s just a return to the mean. When you have that many people, you’re going to be the dominant economic force.

Do I know what Chinese GDP growth is? No. I think it’s somewhere between 5 and 15 percent. And anybody who thinks they can forecast anymore tightly than that is either a charlatan or naïve — one of the two, and I’m not certain which.

Do I think that China is going to have a recession where GDP growth goes negative in the next 10 years? No, I do not think so, given the fact that you have hundreds upon hundreds of millions of people on the move from the western provinces to the eastern provinces where they are certain that economic growth is going to be permanent. And it will be permanent in my lifetime, and probably permanent in my daughter’s lifetime.

But we have to understand that a slowdown in China means something closer to 7 percent GDP growth. Is that possible? Of course it is. But is China going to go negative? I doubt that. But I have been wrong in the past, and I can be wrong again in the future.

Brazil is probably the better of all of them because it’s probably got the best policies and the most reasonable respect for law. It probably has a population willingly coming into the 21^st century. It has plenty of raw materials that it can export and it has industry. And it also has a growing population, which is important. I don’t think you can underestimate the importance of rising population growth. It’s hard to have a growing economy if your population is declining.

HAI: What advice would you give investors who are looking for exposure in emerging markets? Is it an ETF broad basket?

Gartman: I think ETFs are far and away the better way to go. Very few of us have the capability of understanding corporate structure or corporations here in the United States, much less individual corporations abroad. Reasonably widely ranging specific country ETFs are probably the way to go.

HAI: What do you think the eurozone is going to look like by the end of the year?

Gartman: You are going to have to have pieces fall off. I think it’s only rational and reasonable to expect them to fall off. I think Greece has to go. The question is whether Greece goes on its own accord, which is difficult for Greece because then it will be forced to accept legal responses. It will be easier for Greece if the Germans say, “You’re out.” Because if the Germans say, “You’re out,” then the Germans will have said, “OK, we know that we’re pushing them out and we’re not going to get repaid on any of this debt.”

HAI: Sort of like a foreclosure?

Gartman: Yes. It would be rather like a foreclosure.