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Dennis Gartmen, editor of the Gartman Letter, has surprised many of his readers by turning bullish after many months of being a very grumpy and vocal bear.
Until recently the only thing he preferred to hold was gold and he was negative on US equities and especially pessimistic on the housing sector, believing that it is far from a recovery. But now he has turned generally positive on the stock market and specifically, one sector in particular:
We were fortunate earlier this week when we turned bullish of stocks for the first time in many months, officially recommending that our clients step up and buy “the things that if dropped on your foot shall hurt.” We have returned to an old thesis that serves us well in years past, wishing to own copper, steel, coal and railroads, for these are the things we understand; these are the building blocks of global economic strength.
To his credit, Gartman turned partially bullish on Wednesday, before this Thursday’s strong up move in stocks. One of his favorite themes is to invest in “stuff” as in basic materials and related companies. In his newsletter he specifically points to the Materials SPDR ETF (XLB) which has formed a reverse head and shoulders formation.
To answer his befuddled readers as to why he has suddenly sprouted horns after being so pessimistic for so long, he writes:
We have been asked then recently… usually by our younger and more “self-certain” clients… “How can one change one’s view on equities so quickly? How can one go from being overtly bearish one week to being a buyer the next?” The answer we have is that one has no choice in the world of trading/investing, for holding to a losing thesis and remaining steadfast in that losing thesis is the one certain route to ruin in this business. The “quick” do not become the “dead” and the very best traders… the very best investors… are those who can say that the trend has changed…
Here is a recent CNBC interview where he outlines his “stuff” thesis:
And by way of comparison, here is a short clip from a few weeks earlier where he explains why he is bearish:
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