Dennis Gartman Is Long on Cheap Retail, Short on Malls

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Includes: FDO, MCD, RY, SPG, WMT
by: Market Folly

Dennis Gartman says he has survived this mess because he is a hedger. He is long something, and short something against it; or vice versa. And we track him on the blog for this exact reason. We run our portfolio in a similar manner and believe that if you're going to try to run a hedge fund-esque portfolio, you truly need to be hedged. So many funds these days have employed leverage and have ran such concentrated portfolios with 'all-in' bets that they have deviated from the original defintion of a hedge fund. We hope to highlight what a hedge fund should be in the true sense of the world. We like to keep it old school.

Noted trader and author of the Gartman Letter, Dennis Gartman, recently sat down and basically said that he likes being long Canada and short the US. Gartman likes Canada's commodity exposure and so he is bullish on Canadian equities, relative to the US, as well as the Canadian dollar compared to the US dollar. If you're unfamiliar with Gartman, check out his Rules of Trading to get a better idea of how he thinks and positions himself.

In terms of specific equities, Gartman likes Family Dollar Stores (NYSE:FDO) in that they are the cheapest of the cheap. From the beginning of this recession, we here at Market Folly have preached that you want to be long the cheap goods and short the expensive. We've been long Walmart (NYSE:WMT) and McDonald's (NYSE:MCD) and short the retail indexes, some discretionary retailers, and commercial real estate plays that focus on malls and retail such as Simon Property Group (NYSE:SPG). Gartman harps on this point and claims that FDO is the lowest of the low in terms of cheap retail and says he likes to be long the cheap plays. Additionally, he has joined us on our 'short the malls' play and is short SPG as well, as mall traffic and consumer spending continue to decline.

He also mentioned to keep an eye on the Yen/Euro Cross in forex markets. This pairing began to rollover as the crisis began and he has postulated that the recent turning in this cross could possibly be bullish for markets. He cautioned to monitor it carefully, as it could just as well rollover yet again and signal another leg down.

In terms of Canadian equities, Gartman specifically likes Canadian banks. He is long the Royal Bank of Canada (NYSE:RY) because of the technicals. He stated that there is no way he can go in there and examine every little detail of their balance sheets. That's the big mystery of financials; their balance sheets are like an abyss. He's simply gauging the price action and has noted that the chart has shown some signs of improvement. He also mentioned that he was looking at CIBC and Bank of Montreal (NYSE:BMO). Plus, he's bearish on US banks, so that sets up nicely.

He has liked being long infrastructure and short the general markets. But that position started to move against him and he has now shifted into a long Copper position. He sees this as an alternative infrastructure play for the meantime and would like to move back into his infrastructure play.

We've covered Gartman numerous times on the blog before, as he recently said he saw Gold becoming the world's second reserve currency. He has also mentioned to keep an eye on the Baltic Dry Index and Transports, as they are leading indicators of global economic activity.