It's all about risk on vs. risk off. Forget buy and hold or even conventional trading; the only way to make money in 2011 has been putting risk on when others are fearful and taking it off when others are greedy. Traditionally the easiest way for individual investors to adjust their portfolio's level of risk accordingly has been flipping their entire holdings or using the blunt instruments that are index or sector ETFs.
At least that's been the easiest way to flip your book until this morning when Mark Fisher, Dennis Gartman, and UBS launched two ETNs allowing investors and traders one-stop shopping to hedge or make directional bets. With the S&P 500 having reversed the worst Thanksgiving week on record in all of three days, now seemed as great a time as ever to welcome Mr. Gartman to discuss his ETN's and current take on the market.
Gartman says the ETN's, appropriately named Risk On (ONN) and Risk Off (OFF) "take a look at all of the risk that one would get around the world," including bonds, currencies, stocks and energy. In effect the ETNs are designed to let traders capture moves in the globalized economy in one fell swoop.
"It's something the market needs," says Gartman of the ETNs, calling them "simple elegant and useful."
All of which sounds great but there's no way I was letting him out of the interview without asking what on earth is driving this week's sharp reversal. Europe may be getting a decent amount of the headlines, but Gartman begs to differ.
"Let's not blame the Europeans for doing something right this time," he says. "Let's give credit to the Chinese for doing something materially right by cutting the reserve requirement over night; that's really what triggered the all movement so far."
Gartman largely dismisses moves from across the pond. "The Europeans are doing a few things better than they have in the past, hoping to either con the IMF into doing something or increasing the leverage on the EFSF. One of the two." But it was the Chinese who flipped the switch.
As for the here and now, his positions haven't changed at all. Gartman notes that the news from China has resulted in a change in the psychology of the tape, from one of overt bearishness to acute fear of not being bullish enough. Even those who disregard the increasingly positive economic data should know that longtime traders realize "psychology at many times trumps economic reality," as Gartman puts it.
The bearish mood of stocks ahead of today sets the stage for a great December at the very least. We "could start to see some real panic on the side of those who are under-invested," says Gartman, adding that the smart move may very well be staying long and trying to ride this rally into New Year's.
"It's now risk on," he states, pointing to an article about the risk on/risk off universe in today's Financial Times. "People are going to have to buy risk through the end of the year."
Gartman is a gentleman, a pro and has insight on most everything that trades, be it stocks, bonds, commodities or currencies. Agree with him or not my suggestion is not to ignore him.