The Investment U E-Letter: Issue # 350
Friday, July 02, 2004 Dennis Gartman and the Truth About the Money Supply
By Brian Hunt, Advisory Panelist, Investment U Is inflation set to take off… and destroy your life savings in the process? If you listen to many popular financial gurus these days, you might think so… - "The dollar is about to crash!"
- "The Fed is letting the printing presses run!"
- "It'll be like the 1970s all over again!"
- "Your dollar is going to be worthless!"
These gurus might be right. Quite frankly, I don't know… I don't fully understand these things. I don't see the evidence when I look at the numbers - but honestly I have a hard time making heads or tails of the numbers… So what am I supposed to be looking at? So today, we'll turn to a guy who knows… a guy we respect… a guy who actually teaches people at the Federal Reserve. If anyone understands this printing-of-money business, it's Dennis Gartman. Should we be scared about the government printing too much money right now? Let's find out… Dennis Gartman: The Man With The Answer I'm far from an expert on money supply…the subject bores me to tears. But I do know that an increase in the supply should translate into an increase of prices. How you measure that properly, I haven't a clue… Do you look at M2 or M3? M1 or MZM? I'm not even sure what these mean… Fortunately, Dennis Gartman knows this stuff… He has taught courses to the Federal Reserve on derivatives for a decade. His clients include Soros Asset Management, Tudor Asset Management, Moore Capital and a goodly number of the largest hedge funds and money managers around the world. Each morning Gartman gets up at around 2 a.m., reads a ton of newspapers and economic reports, and writes a four-page newsletter with his opinion of what's happening in the markets. In today's letter, Gartman essentially disagreed with the doom and gloomers about the speed of the printing of money. Gartman thinks monetary growth is just fine… In today's Gartman letter, Dennis points out that the only thing the Fed really has control over is the growth in the monetary base. Year on year growth in the monetary base is 4.6% now…pretty close to current GDP growth. According to Gartman, that's where growth in the monetary base belongs - in line with the economy. The supply of money in the U.S. is growing at the same clip the economy is…it's not exploding like some writers claim. Gartman concluded his letter today saying: "For now, the base is doing exactly what we'd like it to do, and for the moment we suggest that everyone out there takes a collective deep monetary breath and relaxes as it does so. We have. It feels good." In other words, the money supply isn't booming…it's just about right. No need to bury gold in your backyard yet… Thanks Dennis. And thanks for letting me know which indicator to track… the monetary base. Good investing, Brian Hunt P.S. When a business is growing - and institutions are heavily buying its stock - its executives aren't concerned with money supply. Good, profitable companies are more interested in introducing new products, cutting costs and boosting sales. Here's how to find businesses steadily increasing their earnings, regardless of broad-based economic trends. Full report. Today's Investment U Cribsheet - For more on Dennis Gartman's daily letter, you can reach him at Dennis@TheGartmanLetter.com (The letter is not cheap… but for institutions and large individual investors it is excellent. He'll often do a one-month free trial if you're interested.)
- To track the monetary base, you can go to www.StLouisFed.org and click on "Economic Research." Then search for "Monetary Base."
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