There may be some bumps ahead, but the worst of the world’s economic turmoil may be over.
“I think we have to pay attention to the fact that consumers and businesses are as liquid as we have seen them in the past 15 to 20 years,” trader Dennis Gartman, editor and publisher of The Gartman Letters, told GrainWorld. “That liquidity is eventually going to be put to work. The amount of liquidity that exists on corporate balance sheets in the United States is almost unprecedented.”
The problem, though, is a big chunk of it exists offshore, where it’ll remain “until there is some clarification as far as health care concerns and the employment situation are concerned,” Gartman said.
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“Nonetheless, the re-liquefaction of balance sheets in the United States, Canada and Europe is one of the major reasons why I look rather optimistically toward economic activity going forward.”
Gartman admitted to having been a Euro skeptic, but conceded he’s been proven wrong. But he is concerned about upcoming European Parliament elections.
“There is some possibility – slim – that the far-right parties, very Euro-skeptical parties, may actually win 35 to 40% of the votes cast. If that happens, then suddenly the Euro becomes non-viable … fractious … keep an eye on what’s going on into the run-up of those May elections.”
Perhaps a bigger concern of his is the fact the industrialized world is becoming underpopulated while the emerging world becomes overpopulated.
Japan’s demographic shift is particularly troubling, and so extraordinary that its own government predicts the country’s population will fall in half within 30 years.
“The only reason that the U.S., Canada, New Zealand and Australia’s populations are increasing is because of the movement of immigrants into our four countries. Japan does not allow immigration. And if it doesn’t begin to change its policies, the government’s own [population forecast] … is going to come sooner rather than later.”
Anyone predicating their business on expansion in Japan over the next 25 to 30 years is “making an egregiously bad decision,” Gartman said. With its aging and declining population, Japan also can’t perpetuate its production of machinery, automobiles and computers.
“There are now more Hondas being imported into Japan from the United States than are being exported from Japan to the United States.”
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On the flipside is China, which rescinded its one child principle, and is poised to continue growing economically over the next 15 years. The internet has brought the populace modernity, a view of what life looks like outside China, and the people there will refuse to go back to what life looked like years ago. Already bicycles have been replaced by Mercedes-Benz, and a massive financial sector has taken over miles of formerly rice paddies.
“The difference that has taken place in China is breathtaking in the last 20 years. I’m constantly amused by people who tell me China is about to collapse, that it’s overbuilt, that it’s done all of the wrong things,” said Gartman. The reality is the country is getting wealthier and coveting western tastes. “They’re going to want chicken, pork, cattle. … The only thing we know for certain in this world is when people’s per-capita incomes rise at a steadily advancing pace, their demand for food and better quality food rises.”
Gartman also scoffed at anyone claiming the world is in danger of running out of fossil fuels, and said the advances in discovery technology has provided more proven reserves of crude oil and natural gas than existed nearly 50 years ago.
“If I have learned anything in 40 years of being in capital markets, it’s that ‘peak oil’ was an absolute and complete lie,” he said. “I’m willing to make you the bet that in 2050, we will have more proven reserves than we do today. And I would bet that by 2075, we’ll have even more proven reserves of crude oil and natural gas in the ground than we shall have in 2050.”
He forecasted energy prices to run sideways at worst, or fall dramatically over the course of the next several years. Fertilizer prices in turn should decline as well. “If the availability of natural gas is so heavily incumbent to the supply and price of fertilizer, I think fertilizer values are going to decline enormously over the course of the next several years.”
Gartman’s worry is the impact the radical green movement might have.
“We have four times more energy in the ground now than we did in 1968. If I have a fear, it’s the eco-radicals. I fear they’re the ones who don’t understand economics. I don’t understand why they wish to turn the clock back to the seventeenth century, because that’s in essence what the greens are attempting to do.”
