Our favourite whale oil trader

2016-01-26 9am EDT  |  #Dennis Gartman #Crude Oil #Jeff Gundlach #Federal Reserve


Our favourite whale oil trader is at it again… Dennis Gartman, who loves to talk about his days in the whale oil trading pit (see this and this), has once again stepped onto the CNBC set and said something so extraordinarily stupid, I am baffled what is going through his mind.


Gartman claims crude oil will “not see $44 in his lifetime.” Holy shit, is Dennis dying? That is the only reason I can figure he made such a preposterous statement. This morning I took some time to estimate Dennis’ age, height and weight (he is looking a little pudgy lately, but so is the MacroTourist, so glass houses and all of that). After putting my estimates into the Longevity tool developed by Wharton Professor Dean Foster, I came out with a forecasted life expectancy for Dennis of 91 years.


I figure Dennis is around 60 year old, so that means he probably has another 31 years. At the very least, it looks like there is a 75% chance he makes it to 83, so let’s just say we are talking about at least another quarter century of Dennis blessing us with his wisdom.

So for the next 25 years, crude oil will never trade above $44?


Dennis’ comments illustrate the extreme negative sentiment towards crude oil. At this point investors can only imagine the selling continuing forever. When pundits feel confident enough to get on TV and claim oil will never again trade above a level where we have spent most of the last decade, then all I can say is, “bought from you Dennis…”

So far the Federal Reserve seems completely oblivious to the shit storm they have unleashed. Contrary to all the economic optimists who claimed everything would be “just fine” with a Fed Funds rate hike, the speed at which financial conditions have tightened has proved their theory to be hogwash.

Have a look at the Goldman Sachs’ financial condition index:


We are now well through the point where Bernanke was easing with his third QE program.

Same deal with inflation expectations:


The really shocking part of this recent period is how much the FOMC members have kept on message regarding future tightenings. They are completely convinced the market swoon will not affect the US economy. Not a single member of the Federal Reserve open market committee has wavered in regards to future policy. I can only surmise this backup in financial conditions caught them off guard, and they haven’t had a chance to adjust yet. Well, they better start adjusting quickly otherwise we will have a big accident.

I have been arguing this line of reasoning for a while, but yesterday Jeffrey Gundlach articulated it much better than me, so I will just leave you with his comments:

Back in September, the Fed was going to raise rates. If you had asked Janet three days before the September meeting, she would have said we are going to raise rates. And then inexplicably they didn’t do it. And then they came out and said, but we are still going to raise them in 2015. And so they felt compelled to do so in December for absolutely no good reason at all. I don’t think it is any surprise that markets around the world have been collapsing in the aftermath of the Fed’s raising interest rates. Particularly because they continue to idiotically say we are going to raise rates eight times by the end of 2017. The Fed has got to dial this rhetoric back or the markets are going to humiliate them by further declining.


Thanks for reading,
Kevin Muir
the MacroTourist