Dennis Gartman is ‘wild-eyed bullish’ on stocks

The Dow Jones Industrial Average has added more than 2,000 points since its October 2011 lows, a 21% gain. The Standard & Poor’s 500 index is up nearly 250 points from its lows at the same time, a 22.5% advance. The Nasdaq Composite index has hit 11-year highs. And Dennis Gartman is still “wild-eyed bullish” on stocks.

Dennis Gartman at a 2007 investing summit in New York.

Those are his words, folks. I’m not clever enough to make stuff like that up.

The noted trader, editor and publisher of “The Gartman Letter,” and contributor to the business-news channel CNBC was wary about the market until recently. Hulbert Interactive: Tools for tracking and comparing the perfomance of hundreds of investment newsletters .

Now he’s thrown caution to the wind, declaring that stocks can go much, much higher in what he described as a “multiyear secular bull market.”

He’s also bullish on gold again after selling last year and likes “non-U.S.-dollar English-speaking currencies” and markets, particularly Australia and Canada.

His wild-eyed optimism puts him in the company of other raging bulls this column has profiled, like James Paulsen of Wells Capital Management and Laszlo Birinyi. Read Howard Gold column on why Laszlo Birinyi saw a big run for stocks ahead at MoneyShow.com .

Was autumn nadir a once-in-a-blue-moon buying opportunity?

If Gartman’s right, then the big selloff last spring and summer that drove the S&P down to just below 1,100 on Oct. 3 will have been a great buying opportunity that just about everybody missed — and which many investors even fled.

U.S. investors pulled an astonishing $134.5 billion out of U.S.-equity-oriented mutual funds in 2011, and since 2007 they’ve taken a net $469 billion out of U.S. stock funds while pouring nearly $800 billion into taxable bond funds, according to the Investment Company Institute.

Clearly, something is out of whack.

“Investors are terrified of stocks,” Gartman told me. “You can’t get people to buy Procter & Gamble (NYSE:PG) with a dividend of 3.3%.”

Besides bond funds, people have been sticking their cash into the proverbial mattress. “Baby boomers are laden with cash,” Gartman said. “Checking-account balances are outrageously high. They’re paying out nothing at all.”

What’s going to get these terrified people with bulging checkbooks back into stocks? “Greed,” Gartman replied simply. “Greed and the need for yield will bring them in. That’s what the Fed wants them to do.”

Take note, conspiracy theorists and Ron Paul supporters (not necessarily the same people): Gartman largely agrees with you — the Fed is behind the whole thing.

By promising that short-term interest rates will stay near zero until 2014, Federal Reserve Chairman Ben Bernanke is offering savers what is in effect a Hobson’s choice: Earn nothing and watch your capital deteriorate, or jump in the pool and take some risk. And don’t worry: The water’s fine.

“Keeping rates low and long will force boomers to … move into the equity markets,” albeit kicking and screaming, Gartman told me.

But it’s not only boomers; the large contingent of Generation Y — the ones who aren’t living in their parents’ basements or sleeping in tents with Occupy Wall Street — have been quietly accumulating wealth, but they’re the most conservative investors of all.

A recent Harris Poll found 41% of people between 18 and 33 say their savings are primarily in savings accounts and CDs — nearly twice as high a percentage as boomers and significantly more even than retirees. Read more about that poll’s findings at USNews.com .

And less than 20% have invested in money-market funds, stocks, bonds, or a mixture of stocks and bonds — again, the lowest percentage of any demographic group surveyed.

So, at an age when its members can afford to take the most risk, Gen Y is hiding under a rock. But not forever, according to Gartman. From risk avoiders, “they will become risk accepters,” he said.

When? Who knows? But probably as the market moves higher and people become more confident. Crazy, right? But that’s how it works.

In fact, Gartman thinks there’s time for that to play out, he said, because he believes stocks have been in “a multiyear secular bull market” since March 2009. That would make the secular bear market of the 2000s one of the shortest on record, at nine years.

If the economic recovery gains traction and especially if employment growth picks up, that would also entice investors to return to the market.

See readers’ ideas on how to bring jobs back to the U.S. and take our poll on the Independent Agenda. Click to visit IndependentAgenda.com .

He also thinks, he said, that “we’re still in a long-term bull market in gold,” which he started buying again three weeks ago, after stepping to the sidelines when “too many people” had grown bullish.

Now he expects gold — especially priced in euros or yen — to move higher. How much higher? All he’ll say by way of clarification is that “it will go higher until it stops.” That doesn’t help much if you’re looking for a round number, but there you have it.

Gartman favors U.S. multinational dividend-paying stocks, he said, explaining that he’s “too old” to invest in emerging markets and is avoiding Europe because he thinks a Greek default is inevitable. The terms being offered to Greece are too onerous for the Greek people — and their political leaders — to accept, he believes, in spite of the enthusiasm with which markets greeted Thursday’s austerity agreement. See full story on the Greek agreement and read Market Snapshot for details on U.S. investors’ reaction , plus a look at ETFs that stand to benefit if the Greek crisis truly ebbs .

“If you were Greek, you wouldn’t [accept the austerity measures being demanded. You wouldn’t think about it,” Gartner told me. “I think [Greece would be] better off … out of the euro.”

He expects other countries to leave the euro, too, he said, and the euro zone to shrink to a more modest size, with lots of pain along the way.

But he doesn’t expect much pain from the currencies of countries like Australia, Canada and New Zealand. He thinks the recent strong performance of the Aussie dollar is a good bellwether for the markets, he said, adding that he thinks “people should be investing in the Australian stock market” because of its strong natural-resource sector, rule of law and stable government. “What’s not to like?” he asked.

Gartman didn’t recommend specific stocks or funds, but there’s an ETF that tracks the Australian stock market, iShares MSCI Australia index (NAR:EWA) . Full disclosure: I have owned a small stake in the Currency Shares Australian Dollar ETF (NAR:FXA) for some time.

Here’s my view: The market’s move since October has been impressive — the fact that the S&P (SNC:SPX) held the 1,100 level then was a good sign that we weren’t entering a prolonged global bear market. In November, after being bearish for months, I wrote that 2012 was likely to be a good year for stocks. Read Howard Gold piece on why 2012 could be a good year for stocks in MoneyShow.com .

And in late December, the venerable Dow Theory Forecasts said a bullish trend in the markets had been confirmed by the Dow industrials and Dow transports.

Right now, I’m nervous. The market’s had a huge run and looks overbought, as technician Larry McMillan wrote in MarketWatch recently. See Lawrence G. McMillan column: Overbought market due for a correction .

Technically, we’re running into strong resistance near the 1,364 level, where the S&P topped out last April 29.

VIX, the so-called fear gauge, is well off last fall's levels.

Also, the CBOE’s volatility index (MDE:VIX) is just above 17, down from around 45 at the market lows of last Oct. 3. The midteens level for the VIX, which signals complacency among traders, is around where we saw the corrections of 2010 and 2011 begin. We’re almost there.

So, I wouldn’t pile into stocks now, but if you’re bullishly inclined, I’d wait for a correction into the mid-1,200s to add a little to my stock portfolio. I’d stick to a conservative allocation — 50% or less in equities — and focus on dividend-paying stocks.

If Dennis Gartman’s right — and who knows whether he is? — this market has a long way to go.