Gartman Doesn't Mince Words on Greece or Operation Twist

Although traders’ focus will likely shift to the FOMC and their new “twist and shout” dance step on Wednesday, it was all about Europe on Tuesday. While the situation is complex and there are obviously no easy answers, Dennis Gartman kept it simple Tuesday as he told a CNBC audience that a “disorderly default” by Greece is coming.

"We know what the end game is going to be. Greece is eventually going to default. Greece always defaults...It’s been their history."

Stocks rebounded from a big decline on Monday in part due to comments out of Greece. Greek Finance Minister Evangelos Venizelos said late in Monday’s trading session that good progress was being made in his discussions with the “Troika” (the EU, ECB, and IMF). Venizelos said that he was close to a deal that would free up the €8 billion tranche of emergency funds needed to stave off default that could occur when Greece’s supply of cash runs out next month.

If the refrain of Greece needing to make a last-minute deal to avert an imminent default sounds familiar, it should as this has been going on for nearly 18 months now. So far at least, Greece has been able to do just enough, or in the prior cases, promise to do just enough in order to convince the Troika to provide the needed funds.

However, Gartman isn’t buying it. He says that we’ve effectively seen this movie before.

“We’ll walk in on a Sunday night and we’ll find out over a weekend that Greece has defaulted – and whether it will be this weekend (which it won’t be) or a month from now (which it probably won’t be)… But, it will be some time in the next year.”

The renowned commodity trader says that the reason Greece will default is simple: The world is pushing Greece too far. “Were forcing them to the edge,” Gartman opined. “We can’t make them become as austere as the Troika wants them to be – they can’t do it.”

Asked if the anticipated default will be orderly enough to stave off a problem for our financial markets or if we should instead expect a disorderly default, Gartman didn’t mince words. "Will it be disorderly? You betcha it will."

His view of “the trade” right now is to be short the euro currency until the default occurs. With the euro close to its lowest point since early in the year, it appears that this has been a good call so far.

Looking ahead to tomorrow’s issue, Mr. Gartman was asked about his opinion on “Operation Twist” (where the Fed sells short-term bonds and buys longer-term bonds in an effort to drive down longer-term rates) that is expected to be either referenced or announced at Wednesday’s FOMC meeting.

Once again, Gartman shot straight from the hip. “Operation twist is one of the silliest ideas I’ve ever heard of,” he said.

Gartman went on, “The benefits that accrue from operation twist – perhaps a change in the yield curve of 10 or 15 basis points – does nothing and sends an air of desperation.”

Gartman went on to say that the Fed will probably implement the strategy because it is expected. However, his suggestion is for the Fed to do nothing. Gartman believes that Bernanke should issue a statement saying the monetary authorities have done all they can and it now up to fiscal authorities to try and move the economy.

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