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Dennis Gartman, the macro trader and editor of the Gartman Letter, is looking at rising equity prices and slowly turning neutral on gold. During a panel on the macroeconomy at IndexUniverse’s 5 ^th Annual Inside ETFs conference, Gartman was unusually bullish about the prospects for the U.S. economy.

He’s also quite excited about the natural gas revolution that’s taking place in the United States. Production is soaring, prices are plunging—all good news for electricity generators, farmers who need pesticide and consumers who heat homes with gas and may one day be driving natural-gas-powered cars, he told IndexUniverse.com Managing Editor Olly Ludwig on the sidelines of the conference.

But given all his optimism, does he think QE3 from the Fed is off the table? Not quite yet.

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Ludwig: I’m struck by your bullishness on the U.S. economy.

Gartman: Why be struck by that? Why be surprised? The economy’s doing really quite well compared to any other economy in the world. Yes, we have our problems, but why be surprised? It’s America.

Ludwig: You were talking about the “animal spirits” in the macroeconomy panel, and they really seem quite compromised. People seem weary, like they’re waiting for something to happen.

Gartman: Well aren’t you supposed to be bullish before other people are? Aren’t you supposed to be bullish before the animal spirits gets stirred?

Ludwig: You mean a “smart-money always starts out dumb” kind of thing?

Gartman: Yes. The smart money starts out earlier and it’s interesting:Here the stock market, it’s at new highs, but yet everybody distrusts it. That’s as potentially powerful as anything you’re going to see. So, I don’t think the animal spirits have even begun to be stirred yet. That’s what will drive the S'P from 1,350 over the course of the next 18 months to 1,650. Can it get to 1,650? Easily.

Ludwig: Now regarding gold, the last time we spoke in New York in December you weren’t ready to capitulate on gold.

Gartman: I’ve been bullish on gold, on balance, for five years. There were times when I got neutral on it, but on balance I’ve been bullish on it. But quite honestly, since November of the past year, I’ve been neutral. The bull market is probably still extant, but it doesn’t act all that bullishly, and it hasn’t enticed me to come back in. So, I’m not bearish on gold, I’ll just let other people trade it.

At this point, rather than owning hard assets like gold, I’d rather own hard assets like U.S. Steel or Norfolk Southern Railway or some shipping companies.

Ludwig: Something that pays you dividends?

Gartman: Yes, an investment that pays me dividends. Absolutely. I think equities, relative to gold, are uncommonly inexpensive. And if you take a look at a chart like GLD (NYSEArca:GLD), divided by S'P 500 futures, for example, you can see that stock prices are starting to gain on gold prices on almost a daily basis.

Something is going on there, and not enough people are paying attention to that.

Ludwig: In the panel, you emphasized the energy story. To what extent is that a huge variable that will drive a lot of other things?

Gartman: I don’t think people understand how important the decline in natural gas prices is. Two years ago, it got a little panicky—it got to $15 per million BTUs—but here we are now down to $2.50 per million BTUs. That’s an incredible decline. Unless you live in the Northeast, where you have to use heating oil, those people who are using natural gas to heat their homes this year, they can’t believe how small their monthly bills are. And you know what? They’re going to get smaller.

It’s astonishing what we have done with technology to drill to drive the exploration costs down and to find more and more natural gas. It’s not a story that’s new, but it’s a story that everybody should understand. It’s only now that the public is becoming aware of it.

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Ludwig: So how does the cheapness become a huge positive for the economy—when gas-powered cars take off, or what?

Gartman: If you’re an electricity power generator—where 40 percent of your power had been generated by natural gas—think about where your costs have gone. That’s why the electricity utilities are going up in price as they have, because their cost of producing that marginal megawatt has gone down. It’s a beautiful thing.

Ludwig: Is greater reliance on natural gas going to take care of the trade deficit?

Gartman: Well, it’s not going to take care of our imbalance of trade.

Ludwig: Well all the importing of petroleum is the biggest piece of the trade gap isn’t it?

Gartman: Our biggest cost is the importation of crude oil. Natural gas really doesn’t get imported or exported like crude oil. It’s basically a national “circumstance.” They export some from Russia to Poland, but that’s via a pipeline on one continguous land mass.

Ludwig: So, you’re not a believer in the development of LNG [liquefied natural gas] tankers?

Gartman: Well, it depends. Right now, natural gas in Japan is about $11. Natural gas in the United States is $2.50 per million BTUs. Two years ago, natural gas in Japan and the United States were at parity with one another. Don’t you think there will be LNG carriers trying to buy natural gas at $2.50 and trying to export it to Japan? I would think so. But it takes a while. Also, an LNG tanker is a difficult boat to make.

Ludwig: What are some of the other virtuous macroeconomic aspects of such cheap gas prices?

Gartman: Think about the cost of fertilizer. The biggest cost of fertilizer is natural gas. This of what the cost of fertilizer is going to be if you’re a farmer—the price of your fertilizer is probably coming down 30 percent this year. That can’t be a bad thing.

Ludwig: So are you a “bear” on gas prices, but a bull on what low gas prices mean for the economy?

Gartman: Well, it’s hard to be a bear on natural gas prices at $2.50. I don’t think one should be bullish on them, but it’s hard to be bearish on them at this price. But what you should be is bullish on the long-term implications of low gas prices.

What could be better than to take automobiles that burn gasoline and refit them for natural gas? What would be better than electricity generators swapping from oil to natural gas? They are and they’re going to continue to do so. That can’t be anything other than beneficial.

Ludwig: So do you think the prospect of the Fed implementing QE3—another round of quantitative easing—is pretty low?

Gartman: Pretty low, yes. Pretty low.

Ludwig: But not off the table?

Gartman: I don’t think it’s off the table. If I were an FOMC member, would I take the possibility of QE3 off the table? Not on your life. I’d want to keep that in my back pocket. If you have a fifth ace, and no one knows it, you probably should try to keep it.

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