Did Dennis Gartman Really Get Blown Up?

Learning about portfolio strategy from a market titan.

There were a couple of headlines on my Twitter feed about Dennis Gartman getting blown up by a bet on Riot Blockchain (RIOT). This is one of the companies that changed its name to include the word blockchain which then led to a massive jump in price. According to both Bloomberg and Zerohedge he made a bet on the company which then got hit after a CNBC piece on it and he bought more which the Zerohedge piece says, violates his trading rules.

Bloomberg quoting Gartman; “Friday was one of the worst days we have suffered through in a very long while,” he wrote in the Gartman Letter on Tuesday. “We were long of a sizeable position in a blockchain focused company that was the victim of a CNBC expose, which sent the shares down more than 20 percent and which sent us ‘down’ for the year to date, having been up about 6 percent previously.”

In one of my stops along the way I got to know Gartman, I think fairly well. We were on many calls together, like maybe a dozen. He might disagree with "fairly well" but either way they were fascinating calls and I learned a lot from the opportunity. The manner in which he trades has very little in common with how I manage portfolios but there is always an opportunity to learn when you get to talk to someone who knows more than you. Knowing a lot of course does not mean infallible.

It is not clear, based on what I read, how much he put in RIOT or how much his retirement account is down but in getting to know him I would observe a tendency to exaggerate. In no way do I mean being dishonest, hopefully that is crystal clear, but more like thinking a 2% decline would be a disaster or some other word that implies a magnitude that is greater than what I think most people would assign to a small loss.

However much I know or don't know about Dennis, the foray into RIOT surprises me on two levels. I never heard him talk about individual stocks. I took his trading to be mostly, but not exclusively, commodities and currencies. And while there may have been trades in other asset classes or stocks, maybe through futures, this was new from what I knew.

The other surprise is the nature of the risk. Something that changes its name to include "internet" (1999 reference) or blockchain or whatever the next potentially huge thing is will certainly be volatile in a way that is unmanageable. Someone could make a lot or lose a lot with the difference between the two boiling down to an unluckily timed phone call which isn't a risk/reward construct that I ever heard him discuss. I would add that sizing something like that to be so large for him to describe the loss the way he did also seems out of character.

But I could be wrong about any or all of as relates to how Dennis trades.

What this boils down to, at least as far as it has been portrayed, is staying in your lane for the types of investments you take on. Not that you should never expand beyond your comfort zone but that such a trade or investment should never be large enough to do the type of damage that Riot appears to have done to Gartman's account.

I've mentioned my thoughts on how to size Bitcoin if you're going to dabble, as an example. Buy a little so that if it goes to zero it doesn't hurt you but if it really goes to $400,000 you do very well. While I would urge anyone to just stay away from something like RIOT, the important thing is that the consequence of being wrong is not ruinous.

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