Some accused me of spreading a conspiracy theory when I wrote in The Globe that investors should avoid buying battered Toyota shares even though usually companies facing massive recalls are an investment gift. My theory isn’t conspiratorial; rather, it’s simply about incentives. The U.S. government’s incentive is to damage Toyota’s reputation. Today’s news seems to lend credence to the idea.

Further to today’s column, here’s a decade’s worth of Home Capital’s returns. It’s breathtaking:

Either Dennis Gartman is fibbing or I am. You decide: On Nov. 30 I published this column about his TSX-listed closed-end fund in The Globe and Mail.

Mr. Gartman was not impressed with what I wrote, and I wasn’t impressed by what he said afterward. Here’s the fallout:

From: Dennis Gartman

Sent: Monday, November 30, 2009

To: Fabrice Taylor

Subject: A note from Dennis Gartman

Dear Mr. Taylor,

I read your note on my performance a short moment ago, and I have one or two major problems with your comments which I would be happy to speak to you about. Firstly, I was never contacted by you or by the Globe and Mail regarding my performance, although your note says that I refused to speak with you. That is simply not true, and I welcome that opportunity. I am available to speak with your this afternoon and all day tomorrow and can be reached at 757-238-9346… my direct telephone number.

Secondly, I never called Mr. Buffett and idiot; I said that his fund last year lost 47% and the long term holding thesis was “idiocy” as that performance would seem to indicate. The notion that I called Mr. Buffett and idiot was something that the internet spun up and out of control after a speech I gave earlier this year in Spokane, Washington.

Thirdly, I was indeed short of Mr. Buffett’s stock, but was at the same time long of a number of other stocks that out-performed his stock materially and as a true hedge fund manager that is how one is supposed to trade.

Fourthly, my performance was stellar in my Canadian fund until two instances in recent weeks wreaked havoc upon me. One was the surprise purchase of Marvel Comics, which was my largest short, by Disney and the second was the massive one day collapse of Molson’s on a day when its earnings were stellar and yet the stock fell 11%. I was precluded from exiting the trade until the close by the rules imposed upon me. Those two trades were what took me from nicely profitable to modestly unprofitable. You never spoke about that.

I am awaiting your call. I am at the phone as I write. I expect, however, not to hear from you.

Regards,

Dennis Gartman

From: Fabrice Taylor

Sent: Monday, November 30, 2009

To: Dennis Gartman

Subject: Re: A note from Dennis Gartman

Dear Mr. Gartman:

I didn’t mean to keep you waiting forlornly by the phone all day. I just read your email – but I gather that’s cold comfort since you didn’t expect the phone to ring anyway.

It’s an inauspicious start to our dialogue that you call me a liar though. I am happy to supply you with my cell phone records, which will show that I did indeed call you twice last week and left a message. Furthermore, my cell phone tells me I called the number you supply below, not some general mailbox. I’m not lying, so please don’t say or otherwise imply that I am. We’re not going to get along at all if you do.

As for telling the truth, here is a quote from the Wall St. Journal, June 19, 2009: “The Oregonian reports: “Warren Buffett is an idiot,” he [i.e. you, Dennis Gartman] said, emphatically, in a short interview after the speech. “Shame on Warren Buffett. That’ll be a good quote for your article.” This isn’t something manufactured in the Internet’s vortex. It’s you speaking to a journalist. Is the Oregonian lying?

As for your pairs trades and your unfortunate short sale of Marvel, who cares? The numbers speak for themselves. Horizons executives say you’re expected to make between 6 and 12 per cent using a market neutral strategy (which goes unsaid in the prospectus, I hasten to add). You are coming up well short and an investor is better served owning Berkshire Hathaway. These are simple facts. Ironically, I suspect your reluctant gold investment is a great benefit to your returns.

I would have liked to talk to you, so I will call you tomorrow morning after about 10 am. I look forward to chatting with you. Perhaps we can follow the column up with something with your voice in it.

Sincerely,

Fabrice Taylor

From: Dennis Gartman

Sent: Monday, December 1, 2009

To: Fabrice Taylor

Subject: A 2^nd note from Dennis Gartman

Mr. Taylor,

I hope that you got my note regarding my required attendance on a conference call for the NC State Endowment Committee that shall begin at 10:00 this morning and will continue on through perhaps 1:00.  I do hope we can talk after that meeting,  or perhaps before it.  As I said, [… ]I’m actually looking forward to speaking with you… to set the record straight on both sides.

Over the years I’ve learned very, very often that the calls that begin in animosity end more often than not in friendship. Let’s hope that that happens in this instance.

Regards,

Dennis Gartman

Friendship? Not quite. Our conversation didn’t go much better. Mr. Gartman insisted that I hadn’t called him, and he called The Globe to make the same allegation. Here’s a copy of my cell phone bill:

You’ll see that I made a two minute call, leaving a message. The first call doesn’t show up because, I think, if you hang up during a voicemail recording Bell doesn’t charge you.

Mr. Gartman also repeated his denial about calling Warren Buffett an idiot. He then told me that a friend of his had crunched some numbers that suggested Mr. Buffett had actually lost money in the stock market over time.

Right. So Warren Buffett got rich by being born with $100 billion and only losing $40 billion of it.

Finally, Mr. Gartman went on BNN, the business news network in Canada, to defend himself. You’ll note that he claims he’s only down a few pennies. Not true.

He was down 3 per cent, not three or four cents (while the market was up 30 per cent since he launched).

It’s down a lot more now.

I got more than a few emails from money managers on my Potash Corp. of Saskatchewan column who wanted to know more about how the government might play a role in a takeover of the company. That tells me that this argument isn’t priced into the shares. If it’s right, there’s money to be made. Meantime the Russians are trying to raise spot prices, which is good for the stocks.

And here’s a great email I got from a farmer in late October when I wrote about Potash then:

Hello Mr. Taylor,

I found your article “Potash paying for past profits” right on the mark.  I am a crop farmer in Western Ontario and an “end-user” of Potash.  The business media have not covered the perspective of the buyers of Potash very well and I think it is somewhat different from what you inferred in your article.  Yes, it is “crucial  to plant nutrition” as you stated but at much lower soil concentrations than exist on most farms.  Through most of this decade, I have been buying Potash from my local dealer for around $350 per metric tonne.  At this price it made financial sense to apply enough to be sure it wasn’t a limiting variable.  In the spring of 2008 the price was $760 and by last fall it was over $1000.  I am not sure about the exact price last fall because I refused to buy any.  My dealer says it is now about $630 but I can still coast along on my soil reserves without buying any.  Essentially, farmers are boycotting Potash Corp. for price gouging.  Even Senator Eugene Whelan picked up the issue.  The company’s attitude that farmers will eventually come to them on their knees with their hats in two hands further strengthens farmers’ resolve to punish the company.  If Lang farms offered me Potash from a Russian source, it would be preferable.

Anyway, back to the economics.  It is essentially a “diminishing marginal returns” exercise.  Low crop prices move you back on the curve of what you can spend on fertilizer.  Alfalfa and tomatoes use lots of Potash because of high concentration of the mineral in the product and because so much of the plant actually leaves the field.  Farming is all about the transfer of nutrients.   Grain corn is not a heavy user of Potash (Nitrogen, yes) because there isn’t that much Potash in the grain compared to the majority of the plant that is recycled in the field.  Thus, corn farmers can hold out for years by only applying minimum amounts.