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 in Hollywood, Fla, 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.

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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