Dollar Milkshake Theory 2021 Update - Forecast for USD, Inflation, Stocks & Commodities

Dollar Milkshake Theory 2021 Update - Forecast for USD, Inflation, Stocks & Commodities

Brent Johnson, CEO of Santiago Capital
Filmed on January 11th for the Vancouver Resource Investment Conference #VRIC21
Host: Jay Martin, CEO of Cambridge House

0:00 Intro
1:29 Dollar Milkshake Theory
4:53 Brent on Twitter
5:30 Protecting Wealth vs Looking for Upside
7:47 USD Rising is the FED Failing
10:55 Inflation vs Deflation
14:37 Best Assets over 1-5 years
17:15 Cryptocurrencies
21:03 Commodities Sector

Interview Notes

The 1st quarter of 2020, Brent could not have been more right about the USD. But for the last 3 quarters of 2020 he couldn’t have been more wrong.

Brent has no problem admitting he has been wrong but the question is where do we go from here?

The game is not over, this could very well still play out. None of the measures we’ve had since March fixed the problem, they only delayed the crisis.

The Dollar Milkshake Theory is still very valid.

The point of Brent pounding the table on the dollar is not that you should sell your gold or equities - but to drive home the fact that just because you want the dollar to drop, doesn’t mean it will. The system is set up in such a way that the potential for the dollar spike is always there.

Don’t pay attention to the dollar because you need to sell your gold and stocks - but because the USD rising would cause havoc across the world.

Brent’s job is to protect wealth as his clients have significant wealth. They need a plan to make and keep money in difficult environments.

Having concentrated bets is a good way to get rich - but it’s also a way to lose the wealth you have.

If the FED is able to print and bring the dollar from 89 to 80 and create continued sustained inflationary pressures that is the central bank winning.

The FED failing means the dollar moving higher. Everything went down when we had a strong dollar environment in March 2020 because the collateral that underlies the entire system went up.

Brent falls in the deflationary camp because he doesn’t believe they have printed anywhere enough to deal with the massive amount of debt that exists.

Inflation v Deflation - The Big Picture

We’ve had the inflation vs deflation debate for 12 years now. The most obvious trade coming out of the GFC was ‘inflation is here.’ It didn’t happen for more than a period of time and it always rolled over.

We’ve had inflationary pressures for the last 9 months but we only get lasting inflationary pressure if banks loan the money to Main St and monetary velocity picks up.

Monetary velocity is the lowest it’s ever been. Lending is picking up but they happened in April and May then lending has decreased every month for 9 months in a row.

Lending standards are higher right now than they were after the GFC - the rumour that the world is awash in liquidity is exaggerated.

USD and USD assets are still the place to be for the next 1-2 years. The consensus trade right now is to get out of USD and move towards Emerging Markets and inflationary assets.

Any contrarian ultimately wants to end up in the consensus.

We’ll see more inflationary pressures and the dollar will go higher. The central banks don’t have everything under control.

If your goal is to change the world then BTC, Gold, Libertarian movement.

Brent read the white-paper for BTC in 2010 but did not think the powers that be would sit back and let that technology take over.

BTC could go to 1M and never displace the USD, Euro or Yen.

People that look only at the opportunities and don’t think about the risk are doing a disservice.

If you don’t think the powerful can take steps to dramatically curtail the risk you’re crazy.

Commodities have gotten way ahead of themselves - the whole world is in on this trade.

If the global reflation trade doesn’t pan out the way we think it’s going to then commodities are overbought.

Never underestimate the power of a good narrative - get into real assets because inflation is coming.

Brent doesn’t expect a pullback in agricultural commodities - no matter what happens economically, people still have to eat.

If commodities go higher it will not be because of accelerating global demand - but because of supply picking up.

In the AG sector look at fertilizer companies, some of the bigger corporate companies, Brent typically does an index until he’s really sure about the theme.

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