Brent Johnson is CEO and Portfolio Manager at Santiago Capital in San Francisco. Prior to Santiago Capital, Brent work with private clients at Credit Suisse.
Santiago Capital is a hedge fund with a focus gold and other metals. However, because of Brent’s macro outlook on things, he can often be found on financial platforms talking about why and where certain asset class prices will be in the future. One of Brent’s well known thesis is his Dollar Milkshake theory.
The Dollar Milkshake theory is a theory in which the dollar is going to get a lot stronger, interest rates are going much higher, bonds will suffer, and stocks and gold are going to both perform well.
In this theory, the milkshake is central bank liquidity, but when central banks, in particular the US Feds start tightening, it will be like a big straw sucking liquidity from global markets because global loans made in US dollars will need to be paid back with interest in US dollars.
However, because of COVID-19, there are others that think, the US Fed have abandoned quantitative tightening (QT) and rate hikes for the foreseeable future and that the US Feds are about to fill up another container with more milkshake. One such person is Stephen Roach, Yale University senior fellow and former Morgan Stanley Asia chairman.
The prominent economist says that the era of the U.S. buck may be coming to an end and is forecasting a 35% decline soon in the U.S. currency against its major rivals, citing increases in the nation’s deficit and dwindling savings.
The lecturer said during CNBC’s “Trading Nation” on Monday that the rise of China and the decoupling of the U.S. from its trade partners is setting the stage for a dramatic weakening of the U.S. currency in the next few years that is likely to end the supremacy of the monetary unit as the world’s reserve currency.
“The dollar is going to fall very, very sharply,” he told the business network.
Roach’s comments follow similarly themed op-ed that he wrote in Bloomberg last week, in which he specifically declared that the “era of the U.S. dollar’s ‘exorbitant privilege’ as the world’s primary reserve currency is coming to an end.
I'm in the camp that the US dollar declines over time because of the monthly chart.
in which we see a lower-high, followed by a lower-low.
If the Dollar Milkshake theory does pan out, the price suggest price will rise to the 108.00,
but than I anticipate price making another lower-low in the future.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
