YouSaid · the spoken record

Brent Johnson

lines on the record: 96
first: 2024-08-08
most recent: 2024-08-08
sittings or episodes: 1
sources: podcast

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“Yeah, exactly. I mean, it's really not even close. I mean, again, it's kind of the only game in town. And people will often then say, well, this is just the cleanest, dirty shirt in the hamper. And my response is always, would you rather wear the dirtiest dirty shirt? I mean, yeah, I get it. It is the cleanest dirty shirt, but which one would you prefer? I mean, if you really want to wear the one that's really stinky and really dirty, then be my guest. But I'd prefer to wear the cleanest one.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“A situation where all fiat currency is debased as government deal with these current crises. But for reasons that I've many times, the dollar will outlast all of the others. So if you chart the gold and all the currencies, the two top would be the dollar in gold, right? And there may be a period of time where gold is underperforming the dollar, but in general, I expect gold to, I mean, my long-term price target for gold has been $5,000, right? I still think we'll eventually get there. I don't think it's going there tomorrow. But I think long term, that's where it's headed. And I think the dollar will rise versus all the other currencies. And so I think as, you know, if you chart all the currencies on a graph, that's exactly what you'll see. You'll see the dollar outperforming all the other fiat. And you'll see gold outperforming everything from a currency perspective.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I think it's both. I think it will ultimately rise in dollar terms, but I think it will rise even more in foreign currency terms. And this is the other part of the thing I said was that we would get into a situation where the dollar and gold were rising together. I've always been a huge believer of gold. I think gold is probably the most important asset portfolio. And”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Code FG10. Back to the episode. So as the dollar rises, a gentle rise, you could say, U.S. stock market is going to perform well. Is that in local currency terms, i.e. dollar terms, or is it just because”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Will do will dramatically help you understand what's going on in the world. And this is what I'll say is even though the whole dollar milkshake theory hasn't played out to its conclusion. The dynamics that I thought would play out as a result of dollar strength have largely played out. And so even though I'm not 100% right, I'm certainly not been 100% wrong. And it's allowed me a level of clarity and peace during a time period that, you know, I certainly 2020 and over the last couple weeks has caused many people a lot of angst. I feel like I have a fairly good understanding of what's happening and why. I'm prepared for what happens going forward.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Way because that's what happens when the dollar rises versus foreign currencies. That's what causes liquidity crises and then dramatic pulldowns. And I think that's what we're seeing now. I think we'll probably have, I don't know, a couple months, maybe six months worth of volatility to the downside in U.S. equities. But I expect after that's over, U.S. equities will go to even greater heights than they've already gone to because I think that's what will happen as the world seeks out safety and yield. So it's a way to understand the types of things that can happen with the dollar. And again, the reason that I focus on the dollar is it is what underlies the entire global economy. If you get the direction of the dollar wrong, it's very hard to have your portfolio do well. It's not impossible. But, you know, understanding what the dollar is.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“My thesis was that this is again, I go back to Druk and Miller and Soros. They had a thesis called the Imperial Circle that said, if you have higher interest rates and a government who is spending a lot of money in a desirable economy, that can lead to a boom. And it can draw capital from around the world in because of the higher rates. The government's spending can be stimulative. And then you get a combination of while animal spirits on top of that, and you can get much higher equity prices. And again, if I go back to my very first interview when I talked about this dollar milkshake theory, I referenced that phenomenon. And I said in the years ahead, I thought what would happen is that bond prices would fall in the U.S. interest rates would rise, the dollar would rise, and yet equity prices would go higher. And that's exactly what we've seen. What I also said in that same interview is that there will be terrifying drawdowns along the way.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Right. And so the point is that if you're wrong, it doesn't kill you. Does it annoy you? Does it hurt? Sure. But it doesn't kill you. But if and when it pays off, you know, it changes everything. And that's just one example. Another thing you could do is you could look at what happens to different asset classes around the world. Again, if currencies start moving and the dollar starts rising, what does that do to certain commodities? What does it do to housing? What does it do to equity prices? My argument has been that equities around the world will suffer dramatically. And over time, U.S. equities will actually do very well. That's what's interesting about this, Jack, is that everybody said that as the US raised interest rates, it would cause markets to crash in the United States.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Couldn't keep it right, and they could put on a brave face, but eventually they would have to cave. And that's exactly what happened, and they became legends as a result. So again, I don't think that people should go out and put 60% of their portfolio and puts on the Hong Kong dollar. If you put 0.6%, not even 1%, 0.6%, and you're wrong, you lost 0.6%. I'm pretty sure people have lost more than 0.6% of their portfolio over the last two weeks, right?”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And again, and if you're wrong and it doesn't, well, you've lost a very small percent of your portfolio. And so, and by the way, it's a managed currency. The reason it has stayed flat for all those years with very low implied volatility is there's a currency board that keeps it there. But you have to realize in times of stress, it becomes increasingly difficult for them to keep it there. Many people know about the story of George Soros and Druckenmiller Brankie, the Bank of England, right? That was a case where the Bank of Lincoln was committed to a certain level. And these guys figured out that”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Because, sorry, it's because for I'm just looking, I'm shocked it's been this long since 1988, the Hong Kong dollar has been in a range between $7.70 and $7.85. So implied volatility is, I'm sure, is incredibly cheap. So if you buy a... Option that even goes down a little bit versus the dollar out of that range, it pays off immensely. That's what you're saying.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Global currency crisis or a debt crisis, it becomes increasingly likely that the Hong Kong dollar peg breaks. That hasn't happened so far, and perhaps it won't, but you can do that trade and it gives you like. Know five, six, seven hundred times leverage. So you can put a very small amount of money down and get a huge leverage that if it happens, it has the potential to be life-changing.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Make it a bed directly on the dollar is one way you could. Right? But understanding what the dollar is going to do helps me understand how to manage that 99% or 95% of a portfolio. We only have a very small percent of a portfolio that's allocated to these asymmetric ideas. So I don't want people to think that my entire business is based on these asymmetric ideas. If you do want to have some kind of hedges or protection that will protect against an adverse market scenario, I think taking a small amount of money and betting on asymmetric opportunities is a fantastic way to go. One way is you could just do it directly and buy calls on the DXY or UUP or whatever it is. The other thing you could do is understand that if the dog is stronger, what does that do to other currencies? One of our biggest positions in our asymmetric allocation is puts on the Hong Kong dollar. We think that if we get into a”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Launched a thousand newsletters, right? It's such an story that it always sells. But that is, in my opinion, one of the least likely things to happen. So I think the perception of the future of the dollar is completely wrong. And when you can invest a small amount of money on a perception that is widely held, that is wrong, that small amount of money has the potential to be a lot of money. And the great thing about it is if you're wrong, that small amount of your money, you bet doesn't kill you.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Thinking otherwise is thinking that the central banks will be able to manage our way out of their way out of this mess that we've gotten into. But my argument is that they will lose control eventually. But in other countries, we'll lose control before the U.S. But when countries lose control, that will see the dollar rise not fall. Now, if I'm wrong and the dollar falls, I'll be fine. I'm prepared for that. But I think I'm more prepared for the dollar to fall than most people are for the dollar to rise. And I think that's why I have wanted to express my understanding of how the system works so much because I think the whole is going to die, it's going to go through hyperinflation. It just can't last. It's like Helen of Troy. It's a theme that launched the...”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“The ramifications of the Fed losing control. Again, the dollar falling is the Fed staying in control. The dollar, and that perpetuates the system. If the dollar just kind of goes sideways in a band or falls in general, that perpetuates the system. The Fed losing control is the dollar going to 125 or 135, or God forbid 170, because that's when things start to break, right? And I think there are many people out there really smart, intelligent. Well intentioned people who have made a lot of money in their careers who just don't think that that is possible. And maybe they're right. Maybe it's not possible. But I think you have to plan for it because, again,”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Perhaps there's a misperception here. I don't think people should just go out and buy the dollar or buy calls on the DXY or UUP or whatever it is. The whole dollar milkshake theory is not about investing in the dollar. What it's about is understanding the knock-on effects of the dollar getting stronger. What happens in a world where the DXY goes to 120 or 130 or 140? What would that entail, right? I think it's pretty easy to understand what would entail if the dollar goes from 104 to 80, right? It's probably risk on assets are rising. Perhaps it's dramatically inflationary, right? That's a world that we're relatively familiar with. We're not familiar with a world where the dollar goes from 104 to 144. And I think many people misunderstand.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely. And just on the point of the hedge, the ETF that trades in short-term VIX futures, right now is trading for $36. In October 2011, it was worth $88.26 billion. So it's definitely the fund was not that big now. But that fund is down 99.999%. And so really is a very bad hedge. It's great in that it has very convex performance, but it's absolute return profile is very negative over time. Is that part of the reason why you're attracted to the dollar as a hedge that it's just less of a, it bleeds less?”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Apple on the line, if you're gonna, you know, you don't put 70% of your portfolio on a hunch, right? Or you don't put 80% of your portfolio on a thesis that's been out there for literally 40 years and hasn't happened. So, you know, again, part of my interest in talking about this so much, and again, pounding the table on it, is not to get people to change their mind, not to get convinced people that I'm right, but just to get them to think a little bit and perhaps they don't have everything figured out to the extent that they think they do.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“But if we're wrong and the 5% goes down, then the other 95% of your portfolio, that's in traditional assets, is going to do very well. And that's exactly what has happened, right? That's exactly what's played out. COVID came along. We had some very asymmetric returns to the upside very early on. But then those asymmetric turns fell because traditional assets did well and the rest of client portfolios appreciated very well. I continue to think it's important to have some kind of insurance protection for the downside. I think that what we've largely seen for the last four years will not likely happen over the next four years. I think the average level of the VIX over the last four years has been something like 17, 18. I would expect that to be higher over the next four years. But again, who knows? But the point is in all of this stuff, it's a matter of probabilities. And when you put”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Now, that was five years ago, Jack, and it hasn't happened yet. Now, we sort of had it in 2020, and I would argue that in many ways, COVID was such a severe thing that it kicked the can down the road, you know, at least a couple years. But I still think that we will have it. But when we did that, when I started talking about that, we set up a fund to take advantage of this. But because we knew that we could be wrong and because we knew that one of the most obvious ways we could be wrong was timing. We did is we set up a fund that had very asymmetric return characteristics, and we told people don't put more than 5% of your portfolio in it, right? Because if it timing doesn't pay off, we're going to lose all that money.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“When I started talking about this dollar milkshake theory, it was 2018. It was kind of the middle of 2018. And I really started talking about it more in 2019. And what I was saying was that the table is set for a currency crisis as a result of all the imbalances. And when we get into a currency crisis and a debt crisis, the dollar will outperform.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Well, especially in my business, listen, my job is to manage people's money. Now, managing money is light years different from writing research or selling signals. It's dramatically different than teaching finance. It's dramatically different than being an economist, right? Because it just is. Like we are measured on sometimes a monthly, quarterly, yearly basis. And to a certain extent, depending on what type of clients you have, you can have a longer-term timeframe. Maybe some clients will look at a two or three year timeframe or a five-year time frame. But when you are managing capital, timing matters, much more so than if you're writing a”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“You're so right, and you said even people might not be wrong. They're just early. I would say being early is the same as being wrong. And people who thought there'd be a recession in 2022. And by the way, I found that argument convincing. You know, the fact we may have a recession now or maybe about to enter one, you know, given we had a horrible, horrible jobs report today. It's like you weren't right in 2022. You were wrong. And now maybe you're right. But if in 1990 you think there's going to be a global credit crisis and it finally happens in 2008, you weren't right.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Yeah. I mean, I can literally remember. And I joke about this every now and then on Twitter, but it's actually true. I can remember being 10 or 12 years old, just starting to kind of understand how the world works and reading this newsletter that my dad had. And it was talking about, and at the time, this was like the early 80s. My dad had bought a bunch of silver because of this potentially impending doom, right? And it was talking about how this was unsustainable and couldn't keep going. Now, that's, Jack, that's literally 40 years ago, right? So it's not that they're wrong. It's just that imminent and inevitable are two completely different things.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Very, very possibly, or probably, right? And so. You understand the rules of the game, and if you understand that in many ways the United States can change the rules of the game if they choose to. The probabilities are extremely high that the US falls last. Now, is it impossible for the US to fall before being the last? It's possible, but that's a low probability event. And investing is all about banking on the probabilities. I don't really have a problem with people who come up with these theories of, you know, the dollar's going to do this or the U.S. is going to do that, or Russia's going to do this, and the BRICS are going to launch that. It's fine to think about these possibilities. It's fun. It's interesting, and it's important to understand what could potentially happen. The problem I have is when people will come up with these somewhat out there theories and then assign a 99% probability to it, and they'll speak about it with such certain terms that I feel like people who aren't as educated will listen to these people and say, oh, yeah, that sounds really good. Well, take a step back and realize that.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Nothing is certain, right? Nothing is ever certain. But the probabilities based on the design of the system is that the United States will fall last. And if you are in a relative gain, and if you don't want to play the game, then don't. But if you do play the game, which I do, this is my job. I actually like the job. It's crazy. It's frustrating. It's fascinating. It's like the Super Bowl, but I like to play the game, right? And if you are playing the game, there is going to be an end to the game. The game will end, right? But you've got four quarters and potentially overtime before that happens.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“So, I agree with it. You know, how, again, this can't continue forever. But you and I have talked about my dollar milkshake theory on several occasions, right? And essentially what this says, and again, I'd have to go back and look, but I think the very first time I ever spoke about it publicly, I think the very first sentence was this is a story that ends very, very badly. And I agree with that. This will end badly. But based on the design of the system,”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“And the Federal Reserve is in the driver's seat. Now, economic conditions, of course, are growth and inflation and employment are really controlling the Fed's actions, but the Fed is in the driver's seat of U.S. dollar interest rates and U.S. dollar interest rates are what control a lot of the global interest rate matrix. Earlier, you referenced interest rate parity or covered coverage parity. And that theory is basically as interest rates rise in currency A, money is going to flood into currency A and cause it to appreciate or there's going to have to be like a foreign market's currency B is going to have to be, appreciation is going to have to be priced in the future. And then that makes total sense that a theory that you just explained. But the argument that you said you disagree with about who is going to buy the treasury debt, I think the underlying case there is as interest rates rise, the U.S. has to pay a greater and greater interest expense so the deficit gets bigger, so the debt gets bigger.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“To make Egypt pay or Turkey pay or the Philippines pay or Thailand pay or whatever it is in order to buy their sovereign bonds. So higher yields in the US actually draw more capital to it or at least make others have to pay a higher yield as well. And I think that's what many people forget, that higher rates are not just a problem for the United States. Higher rates are a nightmare for the rest of the world.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Now, if a US Treasury is having higher yields, let's just say four and a half to five percent or four to five percent. This is a nightmare, not just for the United States or not for the United. It's a nightmare for the rest of the world who is competing for funding. Because if the US is going to pay 4% or 5%, then another entity has to pay a heck of a lot more than 4 or 5% to attract liquidity. Because all things being equal, you're going to buy the thing that underlies the entire system. So U.S. Treasury yields going to fiver. Let's say it goes to six or seven percent. That is a nightmare for emerging markets because now emerging markets who typically have to compete very strongly for liquidity in the first place are now going to, if the US Treasury is offering seven,”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and to that point, and I think this is extremely important for people to understand. Again, yields are falling today, but over the last couple years, they've been rising and they've been high, especially maybe not in long-term historical terms, but high versus the last 10 years, certainly, right? And the high rates that the U.S. has been paying is every day you open up the newspaper, you go on Google, or you go on Twitter and it's the United States now has a funding problem because interest rates are so high and they have to roll over all this debt and this is a nightmare for the United States now again if you analyze the United States in a vacuum that's a not a horrible conclusion But what you have to realize is take into context what I said before about the world uses treasuries to operate.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Works is that people on the large, again, if we go back to these large asset allocators, the banks, the financial institutions, the endowments, the hedge funds. They buy treasury bonds, they post them as collateral, and then they get close to 100% leverage on them. That's the way the system works. The system is one of collateral and leverage. You might not like that that's how the system is, but that's how the system is. And so if for no other reason, the rest of the world will buy US treasuries because they get, what do they get? 98, 99% leverage against them. It's almost like buying, it's almost just like holding cash, right? And it's not. And I know there's people up there saying it's not like holding cash. The bonds come to say if, yes, of course, you are right. I'm just saying that this is how it often works. And so you get, you know, if you're choosing between buying a US sovereign bond and a Turkish sovereign bond or an Argentinian sovereign bond or a Philippine sovereign bond or even a Japanese sovereign bond, you know, you get preferential.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Going to buy the United States debt. But now that we have a little bit of uncertainty in the market, what are treasury yields doing? They're rallying like crazy or bonds are rallying like crazy and interest rates are falling. Now that's not the Fed doing that. I mean, don't get me wrong, the Fed might be in there in some form or another. But this is market action right now, right? That we're not in a period of QE. And so, you know, I think people kind of get it mixed up when they're let me say it this way. It is a little bit different when you analyze the country and the currency that is the global hegemon and the global reserve currency. Doesn't mean that it's always different on all cases, but in some cases it is different. And one example is that the way the monetary system”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“That you can come to. The problem is that analyzing the United States in isolation is not a fruitful endeavor because it's a relative world. And if you do the same level of analysis that everybody tends to do on the United States, on Europe or Asia or South America or Australia or Canada, you largely come to the same conclusion. And at some point, unless you're an individual who has the ability to kind of check out, move to a mountaintop and come back continuous, you have to put your money somewhere. The big asset allocators that move capital on the global stage will put their money somewhere. So it is not an absolute game. It's a relative game. And so that is why the world seeks out the United States. Again, look at today. How many times have we heard over the last year, two years, 10 years?”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Well, I absolutely do. And the first thing I'll say is imagine the rest of the world wasn't buying our debt. Imagine if the rest of the world didn't want to invest in the United States. I mean, people will often say, you know, we are reliant on the rest of the world. No, the rest of the world is reliant on the US economy for growth and income and safety. And again, you have to remember that this is a relative game. I'm not saying there isn't problems in the United States. There are huge problems in the United States. And I will often see these fantastic reviews or analysis on the overall United States economy, interest rates, level of debt. And the conclusion is that the United States is very overextended and hard times are ahead. And as a result, you should get out of the United States and get out of the dollar. And the thing is, is if you analyze the United States in isolation, that is basically the only conclusion.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Brent, there's a common perception of the rest of the world is the lender to the US dollar, you know, back in the days of the 1920s, the US had a huge trade surplus 1910s and 1920s, trade, huge trade surplus, and it exported those dollars to the rest of the world via loan. So U.S. was always lending money to Europe, and they'd always have to have these conferences about who in America is going to bail out some European country this time around. Now it is technically it's the other way around where the US has a massive capital surplus where the rest of the world is an investor in the US and the rest of the world buys US treasury debt. And so that is literally true. But do you think people sometimes miss something when they use the language that as if like the US is funded by the rest of the world and up the rest of the world could just pull the money away and the US interest rates will rise and the U.S.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I would expect the dollar to go higher. And here's the thing. Well, how can asset prices fall if the underlying currency is falling as well? In other words, if there's a liquidity crisis and people are scrambling for liquidity and that's why they're selling securities, well, then whatever they're scrambling for typically rises in price. And right now that's the dollar. So if we get into a situation that's a liquidity squeeze, then the dollar will rise. But as of right now, like I said, I think right now we're just in a valuation reset. Now, I think it's very possible that this transforms into a liquidity crisis, but I don't think we're there today.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I mean, in general, yes, but if somebody says to me the dollar could easily go to 95 if the Fed dramatically cuts rates, and I would say, of course it can, of course it can. Even though I'm known for my dollar bullish views, it's more of a medium term view. From day to day, week to week, who knows what goes on in markets? There's many moves that can take. But those who continually talk about the death of the dollar or the end of the dollar or the rise of the bricks or the change of the monetary system, that's only going to happen through dollar strength. That's not going to happen through dollar weakness. As the dollar gets weaker, the rest of the world will just take on more dollar debt as they always have. The dollar falling actually is what keeps the system going. It's when the dollar goes higher that things start to break. And so, you know, if we get into some kind of a crisis,”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Even though the change in prices has been somewhat dramatic, you have to remember that they were dramatic to the upside before this. So the move to the upside was very dramatic. The pullback has been painful, but still the market's still positive for the year, right? Now, it may not be for very much longer, but so far it is. One thing you mentioned, gold, gold's really interesting because when I came in this morning, and especially after the non-farm payrolls, gold was up quite a bit, but it's turned around and pulled back $40 from its high this morning. So I'm interested to see how that closes the week. Are you bullish”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Of the reason the dollar has been kind of flat recently is largely due and even down a little bit is largely due to the yen rally, right? Now the dollar has taken a big move down today. That is primarily due to the bad non-form payrolls number accompanied with Powell's comments from a few days ago that if they continue to see softening in the economy, then rate cuts are on board. And so now they're expecting, now the market's very much expecting rate cuts and perhaps one or two double rate cuts. And so as a result, if you just look use interest rate parity, then the dollar is falling. But if we get into a situation where this is no longer just a valuation change and this is some kind of a crisis or develops into a crisis or some kind of a geopolitical event, I would expect to see the dollar rally significantly on that. Again, so far it's been fairly ordinary.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Earlier, you said that hedges have used to be cheap, they've gotten a little bit more expensive. One hedge, and I think you thinking about this, one cheap hedge is the dollar that in times of true crises, the dollar tends to actually rally against other currencies as those currencies struggle to be able to maintain their dollar funding. But it takes a real crisis 2020, 2008. We are definitely not there yet. What is going to take for us to have that kind of moment? Because right now, as you said, we're in the time where the markets sell it today is definitely a risk-off day. Gold is rallying, stocks are selling off, interest rates are collapsing. But as you said, the dollar is also rallying. So do you think we're in a regime now where actually the dollar could sell off alongside risk assets because it is the strengthening yen that is causing this global carry trade to unwind?”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Between the United States, Russia, and China. It's just the calm before the storm was very calm, and now the storm is starting to pick up a little bit”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“That those who are using the yin carry trade to make investments around the world are potentially now getting that liquidity pulled away from them. And as a result, then they have to sell those positions that they bought with that cheap funding. So really what you get is potentially a rug pull on global liquidity. And because the yen carry trade is so large with the yen rallying and people trying to figure out whether or not the Bank of Japan has staying power, whether they will continue this or not. In the meantime, they may not even be making the sell decisions. The margin clerks may be making the sell decisions. So I think we're getting kind of a combination of all these things, right? And then not to mention the fact what's going on politically in the US, what's going on militarily in the Middle East, what's going on diplomatically.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Higher or very big as well. And so if you look around at other indicators, you know, high yield seems to be doing okay. You know, bonds are rallying, treasuries are rallying on kind of a risk-off sentiment, but we haven't seen a big blow up in anything yet. So in my opinion, what we're seeing now is the beginnings of evaluation reset. And the question is what happens from here. Again, so far, you know, we've got the dollar falling because they're expecting lower interest rates now. The other part of it that I think is contributing to this is that what's going on in Japan, you know, the Bank of Japan has raised rates and that has made the yen rally from 160 to 148 or whatever it is. Now, I think if a couple years ago, if you would have said the yen was at 148, people say, holy cow, that's horrible. But when it's come from 160 to 148 in a matter of weeks, that's a pretty dramatic movement. And what that means, Jack.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think this is a time when you look at your portfolio and hopefully you bought insurance when it was cheap because it's no longer cheap. And what's been kind of interesting to me so far is that while the market pullback has been, I don't know, I wouldn't say it's been too dramatic, but it's been hard. It's not really the result of some crisis somewhere. It's really just a valuation reset. I think for the most part, the reason people are feeling pain is because they felt so good over the last, I don't know, call it four or five, six months or even longer. And I would characterize the pullback that we're having now as really just kind of a routine pullback. Now, the question becomes, does it become something more than routine, right? So far, I think it's been fairly orderly. And again, while some of the moves have been big, especially in technology, you have to remember that the move.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT