The Dollar Milkshake Re-Visited

Published on
October 9th, 2019
26 minutes

The Dollar Milkshake Re-Visited

The Expert View ·
Featuring Brent Johnson

Published on: October 9th, 2019 • Duration: 26 minutes

Brent Johnson, CEO of Santiago Capital, returns to Real Vision to update his popular "Dollar Milkshake Theory." Johnson unpacks the story of a massive flood of central bank liquidity and explains how capital flows are being sucked into US equity markets through a strengthening dollar. While this has inflated asset prices in the US, Johnson sees these powerful macroeconomic forces building toward a grim reckoning. Filmed on September 14, 2019 in Grand Cayman.



  • mn
    marcus n.
    2 May 2020 @ 18:52
  • NR
    Nathan R.
    11 January 2020 @ 01:48
    Late to the party here, and while I agree the ED monetary system has serious problems, he seems to utterly ignore the possibility of another Plaza Accords. Trump won't be President forever and a conclave of G10 to depreciate the USD would be in the cards if the pain were to get that bad. I hear the cry, "but the EU and Japan will implode." Possibly, but might that also cause them to invest domestically and regionally and make the economic engines of the world a bit more stable and interconnected?
    • NR
      Nathan R.
      11 January 2020 @ 01:50
      Pardon..."LESS interconnected?"
    • PL
      Patrick L.
      5 April 2020 @ 07:15
      If you follow him on Twitter, no he doesn’t ignore it. His point is that the US dollar is a wrecking ball as it appreciates and ONLY THEN does it lead to a plaza accord 2 or hyper inflation and destruction of the dollar...
  • RT
    Ryan T.
    19 March 2020 @ 06:56
    God damn this was a hell of a call...
    • PL
      Patrick L.
      5 April 2020 @ 07:14
      Hell yeah it was. There are some comments on here that haven’t aged well!
  • KI
    Kelly I.
    7 November 2019 @ 11:09
    I keep coming back to this clip because Brent’s dollar milkshake theory is the only view that explains why the dollar, US equities, and US fixed income markets are all simultaneously at or close to highs. He correctly predicted that US equities will trade higher, but at the same time is pessimistic longer term. Love that term global credit super cycle.
  • FB
    Frank B.
    17 October 2019 @ 01:35
    did u give schiff his gold coin?
  • TS
    Taranvir S.
    11 October 2019 @ 14:22
    Despite all this easy money easy money, and yet my (and probably yours too) credit card is charging 20%+ APR and my deposits at the large banks are paying shit
    • JL
      James L.
      12 October 2019 @ 16:10
      Should maybe invest in Visa then no?
    • DS
      David S.
      16 October 2019 @ 11:38
      Refinance CC debt with regular bank loan. Pay off CC each month or your are back in the 20% loan rate on unpaid portion. DLS
  • BP
    Byron P.
    16 October 2019 @ 02:31
    Can someone tell Brent Johnson to stop parroting word for word what Martin Armstrong is saying. Its pathetic.
  • DS
    David S.
    15 October 2019 @ 23:33
    Do not bet on a world recession while MMT is waiting in the wings. All sovereigns and the EUROcrats will print currency until no one will take it. This will be a long time. Gold will work eventually, and Bitcoin if it lasts. Do not bet on any world monetary agreement. It can be broken in a heartbeat by the smarter FX market. Defined pensions plans held by non-fiat printing sovereigns are the canaries in the coal mine. People are retiring daily and there is not enough money to payout the defined pension now much less in the future. Employees get the shaft. The above is just common sense. Of course, “common sense can pass for genius” when everyone believes that printing money will save the world. DLS
  • SS
    S S.
    9 October 2019 @ 19:52
    Can someone please explain how to put on the Canadian Bankers' Acceptance Notes options trade? I am already long Eurodollars Dec2020, 99 Strike.
    • DH
      Darcy H.
      9 October 2019 @ 21:48
      Options on BAX futures (OBX) trade on the Montreal exchange... look 'em up
    • KR
      Kartik R.
      15 October 2019 @ 18:25
      @Darcy H. - I am individual investor and do not have an institutional account to trade BAX futures. Know any platforms/brokers that support BAX futures for retail investors? (FYI: I am Canadian and have a retail brokerage account with Questrade).
  • JM
    Jason M.
    10 October 2019 @ 08:12
    Debt can be rolled.. Doesn't need to be paid back, if financial conditions are normal.
    • NL
      Nikola L.
      15 October 2019 @ 05:54
      but, are financial conditions normal? why FED is pumping money in the repo market?
  • HS
    Henry S.
    9 October 2019 @ 18:45
    U.S: I DRINK YOUR MILKSHAKE! I drink it up.
    • SS
      Sohail S.
      14 October 2019 @ 01:23
      Yes, we got the reference.
  • yd
    yves d.
    10 October 2019 @ 04:23
    if the USD goes higher,substantially, relative to CAD , then the Banque of Canada , ultimately would not be able to cut dramatically: They would have to defend the currency, no ? Otherwise given the place of US imports, in Canada for everyday products, we would see inflation go higher very quickly ... then when you factor the debt level of Canadians; they can't really swallow higher rates without crashing the housing market. Canada is in a terrible place, if Brent is right.
    • MO
      Matthew O.
      13 October 2019 @ 13:57
      I disagree, if Brent is right, interest rates fall further than market expectations and the days of 1.50% five year fixed are back. As rates fall, debt expands, asset inflation drives the “wealth effect” having a two tier society like the US but not necessary bad economically, just more pressure socially. Likely to see the rise of more popular policies anti-immigration (i.e. blame immigration for housing inflation), wage deflation... etc. If you’re positioned accordingly (by owning assets) it will likely offset the impact.
  • TF
    Todd F.
    9 October 2019 @ 12:18
    As a CDN investor who doesn’t trade future or options. Tried to think of a way to capitalize on the inevitable lowering of rates. Looking in to Bank Acceptances but I’m sure I won’t be able to play like a pro. I have been buying high grade fixed perp prefs that are non convertible and trade at a discount to par. Any peer feedback for me? Cheers, Todd
    • PG
      Philip G.
      9 October 2019 @ 13:40
      Same boat Todd, CDN investor looking to play the reduction in CAD rates without access to futures. Would XBB.TO make sense as yields fall? Not a leveraged play though.
    • MS
      Malcolm S.
      9 October 2019 @ 14:00
      Buy gold, silver. They will benefit from increasing negative bonds across the globe and continual QE by the global central banks.
    • AM
      Alonso M.
      9 October 2019 @ 16:05
      Canadian preferred shares act like high yield bonds in an economic downturn. They are too far down the capital structure of a corporation. Credit spreads blow out, and this negative impact on the share price outweighs any positive impact from a lower risk free rate.
    • DB
      Doug B.
      10 October 2019 @ 08:58
      Same, same here. Been burned by preferreds before. Any names Todd?
    • TF
      Todd F.
      11 October 2019 @ 09:59
      I like Brookfield renewable, Canadian utilities, fortis, Brookfield asset management fixed perp non convert prefs. All have healthy dividend coverage ratios, can’t foresee a div cut, mostly utility revenue. Even a common share doc reduction in worst case, can’t see a total elimination of divi. Also, these are all cumulative so would get my back pay when they reinstate div. Brookfield renewable series F seems to trade at biggest discount right now. Just my opinion, as An amateur
    • DB
      Doug B.
      12 October 2019 @ 22:08
      This is pretty interesting. I wasn't aware of BAX futures until reading these comments. Friday, BAX Dec14'2020 closed at 98.17. Given that the BoC current policy rate is 1.75%, BAX futs don't seem to be pricing in much in the way of rate cuts by the end of next year. Darren posted the link with all you need to know:
  • JE
    James E.
    10 October 2019 @ 19:36
    My research says the dollar is topping. Massive dollar buying has lead to a very slow strengthening. Not a good sign.
    • DR
      David R.
      12 October 2019 @ 17:33
      Yep, the next 1000 bps in EURUSD is up, not down. The 1.08 target held like a charm and now dollar bulls are trapped and going to get slaughtered. As EURUSD technically broke out this week - follow thru would be definitive and shout that the next stop for EURUSD is 1.18-120 and then possibly significantly higher. Dollar looks like shit against almost everything and is likely to be pummeled badly. Especially with the new enormous QE4 underway. Look back to the previous QE's when the dollar collapsed 30% quickly. DXY is almost certainly going to collapse toward 80, maybe 70, not 104 where it was not long ago. The dollar recovery has been a classic bear market retracement, technically speaking, so far. And it sure looks close to over and possibly entirely over with a major dollar bear market to begin.
  • MM
    Michael M.
    9 October 2019 @ 12:37
    This is also roughly Martin Armstrong's thesis - it would be great to have him back on, last time was 2015 I believe.
    • WM
      Will M.
      12 October 2019 @ 13:24
      Yes but Martin is not such an eloquent speaker as most RVT guests, therefore the format needs to be tailored and edited to get his major points across to viewers.
  • RS
    Ruben S.
    10 October 2019 @ 14:15
    Thx Brent for the update on the Milkshake ! is recent noise about "getting back to the organic growth of FED b/s" changing your view at all? - as purring some fresh milk into the glass could be enough to stop the Dollar run?
  • ID
    Igor D.
    10 October 2019 @ 12:46
    Phenomenal segment. This guy is a very linear and clear speaker. Please have him back more often.
  • SG
    Sven G.
    9 October 2019 @ 14:39
    i like milkshakes :D
    • SG
      Sven G.
      9 October 2019 @ 14:46
      one other point on a more serious note, I have to say that the interviews without a human interviewer are better than 80% of the interviews with humans. I won't mention who are in the 80% but it's clear to me that listening to a guest coherently deliver their views without being interrupted or taken off course is very much appreciated.
    • DS
      David S.
      9 October 2019 @ 16:49
      As you suggest it depends on the interviewer. Both monologues and dialogues work for different reasons. I do have a problem with rambling set up questions. Shorter questions can focus an interview while explaining certain concepts or keeping the guest honest. DLS
    • DB
      Doug B.
      10 October 2019 @ 08:58
      Rambling setup questions should be felonies.
  • ah
    ahmed h.
    10 October 2019 @ 04:23
    i like his honesty - he's right, its all uncertain and its all about playing the probabilities .. gd segment
  • DL
    Dan L.
    9 October 2019 @ 19:55
    Loved the Tom Brad/Patriots analogy at the end. Beaut
    • Nb
      Nathaniel b.
      10 October 2019 @ 02:25
      It's called the 2 minutes drill btw...
  • RD
    Ravi D.
    9 October 2019 @ 20:02
    Not sure about the strong USD will lead to higher US equities or asset prices? I think its rather complex and not as direct. 1) correlation coefficient between USD and US equities is sub 0.4 (20y period til 2011 and yes slightly outdated). Though its positive, its not that strong and if we take the past 20 years from 2019, I don't think it will be high. 2) You need USD to buy US based assets/equities etc - we currently have a significant USD shortage in the global market, and yes Brent correctly pointed out that the corporate bond market has issued $75-100bn its no way enough. The reason why I say its complicated is because you would need to take in account of corporate profits, US overseas operations, imports and exports, US and overseas M&A, geopolitical issues, etc etc. I wouldn't bet on US equities to break higher.. not because of valuations but I struggle to see what will drive US domestic growth? I don't think US consumers can bare the burden of carrying US economy for the next 12-18 months.
    • MH
      Martin H.
      10 October 2019 @ 01:37
      See Martin Armstrong. Blue Chip US Stocks are in the cross hairs according to him. Made the call a long time ago including the timing.
  • SP
    Sat P.
    9 October 2019 @ 21:33
    23:54 - Looking forward to the "Supernova" before this whole thing comes crashing down
  • JM
    John M.
    9 October 2019 @ 16:16
    Brent doesn't mention CAD FX risk. CAD = 75 cents USD currently. Canadian elections this month Oct 21st. Could be a minority Liberal or Conservative government - that will be chaotic....impact on FX??? Trudeau (Liberal 'leader') is very weak & rocked by various scandals.
    • Av
      Arthur v.
      9 October 2019 @ 21:24
      Yes the FX risk is there when Canada cuts rates. But if they aggressively cut rates, there is the 3 to 10 times profit via the CBA Notes options.
  • AA
    Aymman A.
    9 October 2019 @ 15:20
    Really, really good presentation! How / where do you buy Canadian bankers acceptance notes? Would appreciate it if you an answer about details of this trade. It seems to make a lot of sense to me.
    • DC
      Darren C.
      9 October 2019 @ 19:05
      The Montreal exchange seems to be where to buy them.
  • JS
    Jason S.
    9 October 2019 @ 17:12
    With everyone so dollar bullish it doesn’t make sense that our yields are so much higher. Everyone in the world should be piling into treasuries.
    • PE
      Per E.
      9 October 2019 @ 17:30
      The problem is the hedging cost which means the returns are better in euro and yen terms when they invest locally rather than fx hedged U.S. treasuries. I haven’t heard BrentJ address that once..
  • RK
    Robert K.
    9 October 2019 @ 16:58
    Brent sounds like Marty Armstrong Jr - which I mean as a compliment not an insult
  • DS
    David S.
    9 October 2019 @ 16:53
    Most of the CBs gold purchases are China and Russia because of the weaponization of the dollar. What other CBs are really increasing their gold reserves? DLS
  • TE
    Tito E.
    9 October 2019 @ 16:25
    Brent talks sense
  • AM
    Alonso M.
    9 October 2019 @ 16:14
    The currency in which a company issues debt will (should) mostly depend on its currency mix of revenues. Corporations do this to create a natural hedge and to mitigate FX risk. If there is less of a need for a corporation to create the natural hedge, it will not reissue as much of its debt in USD.
  • LJ
    Lucas J.
    9 October 2019 @ 13:41
    I thought that was Brest best realvision interview. Brings up a bunch of interesting points but I don't get why people play the eurodollar trade or Brent's Canada trade if they think rates are going lower, why not just go with the gold trade? Is it because you can lever those up more? Also, I get how realvision isn't bubble vision and is a bit irreverent but I spent a good portion of the interview wondering where Brent was the night before. Was it a Dierks Bentley concert, Sugarland or some other modern country band? The unshaven look works so much better with an accent, when we Americans do it I don't think we come across as well...
  • DP
    Daniel P.
    9 October 2019 @ 12:02
    This analysis seems largely dependent on predicting the Fed - i.e. that they won't start to catch up in terms of the depth of interest rate cuts in other countries, and that they won't print so much money that they guarantee an inflationary US environment. I understand you could argue that even if you get the fed call wrong, other countries will still need dollars to service their debt, but that alone would seem a far less compelling case for the kind of global deflationary pressure described here.
  • DH
    Daniel H.
    9 October 2019 @ 08:20
    Brent is always interesting.
  • PB
    Pieter B.
    9 October 2019 @ 06:23
    Great analysis! Thanks for the trade ideas!
  • GG
    Gary G.
    9 October 2019 @ 05:52
    Break the monetary system? CB’s will just watch the show? Nice theory and follow up from past episode, but nothing has happened yet for bulls or bears. Time will tell!