The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise
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Jack: Forward guidance is brought to you by VanEck, a global leader in asset management since 1955. You'll be hearing more about a VanEck ETF later on. But for now, let's get into today's interview. So glad to be joined once again by Brent Johnson of Santiago Capital. Brent is an asset manager who focuses a lot on the power of the dollar, and he is well known for his role of viewing the dollar as a risk off hedge, which he thinks is underrated.
And I think he's got a lot of compelling reasons why, as well as the view that he has the temerity to say that the dollar the global dollar system may last for 1 more week or 2 more weeks or even 5 years, which, you know, we all know the dollar system's about to collapse. Anyway Yeah. Brent, great to see you. How are you doing, my friend?
Brent: I'm good. Thanks for having me back. It's been a while since we spoke.
Jack: It's been so long to frame the conversation and to to put a pin on it for the audience. We're recording the just afternoon of Friday, August 2nd this morning. The market had a little bit of a shock with, the very, very negative labor market. Unemployment rate ticked up from 4.1% to 4.3%. And so stocks are selling off like crazy.
Of course, it can always be crazier. And, interest rates are collapsing. The market is now pricing, 50% chance that the market the Fed does 2 double cuts, double cut in September, double cut in November, which to me seems a a little extreme, as well as pricing something like a 70% chance. Again, we recorded 12:0:4 PM that the Fed just does a a double cut in September. So things are getting a little topsy-turvy out there.
Brent, how are you, thinking about this market?
Brent: 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 what's been kind of interesting to me so far is that while the market pullback has been I don't know. It's I wouldn't say it's been too dramatic, but it's been hard. It it it's not really the result of some crisis somewhere. It's really just a re a evaluation 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, 4, 5, 6 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? But so far, I think it's been fairly or orderly.
And, again, while some of the moves have been big, especially in technology, you have to remember that the moves higher were 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, you know, we haven't seen a big blow up in anything yet. So in my opinion, what we're seeing now is the beginnings of a re of a valuation reset, and the question is what happens from here?
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