Why Bitcoin Needs The Dollar To Die – Brent Johnson

**Scott Melker** (0:03)
Markets and geopolitics can continue to be all over the place. So today, we're going to focus heavily on the dollar. We have a very special guest, Brent Johnson from Santiago Capital, famous for the dollar milkshake theory. You know, I drink your milkshake, you guys have seen that movie, right? We're going to talk about what's likely to come for the dollar in context of everything in markets. We've got him, Mike and Dave joining today. Let's go.
Good morning, everybody. Happy Monday. We've got Mike and Brent here. Dave will be joining soon from the sunny shores of Las Vegas, where he's playing in the World Series of Poker. But Brent, thank you for joining. Very excited to have you again. I think it's been a really long time since we did our last podcast.

**Brent Johnson** (1:00)
Yeah, yeah, thanks for having me. This should be a fun hour.

**Scott Melker** (1:03)
Yeah, absolutely. All right, Mike, let's start where we always start. What's everybody talking about at Bloomberg today on the morning meeting?

**Mike** (1:09)
It was the first time they asked me to go first. I'll save my comments to last, which was kind of shock out about crude oil. Obviously, you know my bias in crude oil. It's going to 50 by the end of the year. But I'll save that for later. Anna Wong first mentioned that she expects course PCE to move up to 3.35 percent, could run up to 4 percent. Year of year is likely to be 3.4 to 3.3 percent. What's driving it is mainly is airfares, healthcare costs and portfolio management. That's part of the stock market going up, creating actual inflation PCE. She pointed out that Warsh is very hawkish, which one thing she noticed, he focused on price stability, not talking about full employment. And she said they may abandon that second leg employment right now, because it focuses on price stability. Half of the committee wants hikes and half wants stable, so the focus is towards hikes.
Does it make sense, her view, to hike rates at all, certainly in October, because her normal projection for CPI core would get to near 2% in April of 2027 and below 2% at some point next year. And she said if the Fed does hike, she's going to revise upward her unemployment rate outlooks. Ira Jersey, our interest rate strategist, said the market was surprised by Warshawka's comments.
He said SOFR's oddly priced for more hikes and then cuts next year, which he thinks he's leaning towards the Fed being slower, which is on his same view.
How the market will shift its communication policy was his key question. He thinks it probably means more volatility, less communication. Two is flattening, expects that to continue. And he thinks SOFR's actually just a little bit out of whack at the moment. Chris Kane, our equity strategist, pointed out how bullish everything is.
He's a major factor guy. He pointed out the number one factor winning by far is momentum. But he says it's typically not as extreme as it often time gets extreme versus low momentum. Right now, he says momentum premium and high momentum stocks is about 18% above low momentum. So that can get extreme at 60%. He says one key thing that's extreme is ROE. Lower profitability in the high momentum stocks is quite extreme. Audrey Schill Freeman said, yeah, this is quite bullish for the dollar. From Chairman Warsh, expects the euro to continue shifting lower, and the yen now is above, below in its value, above the intervention level 160 That's a problem. Expect the dollar strength to continue, potentially, particularly if the Warsh comments and with the economy doing better. And then I just tilt over to my economist. I started out with the key focus I'm enjoying in crude oil, and still a lot of analysis I see is people are just missing what matters. The 10, on a 1 to 10 basis, is what does the leader of the world's largest energy producer, net exporter, want? Sure, Mr. Trump did not get his surrender out of Iran, but that doesn't matter now. He needs lower energy prices for midterms. He needs lower inflation. Warsh gets that. And then I pointed out the pump and dump contagion is gaining momentum. First, in the beginning, it was just Bitcoin and US natural gas. Now it's gold, silver, platinum, and platinum, iron, ore, and corn. I expect that to continue. I came up with my outlook. I still expect crude oil to be down in the year, just like natural gas, by the end of the year. That would be below $57 a barrel. Right now, it's $74. The December contract is $71. And I think we've put in pretty enduring peaks in gold and silver. One fact I pointed out, the 60-day correlation between gold and S&P 500 is the highest ever, about 0.7.