How are you looking at the entire macroeconomic picture right now? It has been almost a year since the pandemic set in and we have had a lot of time to digest what has happened. Where do we stand at this moment?
We are at the precipice of another turn. In a weird way, the pandemic actually saved rather than hurt the stock markets. When Covid hit, all the asset classes fell and the US dollar rose. It was such a dramatic event that the whole world came together and rather than working against each other they all worked together to push the US dollar lower, to elevate stock markets and to bail out companies and the banks at the end of it. The world has got way ahead of itself on the reflationary theme.We are going to have some rising prices due to supply shocks and supply lines being disrupted but this idea that the world is going to go through the 1920s all over again — I don’t think we are there yet. I think more than likely we will have another crisis.
Has the pandemic in any way affected your Dollar Milkshake theory and what is your view with respect to the dollar?
Brent Johnson: If my thesis was ever going to play out, the table is set for it to happen and we always thought that there would be some catalyst that would cause the shortage of dollars to show up in the markets and then the dollar being strong would lead to another crisis. We never thought the pandemic would be the catalyst but it turns out it was and so we really could not have been more right from January to March of last year. I do not think the amount of liquidity that everybody thinks is there, is really there. And, part of the reason is because lending has not picked up. Unless banks start lending again, we are going to roll over again. The lending from banks is the key to everything and right now the banks are just not lending.
Have you ever considered investing in India or do you currently have any investments in India? How do you look at the entire India story at this point of time?
The exciting thing about India is that it is such a big country but it is growing very fast with very smart citizenry. Not only that, the demographics are also very good. It is a very young country. So there is a huge potential there. I am long-term very bullish on India. In the short term, I am probably not. There is probably some pain to come. But long term, once we get through the next couple of years, that could be difficult. That is an area of the world where you want to go up and buy as much as you can because long-term prospects are fantastic.
“We are going to have a currency crisis once the US dollar gets very strong and other currencies get very weak. Then you want to go to places like India or Bangladesh or eastern Africa and start looking at some of these emerging markets.”
Where do you stand on the entire Bitcoin versus gold debate? Do you believe that they can both coexist in one’s portfolio?
I know that they can coexist in a portfolio because I own both of them and I have encouraged other people to own both of them. The debate between the two is a little bit silly because there is no reason you cannot own both of them. If I had to choose between the two, I would pick gold. Gold has proven over millennia that it will still be there and it will still have value and Bitcoin has shown recently that it has incredible power and incredible potential but it has not yet been tested in the same way that gold has. Not only that, in societies like India going back thousands of years, people have used gold. You did not need to have electricity and phone lines and mobile communications in order to use gold but you do need that in order to use Bitcoin. So if I had to choose, then gold is a superior asset to me.
How do you expect the global central banks to tackle the level of indebtedness that has now come into the system after the pandemic?
All the different things like debt forgiveness, negative interest rates and virtual currencies are going to play out. What will also play out is this is going to become a geopolitical issue for better or worse. The monetary system is headed towards, not necessarily an end game, but some kind of reset. A part of that is that some of these debts will be forgiven. I just feel that because the debt has become so big, we are coming towards the end of this monetary experiment for lack of a better word.
What will the end look like?
A lot of people think that the US dollar is going to lose its value and as it loses its value then other currencies are going to come in and take its place. I actually think it is going to be the opposite. When there is a reset in the global monetary system, there will likely be a basket of currencies that is used as the global reserve currency or a basket of currencies and commodities including gold. There will be some government or a collection of governments to enforce it. It will be in a digital form, but it is not going to be Bitcoin.
How does one position their portfolios for this sort of world that you are predicting?
First of all, I would say everybody needs to realise that the governments are coming for their money in order to bail themselves out. You need to do as many things as you can to protect yourself from that happening. A part of that is owning some real assets whether that is gold or land or Bitcoin or some kind of real asset. It does not mean you put everything in gold. You should be diversified. I think the most important thing to think about is the currency because all currencies are falling but one of the currencies is going to outperform. A lot of people outside the United States are going to see their currencies fall dramatically relative to the US dollar and to the extent that people outside of the United States can protect themselves by giving exposure to US dollar assets as those assets rise versus their currency falling. Ultimately, we are going to have a currency crisis because the US dollar gets very strong and other currencies get very weak and once the dollar has peaked, you want to go to places like India or Bangladesh or eastern Africa or western Australia and start looking at some of these emerging markets.
