Welcome to my series of macro outlooks where I put together threads focused on long term perspectives for major asset classes. My goal is to provide you with a long term view that I update on a monthly and sometimes weekly basis so that you can have the means to make wise and calculated trades in the shorter term.
I have threads for assets that are typically viewed by investors and traders as market leaders. Having an idea where the market leaders are heading will give you a compass to make decisions in smaller cap assets that tend to follow.
I will do my best to keep these threads purely technical in nature.
The Dollar Milkshake Theory
The dollar milkshake theory, coined by Brent Johnson, is the theory that before any type of hyperinflation occurs, countries must pay off their debts. Since the dollar has historically been the global reserve currency, the majority of debt is held in US dollars. As we enter the stage of retracting economies and deflation, liquidity will get sucked into the dollar.
The Petro Dollar
The US dollar has been the standard for oil trading. From 1971 to present day, if you want to buy oil, you need dollars to do so. Countries have been trying to get around this. We have seen countries like China swapping oil for gold and other savvy moves. This hasn't become the dominant way of trade to avoid a type of war, I'm assuming.
The Forex Markets
The forex markets are pairs of national currencies trading back and forth. Each currency "price" reflects the strength of that country's economy against the countries currency it is measured against. The $DXY for example reflects the US dollar against a basket of currencies such as the Euro, Pound, Swiss Franc, Etc.
Understanding the forex market, specifically the DXY will give you a snapshot of what the country's economic condition is in.
Enjoy!
I have threads for assets that are typically viewed by investors and traders as market leaders. Having an idea where the market leaders are heading will give you a compass to make decisions in smaller cap assets that tend to follow.
I will do my best to keep these threads purely technical in nature.
The Dollar Milkshake Theory
The dollar milkshake theory, coined by Brent Johnson, is the theory that before any type of hyperinflation occurs, countries must pay off their debts. Since the dollar has historically been the global reserve currency, the majority of debt is held in US dollars. As we enter the stage of retracting economies and deflation, liquidity will get sucked into the dollar.
The Petro Dollar
The US dollar has been the standard for oil trading. From 1971 to present day, if you want to buy oil, you need dollars to do so. Countries have been trying to get around this. We have seen countries like China swapping oil for gold and other savvy moves. This hasn't become the dominant way of trade to avoid a type of war, I'm assuming.
The Forex Markets
The forex markets are pairs of national currencies trading back and forth. Each currency "price" reflects the strength of that country's economy against the countries currency it is measured against. The $DXY for example reflects the US dollar against a basket of currencies such as the Euro, Pound, Swiss Franc, Etc.
Understanding the forex market, specifically the DXY will give you a snapshot of what the country's economic condition is in.
Enjoy!