Brent Johnson (@SantiagoAuFund), the CEO of Puerto Rico-based wealth management firm Santiago Capital and the creator of the Dollar Milkshake Theory, returns to the podcast for episode 79.
Brent, who believes we’re heading for a currency crisis, is the creator of The Dollar Milkshake Theory, a framework he developed to explain how a sovereign debt and currency crisis might play out. He explained how the world was flooded with liquidity thanks to extraordinary monetary policies following the Global Financial Crisis. The Dollar Milkshake is a simplified way to demonstrate how capital — all of the liquidity that makes up the “milkshake” — would flee the rest of the world and get sucked up by the U.S. Dollar (the straw) and U.S.-based markets creating a myriad of problems globally.
During this conversation, Brent explains his Dollar Milkshake Theory and what’s changed since publicly sharing his thesis five years ago. Brent weighed in on the de-dollarization narrative and why he expects the U.S. dollar to go higher. He also made a case for investing in gold.
0:00 Show Open
1:22 Welcome Brent Johnson
2:04 Macro framework
2:57 Heading toward a sovereign debt and currency crisis
4:04 Rate hikes will likely pinch economy in back half of the year
4:50 The Dollar Milkshake Theory, explained
6:52 Why we’ll likely see easy money again
7:45 “This is not a story that ends well”
10:00 Has the Dollar Milkshake Theory changed in 5 years?
13:42 Last year solidified our thesis
17:37 Catalysts for a higher dollar
19:19 Credit crunch
21:43 Geopolitical concerns
22:40 De-dollarization
29:49 A blowback from rate hikes?
35:00 Headlines don’t match reality
37:33 Debt ceiling short-term and long-term implications
44:14 Why is the Fed continuing to hike?
48:20 Why the Fed will pivot
50:05 Regional banks
52:52 Owning physical gold as an insurance policy
55:05 Cash for optionality
56:56 Camino de Santiago
1:01:01 Parting thoughts
