What is the Dollar Milkshake Theory?

The Dollar Milkshake Theory, penned by Santiago Capital's Brent Johnson, foresees the US dollar fortifying amidst global economic uncertainty. The theory pivots on two contrasting central banking strategies: expansive liquidity provision by global central banks and the US Federal Reserve's tighter monetary policies. 

The former creates a 'milkshake' of global capital, and the latter acts as a 'straw,' drawing in this capital due to higher returns and perceived safety. Despite inherent US economic weaknesses, Johnson's theory suggests the dollar will strengthen as it becomes a global financial sanctuary. This provocative theory has ignited heated debates within economic forums.

How Does the Dollar Milkshake Theory Impact Gold?

The Dollar Milkshake Theory, if realized, could have a two-pronged impact on gold. Typically, a stronger dollar, as predicted by the theory, would drive gold prices down due to their inverse relationship. 

However, in periods of severe global economic uncertainty, gold's status as a safe haven could counteract this effect and potentially increase its price. The final outcome would depend on the severity of these factors and investor sentiment.

How Does the Dollar Milkshake Theory Impact Bitcoin?

The Dollar Milkshake Theory's impact on Bitcoin remains a riddle, thanks to the cryptomarket's unpredictable & relatively nascent nature. That being said, here two game theoretically plausible outcomes:

  1. Dollar Dominance: A surging dollar could theoretically undercut Bitcoin prices. As the greenback flexes its muscles, Bitcoin, for non-dollar holders, could become pricey, potentially reducing demand. Additionally, a safe-haven dollar might lure investors away from riskier bets, like Bitcoin and into US dollar treasuries and debt.
  2. Bitcoin: The Digital Safe Haven?: Contrarily, if global instability escalates, Bitcoin, often touted as "digital gold," could pique investor interest. Should Bitcoin's safe haven narrative gain traction, we might see an uptick in demand, and consequently, its price.

However, tread lightly. Bitcoin’s relationship with traditional financial markets remains an enigma, and its price swings are influenced by a kaleidoscope of factors. As the Dollar Milkshake Theory unfolds, Bitcoin's trajectory will likely hinge on its evolving perception and acceptance in the financial world. For a deeper perspective, you can read Santiago Capital's research paper on Bitcoin written by Brent Johnson or watch his video on the Crypto Milkshake Theory with Bankless.

How can I Prepare my Portfolio?

In light of the Dollar Milkshake Theory, there are a few strategic moves to consider for safeguarding your portfolio:

  1. Diversification: This is your first line of defence. Hedge your bets across different asset classes such as stocks, bonds, commodities, even cryptocurrencies if you're feeling adventurous.
  2. Risk Appetite: Know your limits. Gauge your tolerance for red on the trading screen and align your portfolio accordingly.
  3. Stay Informed: Knowledge is power. Keep your finger on the pulse of global economic trends, crypto news and expert commentary to steer your investment ship wisely.
  4. Seek Expert Guidance: Consider roping in a financial advisor for tailored strategies that align with your financial goals and circumstances.
  5. Emergency Savings: Keep a stash of liquid assets for financial curveballs. This should be a separate pot, not intertwined with your investments.

Remember, theories like the Dollar Milkshake Theory are just that - theories. They offer a lens to view complex financial systems, but they aren't crystal balls. Brent Johnson himself always outlines how multivariate and complex financial markets are, and that nothing is certain. Hedge your bets by considering various perspectives before making any financial moves.

Who is Brent Johnson of Santiago Capital?

Brent Johnson is the CEO of Santiago Capital, a private company that offers wealth management services. He's well-known in the financial industry for his Dollar Milkshake Theory. Johnson has considerable experience in the finance sector. Prior to founding Santiago Capital in San Francisco, he worked for Credit Suisse and Baker Avenue Asset Management, among other financial firms.

Not only an experienced wealth manager, Johnson is also a regular speaker at large investment conferences and popular Macro podcasts such as Real Vision or Blockworks. He also hosts his own show called Markets Milkshakes and Madness (@MilkshakesPod) on Youtube alongside Jon Kutsmeda. He is often featured in financial news outlets for his unique and often balanced interpretation of monetary policy, global currency flows and other macroeconomic trends.

Bottom Line

In conclusion, the Dollar Milkshake Theory by Brent Johnson offers a unique perspective on the future of the US dollar amidst global economic uncertainty. While the theory suggests a strengthening dollar, it's important to remember its potential impacts are multifaceted, influencing various asset classes, including gold and Bitcoin. As an investor, it's crucial to understand your risk appetite, diversify your portfolio, stay informed, and consider seeking professional advice. 

While the Dollar Milkshake Theory is an intriguing lens to view the financial markets, remember it is just one of many perspectives. As always, Brent Johnson advises considering the complex and multivariate nature of financial markets, emphasizing that nothing is certain. Stay informed, stay diversified, and stay prepared.