 Brent, welcome to the show, man. How are you doing? I'm good. Thanks for having me. Yeah, my pleasure. Well, the reason why I got you on the show is I've been following your work for a while. And as of late, your work on the milkshake theory is quite relevant. And not too many people know about at least on my audience. So I would love to kind of kick off this episode and podcast with you kind of briefly explain explaining that theory of the milkshake theory. OK, so the milkshake theory kind of came about over a process of a couple of years. It kind of started in 2016 and it kind of became more fully developed in 2018. And it basically came as a result of me trying to figure out why the dollar wasn't going down when I thought it should and why gold wasn't going up when I thought it should. And so I really kind of did a deep dive into I already had a good understanding of how the monetary system was designed and the way money came into existence. But, you know, my preconceived notions based on that knowledge told me that the dollar should be falling and gold should be rising. And I couldn't figure out why it wasn't. So I finally just really kind of had to check myself for lack of a better word and really kind of deep dive into all the different pieces and figure out what I was missing. And as I came out of that, what I realized what was happening was that I was doing a very good analysis on the dollar, but I was doing it in a vacuum. And what I mean by that is, you know, it's not too hard to understand the fact that if you have a limited quantity of something and you have a high demand, the price goes up. So, you know, if you have the ability to manufacture that quantity and print it into oblivion, that should mean the dollar should go down, right, pretty simple. But when you live in a world of multi fiat currencies and it's not a closed system where only one currency is used, then you realize that it's more than while you're not wrong on the whole idea of printing currency will debase it. It doesn't necessarily translate into falling versus other fiat currencies because you have to take all their, you know, characteristics and quirks and advantages and disadvantages as well. You know, and after Nixon cut the the Bretton Woods system and took the U.S. off the gold standard in 71, you really got into a situation where fiat currencies were really just floating against each other. And I realized what I had done wrong, not had done wrong. It wasn't that I had done my analysis wrong. I just, it was just incomplete. And so when I figured out that I needed to take other countries into account and other currencies into account and I realized that for many reasons there's an institutionalized effect that it goes along with having the global reserve currency. But it's not quite as easy to leave the dollar as just saying it. And so I came to the conclusion that for many reasons the dollar was going to rise in value. And I thought that that would initially be bad for commodities, asset prices in general. But then I also got to thinking, well, again, money's got to go somewhere. And so even if all of these currencies are bad, the individual fiat currencies are bad, one of them is going to get the flows of capital from around the world. And that will be the dollar for the reasons I just mentioned. And so I thought we would eventually get into a situation where because there were so many advantages that the dollar had over other fiat currencies, it would suck up all that liquidity into the United States markets. And I kind of borrowed from this movie called There Will Be Blood where it was this ruthless oil baron who would just kind of do anything to beat his competitors. And he explained to one of his competitors one time he was just going to stick a straw into the ground, put it into the other guy's side of the other guy's fence and just suck up his milkshake, suck up all his oil. And that's really kind of what I see happening in the global economy over the next couple of years. I think for a number of reasons, the US is going to suck up all that liquidity. Now at the time, the US was raising interest rates while the rest of the world was still doing easy monetary policies. And so I used the analogy that as we raised interest rates, that's like sucking capital up while everybody else is still injecting capital. But my theory wasn't based solely on interest rates. Now that was a big part of it. So I won't say that that wasn't a key factor. It certainly was. But a lot of people have said now that we have lowered interest rates and gone back to injecting, does that mean the milkshake is over? And the answer is no, because now we're just to help and everybody else inject it. We're not only drinking everybody else's milkshake, we're mixing our own milkshake, but a lot of the institutionalized effects of the global reserve currency still exist. Tax policy is still favorable to the US. A regulatory policy is still favorable to the US. We still have the deepest and largest capital market. So they're the most liquid. Even though the whole world is slowing, there is still little pockets of growth here and there. And I think we have more of those little pockets of growth than anybody else. Again, it's all relative. It doesn't mean it's great. It just means it's better than anywhere else. And we have the US military, which kind of enforces the uses of the dollar. And we have the global dollar payment system, which there's no real other system to send capital around the world as efficiently. So for all of these reasons, all of these reasons are kind of like the straw that helps suck that capital into the US. And that's why I think the dollar is going to get stronger as we go through these deflationary events over the next couple of years. It will eventually end horribly for the US as well. It will end in inflation, not deflation, but I think we have deflationary effects to get through before we get to that inflation. So that was probably a very rambling way to explain the dollar milkshake theory, but that's what it is. It reminds of the Gresham's law, right? Bad money drives out good money. So it sucks up everything. My question is then, follow-up question for that is, what does this mean for the American market then? Yeah. So, well, in the short term, it's tough. It's hard for everybody. I think we had the huge sell-off. We've had a pretty good bounce. I don't think anybody can really complain with the bounce we've had. I think it's likely that we go back down and retest those lows. We might not, but I think that that is likely. And maybe we even go a little bit lower, but I think what it means for the US markets is over the next couple of years, even the US stock market, I think will outperform the rest of the world on a relative basis. And I actually think that the US stock market will return to its highs. That's probably the biggest or the most controversial part of my theory, the thing that most people push back on. A lot of people can understand the flight into the dollar. They have a hard time believing that it will find its way into the stock market. Essentially, what I think will happen is, there will come a point where the general public and not just the few people who have really studied it and understand that global sovereign bonds are going to lose value. They're never going to be paid off in real terms. Now, there's a subset of people who understand that, but I don't think the general public really buys that yet. But when that happens, I think sovereign bonds will get sold. And I think when that happens, they won't just go to cash. They might go to cash, but again, if they go to dollars in cash, I don't think it will just sit in cash. I think it will find its way into US assets, and I think it will find its way into things like Coca-Cola or Philip Morris or... Or recession-proof businesses. These other big blue-chip battleship-type companies that pay a dividend. And I think that will make valuations go through the roof, which will be ridiculous, but I just think it will happen. So this isn't a value play. People will say, well, yeah, but price to sales and price to earnings, it'll be off the charts. And I agree, it will be. And I don't think it should happen, but I think it's going to anyway. And because I think that will be a release valve for when people eventually decide to get out of bonds. Again, I think US bonds will be sold last. So I don't think treasuries are going to default next week or anything, but Italian treasuries might, or Indonesian treasuries might, or Chinese treasuries might. So I think there'll be a dominant effect where sovereign bonds around the world will get into crisis prior to the US treasury getting into crisis. And as that happens, that's kind of the squeezing of the liquidity. And I think it gets squeezed into the US markets. What do you think the ramifications are then for like US exports? Yeah, it's hard, right? Not great. Not great, I know. Not great. And again, so I don't necessarily think US exports go up a lot. And then you can make an argument, well then stock prices have to go down, but not evaluations rise, right? So again, and this will eventually end really bad. I think likely we're going to get this big blow off top in the US, and then we'll just, that's when the big depression will hit. Then we'll have the 50, 60, 70% crash, and maybe we have 10 years of sideways depression. I just don't think we're there yet. Maybe we are, I could be wrong, but I don't think we're there yet. The exports are a big one for me. Like I'm in Canada, and our dollar has always been quite weaker than the US dollar. It dropped significantly in the last couple of weeks. It's risen a little bit. Nothing compared to the Australian dollar. We work around the world. Everything's quoted in US. But if you look at the conversion rates, it's not even worth it for us to be doing business with these people. It might as well just be hiring local people because of the 4X exchange. Right. No, exactly. So I think the Canadian dollar and the Australian dollar are really similar, and the economies are really similar. Their exposure to China is very similar. Their dual real estate bubbles are very similar. I think those countries are going to have a really hard time over the next couple of years. Canada is one of the most indebted countries in the world, both on a government level and on an individual level. So I certainly can't look at the US and say that we are this paragon of virtue when it comes to being fiscally responsible. But when I look at Canada, I think I'd rather have my money here than there. Ontario that has, I don't know, at its peak, maybe eight, nine million people, something like that. So a quarter of the Californian population, we have more debt than California. It's ridiculous. And it's all in the last 10 years. The provincial debt has doubled in the last 10 years, and provincial debt is now greater than federal debt in Canada. And what's interesting, part of the reason that the Bank of Canada had to come out and start buying provincial debt is it started to get sold. And the problem is that provincial debt is now bigger than federal debt, but it only has 20% of the liquidity of federal debt. So if everybody starts to sell it, it turns ugly really quickly. And that's why the Bank of Canada had to step in. Do you think the current oil crisis, since we are, all there is oil, it's pegged oil. Do you think that plays anything different, or does that kind of change the outcome that you've been saying for a while? No, it actually exacerbates it. I've gotten this question a lot over the last weekend. I'll tell you why. I did a presentation in Vancouver that was really specified towards Canada. And if you tracked Canada's GDP with the price of oil, it's pretty much one for one. So this fallen oil over the last couple of weeks, it's not positive for Canada. It's not positive for a lot of places. I'm not picking on Canada, but just... We're anti-business here, by the way, so... Well, that doesn't help either, right? But here's the thing with, when the price of oil falls, it means that those oil exporting countries are now receiving less dollars for their goods. But those oil exporting countries, a lot of them have dollar debt. They have dollar liabilities that they need to fund, and their operations take place in dollars. So if the price of oil is lower, not only is less dollars flowing, which makes it harder to come by, it also leads to defaults within the oil industry. A lot of people will say, yes, but a lot of that takes place in the frackers and stuff in the United States, and that's true. But it still contracts dollar supply. And in a debt-based monetary system, when defaults happen, the demand for those dollars goes down at the level of the loan that's defaulted on. But supply gets really crunched more than just that level of demand. So even though demand falls, the supply of money contracts even more. And so you get this credit contraction, which means dollars are even harder to come by. So now you've got... It's like musical chairs. Not only did the music stop, but a couple of the chairs are being taken away at the same time, too. So you've got... Let's just use an example. You've got 100 people walking around 30 chairs. When the music stops, it's 100 people going for 30 chairs. But then imagine 10 chairs disappear as well. So now you've got 100 people going towards 20 chairs. It's kind of the same dynamic. So as the price of oil comes down, it's indicative of demand falling. It's also indicative of these companies and these oil producers, or the whole industry comes under pressure. It's demand destruction. It's supply destruction from a dollar perspective. And it just becomes extremely deflationary. So that actually helps my theory of the dollar getting stronger. It doesn't necessarily help my theory of US asset prices rising. It's not always going to happen every day. But it certainly helps my theory that the supply of dollars will be constricted, and it will be harder to get ahold of them. Do you think the US is going to amend any NAFTA agreements it had before? I think it's possible. I think it's possible. Whether you like Trump or whether you hate Trump, whether you think what he's doing is right, or whether you think he's doing is wrong, he is who he is. And he's always going to try to renegotiate things in his favor. And in the last two or three months, Canada has cut rates three times. Mexico has cut a couple of times. They just cut rates again today. Their currencies have fallen since the NAFTA deal was negotiated. There's actually a clause. I don't have it right in front of me, so I don't have the language exactly. But I know that there is a clause in the recent NAFTA agreement that says, if currency manipulation takes place, this agreement can be null and void or can be renegotiated. So I can see six months from now, nine months from now, Trump's taking a look at this and he's saying, well, hold on a second. Your currencies are reached down 20%. You're manipulating your currency. And with Mexico and Canada going to say, we're not manipulating our currency, our economies are in trouble. This is the markets taking our currencies lower. And Trump's going to say, I don't care. Because he doesn't care. He just wants his pound of flesh. So I think that the dollar will be used as a weapon over the next couple of years. It's already been used as a weapon for several years, but I think it will become increasingly so. I see one upside though for Canada. So at least for the service work, knowledge base, and Silicon Valley's been doing this for a while, but I think this even propagates a little bit more. The amount of developers and workforce they can get for the premium of the dollar in Canada is just, it's a win-win for the American companies. Not only that, I'll go another one for you. As companies, one of the impacts going forward of COVID, once COVID is behind us, if it ever is, right? But once it's behind us, I'm not sure that people are going to go back to work in the way that they were before COVID. In other words, one thing that I think has been shown is that some of these service businesses, people can do their jobs from home or do them remotely. And I still think it's advantageous to have an office, and I still think offices will still exist, but maybe they don't have all the square footage that they used to, right? Maybe they do offer, people have the ability to work from home in order for these employers to save some money on rental space or whatever it is. And so if they can hire Canadians who can do it just as well as an American counterpart, and they can pay them in Canadian dollars at a much better, you know, telecommuting from Toronto is just as easy as telecommuting from around the block. The distance doesn't really matter. So I do agree with you on that part. Where do you see us then from a year from now? Like what I kind of want to at least lay out for people, what can regular entrepreneurs or people who are in business, I'm not talking about billion dollars, what can they do in this circumstance? Are you talking about Canadians or just people in general? In general, let's say. Like most people are global business anyways. Like my business is online, I got customers everywhere. Yeah. Well, the first thing I would do is I would hold any savings or reserves in dollars. US, yeah, yeah, yeah. And then, you know, pay your expenses in Canadian dollars and or Australian dollars or euros or whatever it is, but I would hold my savings in dollars. Now, I do anyway. It's just kind of natural for Americans to do it, but I really think that that would be one, that'd be the first step I would say is, you know, hold as little local currency as you need to. The other thing I would say is if you have a job, keep it. This isn't, I don't think this is the time to be cavalier with, you know, putting my job and I'm going to, my value is really high, so I'm going to go get another one somewhere else. Maybe that's the case for you, but I think times are going to be tough over the next couple of years. So I think if you have a source of income, you should respect that source of income and try to keep that source of income. Now, it doesn't mean that it's not an opportunity what's that saying that chaos is a ladder, right? So, you know, with this great times of disruption, if you see an opportunity, I'm not saying don't try to get it. I'm just saying be careful and don't just throw caution to the wind, make sure, but once you've made sure, if you see an opportunity, be ready to take it, but don't just, I don't think it's time to just have a hunch and buy a bunch type of thing. I think you really need to think about what your moves are. Also, Brent, I just want to thank you so much for coming on the show and sharing all your knowledge. If people want to get ahold of you and know more about you, what's the best resource? You know, you can email me. It's Brent at SantiagoCapital.com. My website is SantiagoCapital.com. It's just a landing page, but it has my contact information on there. I'm also pretty active on Twitter. It's SantiagoAUfund, so you can find me there. And, you know, I do a number of presentations and podcasts and funnily enough, which I laugh at this, but if you type dollar milkshake theory into Google, you will actually get a number of links that come up. So if you're interested in hearing more about that, check that out. Brent, thank you. Absolutely.