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Brent Johnson: latest market views
Santiago Capital
Summary
Brent Johnson is the founder and CEO of Santiago Capital, a wealth management firm, and is best known for originating the 'dollar milkshake theory' of US dollar strength.
Chorus has 37 views from Brent Johnson across 2 episodes on Thoughtful Money and MacroVoices since October 8, 2026.
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Rising yields will cause crisis in Europe, especially France, before the US; Europe may have to cap yields.
Brent points to a recent spike in European sovereign yields, especially in France, as evidence for his Slow Shave thesis. His earlier work argues that rising US yields cause problems overseas. Countries face two carry trades: one in dollar terms because the dollar is the global funding currency, and one in local currency because all money is loaned into existence. France is worse off because, as an EU member, it cannot print the euro and cannot control the currency it borrows in. The ECB and EU will not act for France specifically. Europe also faces weak growth, sovereign issues and new defense spending needs because of a war on its border. He expects financial repression, with yields capped and continued fiscal spending that erodes the euro's purchasing power. He thinks the US is the cleanest dirty shirt, not because it is clean but because problems elsewhere are bigger, and that these problems will show up overseas before they show up in the US. He calls the outlook a slow shave rather than a collapse, because central banks have kicked the can for years.
“that rising yields are a problem for everybody, but that it will manifest in crisis overseas before it manifests in crisis here in The United States.”at 8:14
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
The dollar's relative strength is the most important variable in global finance, affecting almost everything.
Brent argues the dollar's strength on a relative basis matters more than its purchasing power. Gold buyers are often told to buy because the dollar is dying, but that argument glosses over relative dollar strength. He calls relative dollar strength probably the single most important variable in global finance because it affects literally everything. Someone who cares only about purchasing power can buy gold and wait, but anyone who runs a business, operates globally, invests in capital markets or follows geopolitics has to watch the dollar, even if it is losing purchasing power, because it shapes all those markets. He says the dollar could die last and that is still extremely important for everything else.
“And the strength of the dollar on a relative basis is probably the single most important variable in all of global finance because it affects literally everything.”at 13:06
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Dollar breakout above its ~105 band would trigger bad outcomes; dollar near 102 and breakout more likely than a drop.
Brent's framework says the dollar works within a band of roughly 90-105 (or 85-105) on a relative basis, where the global system can handle both dual carry trades that countries face. Above that band, bad things start to happen. He says the dollar is around 102 and getting close, and that given his scenarios a breakout to the upside is more likely than a breakdown. If the dollar rises fast from about 102 to 105, he expects elevated volatility. A move from 105 to 110 in a short period would be a liquidity event: assets get sold to meet margin calls and debt service, because asset prices fall while debts stay at par. He compares this to 2008, 2020 and early 2022, and notes that 2020 lasted about sixty days while 2008 lasted about nine months. His base case is that the dollar stays between 100 and 110 but probably tests the upside within the next year, with low conviction. He keeps hedges, cash and downside protection in case the breakout happens, and says a dollar decline would be fine for his holdings.
“But if the dollar breaks out to the upside of that band, that's when bad things start to happen. And we're getting relatively close to where that is now.”at 16:12
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Treasuries would likely hold up in a dollar liquidity event, possibly with yields falling sharply.
In a dollar-breakout liquidity event, Brent expects forced selling across assets, but he thinks US Treasuries would probably hold up. He notes that a good argument exists that yields would fall dramatically in that environment, though he is not sure that will happen. He also says short-term US fixed income is where he would hide. This is part of his broader scenario in which a dollar breakout sets off a margin-driven selloff.
“I would expect treasuries to probably hold up. Don't you know could make a very good argument that yields would fall dramatically in that environment.”at 22:06
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Gold and silver would probably fall in a dollar liquidity event, as they have before, due to margin calls.
In the liquidity event he expects if the dollar breaks out above its band, Brent thinks gold and silver would probably fall, because they always have in these episodes. He attributes this mainly to the margin-call dynamic, in which everything is sold to meet liquidity needs. This runs against the common gold argument that the dollar is dying. He argues that relative dollar strength matters more to gold in the near term than purchasing-power erosion.
“think gold and silver would probably fall in that environment just because they always have.”at 22:21
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
US equities would fall in a dollar-breakout liquidity event, with real estate depending on how long it lasts.
In the liquidity event that Brent expects if the dollar breaks out above its band, he expects everything to fall, including US stocks, because forced sellers meet margin calls and debt payments. He says treasuries should hold up, and short-term US fixed income is a place to hide. Whether real estate also falls sharply depends on how long the liquidity event lasts. In 2020 it lasted about sixty days; in 2008 it lasted about nine months. Brent says a 20% to 25% drawdown is possible and investors who cannot absorb one should prepare with hedges, cash and secondary liquidity so they do not become distressed sellers.
“And I would expect US equities to go down. The question then becomes is does real estate start to fall precipitously as well?”at 22:31
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Democratic midterm gains beyond his base case create uncertainty weighing on markets; he would buy a dip if Republicans held Congress.
Brent expected Democrats to win the House but not the Senate, and he did not expect the Senate flip or the governor gains. He says this is a surprise, though not a shock, and that his base case was that markets would keep moving sideways with the same divided government. He thinks the current pullback reflects uncertainty about what Democrats will do, including investigations, rapid legislation to undo Trump's moves, and Trump's reaction. Adam adds that many governors were elected on anti-data-center platforms, so AI capex may be at risk. Brent says that if Republicans still held both chambers, he would probably be buying the dip. He also argues that midterm swings usually come with big promises that rarely materialize, and that the midterm outcome matters less over the long run than the market's reaction to uncertainty.
“if we would have had this pullback today with both the house and the senate still republican, I would probably be buying the dip.”at 32:30
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Democrats winning the midterms does not change his thesis; politics is a symptom of longer historical trends.
Johnson argues that the Democrats' midterm win was driven by the economy rather than Trump's policies, and that economic conditions could flip control back. He says his framework is based on historical precedent in which the pendulum of politics swings while a long-term ratchet keeps moving in one direction. That trend is decoupling and de-globalization over 10 to 50 years, so the politicians are only a symptom of it.
“whether the Republicans lose in 2028, whether the Democrats have some masterful campaign... to me it doesn't really matter in the overall scope of things. I think history is taking us in a certain direction.”at 40:12
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
US global standing & alliances
Democrats are unlikely to return Venezuelan energy control, since US control of its oil is a benefit.
Johnson argues that a Democratic government is unlikely to hand Venezuela's oil back or tell US companies to leave. Behind the scenes he does not think they are that upset that the US now controls the biggest energy source in the Western Hemisphere. He concedes they may dislike how it was done and that it may have hurt the US visually in the short term.
“I don't think that they are really that upset that The US now controls that biggest energy source in the Western Hemisphere.”at 42:10
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
US government spending will not be cut regardless of which party controls Washington.
Johnson recalls that after Trump's election, he and George Gammon laughed at the idea that Republicans would rein in spending and cut the budget. He says that did not happen then and does not happen now. He expects the same spending dynamics whichever party is in power.
“I don't think that's going to happen. I didn't think it was going to happen then. I don't think it's going to happen now.”at 43:23
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
The Iran situation is not over; more US action is likely while Trump remains president.
Johnson argues that the Iran story is not over, and that the Democrats' midterm win will not end it. He expects US policy toward Iran to stay as it is while Trump is president, which he says is another two years. He says he would be surprised if there is no more action, though he is unsure how or when it will happen.
“that the policies towards Iran are gonna stay what they have. I don't think it's over yet. I think there will be more action.”at 47:30
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Losing the AI race would make it very hard for the US to keep global hegemony.
Johnson's research service argues that the underlying driver of geopolitics and many capital-market moves over the last couple of years is great-power competition between the US and China. He says this competition is largely a technology and AI race, with technology one of the highest components. In his view it would be extremely difficult to lose the AI race and still keep global hegemony.
“we think it would be extremely difficult to lose the AI race and yet remain global hegemony or win that overall power competition.”at 55:52
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
China is extremely formidable, not an automatic loser, because of its manufacturing and electricity generation.
Johnson says he pushes back on the idea that China's rise is automatic and that it is not formidable. He says China is extremely formidable because of its manufacturing prowess and its ability to generate compute, which depends heavily on its electricity production. He adds that US challenges do not mean the US will automatically lose, and that the US has recently started putting efforts in place to counter this.
“I think they're extremely formidable. Their manufacturing prowess is obvious... a big part of their ability to generate this compute is... their electricity production.”at 56:25
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
The US and China will weaponize compute if needed, with Europe, Africa and Southeast Asia likely losers.
Johnson argues that the US-China competition is a technology and AI race, and that both countries will use control of compute as a weapon when needed. He says Europe, Africa and Southeast Asia are the likely losers. China's large electricity-generation advantage makes its compute capacity stronger, which in turn raises the chance that traditional energy prices rise and hurts importers.
“there is no question that The United States and China will weaponize compute if needed. And I think the losers in that are probably Europe, Africa, Southeast Asia.”at 57:27
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Traditional energy prices, including oil, natural gas and diesel, are likely to rise.
Johnson argues that China's electricity generation advantage matters because traditional energy sources such as natural gas, oil and diesel are likely to go up in price. This is part of his view that the pressure from higher energy costs will fall hardest on importers such as Europe.
“is the likelihood that traditional energy sources are going to go up in price. Whether it's natural gas, whether it's oil, whether it's diesel, all of these other things.”at 57:49
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Dollar-priced energy and a strong dollar add to Europe's pain, straining its ability to stay relevant.
Johnson argues that traditional energy is priced in dollars wherever it is sold, even when invoiced in yuan or euros. If energy prices rise while the dollar stays strong against the euro, that adds another source of pain for Europe. He ties this to Europe's debt-service burden, which he expects will likely force financial repression.
“energy is priced in dollars... as that energy price goes higher and as the dollar remains strong versus the Euro or other currencies, that is another source of pain for Europe to remain relevant.”at 58:11
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Gold likely falls in dollar terms in a liquidity event, but may hold up better in euro terms.
Johnson agrees gold would likely benefit in euro terms because of financial repression that Europe will need to service its debt. He thinks a liquidity event would probably push gold down in dollar terms. He is unsure whether gold falls in all currency terms, since a falling euro or other currency could mean gold falls less in euro terms.
“certainly in euro terms... I think it probably falls in dollar terms. The question is, does it fall in all currency terms? I don't know.”at 59:04
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
The US has co-opted stablecoins, and their adoption will grow once regulatory clarity arrives and crisis hits.
Johnson's research argues that the US government has co-opted stablecoins, a private-market innovation that works as a parallel system to traditional monetary rails, and that this is well underway. Adoption has been slower because markets hate uncertainty, and the pending Clarity Act is holding things up. He expects stablecoin use to grow tremendously, and to be used much more dramatically in a sovereign debt or currency crisis as part of the solution.
“we think that they figured out a way to kind of co opt that system to their own benefit. And we think that that is well underway.”at 1:01:15
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
The dollar's reserve role is moving toward re-dollarization, not de-dollarization, over a long-term trend.
Johnson's framework rests on historical precedent (Rome from roughly 140 to 60 BC) where policies swing back and forth like a pendulum while the overall trend moves in one direction, which he calls the ratchet. He argues the world is decoupling and de-globalizing over 10 to 50 years regardless of year-to-year politics, and that the ratchet is moving toward re-dollarization. He says the US still has the dominant economy, the reserve currency and relative power, and that stablecoins help extend that position.
“the ratchet is still moving in one direction and it's all moving towards re dollarization as opposed to de dollarization.”at 1:02:48
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Wealth, inequality & billionaires
The K-shaped economy will keep growing, and inequality will likely worsen.
Johnson says that if people ask how this will benefit them, he does not know that it will. He expects the K-shaped economy to keep growing and inequality to move in a negative direction. He says he dislikes this outcome but tries to assess the board dispassionately, and that is where he thinks it is headed.
“I think this k shaped economy probably continues to grow. I expect, that inequality will probably continue to move in a negative direction.”at 1:03:32
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Defense and national security spending will be the biggest wave of capital in the next five to ten years.
Johnson says Santiago Capital sees a pro-security, defense or national security initiative as likely to be the biggest wave of capital, with the possible exception of AI, over the next five to ten years. He has been in the business 26 years and has never seen capital flow into a theme like this. The firm plays it through an asymmetric trade that allows a small portfolio allocation with large upside.
“the PRO SEC... defense or national security initiative... we think that is probably going to be the biggest wave of capital... we think it'll probably the biggest wave of capital we've ever seen.”at 1:08:44
Thoughtful Money: "Bad Things" To Happen As US Dollar Strengthens | Brent Johnson ·
Europe is unattractive for capital: weak growth, a war on its border, and political union without fiscal union.
In arguing why global capital stays in dollars, Brent says there is little reason to go to Europe. It has very little economic growth, a war raging on its border, and a political union without a fiscal union, which he finds unattractive. Japan has a number of problems and China has a closed market, so neither is a good alternative. Together with the dollar's role in trade and funding, this means the world has nowhere better to park capital, which supports the dollar.
“Do you really wanna go to Europe that has a war raging on its border, very little economic growth, and a political union without a fiscal union. That doesn't seem too attractive to me.”at 2:26
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
Dollar can rise to much higher levels longer term despite a near-term pullback.
The Fed raised rates to establish credibility, and markets are demanding higher rates. The world still needs dollars to operate: it sells to the US in dollars, borrows in dollars, and stores money in dollars to match liabilities. Alternatives look weak: Europe has a war on its border, very little growth and a political union without fiscal union; Japan has problems; China's market is closed and it is in a trade war with the US. Higher US rates and AI-driven growth expectations also support owning dollars. Near term, the dollar is overbought and the narrative is no longer a shock, so a pullback is possible. Brent does not expect a super spike in the short term. But if the dollar keeps rising, 'heaven help the world,' because it would start to break things. In the end-game sovereign debt scenario, the dollar is more likely to shoot higher than lower.
“But more of the longer term, I still think that we can go back to much higher levels on the dollar.”at 5:55
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
Gold could make a big move higher in weeks after a golden cross, though it may dip toward $3,700.
Gold has fallen from its summer run, with momentum and narrative gone, but it is now at a support area near $4,100. A golden cross, where the 50-day moving average crossed above the 100-day, just formed. If the dollar rises to 110, Brent thinks gold probably falls to about $3,700. If support at $4,100 breaks, gold could fall another 10%. He bought gold for a client the day before, sees the area as a place to start nibbling, and thinks gold will make a fairly big move higher in the next few weeks, probably going higher. If he is wrong and gold falls, he would buy the low. He also expects a short-term bounce in gold and the euro alongside a short-term dollar pullback.
“I actually think the gold's gonna make a fairly big move in the next few weeks. I think it probably goes higher, but if I'm wrong and it goes lower, I would probably be a buyer of that low”at 8:16
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
The Fed is not independent, only autonomous, and will work more closely with Treasury.
US power rests on separation of powers and an independent central bank. But the Fed is not fully independent: it testifies to Congress twice a year and needs a charter from Congress. Its history with the Treasury has been mixed, with the 1951 Treasury-Fed Accord, and in 2022 Powell was raising rates while Yellen drained the TGA and reverse repo, adding liquidity. Over the past eighteen months, Treasury Secretary Bessent has moved into traditional Fed territory with buybacks and swap lines. He said 'we will work together' rather than staying in separate lanes. Brent thinks the Fed and Treasury are headed toward a closer working relationship, driven by a great power competition in which the sovereign needs full power. Whether it is a 'mutual marriage' or a 'shotgun wedding' is undetermined, but he sees dramatic consequences for domestic and world markets.
“We do not think the Fed is independent. We think they have autonomy, but we think that is different than independence.”at 10:02
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
Treasury could revalue gold certificates to market for about $1 trillion, but he doubts it happens soon.
The US Treasury's gold is booked at $42 an ounce on Fed-held gold certificates. Marking them to market near $4,100 would let the Fed mark up the certificates and credit the Treasury's account with roughly $1 trillion, which can be done in an afternoon. It requires the Treasury to ask and the Fed to agree. If the two were at odds, the Fed could refuse to credit the account, and Brent thinks the Fed would lose such a fight. He calls it an accounting trick, similar to the 1930s gold confiscation and revaluation, that increases money supply and reduces the value of each dollar. He thinks the government keeps this as insurance, is not expecting it anytime soon, and sees it as far down the list of Treasury Secretary Bessent's ideas. A dollar bid shows they do not need to do it yet.
“They credit the treasury's account with that trillion dollars, and that can be done in an afternoon, but it requires the treasury to say to do it, but then it also requires the fed to say, okay.”at 17:53
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
Stablecoins let the Treasury bypass banks, eroding the Fed's leverage over it.
The Fed's leverage over the Treasury has come from being its bank and the distributor of the dollar system. Stablecoins are a new capability from the last five or ten years that could put some of that leverage back in the Treasury's hands. Stablecoins do not need a banking system to distribute bonds, raise cash or make payments. As that technology is built out, it removes some of the Fed's leverage. Brent says the Fed and Treasury still depend on each other today, but the ability to remonetize gold certificates or use stablecoins as a backup is a key factor in the future.
“Stablecoins do not need a banking system to distribute either the bonds or to raise cash or to make payments. And so as that technology gets built out, it starts to remove some of the leverage that the Fed has.”at 19:26
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
The Fed has far more policy tools than markets assume; 'out of bullets' talk has been wrong for decades.
Brent has been hearing for 25 of his 26 years in the business that the Fed is out of bullets, and has been wrong each time. His view is that the Fed has far more tools than people appreciate. He ties this to its position as the banking arm and distribution arm of the dollar system to the rest of the world, which gives it leverage over the Treasury. He thinks it is a long way from the more extreme tools, like gold remonetization, that a crisis might require. Those tools do not mean people should expect them now. They do mean people should be ready for them in a crisis, and the Fed and Treasury have more ammunition than assumed.
“I've been doing this for twenty six years now, and for twenty five of the twenty six years, I've been hearing that the Fed is out of bullets. And my point to people is that they have a lot more bullets than you can possibly imagine.”at 22:55
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
US yields are rising because of policy uncertainty, weaker demand, AI growth hopes and passive selling, not inflation.
Many people say rates are backing up because inflation is about to run away, but Brent says the data don't show an inflation problem, which is what he finds puzzling. He gives several drivers. First, uncertainty over Trump's policies means investors are less eager to buy Treasuries. That is not a wholesale rejection, but it pushes rates higher. Second, the AI trade suggests growth could let the US kick the debt can down the road or even grow out of it, so bondholders want more compensation. Third, passive management works in reverse on bonds: as yields rise and bond prices fall, passive portfolios get sold by machines, which can cause fast dislocations, as passive flows do in equities. He is concerned about rates rising and especially their knock-on effects. Rates are also rising in Europe, South America and parts of Asia, and the US, as the big stack at the table, can absorb more pain than smaller players.
“I think there is some uncertainty with Trump's policies and what's going on in the world. I think people are perhaps not quite as excited to run out and buy a treasury as they used to be.”at 25:51
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
He would rather own US dollars than Canadian dollars, earning the yield and the currency gain.
Erik Townsend suggests a carry trade that is long US Treasuries and short Canadian Treasuries, which is liquid and easy to access. Brent says the trade is not a bad one and he would much rather own US dollars than Canadian dollars. A Canadian investor could buy dollars and then a T-bill. As the Canadian dollar weakens against the dollar, they make money on the currency and also earn an extra percent on yields in dollars. He sees this as one way the US draws capital from around the world, and it reflects his view that rates will rise more sharply outside the US, hitting other economies harder.
“I would much rather own US dollars than own Canadian dollars. Or if you're a Canadian, you just buy dollars and then you buy a UST bill.”at 32:11
MacroVoices: MacroVoices #553 Brent Johnson: Disparate Housewives ·
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