3 cups packaged unsweetened shredded or flaked coconut
1 cup hot water
1 cup sweetened condensed milk
1 cup Puerto Rican white rum
2 large egg yolks
Ground cinnamon or nutmeg
Combine coconut and hot water in a large pitcher, and let the coconut steep for 10 minutes. Strain the liquid into a blender. Put the coconut pulp in a cheesecloth and squeeze it to extract as much coconut milk as possible, then add the extracted milk to the coconut milk in the blender. Discard the coconut pulp.
Add condensed milk, rum and egg yolks to the coconut milk in the blender, and process until the Coquito is well blended. Transfer the beverage to the pitcher, cover, and refrigerate it for at least 2 hours.
Remove the Coquito from the refrigerator about 30 minutes before serving. When ready, stir it thoroughly and pour the Coquito into short glasses and add a dusting of cinnamon or nutmeg.