Index

Anti-bubbles, 103

antimissile, 12

asset valuations, 12

correlation, 15–16

gold, 13–14

current market consensus, 78

down and out calls, 81

equities, 79, 84

exploration, 84

hedging programs, 82–83

jurisdiction, 80–81

management, 81

marginal cost of production, 81

nationalization, 80

physical gold (see Physical gold)

Real Options theory, 79–80

services, 85

smart investment, 78–79

taxation and expropriation, 80

up and out calls, 80

widow maker, 85–86

platinum and palladium, 92

price valuations, 12–13

silver, 91

Smart Gold strategy, 92–100

vs. traditional financial bubbles, 12

volatility, 14–15

Bank of England (BOE), 12

Bank of Japan (BOJ), 11, 45

Bubbles

benchmarks, 73

beta to alpha allocations, 74

bridges of competence, 26–27

complacency phase, 23–24

financial assets, 74

inequality, 24

monetary assets, 75

real assets, 75

reflexive competence, 27

risk and behavioral factors, 73–74

twilight phase, 24

Central bank leadership risk, 46–47

Central Bank, 11–12, 101–102

Chinese Central Bank, 55

Chinese Yuan (CNY), 40

Commodity Trade Advisors (CTAs), 90–91

Complacency, 6

Consumer Price Index (CPI), 42

Conventional monetary policy, 33

Credit markets, test limits

credit risk premiums and benefits, 49–50

prudent imprudence, 50–51

return on capital vs. return of the capital, 55

stress tests, 54–55

structural reform and restructuring, 51–54

Currency wars, 40

Desperate search for yield, 4

Digital money, 36

Diplomatic neutrality, 69

Direct credit easing, 37

Duration bubble, 41–42

Energy deflation, 44

Epicenter, 53–54

European Central Bank (ECB), 1

Exuberant market behavior, 6

False diversification, 5

Federal Reserve, 32

Fiat currencies, test limits, 5

borrow more money, 58

current global currency system, 62–63

Gold’s Perfect Storm investment thesis, 58–59

Gresham’s law, 60–61

monetary asset of choice, 64–65

monetary policy and fiat currencies, 57–58

monetary supercycle, 62, 65–66

print more money, 58

seigniorage, 61

shadow gold price, 63–64

World’s Reserve Currency, 65

Flows of speculative international finance, 32

Foreign Exchange (FX) channel, 12

Global Financial Crisis, 3

Gold-backed currencies, 31–33

Gold exchange traded fund, 88–89

Gold Perfect Storm investment thesis, 29–30, 58–59, 92–100

Gold Reserve Act, 32

Gold structured products, 89–90

Greedy borrower, 20, 23

Gresham’s law, 60–61

Helicopter money, 33, 38–39

High grade corporate bond quantitative easing (HGCB QE), 37

Indirect quantitative/credit easing, 35

Institutional allocator, 22

Interest-free risk, 41–42

Internet, 19

Japanese Government bonds (JGB), 37

Japanese Yen (JPY), 93

Law of diminishing returns, 39–40

Lehman Squared, 25

acronyms, 20–21

building bubbles, 23

Global Financial Crisis of 2008, 18

greedy arrangers, 19–20, 22

greedy borrower, 20, 23

miracle technology, 19, 21

naive lender, 20

premortem analysis, 18

rating agencies, 20, 22

sleeping policeman, 21

supervision, 22

West Side Story, 17–18

Long-term repurchase obligations (LTRO) program, 35

Metallic currency system, 31

Metastable equilibrium, 9

Monetary financing, 34

Monetary policy, test limits

bond price increasing, 4

conventional monetary policy, 33

currency wars, 40

digital money, 36

direct credit easing, 37

energy deflation, 44

exit strategy, 47–48

gold-backed currencies, 31–33

helicopter money, 38–39

inflation, 42–43

Japanese experiment, 3

law of diminishing returns, 39–40

long-term repurchase obligations, 35

monetary financing, 34

monetary radiation, 44–45

negative interest rates, 35–36

point of no return, 45–47

prohibition of cash, 36

qualitative easing, 34

quantitative easing, 3, 33–34

Scandinavian experiment, 2

tax on cash, 36

Theory of Monetary Relativity, 40–41

virtual currencies, 36–37

Monetary radiation, 44–45

Monetary supercycle, 62

Naive lender, 20

Negative expectancy, 70

Negative interest rates, 2–4, 35–36

New normal concept, 68–69

New York Mercantile Exchange (NYMEX), 65

No free-lunch economics, 57

Now paid for borrowing (OMG), 21

OPEC put, 10–11

Over the Counter (OTC) market, 88

Paper-gold, 87–88

People’s Bank of China (PBOC), 12

Physical gold

Commodity Trade Advisors, 90–91

discretionary macro strategies, 91

financial leverage, 90

gold coins, 87

gold ETF, 88–89

gold futures, 89

paper-gold, 87–88

rationale, 86–87

short positions, 88

structured products, 89–90

Premortem analysis, 70–71

Produce Price Index (PPI), 43

Prohibition of cash, 36

Prudent imprudence, 50–51

Qualitative easing, 34

Quantitative and Qualitative Easing (QQE), 34–35

Quantitative easing (QE), 3, 33–34

Rating agencies, 20, 22

Real Options theory, 79–80

Reflexive competence, 27

Relative Value trading (RV), 85

Renminbi RMB, 40

Risk-free interest, 41–42

Securitization, 19

Seigniorage, 61

Shadow banking system, 53

Shadow gold price (SGP), 63–64

Silver, 91

Smart Gold strategy

contrarian bias, 95–96

false diversification, 99–100

first mover advantage, 97–98

investment horizon, 96

known and unknown unknowns, 99

liquidity, 100

long gold, 92–93

long gold volatility, 93–94

long tail risk, 95

luck vs. skill, 97

path dependency, 97

precious metals, 94

timing, 96–97

Soros’ Reflexivity theory, 67, 74

Stable equilibrium, 7, 8

Stress tests, 54–55

Structural reform and restructuring

capital structure, 52

catalysts, 54

Epicenter, 53–54

gross misallocation of capital, 51–52

second-order effects, 52–53

shadow banking system, 53

taxation, 53

Swiss National Bank (SNB), 12

“The frog in the boiling water” policy, 38–39

Theory of Inflation Relativity, 42–43

Theory of Monetary Relativity, 40–41

T-Junction, 68–69

Transformational technology, 19

Unstable equilibrium, 8–9

Value at Risk (V@R) model, 16

Vicious cycle, 71

Virtual currencies, 36–37

Virtuous cycle, 70

Wealth effect, 39, 74

West Texas Intermediate (WTI), 86

Widow maker, 85–86

World’s Reserve Currency, 65

Yield curve control (YCC), 37–38

Zero Interest Rate Policy (ZIRP), 1