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A Golden Tipping Point: University of Texas Takes Delivery Of $1 Billion In Physical Gold
Tipping points are funny: for years, decades, even centuries, the conditions for an event to occur may be ripe yet nothing happens. Then, in an instant, a shift occurs, whether its is due a change in conventional wisdom, due to an exogenous event or due to something completely inexplicable. That event, colloquially called a black swan in recent years, changes the prevalent perception of reality in a moment. This past week, we were seeing the effect of a tipping point in process, with gold prices rising to new all time highs day after day, and the price of silver literally moving in a parabolic fashion. What was missing was the cause. We now know what it is: per Bloomberg: "The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board." And so, the game theory of a nearly 100 year old system of monetary exchange has seen its first defector, but most certainly not last. With an entity as large as the University of Texas calling the bluff of the Comex, the Chairman, and fiat in general in roughly that order, virtually every other asset manager is now sure to follow, considering there is not nearly enough physical gold to satisfy all paper gold in existence by a factor of about 100x. The proverbial Nash equilibrium has just been broken.
From Bloomberg:
The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.
Years from now, when historians attempt to define who may have started it all, one name may emerge...
The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
In summary - the fiat tide is now going out. And among those who will first be
observed swimming naked are the very same people whose fate has been so
very intrinsically linked to the perpetuation of a flawed regime (and
who coined this very saying). In the meantime, hold on to your hats: should a scramble for delivery ensue, the recent parabolic move in various precious metals will seem like a dress rehearsal for what is about to transpire.
The only open question is who was the broker with enough gold to deliver to the UofT. We hope to find out soon enough. We also hope that the UofT is smart enough, and that Kyle Bass advised it, that if they are getting "delivery" in a Comex vault in New York, the gold has likely already been leased out at least several times to various entities demanding paper allocations...
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If you have the gold stored at a bank in New York then you have not exactly taken delivery. Try getting it out of that bank if the bank suddenly fails.
Nuff said here, no need for further comment
However, the enthusiasm and hysteria is duly noted.
Note to self-----------
Sell in May and go away come back in July when Elmer Fudd is dead.
No offense folks, just business.
Just saying - carry on
I think you are right. It is my plan too.
The end of qe2 will be briefly deflationary.
At first, an idea that goes against the status quo seems to really be odd and fanatical. Then suddenly, it becomes the obvious move in troubled times. This hearkens to George Orwell's famous saying, "In a time of universal deceit - telling the truth is a revolutionary act." In this case, gold is the truth and the revolutionary act is to overthrow fiat money.
The next time that gold moves will be when the University of Texas moves it to Texas, prior to the balkanization and split-up of the United States into smaller republics.Is this that bubble tipping point where "everbody's doing it"--and the price falls off the table?
Or is it the point in which people have lost faith in US (& other?) currency and start seriously buying/hoarding goal for its stable (?) value?
Note: I'm not a gold bug altho I have a small amt. in gold-related investments. I certainly don't believe in a gold standard since all value is relative, but I'm also losing faith in the US$ as a store of value. Go figure!
Any state can leave the union. Abe Lincoln was a silly ass in this regard.
If you can't make and adhere to voluntary agreements, and have to resort to force to make your contracts work, you have a bad problem.
Law doesn't exist in 2/3 of North America. I don't speak for Canada but the US and Mexico departed from law a long time ago. When Mexico flaunted it, Texas left. When the US flaunted it, Texas whimpered. Pussies.
As Tyler says, this is a tipping point.
I think there are two points that are getting tipped at once:
(I) UT is well respected. They will get copied. Gold is < 1% of total investments at this point. It is possible that this will take Au mainstream. If investment were to grow to a very small 5%; it would imply an explosion in the price.
(II) I sent this to Bernanke. I'm sure he has seen it already. This will strike a dagger into his heart. This is the ultimate insult to his policy of debasement. Bernanke is being pushed into a smaller and smaller corner these days. The actions by UT will make the corner smaller still.
It's 5%
If PIMCO were to suggest this was a good idea by UT, then the tipping point is tipped. I do believe Bernanke and Fed gubs are nervous nellies tonight.
Dumbest thing I've ever heard. This guarantees that gold will decline by 50% in the next couple of years.
All you have to do is short gold and make a 50% profit. Easy pickings, right?
irrespective of the texas endowment decision i spent the day yesterday buying more gold. sure, it's expensive versus what one has paid in the past. but my world view is that the fed steps up for qe3. i think they're bluffing about the exit, and even if not the budget problem will not be resolved by organic growth, more taxes or budget cuts. this means more deficits, a lower dollar and zirp for an extended time.
Global QE bitchez.
Silver (known as plata by many texans) would probably be a better bet. It is ironic that the proof of that statement is that it would be almost impossible for them to take physical delivery of a billion dollars worth, about 23.2 million ounces at friday's close. Wouldn't it be sweet if they had taken bought COMEX silver calls for 23 million ounces, stood for delivery, and then trucked it all down to Austin? The Morgue might have folded on the spot!
God may bless Texas, but probably questions them keeping their bullion in Hell's Kitchen.
Sweet... my comment got 2 junks from 2 greedy bastards
“Give me an army of West Point graduates and I'll win a battle. Give me a handful of Texas Aggies, and I'll win the war"
General George S. Patton
Crunching the numbers presented, UT purchased 500 million of gold last year (assumed to be 2010) that is currently worth with prior holdings 1000 million = 1-billion in US nomenclature. UT recently purchased 1-billion additional USDs worth of gold and thus are currently holding 2-billion of their 20-billion endowment in gold = 10%.
No question, a billion dollar purchase is stunning in character. With this said, is the following statement accurate, “And so, the game theory of a nearly 100 year old system of monetary exchange has seen its first defector, but most certainly not last?” If so, one is negating the thought that a huge plan (20-billion) simply got caught holding far too little funds (approximately 5% in real property e.g., gold) and made a desperate play to reach the widely accepted 10% holding figure advocated by many.
Paraphrasing, is ZH creating a histrionic scenario that the USD’s days are approaching critical mass vs. an institution prudently balancing its holdings to a 10% gold holding level? I genuinely wish I had an absolute answer and perhaps the ZH group’s wisdom will enlighten and inform.
Wonder if CNBC will report this? Just kidding. No way they would. Same way they will wait till silver surpasses $150 to tell everyone how incredible a metal it is(most conductive,most reflective, ect., ect.) and they will report it in a way like they had no idea how valuable it was and now love silver at $150. (after they hated it at $5)
One thing I can't understand is how ignorant and gullible people are. Gold and silver have been money since man invented the wheel. Why? Because they are valuable, precious and rare and the people want it as money and so do the wealthy and powerful and so do governments who don't want to be screwed by invading empires. Everybody smart wants their money redeemable in gold/silver. Everybody stupid and lazy wants the government to print money out of thin air and give it to them.
Shanye McGuire who convinced the UT Pension Board to buy the gold in the first place deserves a pat on the back:
http://www.blanchardonline.com/investing-news-blog/econ.php?article=1218...
http://www.amazon.com/Buy-Gold-Now-National-Languishing/dp/0470185880
The downside is Bass, McGuire and Zimmerman will not be invited to Tea Time, cake a crumpets, scones, et al....at The Bernank's house for a long time.
Needless to say, gold is far superior than fiat, but one must also realize that what one wishes to trade it for must be in a surplus condition, else all that you have is a shiny and yellow metal...
Not true.
The seller simply must need the currency (in your example Gold) more than they need the good (perhaps to purchase something of which they're in even direr need).
Consider the example of someone pawning the fine china to buy drugs.
So it would appear that we are on the cusp of the Federal Reserve, "seeking legislation to expand it's authority".
The legal precedent exist....
By Executive Order Of The President of The United States, March 9, 1933.
By virtue of the authority vested in me by Section 5 (b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, in which Congress declared that a serious emergency exists, I as President, do declare that the national emergency still exists; that the continued private hoarding of gold and silver by subjects of the United States poses a grave threat to the peace, equal justice, and well-being of the United States; and that appropriate measures must be taken immediately to protect the interests of our people.
Therefore, pursuant to the above authority, I hereby proclaim that such gold and silver holdings are prohibited, and that all such coin, bullion or other possessions of gold and silver be tendered within fourteen days to agents of the Government of the United States for compensation at the official price, in the legal tender of the Government.
All safe deposit boxes in banks or financial institutions have been sealed, pending action in the due course of the law. All sales or purchases or movements of such gold and silver within the borders of the United States and its territories and all foreign exchange transactions or movements of such metals across the border are hereby prohibited.
Your possession of these proscribed metals and/or your maintenance of a safe deposit box to store them is known by the government from bank and insurance records. Therefore, be advised that your vault box must remain sealed, and may only be opened in the presence of an agent of the Internal Revenue Service.
By lawful order given this day, the President of the United States.
Franklin Roosevelt – March 9, 1933
Kind of make you want to do some night gardening and find a nice hidy hole to burry your savings.
This is no big deal. It's only 5% of their porfolio. The headline could read "UT still keeps 95% of its porfolio in investment denominated in fiat currency."
I agree with Tyler.
This is a huge change. Now all the blue bloods will have no choice but to start bandwagonning the gold theme. This could be the catalyst that could cause some real acceleration in gold prices.
I never expected this type of move, but it has happened and now all the big money will be forced to take some position in physical gold.
Here's a chart of the SOX in 1999. Looks pretty toppy.
But then look at this.....
Gold might be entering the final blowoff stage.
ready to apologize to gentleman jim sinclair, max keiser and eric king?
"The dollar might be entering the final blowoff stage." fixed it for ya ;-)
Nice chart except you're comparing apples to oranges
Why they wouldn't take delivery in Texas probably was how they were able to purchase that much of it. Of course they should move it away from NY. In a very real sense, it isn't yours until it's sitting on land you own.
We mark 15 years of becoming a nation on the 21st. The tax deadline and oppressive nature of the federal government are also on our minds. Texas entered the union and the federal government has done nothing but hamper our efforts maintain our standards: from free hand-outs, to deporting illegal immigrants.
If we don't secede soon, we will be overwhelemed with these carpet baggers and union people. The liberal state governments elsewhere are basically shipping those workers with enough cash to relocate here.
We really hate NY, DC and the left coast- anyone who lives here knows that. I long for the day it all comes crumbling apart and we are free of the slave masters in DC.
http://www.gonzalescannon.com/node/4620
I didn't see this shared here. From King World News:
Pierre Lassonde - Texas University Buys $1 Billion of Gold Bars
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/4/16_Pi...$1_Billion_of_Gold_Bars.html
http://tiny.cc/kj50u
I think Tyller is correct. This is a waterfall moment. These endowments make very serious investments. This is a sign of the "trickling down" from the early(smart money) investors, downward towards the bottom where the sheeple reside. Another surge in "Cash for Gold" coming. What amazes me, is the quickening of the pace of collapse of our system. Just a thought that haunts me somewhat........remember the scene in War of the Worlds with Tom Cruise where he drives the only working vehicle into the mob of people that all want that vehicle badly? Not pretty. Just a thought.
Well, who can blame 'em? Even the IMF is unable to ignore the hollowness of gold ETFs now: http://www.guardian.co.uk/business/2011/apr/17/imf-commodities-funds-sub... - how long before the paper gold crowd follow suit?
Bloomberg:
Shortage Threat Drives Texas Schools Hoarding Bullion at HSBC
"Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said."
Didn't we learn anything from the Hunt brothers?
Yes...take delivery of the physical.
Who will buy your gold at $5,000/oz?
who will accept a dollar at $5000 gold?
you've been here for 1 year 15 weeks, and this is your first post, and you've posted the same comment (3) times over the course of this thread.
WTF?
where have you been?
Do you think this is enough to turn the holding houses on their head? Is this the so-called harbinger moment for the JPM?
The Bad Guy.
Allow me to be the contrarian here and say I'll be waiting for the bust side of the gold boom to get in. If the above analysis is correct- that the UT's purchase of $1B of gold bullion has had such an impact on gold prices, and that more fund managers are destined to jump in because of the UT's actions (which are also allegedly due to one man's influence... not exactly a market decision there), then I suggest that what you're seeing is not the effects of sound and rational investment strategy, but speculation. Perhaps from the UT fund's perspective, this bullion is a sober hedge against inflation. We're talking about 1/20th of their endowment after all. (Investing 1/20th of a portfolio in hard currency doesn't sound as sexy as "University buys $1 billion in gold!".) But if other funds are going to plunge in as if this one action is a sign of te end-times, then that is not a very rational approach on their part. Market theory relies on lots of investors making independent decisions based on shared information.... not following the first bull in the herd... that's what a bubble is. The last great hedge cum safe haven cum no-brainer investment was property... after all, 'they ain't making more land" (except in Dubai, maybe). We see how that panned out for the majority. If you really think fiat currencies are soon to crumble, then I suggest you might want to invest instead in non-perishable food, guns, ammo, and maybe some instructional courses in animal husbandry, because you're not going to be able to eat your gold, and the people who've got their food are not likely to bestow a lot of value on your shiny but inedible metal tokens. On the other hand, if you fear for an inflation shock short of armageddon, then certainy look at precious metals as a hedge... but only if the cost justifies it. There are plenty of other inflation hedges, some of which might also be useful in the post-industrial hellscape, (assuming you've got enough ammo and siblings to protect your claim).
"He said holding cash wasn’t a better choice because the rate of inflation exceeds money-market rates by 2.5 percent to 3 percent, eroding the value of cash.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”"
http://www.bloomberg.com/news/2011-04-15/texas-university-endowment-hold...
Unfortunately, HSBC doesn't believe that you can't print more gold:
http://www.us.hsbc.com/1/2/3/business/borrowing/specialized-lending/gold...
If the endowment fund doesn't get ACTUAL delivery, then they don't have anything but a piece of paper.
didn't read all of the comments, but keep in mind that Autin-Dallas area is kind of hot bed for conspiracy and fringe thought.
Interesting timing though isn't it? about the shuttle and all :)
Big waterfall moment.
The big institutional investors have been avoiding gold and PMs as if ordered by the Fed Gestapo fiat police not to do it -- even though it has been a no brainer. Paulsen is the exception and he has made a killing.
Just a 1-2 % institutional investment by some of the big boys will rocket gold and double the investment stake of institutions because it's currently so small by historical averages.
Moreover, If the Chinese get a whiff that US managers and institutions are about to go all in for gold and PMs they may abandon stealth procurement. The Great Global Gold race could be upon us.
No one could doubt the big players have been eyeballing each other for such a moment to see who would be go first and start exiting the USD.
Even airhead supermodel, Tom Brady's very hot wife, said 2 years ago she wanted to be paid in Euro's because she didn't trust the USD. You can be sure the multi-billion dollar mangers also know the Earth had shifted.
Taking physical delivery of their $1 Billion in gold bars....
That's change you can believe in!
I want to see gold win in the battle of good vs evil, because it's the antithesis of everything evil as represented by The Bernank and his ilk (although The Bernank is merely an errand boy, in reality, bagman for the Wizard behind the hidden curtain), but I, unfortuately, have little faith that they who set the rules are NOT allowed to run the table - at least until such time as many righteous are vanquished (I hope that I am wrong and fear I am correct).
Ergo, gold can't be free from slamnation in vicious manner until those who write the financial engineering rules ('Modern Money Mechanics,' comprising the basis of fiat dilutive, fractional reserve banking methods) have their throats slit, and their replacements are pure of mind and heart, devoted to the best interest of the honest and fruitful man, and they not only reset the corrupt system but perpetually guard the system from a reversion to wickedness and malice.
As the old saying goes, "he who can does, he who can't teaches".
Now they just have to install a few Austrians to tenured positions in order to educate people and make a nice ROI when the masses buy gold.
Harvey Organ said that they took delivery into an HSBC vault. Does that register on anybody else's funny-o-meter?
Gold is up almost a whole percent this year too.
If the Gold is being stored in a New York Vault, then they don't have fucking "DELIVERY" of it.
The entire point of having the Gold is absolutely pointless and any further discussion is a total waste of time.