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University Of Texas Fund CEO Shares His Views On Gold, Explains Why He Took Delivery Of $1 Billion In The Precious Metal
Over the weekend, University of Texas made headlines after disclosing it was the first major institution to take delivery of $1 billion in gold, although still keeping it in the Comex system. Today, the CEO of the management company Bruce Zimmerman was on Strategy Session providing the rationale for his action to David Faber. First some prehistory: "We began buying gold in September of '09 at about $950 an ounce. Our average price is at about $1,150. We've invested around $750 million in gold over that twelve months and it now has a value around $1 billion." On what Texas thinks of gold (no surprise here): "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus. I noted
a couple of days ago, i think there was a story out about Bernanke
mentioning that while they may not increase quantitative easing, they
may not necessarily reduce their exposure either. So i think that may be
a signal that will continue to have a good deal of monetary stimulus.
We read every day what's going on in DC and across the states. We'll see
what fiscal policies look like. It remains a concern for us." As to the specific reason for demanding delivery: "We had gotten to a size and our thought was that we probably will
have our position for a longer as opposed to shorter term, although we
could sell at any time. But rather than continuously roll the futures
contracts, it became easier and more economical for us to take
possession of the bullion." So how long before many if not all other public fund managers decide the same logic should apply to them as well?
As to the question of where UofT is keeping their gold: "in an undisclosed location, underground in New York." Somewhere just off Bryant Park perhaps.
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They will move it to TX soon... why?
Theory: It's a hedge against the collapse of the USA. The Republic of Texas will have it's own tangible assets (gold, oil, shipping, etc.) upon which to rebuild and initiate it's own standing as a sovereign nation.
Come to think of it, even with all its problems, troubles, and southern baptists, it would be one of the most logical states to attempt Secession.
I'd move there in a heartbeat if that happened. Soon Arizona, Colorado, and New Mexico would do the same and eventually the entire Southwest would be one country.
All I have to do is dream......
It is 420 on 420 central standard time.
The heartland celebrates the peoples.holiday.
Life is still good. Let us all be thankful.
pass me that f*cker.
Maybe other fund managers are smart enough to know that QE does not functionally decrease value of the dollar. Banks are never reserve restrained.....QE has no affect on M2. M2 is growing at same rate as before QE.
LOL!!! great!!! and perhaps these smarties will also begin to see how many FRN's = 1 oz gold or = 1 oz silver, too!!!
remember, one is not required to keep score in FRNs. maybe some smarties keep score in ounces of gold and silver.
the trolls certainly seem quite nervous, and even less rational than usual, don't they?
If you think about it, they may be better off not having physical delivery. Suppose it is (or isn't) in a New York vault. If they want to cash in they will get a check for FRNs either way. This is all they want, a hedge against dollar devaluation.
They said they only bought physical because it was easier and cheaper than rolling over the paper all the time.
If they took delivery they might be worse off, for the cost of storage and insurance.
In other words if all you want is a hedge you are just as well off if all you get is paper since that is all you wanted anyway. Just more of it if the dollar goes down and gold goes up.
Texas owns $1Bn. of gold bullion. they have it stored in a vault. they have taken delivery of the gold, not in their chevy van or traincar to Texas, but in a vault in NY.
just a "paper hedge" that's easier now, to hold as gold? perhaps. "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus."
so why not a physical hedge which he no longer is comfy holding as...paper???
so yes, fiat currencies, he says it! right there! but he also says monetary and fiscal stimulus which points to the bailouts, reflation, and federal budgetary madness. policies of economic failure. he doesn't "want" to hedge. he is hedged.
Texas has traded $750 Mil. in green stamps for $1Bn. in gold bullion. and tyler's right: why the hell would anyone in his/her right mind still be rolling paper around the comex at this point? you want to hedge, hedge!!! take the bullion, get it off the "market" and relax. just like some average joe or mary and the home game version, too! jus a diff scale, friends, not a different game.
this isn't "impossible" or "something which can't be permitted" but rather, a fact.
Hey knows that this game of printing is going to end badly.
On the subject of storage...
if they have 200 tons of gold, why store it all in one place anyway?
Split the gold up into many smaller amounts and hide/store it in different locations.
As a gesture of goodwill in these difficult times I could carry 20 or 30 kg away for safe storage, and charge say a nominal 1% storage fee.
The gold will be perfectly safe and no one will ever find it.
Deal?
Also for those worried about non-delivery I also offer a special "No money back" guarantee.
this is good thinking, b_d, about the storage and the "custodianship V. possession" too!
if i had 1$Bn. in phys, yeah, we'd stick some in yer backpack. why tf not if you can think straight and you're an actual human being? i'm such a loser, i'd probably need it back by christmas, just for weed!
there's that desperate trolling sound against PMs again: a futile exercise in self preservation.
well! here's the link, too. so i guess that settles that!
people who trade FRNs for real money are self-futiling their preservation awaaayyy. hard to believe, really, goldenbooger454, but +++ from slewie just for being so damned archetypal!
The U.S. dollar (FRN) is collapsing before our eyes. We're making history today.
I need to margin full up in Ag. What's the best way?
Pretty obvious to me why its not in TX. Its a hedge...a trade. These UTIMCO geeks, my old client BTW, are not gold bulls. So they actually thought about an exit strategy (something 90% of goldbulls don't do). As part of that exit strategy is the proximity to markets but more important was staying in the system (again, they aren't survivalists on a farm). My wager is HSBC/JPM/Crimex read the riot act on what would happen if they took that gold out of the system but wanted to trade it later. Kind of like the challenge one would have if you took a country, put it on the gold standard tomorrow (assuming backed by sufficient gold) and then expected your trading partners to play ball. Hence the Bloomberg article edit and the location of the gold. It does however open the door for the next group with bigger cajones to take it out of the system
i know! these idiots from Texas are way too smart to just let the $1/4 Bn. equity just, uh, sit there in an asset which does nothing except exist as, umm, oh yeah...gold. thank goodness for hillbillies! yay!
of course when gold goes down to $1150, we can imagine where that gold will becoming onto the market from, eh?
if they take the gold outa the system, it certainly may be subject to assay coming back in, which can, it would seem, adversely effect liquidity.
still, if the Texas endowment puts out that their gold is for sale, right now, subject to highest bid over 3 days and subject to assay, they might have a fun little auction, there, Texas-style!
what would kinky friedman do?
let's get some moral leadership, here!
X2, see above
You mistake me for blasting pm's. I'm just the opposite, i'm buying gold and silver big time. I just know the reality of politics and this administration would waste no time in trying to confiscate everything you have in gold or silver by executive order. I'm just a realist. Read and understand American History unless that makes you too uncomfortable.
well, aren't you edgy? i realized you weren't necessarly anti-PMs, but i also read what you actually wrote about texas, too, didn't i? confiscation didn't effect collectors last time, either. i didn't "do" the link, tho.
i understand american history. i certainly understand the confiscation. and no, i'm not uncomfortable about history i read and understand.
you know something we, apparently don't: " I just know the reality of politics and this administration would waste no time in trying to confiscate everything you have in gold or silver by executive order. I'm just a realist."
well, i'm a realist too. i can really see where gold and silver coins are money/currency in the Constitution and early laws of the US. and, i'll be damned if the US Mint hasn't been pouring the bullion coins out since 1986! maybe your realist would like to learn how this happened, and why. feel free to do your own research! who knows what you'll decide it "means"? see ya!
Its sad when you think of the average American who wakes up, goes to work, comes home and goes to bed, doesn't care, nor understand anything about the collapsing dollar. Those content with that 12 pack on Friday, Bowling Saturday, church on Sunday, and little concern with politics. Save for Christmas starting in October, fret for the bills in January. Take two weeks in the summer for vacation. Just give me my pay and leave me alone. To them, the increase in the cost of gas or food will come and go, nothing to worry about. Its sad they don't understand nor care that their government, that they elected, is daily spending billions that don't exist. When the news comes on the major networks, they just accept what they say is true. When they one day wake up and the shelves of the grocery stores are empty, the debit card, credit card, phone card don't work, there's no gas cheaper than $30/gallon and gold is $10k/ounce, then they'll turn the news on and try to find out what happened and then the major outlets will still be telling the latest, force-fed lie from the fed, that there's been a glitch in the financial system, but don't worry, just turn your dollars in for the new improved currency.
i know! i moved my comment, and i still think you're archetypal!
first PMs "R" gonna be confiscated, anyhow, so self-preservation is futile. now this! which sounds like the PM types are preserving better than those who won't understand, whatever happens, because they won't. they just won't. who the hell could argue with that?
i'm schizophrenic, and so am i! but you! you!
how are they going to confiscate it? there's lots of holes in the ground.
"It had been the Golden Age. But gold was also the color of sunset, of autumn. "
Which is another way of explaining how the PM futures markets (and all commodity futures markets for that matter) are not even designed to accommodate a long-term buy and hold investment strategy. Funny how this basic little factoid has been consistently swept under the rug by Wall Street traders and even some large investment managers who have increasingly advised people to invest a portion of their IRA’s and retirement funds in commodity futures.
I'm 64 and who knows how long I've got to live. But I do recall telling my son in 2006, when I started buying gold, that one day it might be the most valuable things he will own. He thought I was a bit daft at the time, but he was only 19 then. At any rate, I can get my hands on it in a flash, and definitely don't keep it either in my home nor in a bank box. Several hundred ounces and no sleepness nights. I sleep well. Bice thing about owning physical is it's too much trouble to sell it. Physical in hand creates strong hands.