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Flashback: Kyle Bass Advises University of Texas to Take $1bn Gold Delivery

CrownThomas's picture




 

In light of the recent inability of the Federal Reserve to return Germany's physical gold to them in any acceptable fashion (timing, quality, etc...) it reminded me of when the financial "journalists" laughed at the fact that the University of Texas took the advice of Kyle Bass and actually took physical delivery on their gold futures contracts. 

If you recall, back in 2011 Bass had the university take delivery on ~$1 billion dollars worth of physical gold. 

Here was his reasoning back then (still laughing now?)

"The COMEX had a bout $80 billion dollars of open interest between futures and futures options. And in the warehouse they had $2.7 billion of deliverables. So $80 billion in open interest, 2.7 billion in deliverables, we're going to own it a long time - that's an easy one, you're going to go get it."

"When I talked to the head of deliveries, and I said what if like 4% of the people want delivery? -- He says oh Kyle, that never happens"... Indeed

 

 

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Sat, 01/25/2014 - 23:01 | 4367729 rbblum
rbblum's picture

Just wait for the outcome when people of the western world quit swalling what the US Federal Reserve et al say about gold being a barbaric relic and begin to actually see the true value of gold . . . physical gold that is. 

Mon, 01/20/2014 - 08:04 | 4347722 GCT
GCT's picture

Long before ZH even existed gold and silver is what I bought and took physical delivery on.  I have bought for 35 years now.  I am not rich by any means but my mother and father taught me, no beat it into my head, that tangible assets you actually have are far better then ink and paper.  I still believe that today.  There is a bonus in owning tangible assets.  I can hand my son gold without any taxes on it. 

My parents never explained to me how finances work and I thought just like most do now banks and investment advisors are here to help you make money.  2008 made a believer out of me and woke me up.  Once I found ZH and some other money sites I study daily and learn from some smart folks and I am thankful. 

My parents lived through the depression and did not trust financial institutions and they were correct.  Some of the best advice my father told me was to never spend more then you make and try to pay cash for things.  Now I know what they meant. I am debt free and plan to stay that way.

Mon, 01/20/2014 - 04:37 | 4347628 Zerohedge fan
Zerohedge fan's picture

Kyle,

there are golden plated tungsten bars left, only

Are they going to be fine with them?

 

Sun, 01/19/2014 - 19:40 | 4346900 Sufiy
Sufiy's picture

There Is No German Gold Left At The New York FED

Die Welt has reported today the bombshell announcement for the Gold market. We have discussed before that only 37 t of Gold out of 674 t was delivered to Germany in 2013 and that the Gold bars were Melted. So not a single original German gold bar was returned to Germany so far!
ZeroHedge reports today that surprisingly only 5 t of gold has been delivered from the NY FED - the rest came from Paris. Now it is not the conspiracy theory any more that there is no German Gold left at the NY FED.
Now all the manipulations in the Gold market and constant smashing down the price in 2013 are coming into another perspective. Germany is very serious about the investigation of the manipulations in the Gold market - it was already reported that precious metals manipulation is worse than LIBOR scandal. This investigation has already claimed the first victim: Deutsche Bank to withdraw from Gold fix amid probe.
With the highest on record leverage at COMEX of 112 owners for every single ounce of Gold and record low COMEX registered Gold at 11 t we have the set up for the major blow out phase in the Gold market. Who in their mind will continue to hold Gold at LBMA any more? According to Eric Sprott, we can expect a failure to deliver Gold and lawsuits with deliveries last February from COMEX of 40 t and China buying at least 100 t of Gold every month on average now.
Once Gold will breach $1270 level Andrew Maguire's discussion about the massive short squeeze will become the reality and even if his predictions about $200 Up-days will not materialise, the move by Gold to the upside from the most oversold condition in history will be nothing less than spectacular.

http://sufiy.blogspot.co.uk/2014/01/there-is-no-german-gold-left-at-new....

Sun, 01/19/2014 - 19:50 | 4346927 Tinky
Tinky's picture

Why don't you give the constant shilling of your website a rest?

If/when you actually have something original to contribute to the topic, feel free to link. Otherwise, enough with the regurgitations.

Mon, 01/20/2014 - 07:44 | 4347713 new game
new game's picture

second that idea - bye surfy. we get it "you be gold bug"-fucken -eh...

Sun, 01/19/2014 - 18:51 | 4346809 J S Bach
J S Bach's picture

Smart man.  It doesn't matter what the price was then (2011) or now.  What matters is laying your hands on the physical.  I pity (or maybe I don't) the poor bastards who are going to take a bath when their GLD holdings evaporate into the worthless paper that they are.

Sun, 01/19/2014 - 20:27 | 4346988 disabledvet
disabledvet's picture

why not just audit Eric Sprott? That thing's up a solid 4% "for no reason whatsoever."

Sun, 01/19/2014 - 18:10 | 4346733 Implicit simplicit
Implicit simplicit's picture

The long wait is coming to an end. They can't deliver and the squeeze is on.

Sun, 01/19/2014 - 17:40 | 4346673 Sabibaby
Sabibaby's picture

Pay me now for the work I'll do later!

Sun, 01/19/2014 - 19:10 | 4346845 Dan The Man
Dan The Man's picture

"I'd gladly pay you tomorrow for a hamburger today"

Sun, 01/19/2014 - 17:36 | 4346665 kito
kito's picture

My understanding is u of t offloaded some/all of its physical?

Sun, 01/19/2014 - 17:15 | 4346615 Sovereign Economist
Sovereign Economist's picture

@CatFlappo....  Who cares what it marks to market today?  They don't need to sell it today, do they?  The strategy was a long term play.  One day, when the dollar and gold go in opposite directions from today, the same question can be asked.  If I had my choice today between saving a $1250 worth of Federal Reserve notes or a one ounce gold eagle for opening 20 years from now, I'd definitely take the gold eagle.  As for all the price ratio perturbations between now and then, I am not concerned.

 

At the time, Kyle's stroke of brilliance wasn't so much the move into gold as it was the admonishment that the University take physical delivery of that gold.  That advice is proving to be prophetic!

Sun, 01/19/2014 - 17:05 | 4346611 Racer
Racer's picture

That is classic for the reasons to hold it in your hand and not in the banksters hands who cannot resist loaning it out many mulitiple times as they do with any money they get their thieving hands on

Tue, 01/21/2014 - 15:12 | 4352447 MeelionDollerBogus
MeelionDollerBogus's picture

pffft.
Next you'll be telling me crackheads can't be custodians of hydrocodone factories.

Sun, 01/19/2014 - 16:41 | 4346556 Catflappo
Catflappo's picture

As much as I love Kyle Bass and more-or-less hang off every word he says, could someone tells how well that 2011 receipt of gold marks to market right now!?

Sun, 01/19/2014 - 21:44 | 4347163 edwardo1
edwardo1's picture

Excellent question. Why don't you try and source the relevant tonnage and see how you do at acquiring it at anything like what shrimps pay for a few ounces.

Sun, 01/19/2014 - 23:18 | 4347335 GubbermintWorker
GubbermintWorker's picture

Shrimp? I'm more like a rock lobster.

Sun, 01/19/2014 - 20:24 | 4346983 Freddie
Freddie's picture

Kudos for Kyle being smarter than these evil NWO ponzi scum bags.

Sun, 01/19/2014 - 18:47 | 4346799 kchrisc
kchrisc's picture

An ounce in hand is worth two in the Federal Reserve vault.

Sun, 01/19/2014 - 20:32 | 4347002 BidnessMan
BidnessMan's picture

Comex has 112 hands hoping for that one ounce.... 

Mon, 01/20/2014 - 01:28 | 4347511 Tapeworm
Tapeworm's picture

No one in their right mind would want COMEX good delivery bars unless they are pulling a short squeeze.

 The goomint will wreck anyone that tries a large demand delivery of thos non-existent bars. Those COMEX bars are very expensive to get out of COMEX and they are worth far less than equivalent London Good Delivery weights. Taking delivery could be priam faceia evidence of someone jacking the "market".

 On the other side of the trade of being short, it makes perfect sense to offer bars for sale that are worth considerably less than the spot value.

 Shorts are sensible for selling junkat full price and longs are manipulative by overpaying.

 Do you get it?

Sun, 01/19/2014 - 17:37 | 4346668 bombdog
bombdog's picture

I guess they're probably down on the billion by about 35%. But they hold the gold long term so it doesn't matter. Stackers always win.

Sun, 01/19/2014 - 20:00 | 4346940 Uber Vandal
Uber Vandal's picture

Down about 16%. ($1254.10 now vs $1486 then)

The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.

http://www.zerohedge.com/article/golden-tipping-point-university-texas-t...

Still better than Cramer's recommendation on BBY or Bear Stearns.

Mon, 01/20/2014 - 03:20 | 4347570 disabledvet
disabledvet's picture

state university...technically that belongs to the State of Texas. Use it as capital for a State Bank and start going long oil revenues. build out a "space infrastructure"... "Seize Mars." talk about capitalizing a bank. "backed by the resources of an entire planet." powered by laughing gas and used tires.

Sun, 01/19/2014 - 16:52 | 4346583 Solarman
Solarman's picture

Because, now if only 1% ask for their gold, the warehouse is empty.

Sun, 01/19/2014 - 17:15 | 4346637 Seasmoke
Seasmoke's picture

Soon to be empty, with NO ONE asking for the Gold

Sun, 01/19/2014 - 16:51 | 4346580 Winston Churchill
Winston Churchill's picture

As he said ,its a long term investment,not a trade.

Sun, 01/19/2014 - 20:08 | 4346954 El Oregonian
El Oregonian's picture

This is when being extremely posessive is a very good thing. Keep your physical, Let them eat "Paper-shit sandwiches".

Sun, 01/19/2014 - 20:35 | 4347007 disabledvet
disabledvet's picture

http://www.infomine.com/investment/metal-prices/nickel/ big move in nickel to start the year...but the 25 year chart doesn't look too good. that was an impressive price spike in 2008 though.

Sun, 01/19/2014 - 16:34 | 4346536 frankTHE COIN
frankTHE COIN's picture

That was brilliant.

Mon, 01/20/2014 - 01:18 | 4347496 Tapeworm
Tapeworm's picture

A few years ago a friend of mine and myself went in on five kilo of CBOT gold contracts and my friend warned the now deceased broker that we were going to take delivery. All was well and good until the Dec contract settled and we asked for delivery.

 It caused a huge stink and was the reason that the mini gold contracts are only paper and cannot be delivered upon.

 As a museum piece of sorts I have the papers for the last kilo that was ever shipped on that gambling site. The poor bastard that got nailed with delivery of his short contract had to go to HSBC NYC on January first to get the bars and get them into the delivery channel, and then shipped same day.  I imagine that getting some HSBC clown to find a couple of kilo bars on New Year's Day and to roust the proper custodian channel folks on holiday must have been an unpleasant series of transactions, but there were severe penalties for delivery fails and they were already late.

 Henceforth it became a paper market only. I heard that there were several acrimonious meetings prior to our demand being fulfilled and that was the end of fizzicle delivery.

 COMEX bars are substandard in purity and a complete oddball on any other market for size too.

 It will be nothing for them to do what CBOT did with we annoyances that forced them on their delivery rules. No one will notice the end of COMEX physical delivery as no one wants .995 100 TOZ bars unless the buyer is making a point. Someone ask Bass if he actually took delivery on COMEX bars, hhich I doubt, or was it LGD?

 London Good Delivery failure is where it's at.

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