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Kyle Bass: "Don't Sell Your Gold"

Tyler Durden's picture


The mainstream media seem willing to sound the all-clear and bring us back from Defcon-3 on the back of what can generously be described by realists willing to look at the actual data as a 'murky' NFP print. The market's reaction seems modestly QE-off (with rates up decently) but the only modest drop in Gold appears to fit with a lack of conviction in the data (especially given the EUR sell-off on Papademos chatter). It seems, as Bloomberg reports, Kyle Bass is right to take the longer-view when he notes today "I'm against selling any of the gold" in UTIMCO's portfolio, pointing out the mounting risks from government deficits in US and Europe, "as every day goes by, I see deflation in the things you own and inflation in the things you need." Summing up the reality of our global situation, one of Bass's colleagues adds "This is a grand experiment and they typically never end well."

YTD performance of Silver, Gold, S&P 500, and the Long Bond.

and today's reaction in context this week.

Chart: Bloomberg


Kyle Bass Urges Texas Endowment Fund to Hold Gold Hedge as Assets Shrink

Kyle Bass, the Dallas hedge-fund manager, urged overseers of Texas (STOTX1)’s state university endowment, the second-largest U.S. college fund, to stick with a $1 billion investment in gold bullion even as the fund’s assets decline.


“I’m against selling any of the gold,” Bass said today at a meeting of fund directors in Austin, citing the need for a hedge against mounting risks driven by government deficits in the U.S. and Europe. “As every day goes by, I see deflation in the things you own and inflation in the things you need.”




The Fed’s governors, led by Chairman Ben S. Bernanke, “are scared as they can be of deflation,” said Ardon Moore, president of Lee M. Bass Inc., an energy company in Fort Worth, Texas. “This is a grand experiment and they typically never end well.”




Kyle Bass, a managing partner at Hayman Capital Management LP and a Utimco trustee who isn’t related to Lee Bass, faulted the world’s biggest central banks for expanding the money supply by what he said was $15 trillion during the past five years. In April, he advised the fund on holding gold bars rather than futures contracts.


Gold futures for April delivery, the most-active contract traded on the Comex today in New York, touched $1,763.80 an ounce, the highest price since Dec. 2. The metal, which reached a record $1,923.70 on Sept. 6, climbed 11 percent last month, the biggest January rally since 1983.


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Fri, 02/03/2012 - 16:12 | 2124453 DaveyJones
DaveyJones's picture

definitions become tricky as the currency becomes tricky They are not mutually exclusive phenomena when a currency is collapsing. Money can crowd ridiculously at the front end, deflating long term things and inflating short term / often necessary things.

Fri, 02/03/2012 - 12:59 | 2123638 jimmyjames
jimmyjames's picture

Deflation and inflation are mutually exclusive when their proper definitions are used (increase or decrease in prices caused by money supply).

Those reasons do not include a falling money supply to the contrary the money supply is increasing at a tremendous rate.


Yes people should use the definitions in proper context-

Inflation-an increase in the money "and" credit supply-

Deflation the opposite-

The money supply is increasing rapidly-but-the credit supply is decreasing at a much greater rate-so in that regard-we are seeing deflation-


Stocks fell, pushing the MSCI All- Country World Index of 45 nations into a bear market for the first time in more than two years, after the worsening European debt crisis and threat of a U.S. recession erased more than $10 trillion from equities since May.

U.S. household wealth fell by about $16.4 trillion of net worth from its peak in spring 2007, about six months before the start of the recession, to when things hit bottom in the first quarter of 2009, according to figures from the Federal Reserve.

That leaves American household wealth $7.7 trillion less than it was before the recession.


Fri, 02/03/2012 - 13:16 | 2123709 riphowardkatz
riphowardkatz's picture

Credit supply is decreasing? Ha! Ask the US government if that is the case. They have all the credit they can handle for .000005%

What is the advantage of mixing credit in with money. They are two completly different things. 

Fri, 02/03/2012 - 14:14 | 2124011 jimmyjames
jimmyjames's picture

Credit supply is decreasing? Ha! Ask the US government if that is the case. They have all the credit they can handle for .000005%

What is the advantage of mixing credit in with money. They are two completly different things.


They are two different things-

Two different forms of money supply-

Can you pull your visa out and "buy" an item?

Can you renege on paying your visa?

If you do that-someone has experienced a decrease in "money supply"

Credit is money-because it acts like money-same for gold or cash-

And after i just showed you the trillions of losses ie" decrease in personal/corporate money supply-you say it hasn't happened-

What good is a stash of credit/cash when it isn't moving?

It's certainly not inflationary-


Fri, 02/03/2012 - 15:00 | 2124196 riphowardkatz
riphowardkatz's picture

And after i just showed you the trillions of losses ie" decrease in personal/corporate money supply-you say it hasn't happened-
> You showed a decrease in credit supply not money supply.
>You think the government is sitting on the billions/trillions  they are borrowing through QE12345? Saving it for a rainy day?I don't disagree that private credit has imploded. I think this is temporary but we shall see.

>You are wrong in your outline of the visa situation. I borrowed the money. I default. The money I borrowed is still floating around. It didnt disappear. Visa takes a hit but the total money supply is unaffected. 

Fri, 02/03/2012 - 15:42 | 2124338 jimmyjames
jimmyjames's picture

You showed a decrease in credit supply not money supply.


Did credit supply drive GDP--did credit supply drive up the value of housing by lending people with no money-money/did credit enable people with no money to buy homes and then ATM the equity away on toys?

Sounds to me like credit acted as money-and if not-why is Bernanke so afraid of deflation?

The government is not sitting on billions and trillions-otherwise they would not have to keep increasing the "debt" limit-

Banks are sitting on billions but that's all that happening with it because they are not lending it out to unworthy borrowers anymore and the people/businesses that are worthy are not borrowing-


Visa takes a hit but the total money supply is unaffected.


Did visa experience a loss in money supply on their balance sheet?

Fri, 02/03/2012 - 16:41 | 2124603 riphowardkatz
riphowardkatz's picture

Credit supply did not drive GDP money supply drove GDP. Money supply also drives credit supply so there is an add on effect. The loss of credit supply to private sector is and has been replaced by government credit. 

The government is spending the money on defense, on bridges to no where, on payrolls, on doctors and on lots of other stuff. They have a far greater capacity for spending than the private sector. If you cannot see how government debt can and is making up for the reduction in private debt you are blind.

In the visa example, we are talking about total money supply. Visa took a hit to their balance sheet but whoever I spent the money offsets that loss with an increase on their balance sheet. The money still exists eventhough I defaulted and visa took a loss. 

Fri, 02/03/2012 - 19:09 | 2125202 RockyRacoon
RockyRacoon's picture

Credit in today's market/economy IS money.  What's the problem?

Fri, 02/03/2012 - 20:21 | 2125435 jimmyjames
jimmyjames's picture

If you cannot see how government debt can and is making up for the reduction in private debt you are blind.


We are not talking about debt-we are talking about "credit" which is the flip side to debt-it is "borrowing" and spending the money into the economy that drives GDP-not borrowing and absorbing debt onto the balance sheets like the government/Fed is doing-

Credit didn't drive GDP?

I'll show you that it did and not money as you say-

From 1980 until 2008 money supply increase by a paltry 700 billion-

From 1980 until 2008 credit increased by an astounding 45 trillion-

GDP rose with loans until the credit markets locked up-

Did the sub primers "buy" homes on credit?

Did the building of those homes gun the construction market?

Is construction a % of GDP?

Was ATM'ing the house and spending the equity on toys/autos/walmart driving GDP?

I suspect it was and the data proves it-

Fri, 02/03/2012 - 20:58 | 2125541 blunderdog
blunderdog's picture

The money I borrowed is still floating around. It didnt disappear. Visa takes a hit but the total money supply is unaffected.

This is a contradiction.  Don't mind me, but you don't really "get" this stuff.

Fri, 02/03/2012 - 21:07 | 2125561 akak
akak's picture

And if you glibly and ignorantly lump any and ALL debt together with actual money as the supposed "real money supply", as do all the (other) clueless deflationary flat-earthers, then it is you who does not "get it".

Fri, 02/03/2012 - 21:25 | 2125606 blunderdog
blunderdog's picture

If someone can explain something, maybe sure fine I'd agree.  But this is just incoherence.

What is "real money" in your world? 

Throwing the label around is useless if you can't communicate what it means.

Fri, 02/03/2012 - 21:33 | 2125634 akak
akak's picture

The confusion does not lie with me, or with the Austrian School understanding of money --- which does NOT equate debt, particularly any and ALL debt, of whatever variety or source, as "money", as do the clueless deflationists currently.  Reality is so at odds with their harebrained, academic theories that it continually astounds me that anyone still buys into them.

Fri, 02/03/2012 - 21:40 | 2125647 blunderdog
blunderdog's picture

You got nothin, huh?

I don't fault you for it.  "Money" is a slippery concept.  But if you don't know what you mean by the word, it's pretty clear where the confusion is.

Fri, 02/03/2012 - 11:41 | 2123269 Benjamin Glutton
Benjamin Glutton's picture

Don't take your gold to town son leave your gold at home.

Fri, 02/03/2012 - 11:51 | 2123311 americanspirit
americanspirit's picture

Sorry to hijack this thread but for all of you Eric Holder fans out there this is true breaking news.

The first paragraph of the story, datelined today Feb 3 2012 reads:

A US Justice Department source source has told The Daily Caller that at least two DOJ prosecutors accepted cash bribes from allegedly corrupt finance executives who were indicted under court seal within the past 13 months, but never arrested or prosecuted

The link is



Fri, 02/03/2012 - 12:07 | 2123417 MsCreant
MsCreant's picture

I wish they gave more detail. I can say somone told me anything and stir some stuff up for a minute. 

Fri, 02/03/2012 - 11:57 | 2123339 DrZuess
DrZuess's picture

Kyle Bass emerges form his burrow, sees his shadow, 6 more years of tail risk.


Best Bass quote ever after responding to a european journalist blaming hedge funds for increasing the cost of bonds: "Dont blame the mirror if you're ugly"

Years from now, (post Warren Buffet hero worship era), Kyle Bass will be rembered as one of the great financial minds.

Fri, 02/03/2012 - 12:09 | 2123436 MsCreant
MsCreant's picture

Nothing is inviolate. We need to get that through our thick skulls. Nothing.

Fri, 02/03/2012 - 12:08 | 2123429 chan_preet23
chan_preet23's picture


Fri, 02/03/2012 - 12:28 | 2123514 Think for yourself
Think for yourself's picture

Thank you for your thorough analysis of the situation.

Fri, 02/03/2012 - 17:49 | 2124881 tmosley
tmosley's picture

You misspelled "GLD".

Fri, 02/03/2012 - 12:17 | 2123477 Silversinner
Silversinner's picture

Would change that advise to buy some more gold/silver.

Bought the fucking dip all the way down and up.

This bull market in pm has a long way to go.

If friends ask me today if they should buy gold,

I tell them no it is allready to late for you to

buy gold,because most of them can not

even spend 1800$ on one coin anymore.

They would not listen to me years ago,when gold was

still affordable for working class people.

I tell them to buy silver instead and not wait

to long because in a few years the same could be

the case for silver.Happy some of them did buy


Gold is money for the kings,silver is money..........



Fri, 02/03/2012 - 12:34 | 2123526 Fix It Again Timmy
Fix It Again Timmy's picture

What would BlackBeard do?  Pirates generally went for chests of gold and silver.  Don't ever remember them opening a chest and finding fiat and if they did, I'm sure it went something like this: "Ay matey, what a worthless lot, the better to wipe yer ass with...

Fri, 02/03/2012 - 13:39 | 2123843 resurger
resurger's picture

Type Kyle Bass on youtube, see the his last Intreview

the bottom line is

1- Short Stocks (Just wait for the bubble)

2- Long Gold And Silver

Fri, 02/03/2012 - 13:52 | 2123906 AvoidingTaxation
AvoidingTaxation's picture

HA! 3000 USD in PSLV now!

Fri, 02/03/2012 - 14:08 | 2123977 devo
devo's picture

Selling your gold = giving your money away.

Why would you do that?

Fri, 02/03/2012 - 14:09 | 2123986 DavidPierre
DavidPierre's picture


Is the Gold Bull Market ... or is Facebook ... almost Over?



The precious metals bull market is nearly over. Not trying to disappoint anyone but those expecting this Gold and Silver bull market to run for years are going to be sorely disappointed. Timewise, this thing may last only another 2 or 3 years...or less! This does not mean that Gold and Silver will not continue to be assets that will "store" value. They will but there will be other "assets" that if purchased correctly will appreciate in value versus both Gold and Silver.


Before slitting your wrists and questioning your gold investment premises, it is only about "time" right now, NOT "price".

The bull market in precious metals... the bear market in fiat currencies... cannot continue for very much longer for many reasons. One being that the "system" itself is so fragile that each and every day can now be "THE DAY" that the music stops. Another thing is "power", whoever controls the "money"...currency... controls the nation. The "powers that be" do not want to give up power, that is a given. They are not stupid people and understand that folding the current monetary tent and raising another one before the market forces do this for them is certainly better than losing all power, being run out of town or hung from lamposts.

We are now at a point where there are too may holes in the financial dam to be plugged...the lies are getting to big even for 3rd graders to be fooled. The total bankruptcy of the system is just too obvious to be ignored. We will get an overnight "reset" and it looks to be much more likely than an orderly 5-10 year devaluation of fiat currency. A devaluation that takes "time" will allow too many "peasants" the opportunity to board the train, this is NOT something the Fascist "elite" planners would want.

No, the "elite" have been personally loading up on precious metals because they are fully aware that the current monetary system is and has been for quite a long while...UNTENABLE.

Pick a number, $10,000, $100K, $1 Million per ounce ... whatever... it will not take years and years to get to a number where the supposed Treasury Gold covers all of the paper.

Think about the problems in Europe for a moment. Were the central banks by decree to mark up the value of their Gold reserves high enough, their "debts" would be covered and a new currency "backed" by their Gold could then go forward. This thought process is not new, it has been done hundreds of times throughout history.

THIS is what must and will be done, it is only a matter of time.

A "mea culpa". For the last 11 years non precious metals holders were told to "move" and purchase some Gold and Silver to protect themselves. On nearly all pullbacks in price everyone was assured that the bull markets were "young" and what they were seeing was a "gift" to buy more rather than to panic and sell. A failure of overall timing. Not the "buy points", those were pretty good, the "overall" timing. If you asked in the year 2000 when the revaluation would occur, it might have been 2005 or '06. If you asked in 2006...certainly not more than 2 years.

Here we are. No currency change yet.

A failure... to account for governments willingness to financially bankrupt themselves to continue on... to foresee that governments would step into the "debt creation void" and to continue their Ponzi using their own balance sheets. Even today knowing what has happened... governments, central banks and treasuries made themselves into bankrupt entities. If the current system is still functioning on smoke, mirrors, lies and thin air in 2 or 3 years, they will be more wrong, more bankrupt than they already are.

Because information... computers... now circles the globe in less than 1 second, that "revaluation" will also be very rapid.

Gold and Silver have in fact revalued versus paper but has taken place over 11 years. Longer than any revaluation in history. Yes, there are now a gazillion ways to put "leverage upon leverage" which has prolonged this epic event.

HOW MUCH can be created ... HOW LONG will it last.

Jim Sinclair has said that Gold will reach a "level" ... maybe overshoot by 20%... and fall no more than 20% ... not replay the 1980 peak and collapse. Right now is the time to decide what area, what sector, what type of business you ultimately want to be in because sitting on a pile of precious metals for the rest of your life will not be the best ... percentage wise... that you can do. If you "miss" the top, you will not go broke. This will not happen.

Plan now as to what you'd really like to do. Do you want to be a landlord? A small business owner? Own some sort of manufacturing business or whatever? If you just want to stay in stocks, what industry? When there is a "reset", you will be sitting on a huge pile of capital in relation to everything else. If you already have enough in precious metals, this will be a moot point. If not, you will be given the opportunity to invest your newly and higher revalued wealth into something productive.


Thinking about this now... be able to invest in whatever you choose from the GROUND FLOOR! It will at some point cost "more ounces" to purchase whatever endeavor choosen. Put some thought into what you'd like to do and have something in mind. Cut down the amount of time "wasted" in making your investment.

This "revaluation opportunity" my very well present itself this year. Make... or at least ponder an "exit strategy" before the opportunities present themselves. You will not be given much time... "some time"... as a banking holiday will occur. But what if they really do pull this off and get it done efficiently in only 1 or 2 weeks?

Opportunity knocks at the door and you are not prepared to answer it? Maybe this doesn't happen quickly and you are forced to sit at home eating up your stored beans and rice. At some point you will hear the knock if you are listening. Being prepared for this possibility cannot hurt even if wrong about the price and time. The current paper money will NEVER appreciate versus your precious metals holdings on any sustained basis. You have already won... you are mathematically assured that you have.


What will you do with your "winnings"?

Gold is not productive...It is money!


Fri, 02/03/2012 - 14:23 | 2124052 devo
devo's picture

The only timeline on the bull market in PMs is how long central banks continue to inflate their way out of bubbles. That could go on for another 20 years. Your post is somewhat assinine.

The time to sell will be when current policy stops. But, it can't without asset price crashes and higher borrowing costs, so yeah, it won't. Don't you understand this basic notion?

Fri, 02/03/2012 - 16:01 | 2124421 HungrySeagull
HungrySeagull's picture

A billion bullion and stack more.


best I can hope for is two or three gold this year...

Fri, 02/03/2012 - 22:25 | 2125745 Tedster
Tedster's picture

Credit is not money. If you look at older textbooks, it was termed "near money", that sounds about right.

Asset values are not money. If a homeowners property was valued at $500,000 four years ago, and now valued $189,000, where did the "money" go? From whence it came! It's probably a question for the existentialists how something that really isn't anything, can have real consequences. Currently, only officially issued rectangles of linen and cotton, along with minor subsidiary slug coins, with likenesses of various deceased and past Presidents and dignitaries et. al, can be considered "money". Virtually (heh) everything else is a bit sketchy, depending on the circumstance.

Cash (despite paper currencies historical problems) has advantages, for example, when electronic payment systems are down. Cash is not electronic bits and bytes, or a line of credit. Apart from the problem of theft or robbery, (apparently from bank robbers, and robber banks) there is no reason to actually keep cash on deposit.

Strange days, folks.

Sat, 02/04/2012 - 01:02 | 2126001 Dermasolarapate...
Dermasolarapaterraphatrima's picture

Why are the Chinese buying gold like crazy?

Mon, 02/06/2012 - 02:04 | 2129919 Matt
Matt's picture

Its the next get-rich-quick scheme. They rotated out of housing and into gold. Plus they have their own rapid inflation to hedge against.

Not that I think gold buying in general is a get-rich-quick scheme, but from the perspective of Chinese Speculators, I suspect that is what they see; they seem to move into a particular asset en masse more so than any other group of people.

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