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 - 11:09 | 2123139 francis_sawyer
francis_sawyer's picture

or your nickles (look at Dr. Copper)...

Fri, 02/03/2012 - 11:01 | 2123096 AccreditedEYE
AccreditedEYE's picture

"I see deflation in the things you own and inflation in the things you need." 

Hmmm... I seem to remember some other smart guy saying the same thing...   paging Dr. Caviar Emptor.... 

Fri, 02/03/2012 - 15:41 | 2124334 DosZap
DosZap's picture

deflation in the things you own and inflation in the things you need."

Yes sir, just got a dose of that yesterday,on food items.

Two to be exact. Quaker Oats(Lg carton),6weeks ago was $2.80,now $3.89.

Ocean Spray Grapefruit Juice (low cal), 6 weeks ago, was $2.00 for a jug, now $2.86.

Basically I have said hell no, and have ceased even buying beef,poultry,fish,pork, etc..................unreal.

Buying in large quanities just to save some $$$ for the next trip,no telling what it will be.

Fri, 02/03/2012 - 11:01 | 2123098 Rodolfito
Rodolfito's picture

"I see deflation in the things you own and inflation in the things you need."

That is the best summary I have heard yet.

Fri, 02/03/2012 - 11:03 | 2123116 nontaxpayer
nontaxpayer's picture

Kyle, I won't.

Fri, 02/03/2012 - 11:05 | 2123117 Disenchanted
Disenchanted's picture

Even the email spammers are now talking gold...almost unreadable though.

This fell into my email inbox at 0315 local time this morning:


Subject: "I am sure that we never mate before"  (yeah I'm pretty sure of that!)


Dear, Sir
My name is Martins Ranketu, I got your contact through my internet search
for an assistant from you. I am the son to Late Mr. Felix Ranketu…Sir
before the late of my daddy on the 12/9/2008 when I was still at the age of
sixteen years, my daddy deposited with my name the sum of twenty two
million US dollar with some gold appreciated 985,000.00 USD in a security
company for himself before the discharge of his duty as a ship captain and
later join our government as senator and his departed from me…
I did not get intoxicated to write but I write you to help me to receive
the fund and the gold out for me from the security company since I have no
money to pay the release charge…that’s my reason of contacting you and I
believe in the word of my daddy before he died…Says that people from your
place is honesty and you will also help me and my little sister to come
over to your place since our mummy has decided to get married to another
man who were trying to claim and to use our inheritance to train his own
family…please help me to reply before it become late from the day the
security company has given to me to take the save off from there company….i
an my sister has agreed that when you help us,25% of the total fund will be
for you and we will give to sum gold out from all…I will be looking forward
to hear from you soonest as i know the security company can help you get
across the hole treasures to your place.
Yours truly,
Martins Ranketu


Received: from (LHLO ( by with LMTP; Fri, 3 Feb 2012 08:15:43 +0000 (UTC)
Received: from ([]) by with comcast id VLFi1i0144DEkgp0CLFjED;
 Fri, 03 Feb 2012 08:15:43 +0000


Fri, 02/03/2012 - 16:36 | 2124588 akak
akak's picture

Sounds totally legit to me.

Can I go in on the deal with you, Disenchanted?


PS: I did not get intoxicated to write, say that I from the your place that is honest.

Fri, 02/03/2012 - 19:38 | 2125308 Disenchanted
Disenchanted's picture

"Can I go in on the deal with you, Disenchanted?"


Sure, why not...sounds like there's plenty to go around ;)


I'm wondering about this part:

"I will be looking forward to hear from you soonest as i know the security company can help you get
across the hole treasures to your place."

Is he saying he's throwing his sister in as part of the deal?    /s

Fri, 02/03/2012 - 16:37 | 2124591 EINSILVERGUY

Ben Bernanke will stoop to nothing

Fri, 02/03/2012 - 11:03 | 2123119 hungarianboy
hungarianboy's picture

Bearish engulfing on the daily, hourly shows very nice 3 line strikes. this is going to collapse. to 1500 again heck if 1540 passed then see you way below in the 1200 maybe sub $1000.

Fri, 02/03/2012 - 11:29 | 2123220 tmosley
tmosley's picture

$0 is the real target for these fake, paper assets.

Fri, 02/03/2012 - 11:37 | 2123253 Al Huxley
Al Huxley's picture

Wow, if that's what you're reading, and if you're actually taking trading positions on that, and if you've made similar calls in the past, this market must be costing you a fucking fortune. But hey, good luck with it Nouriel.

Fri, 02/03/2012 - 11:59 | 2123363 MsCreant
MsCreant's picture

It either is Nouriel or a troll who likes to stir the pot posting as if he is Nouriel.

Fri, 02/03/2012 - 12:24 | 2123502 trav7777
trav7777's picture

Gold is pretty seriously overbought on the dailies...exercise caution long here.  Negative strength divergence from the top in August

Fri, 02/03/2012 - 11:07 | 2123127 junkyardjack
junkyardjack's picture

Dump your gold, margin hike has to be coming through.  Buy back after chaos

Fri, 02/03/2012 - 11:12 | 2123129 EL INDIO
EL INDIO's picture

I’ll sell my Gold when we’re back on the Gold standard.


(By the way Gold entered overbought territory (RSI ~ 75) and could concede as much as $100/ounce. MA 50 ~ $1670)

Fri, 02/03/2012 - 11:07 | 2123130 Stuck on Zero
Stuck on Zero's picture

"I see deflation in the things you own and inflation in the things you need."

That's what the guy holding the things I need said. 

Fri, 02/03/2012 - 11:08 | 2123135 DaveyJones
DaveyJones's picture

"deflation in the things you own and inflation in the things you need"

becoming one of my favorite lines

Fri, 02/03/2012 - 11:53 | 2123320 MachoMan
MachoMan's picture

Which, literally, is nonsense from an austrian perspective...  if we substitute deflation with decreased prices and inflation for increased prices, then we might get somewhere...  but we know what he means.

Fri, 02/03/2012 - 19:51 | 2125351 akak
akak's picture

"deflation in the thongs you own and inflation in the thongs you need"


I can relate to that.

Fri, 02/03/2012 - 11:08 | 2123136 mushioov
mushioov's picture

These are rough times. Sell your gold and silver, under spot... to me

Fri, 02/03/2012 - 11:11 | 2123150 Tic tock
Tic tock's picture

Grand Experiment... or financial terrorism?

Fri, 02/03/2012 - 11:18 | 2123173 Ghordius
Ghordius's picture

hey, this is Tricky Dick in your avatar!

how apt

Fri, 02/03/2012 - 11:45 | 2123290 DaveyJones
DaveyJones's picture

I like to think all their names are dick now

Fri, 02/03/2012 - 12:12 | 2123451 MsCreant
MsCreant's picture

Like "Dick" Holder? I'd love to get your take on a bit American Spirit posted down thread about Eric's prosecutors taking bribes and him not doing anything about it because he did not want it going public and making him look bad.

Fri, 02/03/2012 - 15:58 | 2124406 DaveyJones
DaveyJones's picture

I'll take a look but any man who was counsel for Chiquita is already a criminal to me. How's the water? 

Fri, 02/03/2012 - 17:52 | 2124904 MsCreant
MsCreant's picture

I should have emailed you. Water is a big problem and at this point a point of contention. Thing is, I don't know how to think about planning a garden when the literal shape of the canvas is unknown. They want to throw grass seeds on it. 

Fri, 02/03/2012 - 17:31 | 2124822 RockyRacoon
RockyRacoon's picture

I'm learning not to believe everything I read -- anywhere.

Gold's rally will soon come to an end

Despite its recent highs, is gold vulnerable to a short-term pullback, if not worse? Mark Hulbert has some answers.
Gold's rally will soon come to an end.

Fri, 02/03/2012 - 18:01 | 2124953 MsCreant
MsCreant's picture

I guess his perspective is very short term. Or he thinks the debt issues in EU and US will work themselves out!

How are bug out preps going? You were lightening your load last I saw you posting. My house is getting closer, we hope we will get in, in a month or so. Mr. Jones above will advise on my garden as soon as I know what I will be working with. It is all clay mud right now. Sad.  

Fri, 02/03/2012 - 11:14 | 2123159 mushioov
mushioov's picture

Damn... $40 drop in 1 hour? What the hell is happening there?

Fri, 02/03/2012 - 11:32 | 2123229 tmosley
tmosley's picture

Paper shuffling.  Use the foolishness of these rubes to buy more physical, if you take any action.

Fri, 02/03/2012 - 11:37 | 2123251 EL INDIO
EL INDIO's picture

We had a $100 up move just on Bernanke talk!

It’s got to be given back. Don’t you think ?

Fri, 02/03/2012 - 11:39 | 2123260 fuu
fuu's picture

They said there would be volatility.

Fri, 02/03/2012 - 13:54 | 2123912 blunderdog
blunderdog's picture

Wake me when we've got price swings of 8%. 

Fri, 02/03/2012 - 11:46 | 2123291 tekhneek
tekhneek's picture

I'm summarizing this move as dollar strength:

Fri, 02/03/2012 - 15:49 | 2124365 DosZap
DosZap's picture

Damn... $40 drop in 1 hour? What the hell is happening there?


Fed's Fisher said NO Need for more QE.(and you know how the asshats take that line of crap.

I KNOW Fisher must be clueless that Benny, has never stopped QE, to all except America.Wait till he dumps a pile on Euronisneyland.

Fri, 02/03/2012 - 16:41 | 2124605 EINSILVERGUY

Is this the same Fed Fischer that bought 1 million in the faux gold fund GLD and took possession of $250K of physical platinum or am I thinking of another governor

Fri, 02/03/2012 - 11:17 | 2123160 alien-IQ
alien-IQ's picture

The thing that's been driving the market for the last few months, the AUD/USD, is now 30 pips away from an all time high.

It's quite amazing really. AUD/USD has gone from .62 to 1.0750 in 3 years.


UPDATE: Now 10 pips from all time high.

Fri, 02/03/2012 - 11:18 | 2123171 riphowardkatz
riphowardkatz's picture

 “As every day goes by, I see deflation in the things you own and inflation in the things you need.”

I like Bass but don't undertsand how he can misuse deflation and inflation. It really muddies thinking. 

Deflation and inflation are mutually exclusive when their proper definitions are used (increase or decrease in prices caused by money supply). Just call prices falling, prices falling.  Then look for the cause of them falling. This allows you to more clearly understand the reality of the situation. Or we could go back to just grunting and do away with defintions.

He should of said " I continue to see inflation in things you need and prices declining for things you own" Then explain the reasons for prices falling like regulations, fear, credit destruction. Those reasons do not include a falling money supply to the contrary the money supply is increasing at a tremendous rate.


Fri, 02/03/2012 - 11:48 | 2123298 ZeroChance
ZeroChance's picture

I believe it was a quick "soundbite" way of saying what you are saying --- the long-form correct view.

If our homes have lower prices, that is due to a deflationary situation in that there is a lower money supply/regulations and capability to refinance, buy, etc.  However, we all know that there is also higher prices on many key things and that is due to the huge increase in the money supply that *is* flowing in other areas.

We are currently in strange market dynamics (some say, broken/non-existent markets, in fact) due to the strange actions that have been taken.  Much of these actions are unprecedented in the particular ways they've come forward and give us no useful historical context to easily understand.

So, if I get his gist, I think his statement nails it pretty well actually.

Fri, 02/03/2012 - 12:02 | 2123388 MsCreant
MsCreant's picture

That was very polite and to the point. 

Fri, 02/03/2012 - 12:19 | 2123482 riphowardkatz
riphowardkatz's picture

Yet still inaccurate. That is the good news for speculators. As long as definitions like this are conflated there will be opportunity for market disconnects. Until you can properly use definitions you will continually be confused about reality which will lead to bad decisions. 

Fri, 02/03/2012 - 12:40 | 2123556 Libertarian777
Libertarian777's picture

if its inaccurate HOW is it inaccurate?


Can't remember off teh top of my head but I think the housing bust destroyed some $5 trillion in real estate value.

The Fed printed (electronically) approximately $16 trillion excluding TARP etc, so on a net-net basis we're looking at $10-12 trillion of inflation.

However it hasn't 'hit' the road yet because the velocity of money (which is the indicator of the transmission of monetary inflation to price inflation) is still stagnant.


"Inflation is always and everywhere a monetary phenomenon." Milton Friedman

Fri, 02/03/2012 - 13:13 | 2123696 riphowardkatz
riphowardkatz's picture

If properly used the terms deflation and inflation are mutually exclusive. Deflation is a decline in prices CAUSED by declining money supply. Inflation is rising prices CAUSED by an increasing money supply. Money supply is either increasing or decreasing it isnt doing both regardless of velocity.

There are a ton of other causes for rising and falling prices outside of money supply. By distingushing the causes we can better understand the reality. If you say we have both deflation and inflation you will have a more difficult time understanding the reality.

If housing prices fell while money supply was rising then we have to look for other causes because the cause cannot be a declining money supply. Other causes include less credit (credit is not money) available, market fear, previous capital misallocation(overbuilding)  

Here are just some reasons prices rise and fall: capital misallocation, wage arbitrage, productivity, technology, artificial credit incentives, government incentives. Feel free to couch those price changes all under deflation and inflation but I can promise you it will contort your understanding of what is going on.


Fri, 02/03/2012 - 14:28 | 2124092 blunderdog
blunderdog's picture

Deflation is a decline in prices CAUSED by declining money supply. Inflation is rising prices CAUSED by an increasing money supply.

I dunno, I think it's safer to just think of money supply OR prices when using either term.  There's no other good way to deal with the current circumstance, where you have decreasing "money supply" in terms of collapsing asset valuation at the same time you have loss in purchasing power.

What you call "inflation" in that quote sounds like it's more simply explained by classical price mechanics given increased consumer demand.  You'd say it's money-supply causing the increased demand, I know, but it's not so much about the size of the money supply--it's about the distribution of the money.

Fri, 02/03/2012 - 18:03 | 2124964 riphowardkatz
riphowardkatz's picture

Asset values are not money. Money is money. When asset values collapsed there was still the exact same amount of money as there was prior to their collapse.

Fri, 02/03/2012 - 18:21 | 2125030 MsCreant
MsCreant's picture

So what is The Bernank holding on his balance sheet? And all the banks? Is this not the void that needs to be filled that cannot?

Fri, 02/03/2012 - 19:14 | 2125216 riphowardkatz
riphowardkatz's picture

That is a good question and maybe akak can help me out. My initial response is "he is holding soveriegn immunity". Governments that can print their own currency cannot and will never go bankrupt so the balance sheet is mererly a mirage to manage expectations or provide the illusion of accountability.  I will have to think through it to make sure I am correct.

Fri, 02/03/2012 - 18:38 | 2125075 akak
akak's picture

Riphoward, you are EXACTLY correct, but seem to be much in the minority, even here, in understanding just what is and what is NOT both "deflation" and "money", as well as recognizing that there is simply no "threat" whatsoever facing us from some putative --- and NEVER before seen ---- fiat currency deflation, with the laughable corresponding appreciating fiat currency, something yet to ever be documented in all the thousands of years of monetary history.

Like you, I grow increasingly frustrated, as well as enraged, by all the misinformation, and active DISinformation, surrounding the topic of "deflation" --- which as far as I am concerned, is NOTHING but a smokescreen being thrown up by the powers-that-be, and their lackies in the corporate-controlled media, to confuse and divert the attention of the average person from the one REAL threat, that of ongoing fiat currency depreciation, as well as the very possible if not inevitable collapse of the same. 

No period of exponentially, and unsustainably, rising governmental debt and monetization has EVER spawned an appreciating fiat currency --- but literally hundreds of such episodes have seen the radical depreciation or outright collapse of their fiat currencies.  What makes ANYONE suspect that this time is going to be any different? 

The one thing that I have found to be universally common to all the dishonest, disingenuous and/or clueless deflationist is a complete lack of historical perspective, and knowledge of monetary history.

Fri, 02/03/2012 - 20:46 | 2125508 blunderdog
blunderdog's picture

So what's "money" in your view?  Physical currency only?  M0?

(I'm actually trying to follow your thinking on this, just not getting anywhere.)

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