According to Bloomberg Texas University’s decision to own gold was influenced by a successful hedge fund manager in Dallas, Kyle Bass, who made a fortune shorting sub-prime mortgage securities on the eve of the financial crisis. (I wrote a column about Bass’ killing at the time) Bass is on the endowment’s board of directors, and reflects the view of several leading hedge fund managers such as George Soros, John Paulson and gold enthusiasts Frank Giustra and Thomas Kaplan, whom I have written about often.
Bass was quoted by Bloomberg Friday explaining that “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. I look at gold as just another currency that they can’t print any more of.”
So it's not just John Paulson who's made the shift from shorting subprime mortgage securities to buying gold. The two trades seem to go together, don't they?
What's interesting about this story is the fund's managers taking seriously a point that used to habituate the hardcore goldbug world: buying physical because of counterparty risk attached to paper gold. Yes, gold's slowly becoming mainstreamed. We're far from the outright mania phase, but it's inching closer as gold becomes more legitimate. As of now, amongst major institutional capital-slingers, only the daring have gone into gold at all.