Hmm...University Of Texas Begins To Hedge Its Portfolio With Gold

This peeks above the radar from Inside Higher Ed.

News that the investment arm of the University of Texas has started buying up gold is validating the concerns of some analysts who fear high inflation and increasing U.S. debt will wreak havoc on other more commonly held endowment securities, such as bonds.

The University of Texas Investment Management Company (UTIMCO) announced last month that it would move $500 million into gold. While that constitutes just 3 percent of the $22.3 billion in assets UTIMCO controls, it’s a marked shift in strategy for a management company that had no gold in its portfolio a year ago.

(and later in the article)

Given the fact that a gold investment strategy is predicated on the idea that the dollar is declining and the nation is too deep in debt, some have described the gaga for gold trend gripping the conservative movement – see Glenn Beck – as ideologically driven.

But you don’t have to be a conservative talk show host to see the merits of UTIMCO’s position, said Sandy Leeds, a senior lecturer of finance at the University of Texas at Austin’s McCombs School of Business. Leeds was so fired up by the news of UTIMCO’s strategy that he wrote an op-ed on the subject for The Houston Chronicle, which originally reported on a public meeting where the investments were discussed.

“While unstated by UTIMCO, we should consider the possibility that they are hedging against a U.S. meltdown,” Leeds wrote.

Leed's op-ed is well worth reading.

The financial problems we face are immense. In addition to our trillion-dollar deficit, our total debt is approaching 85 percent of gross domestic product. A recent academic study by Carmen Reinhart and Ken Rogoff suggested that a debt level above 90 percent of GDP is a tipping point that results in slower growth.

In reality, I would be ecstatic if our debt level was only 90 percent of GDP. The real issue is that we have approximately $50 trillion of unfunded liabilities - Social Security, Medicare and Medicaid. This is a daunting liability. Public investors such as mutual funds, pension funds, endowments, hedge funds, foreign governments and individuals have all combined to loan the United States approximately $8.5 trillion to fund our accumulated deficits. If we wanted to be fully funded in today's dollars, we would need to issue another $50 trillion of debt.

Now, if OS may break into the local patios:

Ya'll, these are grownups who have to be in charge of the endowments of major universities, unlike the clown circus who run the White House and Congress. University of Texas existed long before this crew ever got together, and intends to be in business long after they have left to write their mutually-incriminating biographies.

These people ain't no AstroTurf, or TeaParty TeaBaggers, or Glenn Beck devotees, or secessionists, or Klan members, or any of that stuff. These are serious, sober, boring respectable people who have to make sure the alma mater is still in business for their grandchildren.

They are voting with their investment decisions, and they ain't endorsing The One, TurboTax Timmy, and Helicopter Ben, Miz Nancy and Mr. Harry, and Rahmbo. They are distancing themselves from this crowd, and trying to keep their corner of the world intact when things begin to come unwound.