Let’s parlay the publicity given to the recent University of Texas endowment fund’s decision to convert all of their paper gold to physical gold into a campaign to convince large endowments/foundations all over the country to follow in their very wise footsteps.
According to boston.com, university endowment funds lost a lot of their value during the 2009 fiscal year. Harvard’s endowment fell nearly 30 percent in the fiscal year ended June 30, 2009, to $25.7 billion. The Yale University endowment, the nation’s second-largest, dropped 28.6 percent, to $16.3 billion, and Stanford University’s plummeted 26.7 percent to $12.6 billion. The average drop for endowments across the country was 23 percent, based on a survey of 842 colleges and universities by the National Association of College and University Business Officers and Commonfund, an investment firm for endowments. In 2010, some of the top endowments recouped some of their enormous losses from the year prior. Even so, a great, overlooked risk lurks in all endowment and foundation funds invested in paper gold and paper silver derivative products to which the University of Texas System recently called attention.
On April 18, 2011, Bloomberg reported that the University of Texas System endowment fund converted all $991,700,000 of their paper gold derivatives to physical gold. It is believed that the University of Texas board members took this bold action because they saw it as a necessary step to guard against potential devastating losses in paper gold derivative products that are backed only by a tiny fraction of the real gold that exists in the physical market. Here’s an actionable idea by which we can break the international banking cartel’s repressive grip on the control of gold and silver prices and allow gold and silver prices to move as they would in a free market. We can encourage the largest endowment funds and foundations in the United States to follow the lead of the University of Texas System by alerting them to the risks of holding paper gold and paper silver. The greater the amounts of paper gold and paper silver converted into physical gold and physical silver, the greater the strain that is placed upon the banker’s ability to suppress gold and silver prices.
I’ve compiled a list of the top university and college endowments and foundation funds in the United States below. Many of you know that I am not a fan of the bogus modern day education system or of many of the foundations below, especially since many of the institutions below have churned out professors and people that are prominently involved in the effort to spread the very anti-gold and anti-silver propaganda that has muddled the people’s understanding of gold and silver’s real value. But what great fun it would be if we inundated these boards with letters urging them to convert their paper gold and paper silver to physical gold and physical silver and forced some of the institutions that have contributed to our present global financial disaster to partake in freeing gold and silver markets from price suppression! What great irony there would be in this achievement.
We don’t have to successfully convince all universities and foundations to convert their paper gold and paper silver into real gold and real silver, but if we can convince just one of the larger-sized endowments/funds to do so, then other institutions will inevitably follow in a domino effect as they will be encouraged to research the risks of holding hundreds of millions and/or billions in paper gold and paper silver.
To make this task as easy as possible, I have written a letter below that you can copy and paste and mail/email to the below colleges and universities and have slightly modified the same letter so it can also be sent to foundations. The complete list of foundation websites, where email and mailing addresses can be found is at this link (http://foundationcenter.org/findfunders/topfunders/top100assets.html ).
Regarding the universities and colleges, the links to information of the top endowment funds, including email addresses, phone numbers, names of endowment managers, and information for universities’ finance and treasury departments (the department that normally communicates with the endowment fund board), are listed below. Of course, if your alma mater is not on the below list, please don’t let this stop you from engaging in this campaign. Just visit your university’s website and search the directory for the Office of the Treasury to find out who you should contact:
Harvard University http://www.hmc.harvard.edu/contact/index.html
Yale University http://www.yale.edu/fin-bus/
Princeton University http://finance.princeton.edu/
Stanford University http://treasurer.stanford.edu/pages/contact.html
Massachusetts Institute of Technology http://vpf.mit.edu/site/budget_finance_treasury/staff
University of Michigan http://www.umich.edu/search.php?q=treasury&sa.x=0&sa.y=0&sa=Go
Columbia University http://finance.columbia.edu/treasury/
Northwestern University http://offices.northwestern.edu/detail/202
University of Pennsylvania http://www.finance.upenn.edu/treasurer/
University of California System http://www.ucop.edu/treasurer/
University of Notre Dame http://treasury.nd.edu/
University of Chicago http://trustees.uchicago.edu/board/
Emory University https://www.finance.emory.edu/external/deptpages/vp/treasury.cfm
Rice University http://search.rice.edu/?q=treasurer
Cornell University http://www.dfa.cornell.edu/treasurer/
University of Virginia http://www.virginia.edu/treasury/contact.html
Dartmouth College http://www.dartmouth.edu/~control/contact/index.html
University of Southern California http://www.usc.edu/directories/dept/financial_services.html
Here is a list of the top 20 Foundations by asset size as of the end of the 2009 and 2010 fiscal year as compiled by the Foundation Center . The Bill & Melinda Gates Foundation topped this list with more than $33.9 billion in assets under management and the number 20 foundation, the Carnegie Corporation, managed $2.4 billion in assets.
1. Bill & Melinda Gates Foundation (WA)
2. Ford Foundation (NY)
3. J. Paul Getty Trust (CA)
4. The Robert Wood Johnson Foundation (NJ)
5. W. K. Kellogg Foundation (MI)
6. The William and Flora Hewlett Foundation (CA)
7. The David and Lucile Packard Foundation (CA)
8. The John D. and Catherine T. MacArthur Foundation (IL)
9. Gordon and Betty Moore Foundation (CA)
10. Lilly Endowment Inc. (IN)
11. The Andrew W. Mellon Foundation (NY)
12. The William Penn Foundation (PA)
13. Tulsa Community Foundation (OK)
14. The Rockefeller Foundation (NY)
15. The Kresge Foundation (MI)
16. The California Endowment (CA)
17. The Leona M. and Harry B. Helmsley Charitable Trust (NY)
18. The Annie E. Casey Foundation (MD)
19. The Duke Endowment (NC)
20. Carnegie Corporation of New York (NY)
Please help us promote the “Break the Bankers’ Price Suppression Schemes Against Gold & Silver” campaign on twitter and facebook. Furthermore, if you have ever donated money to your alma mater or are a member of your alumni association, then you have a direct line to the people that manage your school’s endowment funds. Use that connection, call them up, and either make an appointment to see them or, if you live too far away, arrange a Skype call with them. Then use the arguments laid out in the letter to simply have a conversation with them. They have to at least be polite and listen. This advice was kindly passed on to us by someone that formerly worked in a college endowment office. They may not agree, but if enough alumni call, they will eventually have to consider the idea.
Below is the university letter that you can cut and paste and email to university/college treasury offices and endowment funds. I realize the letter is much longer than one normally would like, but I believe that a letter that urges such an important decision needs to make a compelling argument to encourage action. If enough of these letters are sent, someone associated with the endowment funds and foundation portfolios will eventually read one of them.
Dear ________,
On April 18th, 2011 the official US debt figure grew to $14,305,336,580,992. The official US debt ceiling is listed at $14.294 trillion. This means that the US government has officially moved into default on all US government issued debt, even if only temporarily. In response to this runaway debt problem that is afflicting our nation and destroying the purchasing power of the US dollar, US college and university endowments with at least $1 billion under management, according to Reuters, have moved 61% of their assets into alternative assets, including commodities, in 2009. I imagine that all endowments managing assets north of $1 billion still have significant amounts invested in commodities, particularly in gold and in silver.
However, I remain extremely concerned that this endowment fund may be invested in paper gold and paper silver that may conceivably collapse and become worthless should the future bring enormous declines in the purchasing power of any of the world’s major international currencies, which at this point and time, seems inevitable. As more and more individuals and institutions purchase physical gold and physical silver in response to our global monetary crisis, it is increasingly likely that growth in physical demand for gold and silver will continue to outstrip the growth in physical supply. As physical supplies of gold and silver continue to shrink, the ratio of paper gold and paper silver to physical gold and physical silver will move from grossly outrageous at the current date and time to obscenely outrageous in the future. I urge the board of the endowment fund to consider the enormous risk to the survival of the operations backed by this fund that comes from continued investment in paper gold and paper silver, derivative products that can plummet to zero in value.
Obviously, the board members that manage the University of Texas System endowment fund, the second largest endowment in the world, found the above described risk to be excessive and canceled this risk by converting its entire allocation of $991,700,000 in paper gold contracts into physical gold bullion bars. If your endowment fund happens to invest in the gold and silver ETFs, the GLD or the SLV, there are additionally numerous red flags contained in the prospectuses of both of these ETFs that suggest that neither ETF is backed by allocated gold or silver and that multiple claims exist on the unallocated physical gold and physical silver that back these ETFs. You may read about these serious risks at this link: (https://www.maalamalama.com/wordpress/2009/07/the-gld-and-slv-legitimate-investment-vehicles-or-not/)
Furthermore, delaying conversion of paper gold and paper silver futures contracts into physical gold and physical silver puts the execution of this task at risk. Exchange Rule 104.36, a rule that governs exchange transactions of futures contracts for physical (‘EFP’) on the COMEX Division, states that “the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged” and that the Exchange Rule confirms that “the Exchange would accept gold-backed exchange-traded funds (‘ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.” Thus, with every passing day, the risk that a decision to convert paper gold or paper silver into physical gold and physical silver may not be honored grows stronger. A game of musical chairs is now being played with the university’s endowment fund, and if other universities move before ours, our university will find itself as the one left standing without a chair. The same risk factors must be taken into consideration regarding any paper silver derivatives held by the endowment fund as well.
On March 25, 2010, at a US Commodities Futures Trading Commission (CFTC) hearing on position limits in gold and silver futures markets, Jeffrey Christian of the CPM Group testified that it was his belief that 100 times more gold futures contracts trade, on average, than the amount of physical gold ounces actually available for purchase on the physical market. Whether this number is the same in the silver futures markets or whether this number is 200 times, 95 times, 85 times or 80 times, and not 100 times, is not as important as the fact that there is an enormous imbalance in the ounces of paper gold and paper silver owned by individuals and institutions versus the ACTUAL amount of physical gold and physical silver that exists in the real world. I’m sure you have heard of others argue that such an imbalance is not a fraud because all commodity markets, including oil, coffee, soybeans and corn possess huge imbalances between the amounts traded in futures markets and the amounts that actually exist in the physical market.
However such an argument contains a formal logical fallacy because the premise behind the argument is flawed. Arguing that all commodity futures derivative products trade in a similar fashion to gold futures contracts, and thus, there is not a problem with the manner in which gold futures contracts trade, is a fundamentally flawed argument. This does not prove that gold futures contracts are not flawed. It only proves that the mechanism by which ALL commodity futures contracts trade are flawed. In fact, if you’ve ever wondered how oil can soar from $50 a barrel to $150 a barrel back down to $40 a barrel and then soar back to $110 a barrel in very condensed periods of time, it is the flawed mechanisms of futures contracts that allows these crazy price movements. If more and more endowment funds or foundations with substantial investments in the GLD and SLV ETFs or gold and silver futures contracts decide to convert their paper contracts into physical gold and silver, the ability to secure physical gold and physical silver represented by all gold and silver paper derivative contracts WILL become problematic, and eventually, impossible in the future.
When this happens, and I believe it will, there is a distinct possibility that the prices established in futures markets will become very different than the prices established in physical markets. For example, paper futures markets for silver may eventually trade at $80 an ounce and physical silver dealers may demand no less than $90 for the very same ounce of silver. If you see this happening, I believe that your window of opportunity to convert paper into physical may have already passed.
As a supporter of your institution, I urge you to discuss this very real problem with other members of your board at the next board meeting, and enact a vote to take physical delivery of all paper gold and paper silver contracts currently held within the endowment fund as soon as possible. Though the execution of such a decision will require some administration, the University of Texas System moved on this problem quickly before they were stuck in a corner with no way out and perhaps left with only a handful of worthless paper. I sincerely hope that you will do the same. There is much to be gained by deciding to tackle this problem pro-actively and everything to lose through inaction.
Sincerely,
Your Name
Class of ___________
And below is the same letter, modified to send to foundations instead of universities/colleges.
Dear ________,
On April 18th, 2011 the official US debt figure grew to $14,305,336,580,992. The official US debt ceiling is listed at $14.294 trillion. This means that the US government has officially moved into default on all US government issued debt, even if only temporarily. In response to this runaway debt problem that is afflicting our nation and destroying the purchasing power of the US dollar, US college and university endowments with at least $1 billion under management, according to Reuters, have moved 61% of their assets into alternative assets, including commodities, in 2009. I imagine that all foundations managing assets north of $1 billion have significant amounts still invested in commodities, particularly in gold and in silver.
However, I remain extremely concerned that this foundation may be invested in paper gold and paper silver that may conceivably collapse and become worthless should the future bring enormous declines in the purchasing power of any of the world’s major international currencies, which at this point and time, seems inevitable. As more and more individuals and institutions purchase physical gold and physical silver in response to our global monetary crisis, it is increasingly likely that growth in physical demand for gold and silver will continue to outstrip the growth in physical supply. As physical supplies of gold and silver continue to shrink, the ratio of paper gold and paper silver to physical gold and physical silver will move from grossly outrageous at the current date and time to obscenely outrageous in the future. I urge the board of this foundation to consider the enormous risk to the survival of the operations backed by this fund that comes from continued investment in paper gold and paper silver, derivative products that can plummet to zero in value.
Obviously, the board members that manage the University of Texas System endowment fund, the second largest endowment in the world, found the above described risk to be excessive and canceled this risk by converting its entire allocation of $991,700,000 in paper gold contracts into physical gold bullion bars. If this foundation happens to invest in the gold and silver ETFs, the GLD or the SLV, there are additionally numerous red flags contained in the prospectuses of both of these ETFs that suggest that neither ETF is backed by allocated gold or silver and that multiple claims exist on the unallocated physical gold and physical silver that back these ETFs. You may read about these serious risks at this link: (https://www.maalamalama.com/wordpress/2009/07/the-gld-and-slv-legitimate-investment-vehicles-or-not/)
Furthermore, delaying conversion of paper gold and paper silver futures contracts into physical gold and physical silver puts the execution of this task at risk. Exchange Rule 104.36, a rule that governs exchange transactions of futures contracts for physical (‘EFP’) on the COMEX Division, states that “the physical commodity need only be substantially the economic equivalent of the futures contract being exchanged” and that the Exchange Rule confirms that “the Exchange would accept gold-backed exchange-traded funds (‘ETF’) shares as the physical commodity component for an EFP transaction involving COMEX gold futures contracts, provided that all elements of a bona fide EFP pursuant to Exchange Rule 104.36 are satisfied.” Thus, with every passing day, the risk that a decision to convert paper gold or paper silver into physical gold and physical silver may not be honored grows stronger. A game of musical chairs is now being played with the foundation’s fund, and if other university endowments or funds move before ours, your foundation may very well find itself as the one left standing without a chair. The same risk factors must be taken into consideration regarding any paper silver derivatives held by the foundation as well.
On March 25, 2010, at a US Commodities Futures Trading Commission (CFTC) hearing on position limits in gold and silver futures markets, Jeffrey Christian of the CPM Group testified that it was his belief that 100 times more gold futures contracts trade, on average, than the amount of physical gold ounces actually available for purchase on the physical market. Whether this number is the same in the silver futures markets or whether this number is 200 times, 95 times, 85 times or 80 times, and not 100 times, is not as important as the fact that there is an enormous imbalance in the ounces of paper gold and paper silver owned by individuals and institutions versus the ACTUAL amount of physical gold and physical silver that exists in the real world. I’m sure you have heard of others argue that such an imbalance is not a fraud because all commodity markets, including oil, coffee, soybeans and corn possess huge imbalances between the amounts traded in futures markets and the amounts that actually exist in the physical market.
However such an argument contains a formal logical fallacy because the premise behind the argument is flawed. Arguing that all commodity futures derivative products trade in a similar fashion to gold futures contracts, and thus, there is not a problem with the manner in which gold futures contracts trade, is a fundamentally flawed argument. This does not prove that gold futures contracts are not flawed. It only proves that the mechanism by which ALL commodity futures contracts trade are flawed. In fact, if you’ve ever wondered how oil can soar from $50 a barrel to $150 a barrel back down to $40 a barrel and then soar back to $110 a barrel in very condensed periods of time, it is the flawed mechanisms of futures contracts that allows these crazy price movements. If more and more endowment funds or foundations with substantial investments in the GLD and SLV ETFs or gold and silver futures contracts decide to convert their paper contracts into physical gold and silver, the ability to secure physical gold and physical silver represented by all gold and silver paper derivative contracts WILL become problematic, and eventually, impossible in the future.
When this happens, and I believe it will, there is a distinct possibility that the prices established in futures markets will become very different than the prices established in physical markets. For example, paper futures markets for silver may eventually trade at $80 an ounce and physical silver dealers may demand no less than $90 for the very same ounce of silver. If you see this happening, I believe that your window of opportunity to convert paper into physical may have already passed.
As an avid supporter of your foundation’s mission, I urge you to discuss this very real problem with other members of your board at the next board meeting, and enact a vote to take physical delivery of all paper gold and paper silver contracts currently held within the foundation’s fund as soon as possible. Though the execution of such a decision will require some administration, the University of Texas System moved on this problem quickly before they were stuck in a corner with no way out and perhaps left with only a handful of worthless paper. I sincerely hope that you will do the same. There is much to be gained by deciding to tackle this problem pro-actively and everything to lose through inaction.
Sincerely,
Your Name
About the author: JS Kim is the Founder & Managing Director of maalamalama, a fiercely independent investment research & consulting firm that seeks to help investors not only avoid the fraud of the commercial investment industry but to remain profitable throughout the growing global monetary crisis. His Crisis Investment Opportunities newsletter has cumulatively returned +176.64% from its launch in June, 2007 to December, 2010, outperforming the S&P 500 by nearly 200% over the same investment period.
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