Why did Warren Buffett buy 20% of the World's Silver?

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Last December, I believe it was, Warren Buffett, 2nd or 3rd richest American, bought 20% of the current supply of the world's silver through his Berkshire Hathaway Fund. At the time, most pundits said that the action defied common sense. Buffett had NEVER bought commodities. He always buys what he considers to be small growth companies and holds for the long haul. That strategy has made him and his followers very rich. IMHO, it makes all the sense in the world if you factor in Y2K. Buffett is a close friend of Bill Gates. I'm sure Y2K has come up in their conversations. Gates, himself, is building what can only be described as a fortress up in Washington State. Now, maybe it's just because Gates has to have security and maybe he likes to live in a fortress; however, if Ed's thinking about anarchy is correct, then Buffett's silver (real money) and Gates' fortress make a lot of sense. What do you think?

-- Larry Grannis (larryg@kincyb.com), March 28, 1998


I've often wondered about B Gates new home. It could just a case of lots of money and wanted a neat place. Or it could be a darned nice place to ride out an upheaval. I would love to see the real blue prints, but I expect BG is too smart to release the most interesting details. I wouldn't.

Buffets silver buying binge did not concern me greatly, except to sell some of mine when the price bumped !(g). What DID concern me about that was the rumour he was taking delivery wherever possible. That's weird if true. We are talking about TRUCKLOADS of silver. Not something you stick in your sock drawer. No idea if it's true, probably just internet bilge water.

-- Art Welling (artw@lancnews.infi.net), March 28, 1998.

Item 1. A missleading phrase, but what do you epxpect from the mass media?!? That "20% of the world's silver" is a term only an ignorant journalist could love (and flog to death and use of course). A more accurate statement would be something like, "approx. 20% of the world's currently traded silver". There are HUGE hordes of silver in east asia, but not by governments, corporations, or the rich there(though they have their share). Silver is held as true money, particularily for a daughter's dowrey, by the poor and middle class, particularily in India. It might be a single coin, or the equal to the daughter's weight, but it's there. It will not come on the market in normal times. Some of it did come on the market during the early 80's run-up. I doubt that it will have any impact on silver values over here in post-Y2K because it will probably simply be used as currency in the black markets of Asia then, which will be legion.

Interesting thought - I wonder if anybody has ever calculated if there is more silver in Indian households or in American households? Since very few Americans have the step-child of "that barbarous relic", and practicly every Indian has at least SOME silver, the results might be surprising, though I have NO idea how you could come up with accurate figures.

Item 2. For Art. No he is not taking options, warehouse reciepts, future contracts, or any other piece of paper. It is ALL in storage in England. P.S. Somebody calculated the storage fee and it is millions of dollars per year. You can find this info in the Wall Street Journal. He is serious about silver.

Perhaps we should be also????

I thik it goes without saying that he is NOT a dumb man that has nothing more than a winning streak that just so happened to have lasted for several decades.

-- Ken Seger (kenseger@primary.net), March 28, 1998.

Buffett is a value investor. He buys what he believes is cheap (and usually out of favor). He does not trade futures contracts--he holds the real deal. Getting much less attention was his several Billion dollar purchase of bonds several months ago--short term ones. Buffett has moved about 10 Billion dollars our of equity markets in the last year or so. He believes you should be greedy when everyone else is afraid, and afraid when everyone else is greedy. He is, in that regard, a contrarian. He also knows where the smart money and "strong hands" are in the market--I'm sure he considers that information as well.

-- P. Larson (ptrades@earthlink.net), March 28, 1998.

A couple of additional clarifications:

1. It was 20% of a year's production, which as has been pointed out, is much less than the total supply. The purchase was made last summer, but didn't become public knowledge until December.

2. It was long-term zero coupon Treasuries that he bought, also last spring or summer.

-- (rgriffith@sfasu.edu), March 31, 1998.

I don't know just how much of a sound money advocate Mr Buffett is, but...if the fiat money system collapses under the weight of y2k, then Berkshire Hathaway with 130 million oz of silver will become a de facto Central Bank. At that point, more than a few of us will be carrying legal tender silver coins bearing the motto "In Warren We Trust". Under the right circumstances, Mr. Buffett could become our next Federal Reserve Chairman and the architect for a sorely-needed world currency system backed by tangible assets.

-- R L Flink (CFA100@msn.com), April 02, 1998.

Warren Buffet is no fool. I found it amazing that the first I heard of this was on an agriculture site, they broke the story before anyone. I also find it amazing that no one noticed what he was doing. When the Bass brothers tried to corner the silver market, it was noticed. Makes you wonder how many other big money brokers have a large position in gold and/or silver.

-- Rebecca Kutcher (kutcher@pionet.net), April 02, 1998.

Buffet bought silver

Buffet owns a big stake in Gillette.

Besided razorblades Gilette makes batteries.

Batteries have silver in it

What could trigger an increasing demand in batteries in the next few years?

Some people expect that 1 jan 2000 there is a fair change the (a part of) the power-supply will fail.

Without power computers won't work.

Except for the lap-tops, they run on batteries.

Laptops are a hot product anyway.

Sounds logic, but I'm sure it isn't.


-- Paul van Wijk (pvwijk@wxs.nl), April 15, 1998.

I keep hearing this Buffett thing coming up in connection Y2K. But no-one has ever been able to give me any proof that Buffet has even _mentioned_ Y2K.

Look -- it's not some big secret that Buffet bought 20% of last years silver production. It was at the time but is not now. In fact he has actually sold off part of his holding this year in order to take a bit of profit.

Silver may very well be a good hedge against Y2K risks -- but don't fool yourselves into thinking that Buffetts activities make buying silver any more attractive - if anything it is the opposite because his purchases have already driven the price up.

-- Murray Spork (murray@bucks.net), April 16, 1998.

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