So THAT"S what happened to Buffett' s silver...

tincup · May 12, 2006 10:23AM

Wow... this sure surprised me. We all knew there was the 'silver cartel' that was manipulating the price of silver for a decade or so... and I always figured that China was involved.... but Buffett?? So much for his public face of being an ultra conservative, buy and hold type of guy.....

Buffett loses his silver

DUIGUY · May 12, 2006 11:01AM

Very interesting .

streeter · May 12, 2006 12:09PM

fascinating.

Stuart · May 12, 2006 12:13PM

TinCup: Thanks for posting! That was interesting reading.

mrearlygold · May 12, 2006 12:17PM

bgman · May 12, 2006 12:35PM

Thanks for posting. Amazing what you can learn from the posts here.

cladking · May 12, 2006 1:12PM

From his April 25th commentary:

<< <i>With higher silver prices, silver will take on a new respectability. It will no longer be the poor man’s gold. People will desire and wear silver jewelry with pride precisely because silver costs more. People will buy and use sterling silver flatware and display silver objects of art because it is made from an expensive material that is in the news.

And it’s not just that people will buy silver jewelry and art objects because of higher prices, but that industry must gear up to manufacture and distribute and inventory in order to satisfy demand from the public for a new status symbol. This, as Izzy writes, could involve hundreds of millions of ounces of new silver demand at higher prices.
>>

This is a point I've been trying to make. People sold their silver in 1980 after the price
crashed. This silver has not been replaced and the average household contains almost
no silver except for the small amounts in use in electronics and the like. As silver demand
increases it will become more fashionable. You'll see it in thin plate and a few atoms
thick deposited on plastics for expensive consumer goods. As the price increases there
will be greater demand for it as an ostentatious show of wealth.

There is just not that much silver in the world and higher prices will not impact mining
significantly. The one weakest link is the increasing price of copper since much new silver
production is a by product of copper production. But even this can be a blessing in dis-
guise. With the hugely higher cost of copper there will be increasing usage of silver for
plating copper wire. Most electrical current is carried on the outside of wire so plating it
with silver allows for much less copper to be used.

cladking · May 12, 2006 1:15PM

Clad wire.

Even the warmest superconducting wire now is actually called "clad".

tincup · May 12, 2006 11:08PM

I really have to think... now that the manipulators have lost their tight grip on silver.... silver has a lot of HUGH potential. We've seen nothing yet. Especially given the underlying factors that have been discussed here on the board for quite some time, that all still remain in place.

Of course.... I'm sure that the manipulators will keep trying to regain control again so they can keep their money machine going.

tincup · May 12, 2006 11:12PM

This article also makes sense why Buffett... did not seem to give out many details on how or why his silver was disposed of, and at little or no gain. Almost seems like he is embarassed... and may not want his share holders to realize that he was in on a scheme like this. Would not be good for his 'ultra conservative' image...

dwssws · May 12, 2006 11:41PM

interesting reading! thanks for sharing

fcloud · May 13, 2006 12:02AM

It is better to get out while its on the rise than on the slide!

Connecticoin · May 13, 2006 12:52AM

Very interesting indeed. Probably the only logical explanation as to how Buffet supposedly did not profit from his silver position.

As the article indicates, this is probably very bullish for silver with Buffet's position no longer hanging over the market.

RedTiger · May 13, 2006 2:00AM

Buffett has been "leasing out" his silver for years. I'm not sure of the exact details, but some speculators need physical at some location to be available to them for short periods of time. For this privilege they "lease" some physical silver for a nominal percentage rate (1% to 2% per annum). When markets go vertical, like silver did, there are may be times when the physical is called away as specified by contract. In normal times, the seller can go back into the market and buy it back. However, when the market is moving 5% intraday, it is not so easy. This is my take on what may have transpired, and is more seat-of-the-pants, than verbatim.

Coxe · May 13, 2006 2:19AM

Sounds about right.

I have been saying and posting about the problem of the fact that there is nowhere even close to enough silver available on the market to satisfy delivery requirements. I have not looked recently enough, but the short interest must be up to about a half billion ounces now. The margin requirement boosts cannot go much further and it is going to get downright ugly when the squeeze comes. There are a lot of trapped shorts who should be sweating, seasoned pros and wannabe novices alike. COMEX has done nothing but delay what is likely the inevitable and exacerbated its consequences.

morgannut2 · May 13, 2006 2:34AM

<< <i>Thanks for posting. Amazing what you can learn from the posts here. >>

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Well I'd didn't "learn" anything actually!!! All this link shows is that some no-name silver hustler can speculate on the Internet. Berhshire's explanation-- and the SEC doesn't let them lie about it-----was after meeting carrying costs, he dumped the silver as an inflation hedge and made a new decision to invest in top undervalued overseas corporations denominated in non-US dollars. The explanation was these companies provide the same US dollar hedge, but at the same time generate dividend/earnings income, instead of the storage and/interest costs he had with the silver. To meet those costs, yes he had sold options, that paid his costs and a big profit, but he didn't sell more options than he had silver to sell (that's why he just broke even on the silver itself). So Buffet made money on the options--and broke even on the silver itself.

keets · May 13, 2006 4:01AM

so if i understand the article, Buffet had physical silver but traded paper till the price of the "trades" made it necessary to give up the physical silver??

roadrunner · May 13, 2006 7:25AM

There are a lot of trapped shorts who should be sweating, seasoned pros and wannabe novices alike. COMEX has done nothing but delay what is likely the inevitable and exacerbated its consequences.

They can do what they did to the Hunts back in 1979-80. They can continue to raise margin requirements. they will do everything they can to rig the market against the longs until something breaks one way or the other.

roadrunner

So THAT"S what happened to Buffett' s silver...

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So THAT&quot;S what happened to Buffett' s silver...

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So THAT"S what happened to Buffett' s silver...