Silver Purchase By Buffett

Question: Stories circulate that Warren Buffet bought a boat-load of silver. Just how much silver did Warren Buffett purchase for Berkshire Hathaway?

Answer: According to a good source Buffett purchased and took delivery of 129 million 700 thousand troy ounces of silver in 1998.

Maybe that humongous purchase caused the run-up in the spot price of silver (see the peak in the above graph, from kitco.com, that occurred between July 1997 and July 1998).

Want more information?

Here's an excerpt from an article by David Morgan that is dated 4 February 2003:

"Warren Buffett's... silver purchase started in the summer of 1997 and continued for several months. The lowest price on the COMEX during that time frame was around $4.40. The market recognized this in February of 1998 and silver advanced to over $6.50 an ounce. Mr. Buffett took delivery of about 90 million ounces of silver and gave the dealers more time to deliver the rest.

"It is my strong opinion that Mr. Buffett leased out the remaining 40 million ounces.

"Why do I make this assertion? Because, I have studied the annual report of Berkshire Hathaway which states the following:

"--Line item 53. Miscellaneous items. 400,000,000$--

"Now it was widely reported that Mr. Buffett bought 129 Million ounces. However, unless you were really alert you might have missed the fact that only 90 million ounces were delivered.

"So silver at $4.40 (spot price at the time of the annual report) times 90 Million ounces is about equal to the $400 million dollars reported in the annual report. I think Mr. Buffett leased out the 40 million ounces..."

Fascinating! Absolutely fascinating.

But did you know that Buffett had experience in buying a huge quantity of silver earlier in his investing career?

Consider this additional information from David Morgan:

"Mr. Buffet has liked silver for a very long time...

"When Warren Buffett was associated with Solomon Brothers, the #1 trader nearly cornered the silver market by paying 20 cents more per ounce than anyone else. There were several expiring options that were out of the money. Everyone thought that these were expiring worthless, until the holder (Solomon Brothers/Buffett) decided to exercise the options at the strike price they held.

"The next step was to simply take delivery of their silver. It should be that simple, especially in a free market. That of course is one of the BIG LIES about the silver market; it is not exactly a free market.

"The dealers and Wall Street firms that held most of this silver ran to the U.S. Government and asked for relief from delivering what Solomon and bought and PAID for. Since there was not enough silver available, the rumor was that the government asked to meet with Mr. Buffett in private. Buffett backed down and the government made sure that Solomon did not lose any money. The government was willing to settle this embarrassing situation and pretend that the free market in silver still exists, when in fact is does not."

Very interesting... non?

P.S. In his 8 August 2005 newsletter Ted Butler wrote: "I would never advise anyone to buy and store 1000 oz bars other than at COMEX-approved warehouses. There are no transparent and audited accounting of silver held anywhere in the world other than the COMEX. Even Warren Buffett had to originally get his silver from the COMEX to ship to London. If there was, or is, so much audited and legitimate silver in London, as many insist, why not just buy it there, instead of shipping it there?"