Warren Buffett: The Sage Bets On SilverAndrew Osterland
What is long-term investor Warren Buffett doing in the commodities market? Playing it long-term, natch. On Feb. 3, Buffett's Berkshire Hathaway said it had amassed 130 million ounces of silver since last July. That $850 million hoard is larger than the inventories of the COMEX--and about 20% of annual world production.
The laconic Buffett explained: "The equilibrium between supply and demand is only likely to be established by a somewhat higher price." In other words, silver is headed up-- an assessment shared by silver analysts. Since 1990, the world has been con-suming more silver than it has been producing. And while Asian demand is expected to drop, supply should remain tight. "This is a smart move," says Tim Porter at commodities trader Refco.
But Buffett can't cash out yet: Any sign of his selling would send prices skidding from recent highs of $6.80 an ounce. Meantime, Buffett could make serious money "renting out" his hoard to companies in need of silver. Current annual rates are an astounding 29% of the value of the amount leased.