Dow Jones story quotes Ted Butler on silver: Forget Buffett, think fundamentals

By Jim Hawe
Dow Jones Newswires
Thursday, May 6, 2004

a href=http://sg.biz.yahoo.com/040506/15/3k1ga.htmlhttp://sg.biz.yahoo.com/0405...

TOKYO -- Is the world's second richest man turning
to silver again?

Recent comments by investor Warren Buffett have
added fuel to persistent rumors that the world's
wealthiest investor is looking to make another big
splash in the silver market.

Some market watchers, however, are discounting
these rumors on the grounds that the quot;Oracle of
Omahaquot; has just become too big for the already
tight silver market.

Ever since Buffett bought up 130 million ounces of
silver back in the late 1990s there have been frequent
rumors that the world's second richest man would
again target this metal.

Buffett's annual letter to shareholders in his company
Berkshire Hathaway Ltd. released in March may have
inadvertently lent credence to these rumors.

quot;We've found it hard to find significantly undervalued
stocks,quot; Buffett said in the letter, adding, quot;Our capital
is underutilized now, but that will happen periodically.
It's a painful condition to be in, but not as painful as
doing something stupid.quot;

So what happens when the world's greatest value investor
can no longer find value in the stock market?

Some market watchers are concluding that another foray
by Buffett into silver could be just around the corner.

However, Ted Butler, an independent silver market analyst
based in Florida, doesn't believe Buffett will be returning to
silver any time soon, as there just isn't enough of the
metal on the market to make it worth his while.

quot;It's a weird problem that faces a good number of people
-- he's got too much money to invest meaningfully in
silver,quot; said Butler.

According to Forbes magazine, the two richest men in
the world currently are Microsoft Chairman Bill Gates
followed by Buffett, each having net worth of more than
$40 billion.

By comparison, the world's known stockpile of silver now
stands around 150 million ounces, valued just under $1
billion. This means Buffet would need only 2.5 percent
of his assets to buy up all of the silver in the world.

However, such a feat would be impossible for Buffet or
anyone else with a spare billion dollars to throw about.

The largest known horde of silver in the world is held by
COMEX, which has just under $750 million in silver in its
vaults.

quot;That is literally chump change to Buffett,quot; says Ted Butler.

Buffett's big silver buy in the late 1990s was also met with
a fair deal of criticism as it was seen by many as an
attempt to corner an already tight market.

Butler contends that Buffett doesn't want to endure that kind
of negative publicity again.

quot;He has bigger fish to fry,quot; Butler says.

However, rumors that Buffett still has a silver itch to scratch
will likely continue popping up on the market, some analysts
say.

Yuki Sonoda, a precious metals analyst with Japan's
Daiichi Commodities, believes that any further involvement
in the silver market by Buffett would be a boon for the silver
price.

quot;There is of course some hope that Buffett will return to
silver. If he were to get back into the silver market, prices
would quickly sail over $10,quot; he said.

Silver was trading at $6 per ounce Thursday in Asia, down
from $6.10 per ounce Wednesday.

Butler, however, suggests investors should spend less time
speculating about Warren Buffett and more time looking at
simple supply-and-demand fundamentals.

quot;The world consumes more silver than it produces, depleting
inventories to, in practical terms, almost nonexistent levels,quot;
Butler says, noting that consumption of silver has outpaced
production for the past 15 years.

Butler sees very little downside for silver right now and
believes there is the potential for prices to increase many
times over the current level.

quot;If you believe in the validity of the law of supply and demand
and you objectively study the real silver story, you will be
compelled to buy silver,quot; Butler said. quot;It's as simple as that.quot;

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