Thursday, May 11, 2006

The silver question: an update.

The purpose of this entry is to provide an update for the recent post regarding Warren Buffet's silver position and the silver ETF. I thought I'd do that by including links to the latest commentaries from Ted Butler and David Morgan, since I cited their some of their earlier ruminations in the last Buffett silver post. Readers interested in the Barclays silver ETF or the matter of Berkshire Hathaway's recently closed-out silver position should read on.

First, we'll start with an excerpt from Ted Butler's May 8 commentary, the first part of which is titled, "Buffett Loses His Silver".

The recent revelation that the renowned investor Warren Buffett sold his silver was a mega-event. It was big news when Mr. Buffett bought silver some 8 or 9 years ago, and its sale is also big news. Let me state the facts as I know them, and then I’ll speculate.

Mr. Buffett always said he would make it known when he sold his silver and he kept his word, using the occasion of his company’s annual meeting to tell of the sale. While he did not reveal the exact amount, time and price of the sale, he indicated that he "sold too early" and did not profit from the sale. I found that very surprising and particularly unusual for Buffett.

Read more of Butler's commentary at the link included above.

Next I'd like to include a section from David Morgan's most recent submission to Financial Sense. In this article, David looks back at some of his earlier thoughts on the silver ETF and the role that Berkshire Hathaway's silver position might have occupied in backing the (at that time) proposed ETF. Here is an excerpt:

What the proposed Silver ETF requires is real silver, but not necessarily new purchased silver. In fact the proposed amount for this issue is about 130 million ounces of silver to begin. This is almost exactly the amount reportedly purchased by Berkshire Hathaway in 1997. We have absolutely no inside knowledge but wish to illustrate a point. Suppose a large holder of real silver were to “pledge” the metal under some type of derivative scenario. The ETF would be up and running, and real metal would be “behind” the transaction.

Well, if you've read the commentaries of Butler and Morgan, you will have an idea as to what might have happened to Berkshire Hathaway's silver position. From what I gather, Butler's opinion seems to be that Berkshire's silver was called away as a result of their leasing, while Morgan seems to support the notion that Berkshire's silver provided the backing for the Barclays Silver ETF.

Interesting, and if we haven't exactly solved this bit of intrigue, we do have some interesting information regarding less-discussed aspects of the precious metals ETFs, thanks to both Morgan and Butler.