From Fortune - Behind Bill Gates Silver Play..................
SILVER GATES.... Wall Street has been awash in talk of gold and silver this week. First there was news of European central banks putting a halt on gold sales. That caused the price of gold to "soar." Well, at least giving it the biggest one-day gain ever. When the price of gold per ounce shot up to the magical $300 threshold, rumors raced through Wall Street that hedge funds that were short had taken big hits. Names like Tiger Management, Long-Term Capital, and Princeton flew around, but no stories were confirmed and most were denied. Then silver. The other day we learned that Bill Gates, through his investment vehicle Cascade managed by Michael Larson, had bought 10% of a small Canadian silver mining company called Pan American Silver. I called Larson to ask him about it. (Two caveats. In no way did Gates make the decision to invest in silver. And two, this is hardly an unusual investment for Larson.) And so Larson said: "I like silver a lot. Yeah we bought Pan American Silver. PAAS, it's a tiny part of our portfolio ($15 million), we don't own much. (Fidelity also owns some of it.) What's great about this company is that they are a pure play in silver, more than any other company. More than Coeur D'Alene silver, which has more gold in it. I think it got cheap after the Bre-X collapse." Interestingly Bill Fleckenstein, the famous contrarian investor, is on the board of Pan American. And, in fact, the company is offering a board seat to Larson! Of course, metals fits in well with Larsons' conservative investment strategy. "PAAS has a big Russia project that could pay off nicely," added Larson. "If that doesn't pay off, they have operations in Peru and Mexico, it's like an option on Russia, get that for free. (Pan Am Silver hopes to be the largest silver produce in North America soon, mining some 20 million ounces a year.) We do own gold and silver, bought some gold recently. Should you have 1% of your portfolio in metals? I think so." That would be $120 million to $150 million in Larson's case!!!! Making Pan American 1/10 of 1%. Gates now owns about $72 billion of MSFT stocks and has, say, $12 billion to $15 billion with Larson. "Silver is cheap, gone from $10 to $5," he said. "And now is $5.80. And I love it, it has lots of uses. Forget photography, it's used in healthcare applications and in electronics. As far as electronics, well, demand is good there, right? Healthcare is always there. Maybe even the Chinese will take more pictures." By the way, even though Bill Gates' close friend Warren Buffett bought a large position in silver in early 1998, Larson says that this has nothing to do with Buffett's position. In fact no one knows if Buffett still owns silver, though there was some speculation that part of the reason the metal has been down over the past year was that Buffett was selling. |
