kitco.com
Poor Warren Buffett! What's a guy worth $40 billion supposed to do with all that money when the global investment climate just plain stinks? Some say he's been a size buyer of Comex silver, and that merely by taking delivery on his futures contracts he could instantly double the metal's price. If true, he'd better do it soon, since, after last week's bloodbath, silver could use a white knight. Spot quotes have dropped 35 percent since early April, meaning that if Buffett is actually sitting on silver, he has taken a savage beating in the last few weeks.
Of course, we can't be certain that he even owned any silver. But I'm not buying the argument that the silver market is not big enough for players of Buffett's size. Estimates place the world's stock at 150 million ounces, or about $840 million's worth at Friday's prices. Although that would represent only about 2% of his net worth, it does not necessarily follow that Buffett would disdain silver any more than he would the shares of a promising small-cap company with a 20-million-share float. It all adds up, even the little $10 million crumbs.
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A strong dollar – one impelled by uncontrollable market forces rather than by Fed whim – seems the most likely catalyst for a deflationary collapse, albeit the one least expected. What it implies is dollar rates rising to extraordinary levels in real terms, with foreign money pouring in to take advantage. If this should come to pass, there will be a dearth of double-your-money bets, and even financial wizards like Warren Buffett will be challenged to withstand the violent, tidal shifts in asset values. For gold bugs, such a volatile period would pose a particular dilemma, since bullion's eventual rise, though absolutely assured, would come only after the pain of deflation had caused the central bank to shovel money out the door. Meanwhile, we should not pretend to be mystified if the dollar's supposed bear rally steepens and bullion remains leaden. A “worthless” dollar may yet have the last laugh on all those who have rightfully disparaged it. |
