Berkshire Hathaway 2002 Annual Meeting Audience Question # 45

Demand, not the leasing of, determines the price of silver

Warren Buffett:

Number 9?

Audience Member:

I’m reading the question of Mark Rescigno, from New York. “I’ve idolized you since I first heard of you 10 years ago. My only regret so far is that both of my children are girls, so I couldn’t name them Warren.”

Warren Buffett:

How about Warrenella?

Audience Member:

That might work.

Is there any merit to the argument that leasing of silver is suppressing the price of the metal, and thereby not allowing it to reflect the fundamentals?

Warren Buffett:

Oh, you hear that all the time. I don’t think so. And in the end, the question of where it’ll sell will be affected by how much there is around and how much there isn’t.

And people get upset with shorts and they get upset with forward sales by producers, and they get upset with leasing, and all of that sort of thing. But in the end, if silver gets tight, it will go up in price. And if it isn’t tight, it really doesn’t make much difference whether it’s leased or not.

It’s like companies that get upset about the short position of their stock. I’ve even had a few people write me because there’d be some…

I don’t care whether there’s a thousand shares short of Berkshire or 300,000 shares short, it really doesn’t make any difference, because someday, the people that are short have to buy and, you know, it’s part of markets.

So the leasing of silver takes place because somebody’s got some silver around, would rather get a small amount of income by leasing it to somebody that needs to use it for one reason or another.

But it’s because the silver was sitting around in the first place that it’s available for lease. And it really doesn’t make much difference, I don’t think, in terms of pricing over time.

Charlie?

Charlie Munger:

I have nothing to say.

Warren Buffett:

Oh.

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