Thursday May 6, 2:11 PM FOCUS: Debunking The Warren Buffet Rumor On Silver By Jim Hawe Of DOW JONES NEWSWIRES Tokyo, May 6 (Dow Jones) - Is the world's second richest man turning to silver again? Recent comments by investor Warren Buffet 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 'Oracle of Omaha' has just become too big for the already tight silver market. Ever since Buffet bought up 130 million ounces of silver back in the late 1990's, there have been frequent rumors that the world's second richest man would again target this metal. Buffet's annual letter to shareholders in his company Berkshire Hathaway Ltd. released in March may have inadvertently lent credence to these rumors. "We've found it hard to find significantly undervalued stocks," Buffet said in the letter, adding, "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." 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 Buffet into silver could be just around the corner. NOT ENOUGH SILVER AROUND FOR BIG INVESTORS However, Ted Butler, an independent silver market analyst based in Florida doesn't believe Warren Buffet 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. "It's a weird problem that faces a good number of people - he's got too much money to invest meaningfully in silver," said Butler. According to Forbes magazine, the two richest men in the world currently are Microsoft Chairman Bill Gates followed by Warren Buffet, each having net worth of more than 40 billion dollars. 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% 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 dollars in silver locked up in its vaults. "That is literally chump change to Buffet," says Ted Butler. Buffet's big silver buy in the late 1990's was also met with a fair deal of criticism as it was seen by many as an attempt to corner an already tight market. Ted Butler contends that Buffet doesn't want to endure that kind of negative publicity again. "He has bigger fish to fry," said Butler. DEMAND-SUPPLY OUTLOOK FAVOURS HIGHER PRICES However, rumors that Buffet 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 Warren Buffet would be a boon for the silver price. "There is of course some hope that Buffet will return to silver. If he were to get back into the silver market, prices would quickly sail over $10," he said. Silver was trading at $6/oz Thursday in Asia, down from $6.10/oz Wednesday. Ted Butler, however, suggests investors should spend less time speculating about Warren Buffet and more time looking at simple supply and demand fundamentals. "The world consumes more silver than it produces, depleting inventories to, in practical terms, almost nonexistent levels," Butler said, 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. "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," Butler said. "It's as simple as that." Jim Hawe, Dow Jones Newswires, 813-5255-2950 jim.hawedowjones.com