Buffett's $325 Billion Mistake

Warren Buffett, the Oracle of Omaha, is facing a peculiar problem these days: he has too much cash.

Berkshire Hathaway is sitting on an eye-watering $325 billion in dry powder, a record high. Historically, Buffett has always been eager to deploy capital when the odds are in his favor. But today, even he admits he’s struggling to find value in this overvalued market.

Which leads to a fascinating question: could Buffett turn to silver, or even silver miners, as a way to put that cash to work?

To answer that, let’s take a short trip back to the late 1990s when Buffett made one of his more unconventional moves.

Buffett’s Big Silver Bet in the 1990s

In 1997 and 1998, through Berkshire Hathaway’s General Re subsidiary, Buffett bought about 130 million ounces of physical silver. That’s roughly 20% of the world’s known above-ground supply at the time.

His rationale was Classic Buffett: supply and demand.

Silver had been beaten down for years, with central banks selling their reserves and industrial demand remaining relatively stable. Buffett saw the price, around $4.40 per ounce, as disconnected from the underlying fundamentals.

Buffett’s mentor Benjamin Graham once told him, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

He figured silver’s actual value would eventually be “weighed” and the price would rise accordingly.

Of course, Buffett was right. Silver prices did move higher, peaking around $7 per ounce in the late 90s. Depending on the price Buffett closed the trade, he made anywhere from $208 million to $328 million.

However, the trade attracted regulatory scrutiny. The CFTC investigated whether Buffett had cornered the market. While they found no wrongdoing, the experience likely left Buffett with a bad taste in his mouth.

How 1998 Relates to 2025

Today, silver finds itself in a similar situation.

Industrial demand for silver is surging, especially for solar panels, electric vehicles, and advanced electronics. Yet mine supply is struggling to keep up. Add in a general underinvestment in new mining projects, and you’ve got a classic supply-demand imbalance brewing.

Meanwhile, institutional ownership of silver remains very low. Hedge funds, pension funds, and endowments aren’t piling into silver the way they are with equities or even gold.

In short, the fundamentals look tight, and the market doesn’t fully reflect that yet, just like in the late 1990s.

Silver, from January 1997 to March 1998; Credit: StockCharts.com

In the late 90s, silver was trapped in a narrow band before Buffett’s buying helped nudge it higher. Today, silver has been rangebound, first between $20.50 and $25.50, and second from $27.50 to $34.50. This is despite booming demand and constrained supply.

It’s not history repeating, but it’s history rhyming.

Why Buffett Probably Won’t Buy Silver Miners

As tempting as the setup is, there are a few big reasons why Buffett likely won’t be backing up the truck into silver miners.

First, Buffett loves businesses with durable competitive advantages, or “moats,” predictable earnings, and strong management. Mining is a tricky business — costs fluctuate wildly, mines get depleted, and governments change royalty schemes overnight. All of that makes mining an unpredictable venture, something Buffett typically shuns.

Second, Buffett experienced the impact of commodity price swings firsthand with silver in the 1990s and again with oil, when he invested heavily in ConocoPhillips just before the 2008 crash. Those experiences taught him that commodities are hard to predict and even harder to control.

Third, Buffett is 94 years old. He’s thinking more than ever about Berkshire’s legacy and stability. A big, volatile bet on miners just doesn’t fit that narrative.

What About Buffett’s Lieutenants?

However, it’s worth noting that Todd Combs and Ted Weschler, the two managers Buffett handpicked to steer Berkshire’s massive investment portfolio, have more flexibility.

They each control approximately $20 billion in assets and have demonstrated a willingness to venture into tech, fintech, and other sectors Buffett has traditionally avoided.

Could they see an asymmetric bet in silver miners? Absolutely.

Especially if they view it not as a commodity play, but as a long-term investment in critical metals needed for the alleged green transition.

Companies like Wheaton Precious Metals or Franco-Nevada, which operate on a royalty and streaming model rather than directly mining, might be more appealing. These businesses generate predictable cash flows without the operational headaches of digging metal out of the ground.

Wrap Up

While the silver setup today echoes the opportunity Buffett spotted in the late 1990s, it’s unlikely that we’ll see Berkshire Hathaway dive into silver miners in a meaningful way.

Buffett himself might pass. The “official” chances? I’d peg it at less than 5%.

But don’t count out Berkshire’s next generation. In a world where tangible assets are becoming more valuable — and where silver’s importance to technology and energy is only growing — a small, strategic allocation to royalty-based silver plays could quietly find its way into the Berkshire portfolio.

For now, Buffett will likely continue to do what he’s always done best: wait patiently for the perfect pitch.

Because, as he once said, “The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot.”

And if silver miners aren’t quite there yet, rest assured, Buffett is still watching… and waiting.