In 1973, the Hunt family of Texas, some of the biggest a-holes
this country has produced, as well as possibly the richest family in
America at the time, decided to buy precious metals as a hedge
against inflation. Gold could not be held by private citizens at
that time, so the Hunts began to buy silver in enormous quantity.
In 1979 the sons of patriarch H.L. Hunt, Nelson Bunker and
William Herbert, together with some wealthy Arabs, formed a
silver pool. In a short period of time they had amassed more than
200 million ounces of silver, equivalent to half the world”s
deliverable supply.
When the Hunt”s had begun accumulating silver back in 1973 the
price was in the $1.95 / ounce range. Early in ”79, the price was
about $5. Late ”79 / early ”80 the price was in the $50”s, peaking
at $54.
Once the silver market was cornered, outsiders joined the chase
but a combination of changed trading rules on the New York
Metals Market (COMEX) and the intervention of the Federal
Reserve put an end to the game. The price began to slide,
culminating in a 50% one-day decline on March 27, 1980 as the
price plummeted from $21.62 to $10.80.
The collapse of the silver market meant countless losses for
speculators. The Hunt brothers declared bankruptcy. By 1987
their liabilities had grown to nearly $2.5 billion against assets of
$1.5 billion. In August of 1988 the Hunts were convicted of
conspiring to manipulate the market.
One other experience in the silver bubble worth noting, according
to author Edward Chancellor (“Devil Take the Hindmost”), is the
experience of an official at the Peruvian Ministry of Commerce,
employed to hedge his country”s silver production, who lost
$80 million by illicitly selling silver short. Said Chancellor,
“Although a relatively small sum for a sovereign nation, it was an
omen: the ”rogue trader” had appeared on the modern financial
scene.”
The stock market had its own troubles during the rise and fall of
silver. The Dow Jones peaked on February 13, 1980 at 903.84.
The day of the collapse, March 27th, the Dow closed at 759.98, a
decline of 16% in just 6 weeks. [However, intraday, the loss
between the 2/13 high of 918.17 and the 3/27 intraday low of
729.95 was actually 20%.you won”t find this last fact anywhere
else. Just another free benefit to readers of
StocksandNews.com].
For many traders the collapse in silver was the final straw for a
stock market already under siege from worries as diverse as the
Iranian hostage crisis, the Russian invasion of Afghanistan and
soaring interest rates. [The consumer price index climbed at a
13% rate for 1979. The prime lending rate hit 22% in early
1980]. But by year end, the whole decline was almost forgotten.
The Dow ended the year at 963.99, thanks in large part to the
euphoria over the election of Ronald Reagan.
*And now for another side of the Hunt family that has nothing to
do with the financial markets.
On the morning of November 22, 1963, President John F.
Kennedy was shown an inflammatory full page advertisement that
appeared in that day”s Dallas Morning News. The ad asked
twelve loaded questions, including: “Why did you host, salute and
entertain Tito – Moscow”s Trojan Horse?” “Why has the Foreign
Policy of the U.S. degenerated to the point that the CIA is
arranging coups and having staunch Anti-Communist Allies of the
U.S. bloodily exterminated?” Jackie Kennedy was sickened by
the display. JFK said to an aide, “We”re heading into nut country
today.” Hours later he was assassinated. The ad was the
responsibility of Nelson Bunker Hunt (and an associate). H.L
Hunt was a leader of the John Birch Society, the anti-Semitic and
racist organization.
Sources: “Devil Take the Hindmost,” by Edward Chancellor;
“Profile of Power,” by Richard Reeves; “The American Century,”
by Harold Evans; Wall Street Journal article by Suzanne McGee;
“The Great Wave,” by David Hackett Fischer.
Brian Trumbore
