The Hunt Brothers: buying up a mountain of silver and going broke 🗿
Bunker and Herbert Hunt were born with a silver spoon in their mouths, into one of America's wealthiest families. Their father had run away from home at 16 and, by 1948, had become the richest man in the world.
In the early 1970s, US inflation climbed, and Arab oil stopped flowing. Not long before, President Nixon had abandoned the gold standard. Plenty of investors started turning their attention to precious metals.
Trading gold wasn't allowed, so the Hunt brothers decided to bet on silver. Mining output was modest, and the outlook looked promising thanks to the booming photography and film industries (silver halide is a key ingredient in photo and movie film).
Growth euphoria
In 1973, Bunker and Herbert bought a massive stash of silver — around 40 million ounces. They started buying at $2.90, and within a couple of months, the price had jumped 131%. By the end of 1974, the brothers controlled 8% of the world's silver reserves. Most of it was shipped off to Switzerland, guarded along the way by Texas's top sharpshooters.
Then the brothers struck a deal with the Saudi royal family and several brokers to jointly buy up precious-metal futures. The Hunts always insisted on physical delivery on every contract.
Silver prices rocketed from $6 per ounce in January 1979 to $52 by January 1980. By mid-January 1980, the Hunts held 69% of all silver futures on the New York COMEX exchange and were pocketing around $100M in profit for every dollar the price went up.
Americans were melting down and selling anything they had — from silver coins to candlesticks. Photo materials maker Ilford had to lay off staff, and jeweler Tiffany bought a full-page ad in the New York Times to run a scathing op-ed against the Hunts.
Silver bottom
On January 7, COMEX capped the size of futures contracts, and two weeks later it halted the issuance of new silver futures altogether — traders could now only close out existing positions. This effectively froze the silver market.
The Hunts poured $6.6B into silver, of which only $1B was actually theirs — the rest was borrowed. Two months later, the price of silver collapsed to $30 per ounce. An avalanche of margin calls came down on the brothers, and they started paying them off in bullion, which was quickly running out. On March 25, the bank demanded $135M in collateral from the Hunts, and Bunker and Herbert simply didn't have that kind of money.
On Silver Thursday, March 27, 1980, all of the brothers' silver positions — worth $2B — were liquidated. The market panicked and futures dropped by a third, down to $10.80.
Bunker and Herbert pledged their companies, real estate, and jewelry, but they still couldn't repay all their debts. For the final court hearing in 1988, the brothers arrived by subway.
🪙 Take a look at silver futures (just don't buy them all up): https://go.utex.io/4aadb8
