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Silver, the Hunt family…and a billion dollars ain’t what it used to be

Silver has raced to its highest price in eight years after retail traders poured $1 billion into the world’s largest silver-backed ETF in an attempt to squeeze the banks. 

Their purchases were inspired by blogs published on Reddit, which urged investors to buy the iShares Silver Trust because this would force the ETF to buy silver and push up its price, thus squeezing the short positions owned by banks and hedge funds.

Three of HL’s fifteen children – Nelson Bunker, William Herbert and Lamar Hunt – sought to dominate the silver market after being bequeathed $2 billion each by their father

Other speculators followed suit, pushing up the price of shares in silver mines along the way. The current price of silver is $30 an ounce. 

The trades follow an initiative by Reddit bloggers to squeeze short-sellers in US-listed video retailer GameStop by buying its call options. 

It also harks back to a far bigger squeeze on the silver market by the multi-billionaire Texan Hunt brothers in the late 1970s. 

They failed, but only because regulations were changed to stop them in their tracks.

This could yet be the fate of the Reddit crowd, if they stick together, although a rule change would dramatically increase the unpopularity of Wall Street while the Democrats are in power.  

Back in 1930, Haroldson Lafayette (HL) Hunt used his poker winnings to invest in oil prospects. Ultimately, he backed a gusher – the six billion-barrel East Texas field.

His dealings made him the inspiration for JR Ewing in television series Dallas. His riches were on the same level as rival oilman J. Paul Getty. He once remarked: “Money is just a way of keeping score.”

Three of HL’s fifteen children – Nelson Bunker, William Herbert and Lamar Hunt – sought to dominate the silver market after being bequeathed $2 billion each by their father.

They had run Hunt Oil successfully for years. But US foreign policy led to the expropriation of their assets in Libya as inflation sapped their wealth. Bunker remarked: “A billion dollars ain’t what it used to be.”

To protect the value of their fortunes against inflation the brothers decided to pile into silver, starting at $2 an ounce, because the US Government had put a limit on gold deals. They became experienced in paying a canny price for derivatives which they converted to silver on maturity. 

Starting in October 1979, they forged alliances with Saudi investors and steadily pushed up the silver price, forcing short sellers to meet growing margin calls. 

In the weeks that followed, the Hunts and the Saudis bought control of half the world’s deliverable supply of silver, plus a stake in their broking adviser Bache Halsey Stuart Shields. The price of silver hit $49.48 an ounce in January 1980.

The New York Commodities Exchange was furious. It hiked the capital needed to trade futures and said the owners of long positions, meaning the Hunts and their friends could only sell to investors with short positions. The brothers had been delivered into the hands of their enemies – the silver bears. 

The silver price collapsed to $10.80. The Hunts’ oil business also collapsed in 1988 after the Hunts struggled to meet margin calls, although their personal assets were kept safe.

It would need more than this to see off a family as wealthy as the Hunts.  Their collective fortune now totals $16.6 billion, according to Forbes. And the money has safely trickled down through HL’s fifteen children by three mothers.  Several of them have added to it after backing new initiatives in real estate, hotels and energy. 

Hunt Oil lives on as privately-owned energy company Hunt Consolidated, which prospers once after a big oil strike in Yemen in 1984 and a string of deals across the energy sector. The company is chaired by another of HL Hunt’s sons, Raymond Lee Hunt. His son serves as co-chief executive. 

Bunker Hunt, perceived as the leader of the silver bulls, was forced to give up his breeding of thoroughbred horses. He went on to fund conservative and Christian causes, including a film about the life of Jesus, before his death in modest circumstances in 2014.

William Herbert rebuilt an estate in the oil business. Lamar Hunt invested in amusement parks and earned great renown as patron to US professional football prior to his death in 2006.  His son Clark is chairman of the NFL’s Kansas City Chiefs and invests in Major-League Soccer. 

Nigel Foster, author of the Derivatives Game, once headed the derivatives team at BlackRock. He says of the Hunt brothers: “They played an aggressive game to win by the rules. But they were not club members and made no attempt to be popular. The strategy put them on a collision course with the stalwarts and they only lost because the rules were deliberately changed to stop them.”

 

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