Guest Post: A Brief History Of Silver Manipulation

Tyler Durden's picture

Submitted by Sudden Debt

A Brief History of Silver Manipulation

The silver fairy tale of the brothers Hunt
 
In the early 80’s the attempt of the Brothers Hunt, Nelson Bunker and William Herbert Hunt, to fully clamp down the silver market was one of the most spectacular but at  the same time also one of the most unsuccessful financials plans within the then fair world. Despite that the brothers failed in their attempt to clamp the silver market, they have succeeded to make a outright mess of the precious metals market and lose one of the largest fortunes in the world in no time.
 
The expansion of the Hunt Empire
 
Nelson Bunker Hunt and William Herbert Hunt were born in one of the richest American families. Their father Haroldson Lafayette (also known as H.L. or Arizona Slim), had acquired a fortune during the 20s and the 30s in the Texan oil industry. By investing these oil revenues in successful companies, the Hunt family grew into one of the most prosperous families from all over America. When H.L. died in 1974, he left his next of kin therefore an immense capital. H.L. Hunt had 14 children at three different women, 6 with his legal wife, 4 from a bigamist marriage and another 4 at one of his mistresses. Bunker and Herbert were two full-fledged brothers, namely the second and the third son of H.L. Hunt and his first wife Lyda Bunker Hunt. When Bunker and Herbert just started to get a grip on the silver market the 70’s, their capital was estimated around 13 billion dollars. H.I. Hunt’s logical successor and next boss of the Hunt Empire was originally his eldest son Hassie. However, his plans were thwarted when the same Hassie during his twenties had to do to with psychiatric problems and underwent various treatments without success. H.L. therefore had no choice but to name his second son as successor to lead. In the beginning, however, Bunker showed not the gift of his father in order to locate new oil fields. Bunker lost in his early years millions of dollars by error self-rated and fruitless attempts to find new oil fields for the Hunt Empire Carlo. But once Bunker learned how to do it after a few year, he did it immediately with verve and with style. He found an immense Libyan oil field, Sarir Field, which turned out to be one of the largest oil fields in the world. The discovery of this oil field swept into a seesaw the losses which he had piled up in the previous years from the table. In the early 70’s, he and his brother Herbert took over the Empire forever on.
 
Silver times glimmer on the horizon
 
By mid 1970s Hunt developed systematically an obsession for silver. When he went looking for a source of stability in a world that was currently very unstable and subject to inflation was and influences was the fear of international communism, he came out on the magic word silver. He saw not only future in silver but he was also convinced that silver was undervalued and that the silver value could not otherwise than rise. Supported by the opinion of their financial advisors locks he joined the investment group Bache investment house and they put their first steps in the silver world. Middle 1970s the brothers Hunt dominated for almost 10% of the entire silver stock and their increasing impact on the silver market made sure that the silver prices within a few years of $ 2 per ounce increased to more than $ 6 per ounce. They invested not only their entire own capital in silver but they tried also others to convince others to do so. In this way, they found support with a group of Arabian investors who where able to buy huge volumes of silver with their endless supplies of money and propel the price of silver into the skies. The Hunts, backed up by the Arabs, increasingly got more influence in the silver market by which their holding grew out of proportion and which supplied them the means to loan more money and buy more silver and increase the price even more. And the plan seemed to be working! At the end of 1979, after years of price increases, the price for silver was 35$/ounce, a unseen price. Other investors where atracked by these price increases and also started to invest in silver what gave the price a even bigger boost. In the 80’s, the plan of the Hunt brothers seemed to have worked and the market was on his head. In less then a decade they where able to inflate the price from 2$ per ounce in the beginning of the 70’s to 50$ per ounce at the beginning of the 80’s. It even seemed realistic by then that silver would go to $200/$300.
 
Bloody Thursday
 
The end was near. The prices of silver stopped rising and started to go down. They weren’t able to attract enough funds anymore to influence the price and the price started to went down. The price of silver and gold started their seemingly endless drop because investors started to invest their money in bankcertificats for higher interests. Not only the value of the precious metals plummeted but also the fortune of the Hunts went up in smoke. The brother took on massive loans to fund their silver quest and couldn’t repay their debts anymore which they made with brokers like Bache, A.G. Edwards, Merrill Lynch en some others who had to be repaid when the silver market crashed. These brokers started to protect themselves against these drops and made fortunes when the silver went down. The Hunts were confronted by margin calls from their brokers to repay them in the next 5 days or there would be a liquidation.

And when a broker demanded $100 million dollars as payment, the largest margin call until then, and the Hunt couldn’t pay up it was the end for them.

In a last attempt to turn the tide, the Hunt brothers tried fabricate paper obligations backed by their 200 million ounces of silver. But in reality they tried to create a international curreny that would have a silver standard. The plan failed and even pushed down the silver price even more because silver by then was linked with the failure of the Hunts and their unstable situation. The price got to a all time low on march 27 1980, a date still known as Bloody Thursday.
 
Old habits die hard
 
The banks involved in this silver play actually got big thanks to this silver play in the 80’s and learned how to suppress the price of silver whenever it went up. It was just a routine game which they played over and over again. Supply/demand didn’t even matter in this play and the game attacked so many players that every big bank in America went along the game from the mid 80’s until now. This was simply one of the biggest money generator of all time and this game is much bigger then J.P. Morgan.

But like any other casino game : You need to quit while you’re still ahead. For them 2007 should have been a warning light but by then it was already to late to unload their silver derivatives.

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uno's picture

 

On March 25th at the CFTC Public Hearing on Precious Metals GATA made a dramatic revelation of a whistleblower source, Andrew Maguire, who has first hand evidence of gold and silver market manipulation by JPMorganChase and who has even tipped off the CFTC in advance of manipulative attacks on gold and silver. Just as in the Madoff case the regulator has done nothing to stop such manipulation.

On March 26th while out shopping with his wife, Mr. Maguire’s car was hit by a car careening out of a side road. The driver of the vehicle then tried to escape. When a pedestrian eye-witness attempted to block the driver’s escape he accelerated at him and would have hit him had the pedestrian not jumped out of the way. The car then hit two other cars in escaping. The driver was apprehended by the police after police helicopters were called in and following a high speed chase. 

 

http://spktruth2power.wordpress.com/2010/04/04/andrew-maguire-exposes-systemic-fraud-by-cftc-and-jpmorgan/

 

flacon's picture

Check out this relaxing silver timelapse from August 2010 - January 2011. 

http://www.youtube.com/watch?v=jEavXM1XuTU

 

bigelkhorn's picture

Alot of people think we are doomed, but there are still great ways to make money. Even while the economy is collapsing around us.

I subscribe to the guy from australia and his FFT economic newsletter at http://www.forecastfortomorrow.com  that guy has called many big events before they have happend, including the stock market crash in 2008 and the current financial collapse of the US. (currently happening) I found him from a friend last year, and he has some important work.

His oil calls are insane, and I have been making good money with them. He is well worth a look, if you want to keep two steps ahead of the sheeple out there.

I am worried about my financial future. Is anyone else nervous out there?

theprofromdover's picture

This is cited every bleeding week, yet never a follow-up.

Where is the outcome, what does Andrew Maquire say happened, and has the driver been charged?

We devalue the effectiveness of this site with replayed rumours.

Either the hit 'n run was premeditated, or it wasn't.

If it was, dig deeper; if it wasn't, stick to Maquire's explosive testimony. That is a big enough story on its own.

 

uno's picture

Now you have a task to do, look into it and report back to us, then you can add 'value' to the site. 

The MSM did not cover Andrew Maguire's testimony or what happened shortly after.  The worse thing for the manipulators is to have the story continue to be told.  CNBS, CNN, Fox, WSJ etc ignored it, bringing it up here is a reflection of their part in continuing the Madoff/Enron environment.

If we are going to have a post of silver manipulation, Andrew Maguire's recent story should be included.  I want it for anyone new to zerohedge to know, the easy thing to do is let it go away over time.  

david3549tw's picture

very good stuff. fortunately i sold off my slv already. 

Imminent Crucible's picture

This story is not only badly written, it's grossly in error.  Are all of ZH's readers children?  Am I the only person that actually remembers the Hunt brothers' debacle?

This piece of rubbish implies that the Hunt brothers got killed because they ran a good scam for too long.  Nothing could be further from the truth.

Here's how it really happened (and there are plenty of historical accounts out there for you to fact-check, as Sudden Dump obviously did not):  The Hunts watched the accelerating inflation that followed Nixon's 1971 default on the Bretton Woods agreement.  They saw the price of gasoline go from 27 cents to over a dollar a gallon (in part due to the Arab oil embargo and other supply disruptions).  They saw home prices double and triple.

They had a family fortune to protect, and determined that, with the U.S. silver reserve gone, that the most reliable way to hedge inflation was to convert as many dollars as possible into silver and other real assets. Eventually they had millions of ounces salted away, and the silver bull market took on a momentum of its own.  It was being called "the poor man's gold".

This grossly misleading account leaves out the two most important events that busted Herbert and Nelson Bunker Hunt.  First, the SEC moved to ban delivery on silver futures contracts.  This was an egregious case of changing the rules in the middle of the game, and it was rumored (and no doubt true) that several clearing members of Comex and members of the SEC were heavily short silver and getting burned alive.

By banning deliveries, the SEC killed Comex as a source for procuring physical silver, and so demand for paper contracts dried up.

At the same time, the accelerating panic over dollar inflation led Carter to put Paul Volcker in charge of the Fed. Carter directed him to do what it took to restore confidence to the currency.  Volcker promptly raised the prime rate from 6% to 16% in five short months. Inflation hit a concrete wall, as did the economy.  With banks offering 16% on certificates of deposit, the return on money finally exceeded the inflation rate for the first time in years.  The rebirth of yield ended the panic demand for gold, and both gold and silver went into freefall.

There's a lesson for us in this. Demand for gold and silver will continue, and the price will keep rising, as long as real yields on "safe" debt instruments like Treasury notes remain near zero or negative.  Bernanke can easily kill the bull markets for precious metals; all he has to do is replicate Volcker's trick by raising the long bond yield to 17%--and watch the economy of the world's largest debtor nation implode as interest rates skyrocket, all borrowing comes to a halt and the cost of federal debt service goes off the charts.

It's not gonna happen.

 

Instant Karma's picture

Interesting story full of typos or errors of grammer. Would like to know exactly how price suppression works. Isn't the usual game to accumulate a position, pump up the price, and then unload (the stock market right about now). 

I prefer price suppression, because it naturally leads to an undervalued asset, allowing the patient to prosper. The usual game of pumping up prices (Netflix) lures in the suckers and then takes their knees out when the price collapses.

nmewn's picture

"Interesting story full of typos or errors of grammer."

In English...Sudden Debt is Belgian I believe.

Cognitive Dissonance's picture

Sudden Debt is a Belgian waffle who wildly waves his arms all day long while mangling the English language.

I like Belgian waffles.........with butter and Maple syrup. Sudden Debt is alright as well.

woolly mammoth's picture

Waffle. Now I get it. I thought all this time he was a screaming chunk of meat loaf.

Problem Is's picture

Try honey from a beekeeper, CD... Never store bought...

You will never go back to Leo Canadian Maple on a waffle again ;<}...

TheProphet's picture

And the word is spelled "grammar"

QQQBall's picture

Haha... never fales (fails)

 

 

 

 

schoolsout's picture

well, I wasn't going to, but, uh...

 

GRAMMAR

hack3434's picture

Speaking of typos...it's grammar not grammer.  

Richard Head's picture

You should always pause for a moment when you write something like this, much like you would before hitting "Reply All" in Outlook.

Hephasteus's picture

I love to read things with typos and grammar errors. Because they are more like streams of conciousness than these breast implanted face lifted fancy worded communications we are inundated with.

velobabe's picture

i love too reed grammer mistakes to. i wasn't going to say anything, surprise, i make a lot of  errors. but i only gave him a good vote. i know he is 7000 miles away from me. in waffle country.

Don Birnam's picture

Arizona Slim...one legal wife, one bigamist marriage, and one mistress. Fourteen chillen' in all. The Head of the Hunt Family was nearly as busy as Rameses. All that procreative effort, and where did it lead ? Nelson and Bill try to corner the silver market with the inherited millions born of dear old dad's blood, sweat and tears...and lose it all.

israhole's picture

Still a far better story than Bernie Madoff's.

Real Estate Geek's picture

Anyone else having trouble accessing Turd's site all day? I've been having internet trouble, so maybe it's a localized problem. (I'm in SF.)

Real Estate Geek's picture

Story of my life . . .
Thanks.

Problem Is's picture

"Nope, just you."

Don't listen to your wife, ex-wives, girlfriend and ex-girlfriends...

They will tell you it's you until the end of time...

Shameful's picture

Interesting back story.

Seemed to me that the real mistake the Hunts made was not ot take delivery. IIRC they kept rolling contracts and left themselves exposed. I'm also leery of using leverage in the metals (particularly silver) just because can see some volatility in what is really a small market overall. But then I'm just a small time wage slave investing my savings.

Nice to see you get something up here Sudden Debt. Can we get something about what you are seeing on the ground in Belgium? As a dumb American I'd like to know what is happening in EU central.

woolly mammoth's picture

One reoccurring thyme as I read these types of stories seems the bankers knowing what others positions are and profiting by betting against these positions, sometimes even against their own clients. "Maybe" Buffet didn't so much as invest in banks, but was buying protection.  

Shameful's picture

I simply assume the system is broken and corrupt. The regulators are 'captured' to put it mildly. Casinos are less rigged. At least with physical possession they cannot reach out and smack the underlying asset out of my hands, without their thrall Uncle Sugar anyway.

Having said that I do have some exposure to the miners, but accept that the prices can be played with. It's money I can afford to lose and I'm only in miners who are in production.

As far as fiduciary duty, it's a joke. Who would enforce that? Oh that's right the regulators who are captured. Captured regulators are worse then no regulators. They give the uninformed the illusion of a watch dog, and they serve to attack dog those who could challenge the rulers in the casino.

goldsaver's picture

Ok, not to demean the guest poster but Tyler, if this is the quality of writing that is acceptable in ZH, how do I get posting privileges?

Wikipedia could have done a better job. And for crying out loud, proof read your stuff before posting man! Don't just count on spell check and call it done. You can not make an intelligent point with dumb writing! Only Yogi Berra could get away with that shit.

bob_dabolina's picture

Blythe Masters was a woman born of two female sea horses. With no assets and the company of only 1 friendly crab she cornered the copper market.

oddjob's picture

I heard she was hippocampussy too,also during social moments or in unusual surroundings,she turns bright colors.

bob_dabolina's picture

I understand you.

My trousers moved.

merehuman's picture

like her or not, she is warrior pussy. How many women have that much balls? Got to give credit where its due. Obama is good at reading teleprompters

JLee2027's picture

You mean the daughter of the devil? She is a destroyer not a warrior to respect.

akak's picture

How many women have that much balls?

Aside from Hillary, you mean?

gwar5's picture

That was interesting. I thought the Hunt episode and the current manipulation was unrelated

Careless Whisper's picture

just crash the mofo. buy silver.

 

Misean's picture

It sucks being ahead of your time.  Just think if they waited 15 years, they'd have been bailed out.

israhole's picture

You got that right, except that the Hunts are Goyim.  Central banks are not there to bail Goyim out.

Bastiat's picture

There was some silver around in those days--not so much now.  Leverage is suicide in the metals unless you are in the club.  Physical demand is the only thing that will ever stop the Morgue and that day is coming.  All the paper bullshit games in the world can't create supply--only prices and mining can.

Tapeworm's picture

I might be full of it but I recall something about the gombit still holding about twelve billion onzas of plata at that time. US centgoo has nothing now. I caution all on just how high silver is now in purchasing power parity. Silverbugs are tagging along with those that might dump at any time.

SwingForce's picture

"The end was near", why did you leave out the part about the CFTC raising margins? And the disallowance of opening new long positions? "The price of silver stopped rising and started to go down". Duh, how could it go UP if the CFTC didn't allow anybody to go long?  I think you left out the best part of the story. Somebody didn't like The Hunts or Bache-Halsey. But that was then, how about now when JPM supposedly has massive positions in both the silver & copper markets? How is this so different that now it is allowed? 

I am very glad to see you contribute, congrats! Does anyone remember Warren Buffet's big silver position of a decade ago? He took a huge position, but made sure it was completely outside of the US markets. What was he worried about? Or trying to circumvent? He lost his ass if I remember correctly.

UncleFester's picture

Not to mention double digit interest rates on the $.  Let me see..who was the FR chairman at the time, seems like he resigned from the big O's admin recently, what was his name?

I Fester

hpro123's picture

SwingForce,

THIS (the CFTC stance and changing the rules of the game to shorts-only) is actually the salient part of the story and the REAL manipulation. AFAIK, there has never been a good account of this ordeal that conclusively shows that the Hunts were more than the original "silver bugs".