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Revisiting the First Silver Bubble
With smoke still rising from the ruins of the recent silver crash, I thought I’d touch base with a wizened and grizzled old veteran who still remembered the last time a bubble popped for the white metal. That would be Mike Robertson, who runs Robertson Wealth Management, one of the largest and most successful registered investment advisors in the country (click here for his site at www.robertsonwealthmanagement.com) .
Mike is the last surviving silver broker to the Hunt Brothers, who in 1979-80 were major players in the run up in the “poor man’s gold” from $11 to a staggering $50 an ounce in a very short time. At the peak, their aggregate position was thought to exceed 100 million ounces.
Nelson Bunker Hunt and William Herbert Hunt were the sons of the legendary HL Hunt, one of the original East Texas wildcatters, and heirs to one of the largest Texas fortunes of the day. Shortly after president Richard Nixon took the US off the gold standard in 1971, the two brothers became deeply concerned about financial viability of the United States government. To protect their assets they began accumulating silver through coins, bars, the silver refiner, Asarco, and even tea sets, and when it opened, silver contracts on the futures markets.
The brother’s interest in silver was well known for years, and prices gradually rose. But when inflation soared into double digits, a giant spotlight was thrown upon them, and the race was on. Mike was then a junior broker at the Houston office of Bache & Co., in which the Hunts held a minority stake, and handled a large part of their business. The turnover in silver contracts exploded. Mike confesses to waking up some mornings, turning on the radio to hear silver limit up, and then not bothering to go to work because knew there would be no trades.
The price of silver ran up so high that it became a political problem. Several officials at the CFTC were rumored to be getting killed on their silver shorts. Eastman Kodak (EK), whose black and white film made them one of the largest silver consumers in the country, was thought to be borrowing silver from the Treasury to stay in business.
The Carter administration took a dim view of the Hunt Brothers’ activities, especially considering their funding of the ultra-conservative John Birch Society. The Feds viewed it as an attempt to undermine the US government. The proverbial sushi hit the fan.
The CFTC raised margin rates to 100%. The Hunts were accused of market manipulation and ordered to unwind their position. They were subpoenaed by Congress to testify about their motives. After a decade of litigation, Bunker received a lifetime ban from the commodities markets, a $10 million fine, and was forced into a Chapter 11 bankruptcy.
Mike saw commissions worth $14 million in today’s money go unpaid. In the end he was only left with a Rolex watch, his broker’s license, and a silver Mercedes. He still ardently believes today that the Hunts got a raw deal, and that their only crime was to be right about the long term attractiveness of silver as an inflation hedge. Nelson made one of the great asset allocation calls of all time and was punished severely for it. There never was any intention to manipulate markets. As far as he knew, the Hunts never paid more than the $20 handle for silver, and that all of the buying that took it up to $50 was nothing more than retail froth.
Through the lens of 20/20 hindsight, Mike views the entire experience as a morality tale, a warning of what happens when you step on the toes of the wrong people.
And what does the old silver trader think of prices today? Mike saw the current collapse coming from a mile off. He thinks silver is showing all the signs of a broken market, and doesn’t want to touch it until it hits the $20’s. But the white metal’s inflation fighting qualities are still as true as ever, and it is only a matter of time before prices once again take another run to the upside.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Silver's manipulation is proof of it's importance. Articles from shills that predict it's price decline is proof of desperation.
Ya I get as bearish as anyone when I see prices rise above the 200 DMA at an accelerating pace and then see the price break below a big important high, but then when I read this kinda crap from MHFT it actually makes me ready to go long again.
silver pump 2.0 in the house
With the ever gowing threat of cyber-terrorism in the US of A, I have taken it upon myself to do a little investigative research and go right to the source. I usually just stick to figuring out how to play the markets but in this case I feel it is my duty to use my extensive contacts to try and help my country for once. So I flew to Pakistan in early April to meet the man himself; Osama Bin Laden.
I asked him point blank, "are you going to use cyber-warfare to attack the US/" and without even flinching he said "pass the lamb curry, yes we will attack you with every thing we have...nukes too."
Being a bit greedy I then asked what he though of the impact on the silver market. Osama said "oouhi vey, that ting was the biggest bubble, I can't believe dumb americans were trading a good strong currency for that old superstitious metal, they better vote for a carbon tax or we are all going to be suffering"
Now I understand why the Pentagon needs to ramp up it's protection...these Al Quada guys are extremely sophisticated financially and have unbounded hate for our freedoms. We underestimate them at our peril.
Great. LMAO
silver crash? who silver crash?
MHFT has stepped in it, on this blog post. Now the gloves come off on this Aussie.......
There were physical stockpiles of silver in 1980 and many fewer industrial uses (outside of photograpy--which was something like 90% recycled). I believe silver will make new highs by year end.
Any time something goes up that the author isn't participating in it's considered a bubble. If the author had seen it coming and was invested they would call it a correction in a bull market.
Yet another piece of garbage by the mad hatter.
Yes, some in the CFTC were themselves short silver futures.
But let us never forget the Board of Governors of the CRIMEX, who got themselves majorly short and then voted a change to make being short a freebie for margin purposes; being long like the Hunts a cash only proposition.
The banksters were immune from prosecution then, they still are.
Gives full credence to the notion that the "Fed" is the Law of the Land, not the Constitution.
Wonder why this is not taught in American History 101
How right you are. But it's going to be different this time.
WE are Nelson Bunker Hunt. WE have bought far more silver than he ever did. We have more money than he did. We are not exposed to the Comex. We did not borrow any money. If Hunt had just bought silver, with cash and accumulated it, and bought a few silver mines, he would have been untouchable by the corrupt NE establishment. It seems he got sucked into the game and was then subject to the owners of the game, like gambling in Las Vegas.
Today, as this group of physical buyers, world wide, we cannot be stopped. The only thing that can be done by TPTB is to outlaw and confiscate our silver, and with the world market as big as it is, whether that would work is doubtful. They are stupid to think the ploys they have done before will work like it did with Hunt. When they manipulate the market and squash the price, what is really happening is that more physical silver gets sold to us buyers, reducing the marketable supply. Supply and demand is a far bigger force than any Sunday Night Massacre, and in short order will bring about the destruction of the Comex and the entire concept of manipulating commodities with futures trading.
Once this very concept is shown to be a lie, this means of control will be destroyed for a long time. The people will just not go along with the idea that slick New Yorkers in $2000 suits can set the price of a commodity for the entire world. It's ludicrous, as they do not even trade 5% of the market. It is an extreme case of the tail wagging the dog, and it is in its last throws of credibility. The emerging physical price discovery mechanism will dominate for a long time to come.
So, remember, Bunker Hunt is dead, long live Nelson Bunker Hunt.
We are him. And we have gotten a lot smarter in 30 years. Buy and hold, and watch the fun game unfold.
Agreed with much of what you write. We are attempting to do a little guy distributed physical corner of the silver market.
1. we think it will be profitiable.
2. we think the paper market is dishonestly rigged and this is used as a tool by the elite.
Is it a illegal conspiracy perpetrated by us? probably, because look who creates the laws.
If voting could actually change anything it would be illegal.
It was neither much of a bubble or a collapse. You could only expect silver for $20 in case of deflationary collapse. Which may happen only if Bernanke is separated from the printer.
Since we don't have a market where true price discovery can take place, we have no idea what the value of silver (or gold) is. Thus, anyone's guess is as good as another's right now.
You are right, of course. It is all just a show and nothing is for sure, except that the bankers get their bonus at the end of the year.
Why do folks continue to claim a bubble popped. It took the CME 5 hacks with a machete to knock silver down. Thats not a bubble pop its a fucking murder.
If it's a bubble that's been popped, why does it seem to reflate on it's own? My point is only that the "bubble" characterization is inaccurate and leads to other misplaced notions.
Sure the margin increases affect the amount of virtual money chasing the asset.
Interpreting "liquidity venting" or algo churn as a change in supply/demand fundamentals is a miss, just as saving FRN's in a conventional savings account is a miss.
It reflates because the pumpers make it do so.
Silver pump 1.0 is the proper name not bubble
we now start silver pump 2.0
when the fish are all hooked as the schills shreek that "armagedon is upon us" they quietly sell there 32 dollar buy and the fish look around and say WTF? You said......
then 3 months go by..
silver pump 3.0 begins
For every version of QE there will a subsequent silver and gold pump. Be sceptical.... You are being played by both ends
The chairsatan on one side
The PM bugs (better known as PM trolls) on the other.
Look around the ZH room - if you ain't controlling the play then you are da fish
+1
Why would a corrupt system not resort to corrupt means to preserve itself? Take delivery and show them to be the used car salesmen shysters they are.
"Mike views the entire experience as a morality tale, a warning of what happens when you step on the toes of the wrong people."
"Mike saw the current collapse coming from a mile off."
So coming from someone with 30+ yrs experience as a broker in the markets with extensive experience being asscandy for TPTB, one would assume that Mike would have made a fortune shorting this recent top in silver? After all he did see it coming right?? SARC/off.
The game is up, only a matter of time now before silver goes parabolic.
seeing something a "mile off" isn't useful, profitable or entertaining.
Silver not a good way to protect your wealth?... then give me an alternative way to store my wealth... one that is as far away from the claws of the criminal genocidal government.
Until there is a decent alternative, i'll stick to gold and silver, proven stores of wealth for centuries. You can keep your jew confetti.
The idea that the Hunts caused that run to 50 is ludacris. They were big and vocal. But to say 100 million ounces was big when the gov was sitting on billions of ounces in a stockpile doesn't wash. They were scapegoated and they lost big. But they were not the market. Well now the Gov stockpiles are mysteriously all gone. We shall see what happens this time.
The idea that the Hunts caused that run to 50 is ludacris.
that spelling of ludicrous is hilarious!
Not unless he means this Ludacris:
http://www.youtube.com/watch?v=UC86yQAzaxg
How about some reasons as to why mike feels silver will go back to $20/oz.
How about putting some clothes on. Please delete this morons account.
WTF? A guy who was actually there and part of the team has an opinion. You don't like that? Disagree with his opinion, but why call him names?
I think that is where the comment the market is broken comes in. It is not a case of price discovery rather the price is set so the "important" people make their money. They being short the market means the paper price will be manipulated lower.
Mike saw commissions worth $14 million in today’s money go unpaid.
You really are a dipshit, you will quote commissions in inflation adjusted terms but not the price of Silver....how much do they pay shills like yourself?
Bahh-zing.
Jeez, a guy is just trying to tell a good story, and you jump his ass? WTF