Eps 1554: Silver Thursday

The too lazy to register an account podcast

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Elaine Jenkins

Elaine Jenkins

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After months of experiencing one financial collapse after another, a monumental silver Thursday event is finally approaching for the Hunt brothers and the silver market. Eventually, the Hunt Brothers plan to corner the silver market was stopped -- but the damage was done, and the fallout from Silver Thursday was a memorable event all on its own. On March 27, 1980 -- a date which would come to be known as Silver Thursday - the Hunt brothers finally missed their margin call, and their cousins plummeted; silver led the way, falling below $11 from a high of $48.50.
The Hunts were short on cash, and Bache was not willing to take silver instead, as had been done all month. Instead of closing out contracts by paying in cash, the usual procedure for his cousins, the Hunt brothers took silver deliveries. People were pawning coins and silverware to capitalize on silvers value, adding to supply, but less than one-third of its cousins were left, which the Hunt brothers did not control through futures.
As the silver price rose, many traders began selling silver futures short, certain the higher prices could not last. Takes began pushing the silver prices up, as much as $50 per ounce, up from $11. Billions of dollars of demand drove the silver price up above $50 per ounce. The steep drop in the silver price that followed led to panic on commodities and futures trading.
Their strategy was to drive the price higher, creating scarcity in silver. The Hunt brothers had already significantly reduced the quantity of silver available in the markets, which made the continued buying operations by the Hunt brothers even more potent, pushing the silver prices higher. The Hunt brothers, who are multibillionaires, have also purchased, and then accumulated, the metal on the COMEX Silver Exchange--a futures market in which traders typically sell relatively rapidly--making their speculation even more linked to the general fortunes of silver.
In 1979, however, the Hunt brothers began buying silver in far greater quantities, trying to corner the market, and by 1980, the Hunt brothers controlled some 200 million ounces. Of the $6.6 billion in silver The Hunt Clan held in their market cap, the brothers had spent only slightly more than $1 billion of their own money. They were correct in singling out the Hunts; by mid-January, they controlled 69% of all the silver futures contracts on New Yorks Commodity Exchange .
Unable to sell the silver, lest it cause panic, the Hunts clan borrowed more. Bunker and Herbert had loosened their grip on silver since the original large purchase in 1973, but by autumn 1979, they were back with a vengeance. On March 26, 1980, the billionaire Hunt brothers announced they were selling bonds with Saudi Arabias royal family that were backed by silver--a sure sign they were running out of money to cover losses incurred by their creditors.
The brothers were able to successfully sell their story and raise money, money which was once again used to purchase more silver. As their wealth began to dry up, the brothers began buying silver using borrowed money.
Instead of going through the normal silver-only trade route, which is selling off their silver contracts holding billions of dollars in order to allow the market to move, the Hunt brothers had the vast quantities of silver bullion shipped out to Switzerland by way of three Boeing 707 planes. Some of the biggest reasons why the Hunt brothers were able to get a lot of investors to put large amounts of money into their attempt at capturing silver was by banking on the Hunt familys reputation to establish trust with investors, as well as the global effort to convince financiers that silver was going to be the next safe haven if the market for fiat currencies fell. While the notoriety surrounding the Hunt brothers and their plans for silver-market cornering continued to rise, the straw that finally broke the camels back was when countries looked at the Hunt brothers overt hoarding of silver.
The situation for other would-be buyers of silver was so bad, on March 26, 1980, jewelry store Tiffanys took out a full-page advertisement in The New York Times denouncing brothers Nelson Bunker Hunt and saying, We believe that it is indefensible for anybody to stockpile a few billion, yes, billions, of dollars worth of silver, and thus driving up prices to such an extent that others have to pay artificially high prices for items made with silver. Until his dying day in 2014, Nelson Bunker Hunt, once the richest person in the world, denied he and his brothers had conspired to corner the global silver market.
Nelsonbunker Hunt predicted at least a tenfold rise in silver prices due to a collapse of the dollars real value, so he and his brothers began buying up physical silver, as well as futures contracts. In the 1970s, with the United States struggling with high inflation, two brothers -- Nelson and Herbert Hunt -- Nelson decided to make a bold bet that would see the price of silver skyrocket to record levels for some time. The Hunt brothers also preached their gospel of silver as a real safe haven from an impending inflationary deluge to rich investors around the world, and they pooled converted funds to purchase even more silver and futures contracts.
It is certainly true that, back in 1980, Bunker, his brothers, and the rest of the Hunt clan owned about two-thirds of all the privately held silver on Earth.