The saga of the Hunt Brothers, or at least two of the 15 kids by several marriages and liaisons of the old man, H.L Hunt, of necessity must begin with the father. H.L. Hunt was born in Illinois, and left home at age 16.
He did a lot of things, such as mule-skinner, logger, and farm worker. He seemed to be a gifted card player. He always played and gambled with cards. Hearing of the El Dorado oil strike in Arkansas, he moved to Lake Village, where he began playing and gambling again. He decided to take a crack at the oil business, and his first well was a success. A friend gave H.L. a tip about a new field in East Texas. He struck it rich, and became the largest independent producer to that time. He eventually moved to Dallas, where he stayed.
H.L. Hunt began his marital career in a normal way, by marrying Lyda Bunker. Bunker Hunt was one offspring of that marriage, being born Feb 22, 1926. H.L. seemed to have a love for women and sex, because while married to Lyda, he also consorted with, and produced children from Frania Tye, and Ruth Ray. The children by these other women were no accidents. H.L. actually believed he was such a genius, that he owed it to the world to fill it with as many of his genes as possible. Lyda died, and he then married Ruth, who gave him 4 children.
One of Bunker's brothers was Hassie, who looked exactly like his old man, and became the apple of his eye, leaving Bunker to helplessly compete for his father's love and attention. Hassie was a millionaire by age 21, thanks to his "inherited" ability to spot oil, but suffered a mental breakdown. After numerous treatments by experts from one coast to the other, Hassie had a prefrontal lobotomy performed on him, which left him an invalid. The old man then shifted his attention to Bunker's younger brothers Herbert and Lamar. Bunker became the object of H.L.'s anger and frustration, belittling, ignoring, and criticizing Bunker without end. Bunker got a job at Hunt Oil, but the old man never let him forget that he considered him a stupid ignoramus.
Bunker got fat, probably because of the old man's treatment, dropped out of college, and decided that he was a natural at discovering untapped oil fields, which of course had best be left to trained geologists. He drilled $11 million worth of dry holes. The old man was not impressed, and said that he could find more oil with a road map, than Bunker could with a platoon of fancy geologists. Bunker didn't give up. $250 million worth of dry holes later, he hit it big… in Libya. The Sarir Field held an estimated 11 - 13 million barrels of oil, and half of it belonged to Bunker. The other half belonged to British Petroleum, but his half was worth a cool $5 billion, or more than twice the old man's entire fortune. Bunker became, overnight, the world's richest private individual. But he was still broke, due to the debts he had encountered with all the dry holes, plus there were no pipelines to carry the Libyan oil. Bunker borrowed from his Dad to stay afloat for a bit longer.
Bunker Hunt, is in no way like his father. No secret families, one wife of many decades, plus four children and many grandchildren. Bunker loves food, and has weighed in at close to 800 pounds it is said. When I met him back in 1980, he wasn't that heavy, but between his sloppiness, cheap clothes, and overweight, he looked like he might have been almost homeless. Nevertheless, Bunker Hunt is a truly fine, Christian man, who has spent his money on hundreds of worthy causes, and besides, like, me, he loves ice cream! Bunker became a board member of the John Birch Society, it is said, contributing $250,000 a year to that outfit. He has a herd of racing horses, and is quick with figures, but rarely gives to politicians.
Back in 1970, Bunker became obsessed with the future of the paper dollar, which he decided wasn't too good. A commodities broker named Alvin Brodsky was visiting, and as he looked around the kitchen, where they were all seated, he asked Bunker, pointing to the table, utensils, and food, if he thought he could buy them for the same price a year later. "No," was the answer, and Brodsky then said, "You should consider silver." Bunker's Libyan oil venture was paying him $30 million a year, tax free, and silver was about $1.50. Between the Vietnam War, American riots, Mid-East turmoil, and in Libya, a left wing, dictator, named Colonel Muammar el-Qaddafi was threatening to nationalize Bunker's holdings. Things looked a bit grim to Bunker. It was still illegal to own gold, which left silver for hard money enthusiasts to consider. Slowly at first, only five or ten thousand ounce lots (!), which were really small change to the Hunts.
Within three years, silver had doubled to $3 per ounce. The old man had started HLH Food Products some years before, and a scandal had erupted. Bunker and Herbert thought that one of the old man's closest friends was stealing him blind. They did a wiretap job, and hired detectives to prove it. They got caught, and in January of 1973, were indicted on a charge of obstruction of justice. Not a pleasant development. As if the indictment wasn't bad enough, in May of 1973, Col. Qaddafi indeed did nationalize Bunker's oil fields, announcing that he wanted to give America, a "slap in the face." Depressed at the world's conditions, Bunker decided to go really heavy in silver. Bunker, brother Herbert and step brother in law Randy Kreiling came together and bought in full bore, as was the Hunt custom. They bought, literally millions and millions of ounces of silver. Their first order was a December 1973 contract for 20 million ounces. By early 1974, the Hunts had accumulated contracts for 55 million ounces of silver, or from seven to nine percent of the estimated total world supply. They had more silver than anyone on earth, except possibly a few governments or possibly the exchanges themselves.
Before we go much further, please note that the Hunts had 55 million ounces of silver UNDER CONTRACT, and they intended to take delivery of it, as anyone of you readers who have contracts should do. Why? Because the exchanges have but a fraction of the physical silver they have under contract. While the Hunts had to put up $160,000 million to take delivery, they had it. But the exchanges didn't have much more than that. If everyone today took delivery of their silver contracts, where would the exchanges get it? They don't have but perhaps half of it in physical, or maybe even less. Would they offer dollars as a replacement, due to a lack of physical? Would they simply fold and leave everyone out in the cold?
It's always wise to get in before it begins to rain, not after one gets wet. If it looks like rain, the clouds are heavy and dark, one could reasonably expect to get wet if one stayed outside. If the fact that the Comex has but a miserly supply of physical to meet their obligations. Shouldn't everyone want to take delivery? Isn't that similar to seeing dark clouds and hearing thunder off in the distance? Isn't remaining in contracts rather than taking physical delivery, similar to storing surplus assets in paper dollars, rather than physical gold and silver? Of what value is a silver contract, if it begins to rain physical delivery requests, and there isn't any? Paper, paper, paper, and of what value is it if there's nothing in back of it?
Of more than casual circumstances to be dealt with, was, in Hunt's case, where in the world would one store 55 million ounces of silver? That should pose little or no problem for small time people like you or I, but in the Hunt's case, it was problematical. First of all, if they took delivery in their state of Texas, they would be liable for a 4 3/4% tax, and they certainly didn't want to have that assessed on them. They decided to store it in Switzerland. Simple? Not really, but it was pretty comical, they way they did it. H.L's second family, of which Kreiling was part of, lived on a 2500 acre ranch east of Dallas. It was called the "Circle K." Kreiling recruited a dozen of the Circle C cowboys, and had a shooting match. The winners received a special assignment, and that was to ride shotgun on 40 million ounces of silver destined for Switzerland. Fifteen million ounces would remain in the US in the exchange warehouses in Chicago and New Jersey.
Guns in hand, they flew to New York, where three chartered 707's waited for them. The 707's had tape over their insignia, and only the "N" numbers showed. Can't be too careful. It took three big jets to haul 40 million ounces of silver. In the dead of night, a convoy or armored trucks appeared with the silver, and it was loaded onto the 707's. Upon arrival at Zurich, another group of armored trucks met the plane, and off-loaded the silver…under the watchful eyes of the Circle K cowboys, of course. But there was too much silver for the Zurich bank vaults, and some of it was stored in Swiss warehouse. Cost of the movement? $200,000. Storage fees? Half Cent per ounce per month. Protect yourself.
Bunker - Part II
The Hunts tried, but failed to keep their intentions a secret. "Who the hell are these Hunts?" was probably the question around the trading floor in 1974, when word got out that someone named Hunt had just taken delivery of more silver than anyone in history. In 1974, the year's production of silver was only 245 million ounces, and even back then, the consumption was about 400 million ounces. These guys had just taken delivery of 55 million ounces. The world's above ground supply was estimated at between 600 to 800 million ounces, and it was further estimated that only 200 million ounces was available for delivery from futures contracts. The alarm bells rang, when in April, 1974, Bunker walked into the COMEX, having never been there before. Silver was about $6 by then, up from the previous low of $1.50
In a rare interview, Bunker told a Barron's reporter that, "Just about anything you buy, rather than paper is better. You're bound to come out ahead, in the long pull. If you don't like gold, use silver, or diamonds, or copper, but something. Any damn fool can run a printing press." How true today! The old man died in November, and his will left a lot of angry kids, from three mothers, who thought they were treated unfairly. That's the way wills are though. What the deceased said in writing, is what goes, and so it did. By March of 1975, silver was down to about $4, and the Hunt Brothers decided to try to interest foreigners in purchasing silver, to bring its price up. So they flew to Tehran to see if the Iranian Pahlevi family would be interested in joining them. The answer was "No."
Next stop was to Saudi Arabia to visit King Faisal. Before he could give an answer, he was assassinated. No sale there. The trial for the wire tapping charge began in September, and the Hunts were exonerated by a jury of their peers. The legal fees were estimated at a million bucks, so they were cash squeezed again. Silver refused to move, so they borrowed on the silver they owned, and decided to play other commodities. This was a huge risk. If they gambled incorrectly on other markets, and silver went down, they would be in a double loss situation. All commodities futures are a gamble, and as far as I am concerned, having lost heavily once, I am not going to do it again. But they did.
Before we go a bit further, let's analyze the past couple of weeks as far as metals prices are concerned. Silver has dropped about 60 cents an ounce, which presents a huge buying opportunity. However, those who have silver futures contract, undoubtedly had huge margin calls, and huge amounts of dollars had to be put up to meet them. I am certain that many futures holders of gold and silver, or any commodity which has slid, are hurting. Millions of futures contract investors over the years have gone bankrupt when their bet went south. While I consider it a huge buying opportunity, silver futures contract holders, I am certain, have taken a bath. Of course it will go back up, but that doesn't change the margin calls. I hope you are not hurting, but I have been preaching this for a long time. No one can possibly know what tomorrow will bring, and a sudden correction can wipe out one's net worth. Stay clear of futures! It is said that 95% of futures players loose. I believe it.
The Hunts bought a 61 percent control of Great Western United, the nation's largest sugar refiner, for $30 million. This brought on all sorts of controls and exposures, since it was a publicly traded company. Great Western's revenues promptly declined by $100 million. By late 1976, Hunt, in the name of Great Western's trading company, took physical delivery of 20 million more ounces of silver.
It then got really screwy. Herbert went to the Philippines and proposed to Ferdnand Marcos, (remember him and his wife's 3,000 pairs of shoes?), that Great Western silver could be sent to the Philippines, and the Philippines could send sugar to Great Western's refineries. The Philippines would trade their silver to the Saudis for oil. With the Saudi's having a hundred million dollars worth of silver, Great Western would have sugar to refine, and the Philippines would have oil. Sounded great, but the Philippines were in debt to the IMF, and the IMF quashed the deal. In early 1977, Great Western sold its silver for $88,500,000, which was at a nice profit, but the company still operated in the red. The Great Western Trading Company still existed, of course.
Great Western, which was the Hunts, then decided that maybe the best idea was to control a huge silver mine. After all, isn't it better to own the mine than to mess around with the production of the mine? Big Creek mine was owned by Sunshine Mining, which was near Kellogg Idaho. After much legal hassling and bickering, the Hunts, under the name of Great Western, owned 28% of Sunshine, and had an agreement that they could purchase the rest for $15 per share. They changed the name of Great Western to Hunt International Resources Corporation, or HIRCO. Gold had become legal to own, and its price was rising. Bunker figured that if gold was going up, silver would too, so rather than staying put, he went after the Saudis again, and used his friend John Connally as his deal-maker.
By 1978, silver was on the move again, had crossed $6, and was headed for $8. Michael Boswell, the Hunt placed manager of Sunshine, turned hostile to the Hunt takeover, and said that the $15 per share agreed upon price was a floor, not the price agreed upon, and especially since silver had gone up appreciably. He wrote to the stockholders and told them "Don't give Sunshine away." The stockholders agreed, and the Hunts lost the mine as well as Sunshine. In the summer of 1979, thanks to John Connally, the Hunts and Saudis incorporated International Metals Investment Company in Bermuda. Its purpose was to invest in gold, platinum, and silver. The Sheiks in the outfit had a lot more money than did the Hunts, so when they decided to buy 90 million ounces of silver at an average price of $10 per ounce, on margin, the Hunts were obligated for $450 million as their half. Where would they get that many dollars? They still had the 55 million ounces, which was appreciating, so they borrowed on that to buy…yes, more silver. The buying began in July with 8600 silver futures contracts bought from the CBOT (Chicago Board of Trade), and the New York Commodity Exchange, (COMEX). This placed 43 million ounces under contract for delivery in the fall. Other mysterious persons also began buying silver futures, and in two months, silver went from $8 to $16, closing at $17.88 on October 3rd.
Bother CBOT and COMEX panicked in a big way. The Hunts & Co kept buying new futures and taking delivery on the old ones. Both warehouses held only 120 million ounces, and that much was traded in October alone. It wasn't just the Hunts which caused the price explosion, because gold went up too. Remember, Jimmy Carter was our President, and inflation was rampant, as it has been since and still is, but it was perhaps more obvious then. The Panama Canal was being given away, the hostages were in Iran, OPEC had run the price of oil way up, and a prime rate loan went for over 13%. Mortgages were at 21%, and the entire world looked pretty glum to most people. People were investing in gold and silver at the same time that the Hunts were trying to corner the world's silver supply. Interesting co-incidence?
Was silver's obvious scarcity, driving up gold too? Or was the world situation driving both up at the same time? The interesting fact, is that the gold-silver ratio in 1980 was 16 to 1. Today, as I write this, it is 62 to 1, and has been as high as 77 to 1, last year. The ratios are important! In the 150 years previous to 1980, the ratio was 16 to 1 or thereabouts, and was actually set as such by the Treasury's buying and coining. 16 to 1 it was. (I can't finish the Hunts this time, so let's talk about the silver they were trying to corner.) Silver became so scarce and highly priced in early 1980 and late 1979, that people were turning in their flatware, silver vases, and jewelry. I was witness to this, and bought a lot of beautiful silver candlesticks and stuff for the spot price. I was selling gold and silver in daytime, and at night, we were counting silver to be shipped to the Hunts. Wild times.
Is there any reason to think that the same ratios will not resume eventually? If they do revert to history's ratios, this means that silver will go up close to four times, percentage wise, faster than gold. Based on today's spots, a 16 to 1 ratio would make silver about $28, to gold's $427. I doubt that silver will ever go as high as gold, but some say that gold and the Dow may cross, and I think that is a possibility. Protect yourself.
Bunker - Part III
OK, this should finish it! It all ended rather quickly, as a matter of fact. As I said in the previous piece, the warehouses of both the CBOT and COMEX only had 120 million ounces of physical silver in them, and the Hunts & partners were buying silver contracts like they were going out of style. On top of that, they were taking DELIVERY. How could the COMEX and CBOT deliver all these contracts, when they had so little in their warehouses? They obviously were approaching a situation where they would be unable to do so. So they changed the rules in mid-stream. In late 1979, the CBOT changed its rules, and stated that no investor could hold over 3 million ounces of silver contracts, and also the margin requirements were raised. Further, all contracts over 3 million ounces had to be liquidated by February, 1980.
Not fair? You bet! Obviously, a shortage of physical was developing, and developing fast. The COMEX and CBOT were doing then, as they are still doing now, and that is selling futures contracts on things which they don't possess, and which may not even exist. If there wasn't a shortage, why were they panicking? If there was no shortage, why were the prices going up so quickly? Didn't matter. He bought more! On the last day of 1979, the price of silver was $34.45 At this point, they held 40 million ounces of physical in Switzerland, and 90 million ounces owned jointly through International Metals. Not only that amount of physical, but International Metals had contracts for 90 million more ounces, due for delivery in March 1980, from the COMEX alone. Brother Lamar, also had taken a $300 million silver position in late 1979 also.
Can you imagine the panic, especially at the COMEX? Not only did they not have the silver to deliver, as the contracts called for, but as it later turned out, a lot of big traders were short silver, and were losing their collective shirts. On January 7th, the COMEX changed its rules also, which was such a rotten, crooked deal, that it has never been equaled in futures trading since, although in the future, they may do it again. This change of rules was (naturally!) upheld by the CFTC. Now, just for a minute, consider this possibility before we go further.
Here we are at the beginning of April, 2005, and silver has gone from about $4 to well over $8, and retreated to about $7.20. Inflation rages, thanks to endless government spending at home, plus hundreds of billions in Iraq and Afghanistan. The dollar is proliferating like cockroaches in the South Bronx. The more they print, the less they will be worth, the higher prices will go, and the more people will get out of dollars, and into other things, such as silver and gold. Why silver and gold? Because they are historic money, compact, etc. You know the details, so I won't rehearse them to you. As the demand for these metals goes up, and it is already doing so, the physical supplies will have to increase, or the prices will go up, and go up big. It takes a lot of time and money to bring a new mine on line. A lot of time and money. The demand could go up quickly, as it did in late 1979 and early 1980. Far faster than any mine could be brought on line. Take oil, as an example.
Oil is becoming a scarce commodity, just as silver was in 1980. A lot of oil is in ANWAR and Iraq. It will take years for the oil in ANWAR to be brought on line, and the Iraq oil is being sabotaged every day, so it may not be available for years either. Saudis and the rest of OPEC are pumping as fast as they can, and China and India are gulping it by the millions of barrels. Is oil going to go up? I think so. Should you buy futures in it? I think not, as they might change the rules again, and you can't take delivery of it anyway. How about silver futures? They can change those rules overnight again, just as they did in 1980. Suppose millions of people begin buying physical silver, and order delivery of their futures contracts? There just isn't that much around to satisfy those demands. The warehouses, just like in 1980, have maybe half or less as much physical, as would be required to fulfill delivery orders. The same exact thing could happen again. Demand, and no supply. Oil and silver could both do the same. If you have silver contracts and want to take delivery, call me. It's easy to convert them into hundred or ten ounce bars, or bags of US silver coins.
On January 7, 1980, the COMEX changed its rules…in mid stream…and said that there would only be allowed ten million ounces of contracts per trader, and all contracts over that amount had to be liquidated before February 18th. On January 17th, silver hit $50 per ounce, and undoubtedly would have gone higher, if Bunker hadn't been double crossed by the COMEX and CBOT. The double cross continued. On January 21st, the COMEX SUSPENDED TRADING IN SILVER! Further, they would only accept liquidation orders. Needless to say, with the markets frozen, silver dropped $10 almost immediately. While the price was at $50 or thereabouts, Americans were selling their silver flatware, vases, candlesticks, and every bit of silver they could scrape up. In all, 22 million ounces of scrap came into the market. In February, the Hunt Group took physical delivery of another 26 million ounces.
With the COMEX and CBOT double cross, silver went down, and by March 14th it was down to $21 per ounce. International Metals still had 60 million ounces worth of silver contracts, all on margin, and the margin calls were then $10 million a day. They had bought contracts at $35, and the price had plunged to close to half, thanks to the COMEX and CBOT. At $10 million a day, it isn't hard to go bust! By March 25th, they ran out of cash, and couldn't meet their $135 million margin call. They sold $100 million dollars worth of silver in one day, and the price kept going down. On March 27th silver opened at $15.80, and closed at
$10.80. The Hunts owed $1.5 BILLION DOLLARS.
It wasn't just the Hunts that were at risk, but the shorts and "establishment," which consisted of the many big bankers and brokers, who just didn't like the idea of a man cornering the market in anything, and actually thinking about starting his own silver currency. Everyone lost, it seemed, except maybe the insiders who had been saved in their short positions. Those who thought, rightly, that silver had a long way to go up, lost, even if they had bought only physical rather than contracts. Their physical went down, and it has never yet recovered. Those who bought paper silver on contracts, lost big, because all their dollars were gone, and a lot more demanded by the brokerages probably. All lost, thanks to the COMEX and CBOT changing rules and screwing Bunker Hunt and associates out of their honest dealings.
Today, as far as I know, no one is trying to corner the world's silver supply, but there's a lot less silver around now, than there was 25 years ago. Not only that, but a lot of new uses have been discovered for it. As far as I know, Bunker Hunt is still alive and well in Texas, and although I only met him briefly in 1980, I am sure he is a devoted family, Christian man. Silver, I think, will zoom up again, thanks to the failing dollar, not because of Bunker Hunt. It isn't just silver that will go up, although it may go up faster than other items. Gasoline, butter, tires, and grass seed will go up, and are going up in dollars every day. The items aren't worth any more. It's just that the currency is worth less. It's the same silver at $4.20 or $50. It's the same Pepsi at a nickel or $1.50. The money is simply going down.
Silver is a good way to hedge yourself against inflation. A "hedge," either literally or financially, is a protection against things. Silver is a marvelous hedge! Protect yourself. By D. Stott
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