al44: Recall what happened to the Hunt Brothers when they were demanding delivery by COMEX of contractual silver in 1979/80. The COMEX changed their rules ex post facto and finally allowed only sell orders! Past is prologue. Bob Chapman has recently and clearly stated on goldseek.com radio that major players holding large gold COMEX contracts were threatened in no uncertain terms when they called for delivery of their gold.
"Bunker accused the COMEX and CBOT board members of having a financial interest in the silver market themselves. Investigations later found that many had substantial silver short positions."
"Finally on January 7th of 1980 the COMEX changed their rules to only allow 10 million/oz of contracts per trader and that all contracts over that amount must be liquidated before February 18th. [...] On January 17th silver hit $50/oz, Bunker had continued to buy. At that point in time the Hunt's silver position was worth $4.5 billion dollars bringing their profits in silver to $3.5 billion dollars. On January 21st the COMEX announced that it was suspending trading in silver. They would only accept liquidation orders."
By the late 1970's the Hunt first family's fortune was estimated to be in the range of 6 to 8 billion dollars. In 1978 John Connally introduced Bunker to a Saudi sheik at the Mayflower hotel in Washington. A year later International Metal Investment was incorporated in Bermuda between Bunker, Herbert and two Saudi sheiks. It was speculated that the two sheiks were fronting for members of the Saudi royal family.
In early 1979 the price of silver steadily rose to $8/oz and the Sunshine Mine deal fell apart. The stockholders demanded more money for the balance of the purchase since the mine was now worth more due to the increase in silver. The Hunt's tender offer failed and they sold their interest back to the management trust.
In the summer of 1979 the Hunt brothers started buying silver through the International Metal Investment group along with their Saudi partners. Over 43 million oz of silver contracts were purchased through the COMEX and the CBOT with delivery to be taken that fall. In the fall of 1979 the silver price doubled from $8 to $16/oz in only two months. Other syndicates with big money behind them started buying silver. The COMEX and the CBOT started to panic. In late 1979 the warehouses of the two exchanges only held 120 million oz of silver and that amount was traded in October alone. Many people, including the Hunts through their International Metal Investment group were taking delivery on all their contracts! The Hunts moved another 9 million oz of silver to Europe through a silver swap (no cowboys riding shotgun this time). The brothers were starting to fear another confiscation by the US government (FDR style) since things were coming to a head. Late in 1979 the CBOT changed the rules and stated that no investor could hold over 3 million oz of silver contracts and the margin requirement were raised. All contracts over 3 million oz per trader must be liquidated by February of 1980. Bunker accused the COMEX and CBOT board members of having a financial interest in the silver market themselves. Investigations later found that many had substantial silver short positions. Bunker knew that a shortage now existed or they would not be screaming so loudly. He bought even more. The price on the last day of 1979 was $34.45/oz. At this point Bunker and Herbert held 40 million oz in Switzerland and 90 million oz of bullion they jointly owned through International Metals. In addition to all that, International Metals had contracts on another 90 million oz due for delivery that March from the COMEX. The younger brother, Lamar had even entered the arena and had taken a $300 million dollar silver position by the end of 1979.
Finally on January 7th of 1980 the COMEX changed their rules to only allow 10 million/oz of contracts per trader and that all contracts over that amount must be liquidated before February 18th. The CFTC promptly backed up the ruling. On January 17th silver hit $50/oz, Bunker had continued to buy. At that point in time the Hunt's silver position was worth $4.5 billion dollars bringing their profits in silver to $3.5 billion dollars. On January 21st the COMEX announced that it was suspending trading in silver. They would only accept liquidation orders. Silver dropped $10/oz and stayed around $39/oz until the end of January. Scrap silver, old silver coin collections and silverware came into the market - about 22 million oz in all. In early February the Hunt group took delivery of another 26 million oz from Chicago. The Hunt's North Sea oil through Placid Oil was coming on line and generating $200 million /year from that venture alone. There was talk of a takeover of Texaco Oil. Bunker was also talking to other Middle Eastern rulers about putting together another silver buying group.
By March 14th silver was down to $21/oz. Volker had raised interest rates and the dollar had firmed up (this also made borrowing to speculate on silver more expensive). International Metals still held 60 million oz of futures contracts. Their margin calls on those contracts amounted to $10 million dollars a day! Bunker still believed the price would go back up if only he could promote more buying. He scrambled around Europe looking for a buying partner but the more the price dropped the harder it was to borrow more money against his silver holdings to buy even more silver to hold up the price. Finally on March 25th of 1980 the Hunt brothers ran out of cash. Bunker called Herbert and simply said, "Shut it down". Herbert promptly told his broker the following morning that they could not meet their $135 million dollar margin call that day.
The Hunt's brokers promptly sold $100 million dollars worth of silver that day. Their account only had $90 million dollars worth of equity and they were expected to loose all that the next day. The CFTC chairman, Chairman of the Federal Reserve and US Treasury Secretary began an around the clock silver monitoring session.
On March 27th (silver Thursday) silver opened at $15.80 and closed at $10.80. The stock market crashed on rumors of Hunt liquidations of stocks to cover his silver losses and then rallied to close at about the same level. The next day silver rallied back up to $12/oz. The Hunt's bullion purchases were all averaged around $10/oz but their futures contracts were purchased at or about $35/oz. When it was all over they owed $1.5 billion dollars.
Fed Chairman Volker gave approval for a bailout plan for the brothers fearing a financial disaster. A group of banks agreed to loan the brothers 1.1 billion dollars. The family had to put up 8 billion in collateral with the banks. The brother's older sister, Margaret finally put her foot down after the silver collapse and demanded to know just what Bunker had intended to accomplish? Bunker sheepishly replied, "I was just trying to make some money".
After the smoke cleared it appeared that the drama was not just a one sided manipulation by the Hunts. The shorts and the Eastern establishment had just as much at stake as the Hunts. By the mid 1980's silver was bumping $17/oz again. Shortly thereafter, Reagan came into the presidency and a new optimism gripped the country.
In 1988 Bunker filed for personal bankruptcy. In 1989 he left bankruptcy with a net worth of $5 to 10 million dollars and a debt to the IRS of $90 million dollars to be repaid in 15 years. Bunker's trusts, set up by his father H.L. Hunt, are currently valued at $200 million dollars. Last year the payments to the IRS finally stopped.
Protect yourself and invest and save in real money instead of our current unlawful fiat. Invest at least 10% of your assets in bullion and take possession - DO NOT BUY SILVER FUTURES CONTRACTS ON MARGIN. THE BIG SHORTS ARE STILL OUT THERE AND WAITING TO HAVE THOSE FOOLISH SILVER BULLS FOR LUNCH FROM TIME TO TIME. THE ONLY WAY TO WIN IS TO PAY IN FULL AND TAKE POSSESSION. It is a game that even the richest men in the world sometimes lose. END
These are my opinions and sentiments only. Take them for what they're worth. Do your DD. Buying stocks is risky!
"If we could sell our experiences for what they cost us, we'd all be millionaires." -Abigail van Buren (a/k/a Dear Abby)
al44 spot IS the real price. Retail jewlery, coins and bars will always be overpriced compared to spot and the "paper" market thrives much like oil futures as a derivative made liquid by traders. The Governments are determined the bailout money will be multiplied into loans as that is the only way to rekindle the inflationary growth model. Problem is we are in a combination of Friedman and Keynesian economics. Free Markets micromanaged by government intervention. As the governments try and "fix" the problems the "black hole" of deflation sucks up the trillions so it will take an avalanch of trillions to overwhelm the problem and get capital working again. When President Obama assumes office next year he will have a Pandora's Box of options and an agreealbe Congress ready to lavish loads of Government Spending and Bailouts including infrastructure programs for job creation and universal health care. Maybe even WWIII during his terms.
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