Silver Thursday 4

If you lived in the 1970’s, you would remember one word that was common in that decade, inflation. During this period, interest rates skyrocketed, oil prices kept rising and big business kept wanting more. This caused unemployment, small businesses to close, and made it tough for people to buy cars and homes. While this was happening, silver prices were on the rise. There wouldn’t be much silver used on silver coins except 1970 Kennedy Half Dollars and collector Eisenhower Dollars from 1971 to 1976. In 1970, the price of silver was under $2 an ounce. By 1978, it would rise to $5 and 1979 would go above $6 on its way to $20 an ounce. This is nothing compared to what happened one day in January, 1980.

We begin with a man by the name of Haroldson Lafayette Hunt, Jr., known as H.L.. H.L. initially ran a cotton plantation, but when it went under it had said that he gambled his last $100 and made $100,000. With this he would purchase oil properties in Arkansas. With some rumors that he heard, he was able to purchase the largest oil deposit at the time, the East Texas Oil Field, paying only 1 million dollars. H.L. would become a billionaire and one of the richest people in the United States.

H.L. past away in 1974 and had 15 children. Two had past away before him. We’ll concentrate on 3 of his sons. Nelson Bunker Hunt was a major player on the development of the Libyan Oil Fields and owned and bred a number of Thoroughbred racehorses. William Herbert Hunt was a legendary oilman owning a number of oil companies. Lamar Hunt was a major sportsman who would create the American Football League and Major League Soccer as well as start what would become the Super Bowl.

Looking at the rising price of silver early in 1979, the Hunt Brothers were considering cornering the silver market. On January 18, 1980 would hit a record high with $49.45 per ounce. No one saw that coming, except maybe the Hunt Brothers who at that time owned a third of the world’s silver. To do this, they borrowed heavily to accumulate the silver. What they didn’t expect was within 4 days, the price of silver plummeted 50%, causing a major panic.

On March 27, 1980, Silver Thursday, the price of silver dropped to a point where the brothers were issued a margin call of 100 million dollars. The brothers were unable to pay the margin call and were looking at a 1.7 billion dollar loss. This could had caused a number of Wall Street banks and firms to collapse, but a number of US banks came to the rescue giving the brothers a billion dollar line of credit.

The Hunt Brothers lost over a billion dollars and their estimated net wealth would decline from 5 billion dollars in 1980 to under 1 billion dollars in 1988. In 1988, a civil suit resulted in the brothers owing a mineral company from Peru, who was one of the companies that would lose money because of the brothers attempt to corner the silver market, 134 million dollars. The brothers couldn’t pay and in the end would have to declare bankruptcy.

Moral of the Story: Greed Does Not Pay!

Silver would not be close to $50 an ounce again until 2011, but that’s another story.

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4 thoughts on “Silver Thursday

  • John

    Great history lesson…greed can tear any person apart. Just a quick comment – I would try breaking up your copy with some larger headers, bolded or underlined. Your content was great, but it is in essay form. Usually this discourages people from reading posts on the internet – especially on a blog. Other then that your content was insightful.

  • isaac

    It’s always a good thing to remind ourselves of how being greedy won’t do you any good. 5 billion to bankruptcy?? Now that’s a really good story for everyone not to follow. Their father was really lucky to made his wealthy when oil went up during his time, but unfortunately his sons are not so lucky. Any idea what happened to them afterwards?

    • Kevin Post author

      It looks like the bankruptcy was not the end. Nelson lost all of his thoroughbred operations and in 1989 was fined 10 million dollars and never trade in commodity markets again. Also, the IRS went after him for back taxes. He passed away in 2014.

      On the other hand, William would be bankrupt in 1990 but somehow bounced back. Supposedly his net worth is around 2 billion dollars. Unbelievable! Still going strong at the age of 87.