The Hunt Brothers — the Billionaires Who Tried to Corner Silver

Summary

Nelson Bunker Hunt and William Herbert Hunt, sons of the legendary Texas oil billionaire H. L. Hunt, spent the late 1970s attempting one of the most audacious financial gambits in history: an effort to corner the global silver market. Beginning in the early 1970s and accelerating sharply at the decade's end — often with Saudi partners and their younger brother Lamar — the brothers bought silver bullion and silver futures contracts on an enormous scale, taking physical delivery rather than settling in cash and tying up a large share of the world's deliverable supply. By late 1979 they were estimated to hold over 100 million troy ounces, about a third of the world's privately held silver.

The campaign drove the price of silver from roughly $6.08 an ounce on January 1, 1979, to a peak of $49.45 an ounce on January 18, 1980 — a 713 percent run that, on paper, briefly made the Hunts' holdings worth billions. But a corner is only profitable if you can sell into it, and the same surge that enriched them on paper alarmed the commodities exchanges and federal regulators, who saw a single family distorting a strategic metal market.

In early January 1980 the COMEX exchange imposed emergency restrictions — the rule remembered as "Silver Rule 7" — limiting positions and tightening margin, effectively halting new buying and forcing liquidation. The price went into reverse. On March 27, 1980 — "Silver Thursday" — silver collapsed roughly 50 percent in a single session, from $21.62 to $10.80 an ounce, and the Hunts, unable to meet a margin call of about $100 million owed to their broker Bache, triggered fears of a chain-reaction failure on Wall Street.

A consortium of banks arranged a roughly $1.1 billion bailout loan to wind down the position in an orderly way and prevent a wider crisis. But the rescue only delayed the reckoning for the Hunts themselves. They lost well over a billion dollars on silver, faced years of litigation, and in August 1988 a federal jury found that Bunker and Herbert Hunt had conspired to manipulate the market, awarding the Peruvian minerals firm Minpeco roughly $134 million. The following month both brothers filed for personal bankruptcy — among the largest individual filings in U.S. history at the time.

The Fortune

The Hunt fortune was one of the largest in America, and it came from oil. H. L. Hunt had parlayed early East Texas oil leases — including a famous stake bought from wildcatter Columbus "Dad" Joiner — into Hunt Oil and a personal fortune that made him, by some accounts of the 1950s and 1960s, among the richest men in the world. When he died in 1974 he left his children extraordinary wealth, and his sons Nelson Bunker, William Herbert, and Lamar inherited both the money and their father's appetite for outsized bets. At their peak the brothers' combined riches were estimated in the billions.

Bunker Hunt in particular thought big and thought in terms of catastrophe insurance. He had been burned once already: his enormous Libyan oil concession, potentially worth a fortune, was nationalized by Muammar Gaddafi's government in 1973. Convinced that paper currencies were being debased by inflation — a reasonable fear in the high-inflation 1970s — Bunker turned to silver as a hard-asset hedge that, unlike gold, U.S. citizens had long been free to own in bulk.

Starting in the early 1970s, when silver traded below $2 an ounce, the Hunts began accumulating it on a scale no private party ever had. Rather than trading futures contracts for profit and settling in cash, they took physical delivery of the metal, removing it from the market and shipping quantities abroad, including to Switzerland. By the last nine months of 1979, working with wealthy Saudi partners and through a web of accounts, they and their allies are estimated to have controlled roughly one-third of the world's privately held deliverable silver — over 100 million ounces of bullion plus enormous futures positions. The strategy was, in effect, an attempt to corner the market: own so much of the available supply that the price had nowhere to go but up.

The Cracks

For a time the bet looked like genius. Silver, which had traded around $6.08 an ounce at the start of 1979, climbed relentlessly through the year as the Hunts and their partners kept buying and as inflation, Middle East tensions, and a general flight to hard assets pulled speculators in behind them. By mid-January 1980 silver touched $49.45 an ounce — with an intraday COMEX high around $50.35 on January 18, 1980 — an increase of more than 700 percent in a year. On paper, the Hunts' holdings were worth billions.

But the very success of the corner was its undoing, because it triggered the institutions that stood on the other side of it. Jewelers, photographic-film makers, and industrial users were being crushed by the price; old silver flooded out of households to be melted down; and the exchanges grew alarmed that a single family was holding the market hostage. The Commodity Futures Trading Commission and the boards of the COMEX and the Chicago Board of Trade began to act.

On January 7, 1980, the COMEX changed the rules of the game. Under the emergency measure remembered as "Silver Rule 7," the exchange placed heavy restrictions on buying commodities on margin, sharply raised margin requirements, limited the size of positions any trader could hold, and moved the market toward "liquidation only" — meaning traders could close positions but not open new ones. This cut off the fuel that had driven the corner: without a steady stream of new buying, the price could no longer be pushed up, and the Hunts' heavily leveraged position became acutely vulnerable to any decline. The Federal Reserve, under Paul Volcker, was simultaneously discouraging banks from extending credit for speculative commodity hoarding. The trap the Hunts had built for short-sellers was about to close on themselves.

The Collapse

With new buying choked off, silver began to slide from its January peak, and a falling, highly leveraged position is a death spiral: each drop in price triggered margin calls, and meeting margin calls required cash the Hunts increasingly did not have on hand, their wealth being tied up in the very metal that was falling. By late March the slide had become a rout — the price fell more than 50 percent in just four days. On Thursday, March 27, 1980 — "Silver Thursday" — silver plunged about 50 percent in a single session, from $21.62 to $10.80 an ounce, against the ~$50 high of January.

That day the Hunts failed to meet a margin call of roughly $100 million owed to their broker, the prominent firm Bache. Because Bache and other Wall Street houses had extended the Hunts vast credit against silver, the brothers' inability to pay threatened to topple their brokers and ripple through the financial system; reported potential losses ran as high as $1.7 billion. For a few hours, Silver Thursday looked like it could become a general market panic.

To contain the damage, a consortium of banks, with the encouragement of federal regulators, arranged a rescue: a roughly $1.1 billion line of credit that let the Hunts' position be refinanced — partly secured against their oil properties — and wound down in an orderly fashion rather than dumped onto a collapsing market. The bailout averted a wider crisis, but it did not save the Hunts. They had lost well over a billion dollars on silver, now carried enormous debt, and faced a decade of legal consequences. In August 1988 a federal jury found that Bunker and Herbert Hunt had conspired to manipulate the silver market, awarding Minpeco roughly $134 million; the brothers were later each fined $10 million by the CFTC and banned from U.S. commodity trading. Rather than post a $225 million appeal bond, both filed for personal bankruptcy in September 1988 — among the largest individual bankruptcies in American history to that point. The collapse of oil prices in the mid-1980s, on top of the silver disaster, deepened the wreckage.

After

Silver Thursday became a landmark in the history of market manipulation and regulation, studied ever after as the definitive example of how — and why — a corner of a major commodity market fails. The episode reshaped how exchanges set margins and position limits and how regulators monitor concentrated speculative positions, and the phrase "the Hunt brothers" entered financial folklore as shorthand for hubristic over-reach in commodities.

For the family, the aftermath was a long, grinding decline rather than a single clean wipeout. The 1980 bailout, mounting interest, the 1988 conspiracy judgment, large IRS claims, and the mid-1980s collapse in oil prices combined to overwhelm even a fortune of the Hunts' scale; their estimated net wealth fell from around $5 billion in 1980 to under $1 billion by 1988. Nelson Bunker Hunt's 1988 personal bankruptcy forced the sale of prized assets, including his celebrated stable of thoroughbred racehorses — a 1988 dispersal at Keeneland brought a then-record $46.9 million — and a renowned collection of ancient coins. He lived his later years on a small fraction of his former wealth and died in 2014. Herbert Hunt, who shared in the silver disaster and litigation, later rebuilt a meaningful fortune in oil and gas, a reminder that the family's underlying business sense was real even where the silver bet was catastrophic.

The Hunts belong in Gilded Ruin not because they were foolish men — they were shrewd operators with a coherent inflation thesis — but because they pressed a single, leveraged conviction so far that it could only end in either a world-distorting jackpot or ruin, and the rules of the game ensured it would be ruin. They turned an inherited oil fortune into one of the largest private losses in history by trying to own a market that no private family could be allowed to own.

Lessons

References

• Silver Thursday Wikipedia
• Nelson Bunker Hunt Wikipedia
• Silver Thursday | Causes, Impact, & Aftermath Encyclopaedia Britannica
• 3 Hunts Guilty in Plot to Corner Silver Market Deseret News