Trading & Options · Profile from Trading and Options Research Companion
Hunt Brothers and Silver
The Dallas oil heirs Nelson Bunker Hunt and William Herbert Hunt spent most of the 1970s buying silver: physical bullion and futures contracts on COMEX (New York) and the Chicago Board of Trade (CBOT). Their buying became the largest attempted corner of a US commodity market since the grain corners of the nineteenth century. The SEC staff's report, The Silver Crisis of 1980 (Oct 1982), found that Hunt-related holdings rose from about 123m to about 195m troy ounces between 31 Jul 1979 and 1 Jan 1980. Over the same period the silver price rose from roughly $9 to about $35 an ounce, and the apparent value of the holdings from about $1.1bn to about $6.8bn. About half the end-1979 position was in futures, held on margin. Silver went above $50 in January 1980 (COMEX intraday high ~$50.36 — V4; ~$48.70 also circulates). Then the exchanges changed the rules. COMEX adopted "Silver Rule 7" on 7 Jan 1980, a set of position and margin restrictions. On 21 Jan 1980 COMEX and the CBOT restricted silver futures to liquidation orders only, apart from bona fide hedging. The price fell, and on Silver Thursday, 27 Mar 1980, the Hunts could not meet margin calls. Silver closed at $10.80, and their broker Bache was left with an unsecured debit of about $122m in Hunt accounts. A $1.1bn loan from thirteen banks to the family's Placid Oil company paid off the silver debts. Each later stage of the case was decided in court or by a regulator:
At a glance
- Who
- Nelson Bunker Hunt (died 21 Oct 2014, aged 88 — NYT via Wikipedia) and William Herbert Hunt, sons of the oilman H. L. Hunt; their brother Lamar Hunt was a defendant in the 1988 civil case. In this file "the Hunts" means Bunker and Herbert unless stated
- Headquarters
- Dallas, Texas; family companies included Placid Oil, Penrod Drilling and Hunt International Resources
- Vehicles
- Personal accounts at several brokers, including Bache Halsey Stuart Shields (Bache), Merrill Lynch and E.F. Hutton (SEC staff report chapters); International Metals Investment Company (IMIC), a Bermuda-registered company owned by two Hunt brothers and two Saudi investors (Deseret News/AP, 21 Aug 1988; Bermuda from memory, verify)
- Type
- Individual traders / family office; a corner and the case of how one ended. A single-event entity with six moves (rule 6)
- Markets
- COMEX silver futures (New York), CBOT silver futures (Chicago), physical bullion (London and Zurich vaults — from memory, verify); an earlier soybean futures position at the CBOT (1977)
- Scale (dated)
- ~50m oz by early 1974 (SEC staff report pp. 31–33); ~123m → ~195m oz of Hunt-related holdings, 31 Jul 1979 → 1 Jan 1980, apparent value ~$1.1bn → ~$6.8bn (SEC report pp. 33–34); "about 200 million ounces, largely on margin" (Christian Science Monitor, 1 Apr 1980); about a third of the world's silver supply, as the plaintiffs alleged (AP, 1988)
- Regulators and venues
- CFTC (created 1974; the Hunts' 1977 soybean case and the 1985 silver complaint), COMEX and CBOT as self-regulators, the SEC (brokers and Bache's stock), the Federal Reserve (Volcker's role in the rescue loan)
- Moves in this profile
- Six, from 1973 to 1989 — the US KB's comparison cases are Amaranth Advisors (a position too large to exit, 2006) and Sumitomo copper (an LME corner, 1996 — profile in batch C17)
- Signature moves (incl. failures)
- Physical silver accumulation (1973–74); the soybean futures position and the first CFTC case (1977–81); IMIC and the futures run (1979); Silver Rule 7 and "liquidation only" (Jan 1980); Silver Thursday and the Placid Oil loan (Mar–May 1980); the Minpeco verdict, bankruptcy and CFTC bans (1985–89)
6 strategic moves analysed
Each one gets a full strategy file in the companion: context, the decision, the financing, what happened, and the lesson.
1973
Physical Silver Accumulation
Large trade or position
1977
Soybean Futures and the First CFTC Case
Large trade or position; regulatory, enforcement and legal action
1979
IMIC and the Futures Run
Leverage, sizing or risk-limit change; large trade or position
1980
Silver Rule 7 and Liquidation Only
Exchange listing, product or fee change (rule change by the venue); loss response by the Hunts
1980
Silver Thursday and the Placid Oil Loan
Loss, drawdown or blow-up response; restructuring and bailout (private loan)
1988
Minpeco Verdict Bankruptcy and CFTC Bans
Regulatory, enforcement or legal action; restructuring (personal bankruptcy)