Silver Thursday: How the Hunt Brothers Lost Billions in a Single Day

“Every moron could buy a printing press, everything might be better than paper money.” That is Nelson Bunker Hunt explaining why he bet the family fortune on silver. Chapter 13 of Torsten Dennin’s “From Tulips to Bitcoins” tells the story of the Hunt brothers, two Texas oil heirs who tried to corner the global silver market. They almost pulled it off. And then they lost everything in a single day.

The Hunt Family Empire

The story starts with the father. H.L. Hunt, known as “Arkansas Slim,” won a drilling license in a poker game in the 1920s. That is not a joke. The man gambled his way into the oil business. He struck oil in El Dorado, Arkansas, and then found what turned out to be the world’s biggest oil field in Kilgore, Texas.

In 1936 he founded Hunt Oil Company, which grew into the largest independent oil producer in the United States. By 1957, his fortune was estimated at 400 to 700 million dollars, making him one of the ten richest people in the country. He also had oil fields in Libya, which produced until Gaddafi’s government expropriated them in the 1970s.

H.L. Hunt was a colorful character to say the least. He had three separate families and fourteen children total. Two of those children, Nelson Bunker Hunt and William Herbert Hunt, would become the main players in what followed.

Why Silver?

After Nixon killed the gold standard in 1971, the Hunt brothers started worrying about paper money. If the dollar was no longer backed by gold, what was it backed by? Government promises? The Hunts did not trust government promises. They wanted something physical. Something real.

Gold was the obvious choice, but the Hunts went with silver. Between 1970 and 1973, they bought 200,000 troy ounces. During that period, silver prices doubled from about $1.50 to $3 per ounce. A nice return. But the Hunts were just getting started.

The Accumulation

In early 1974, the brothers bought futures contracts for 55 million ounces of silver. That alone would have made them major players. But they did something unusual. They demanded physical delivery. Normally futures traders close their positions before delivery. They are betting on price movement, not actually wanting truckloads of metal. The Hunts wanted the metal.

This was deliberate. By taking physical delivery, they removed silver from the market. Less available silver meant higher prices for the silver they already owned. By spring 1974, silver had hit $6 per ounce and the Hunts controlled roughly 10% of the world supply.

They also shipped their silver to banks in Zurich and London. Why? Because they remembered what FDR did with gold in 1933. The US government forced every citizen to surrender their gold. The Hunts were not about to let that happen with their silver. So they moved it overseas, out of government reach.

Going All In

By 1979, the Hunts had partnered with Saudi investors through something called the International Metal Investment Group. Together they amassed about 150 million ounces of physical silver. That is 5,000 metric tons. Half of all US silver reserves. About 15% of all the silver in the world. On top of that, they held futures contracts for another 200 million ounces.

Here is some context for those numbers. Global silver demand at the time was about 450 million ounces per year. But global production was only 250 million ounces. There was already a supply deficit. And the Hunts were sitting on a massive chunk of what was available.

Silver prices responded exactly how you would expect. The price doubled from $8 to $16 in just two months. By the end of 1979, it hit $34.50. Then the Chicago Board of Trade stepped in and limited positions to 3 million contracts, trying to cool things down. Nelson Hunt kept buying anyway. His brother Lamar joined in with another $300 million.

By mid-January 1980, silver crossed $50 per ounce. Adjusted for inflation, that would be about $120 today. The Hunt family’s silver holdings were worth an estimated $4.5 billion. On paper, they had pulled off one of the biggest commodity plays in history.

The Walls Close In

Then the exchanges changed the rules. COMEX, the main silver exchange, announced it would accept only liquidation orders. You could sell silver, but you could not buy more. This was aimed directly at the Hunts.

At the same time, the Federal Reserve was raising interest rates to fight inflation. A stronger dollar was bad for precious metals. Silver started falling. It dropped from the $50 peak to $21 by mid-March. Smaller speculators panicked and started dumping their positions. Regular people across the country cashed in their silver jewelry, silverware, and old coins. All that metal flooding the market pushed prices down even further.

March 27, 1980

This is the day that gave the chapter its name. Silver Thursday.

Silver opened the day at $15.80. By the close, it was $10.80. A drop of more than 30% in a single trading session.

The Hunts had bought most of their silver at an average price around $35 per ounce. At $10.80, they were underwater by billions. Their debt hit $1.5 billion. The family that had once been among the richest in America was broke. They had to file for bankruptcy. The government accused them of conspiring to manipulate the market.

What I Take From This

Reading Dennin’s account of the Hunt brothers, a few things stick with me.

First, the sheer scale of what they attempted. They tried to corner the global supply of a major commodity. Not some obscure niche product. Silver. A metal used in industry, photography, electronics, and jewelry worldwide. And for a while, they actually did it. They controlled 15% of the world supply and had futures on much more.

Second, the pattern is the same one that shows up in every chapter of this book. Bubble inflates, rules change, crash happens. The Hunts pushed silver from $2 to $50. Then COMEX changed its rules to allow only selling. The Fed raised rates. And the whole thing collapsed. When the market cannot go up anymore, it goes down fast.

Third, the personal dimension. H.L. Hunt built his fortune from a poker game. His sons lost billions on a single commodity bet. The family went from poker winnings to oil fortune to silver bankruptcy in two generations. There is something almost literary about that arc. Easy money never stays easy.

The Hunt brothers were not stupid. They saw a real problem with fiat money. Paper currency backed by nothing really is vulnerable to inflation and government mismanagement. Their instinct to own physical assets was sound. But there is a difference between hedging your wealth and trying to corner an entire market. They crossed that line, and the market destroyed them for it.

Previous: Chapter 12: Diamond Crash

Next: Chapter 14: Gulf War Oil

This is part of my From Tulips to Bitcoins book retelling series.