Monday, April 27, 2015
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Investors ignore Hunt brothers’ cautionary tale

stevenson column sig

By
From page B7 | June 15, 2014 |

OK, since it’s Sunday, it might be a good time to make a confession. No, not that – I’m talking about the stock market.

Ever since I planted myself on Wall Street – the actual street – when I was 16, I enjoyed hearing stories about wealthy investors getting clobbered. I guess that’s because I have a case of – I have to use the German word – “schadenfreude,” pleasure in other people’s pain.

I’m exaggerating, of course; if I hadn’t become a broker, I would have been a bell-ringer for The Salvation Army.

That’s by way of introducing one of the greatest cases of financial comeuppance in the past 50 years. The story goes back to the 1970s, when the Hunt brothers, Nelson Bunker Hunt and William Herbert Hunt, began accumulating silver in the commodity market.

By 1979, they had almost reached their goal of cornering the silver market. “Cornering,” if you’re not familiar with the term, is when a trader or any wealthy, greedy investor controls so much of a stock or commodity that they can determine the price. Anyone who wants to buy or sell the commodity has to come to them and pay or get whatever the trader wants.

As a result of their trading – primarily Nelson’s – the silver market was in the Hunt brothers’ pockets. One estimate is that they made between $2 billion and $4 billion as silver rose in price. Of course, it went from $11 to $50 because of their buying, but, surprisingly, these brilliant billionaires had no strategy in mind if the market went against them. And go against them it did, big time, as we would say.

Think about it: They effectively had ownership of 100 million ounces selling for $50 an ounce. How long did it take for Nelson to make his billions in silver? Not very long – silver was selling for $11 an ounce in September 1979. Four months later, it soared to $50 an ounce and some so-called analysts were saying that $100 an ounce was the next stop.

Then, the roof fell in, as silver futures plunged more drastically than at any time in the history of the futures market. The record still stands, as far as I know.

If you’re wondering why Nelson didn’t sell his holdings as his losses accumulated, it’s because he couldn’t. I’ve mentioned before that something as rare as a solar eclipse took place. Silver was hit so sharply that it was trading “locked limit down.” What that means is that you couldn’t sell your holdings at any price. You would just have to grin and bear it, although I would guess Nelson Hunt wasn’t grinning. The collapse in his silver holdings resulted – no surprise – in Nelson’s bankruptcy.

Fast forward to this past Friday and look at the headline in The Wall Street Journal: “Big Investors Lose as Markets Rise.” Let me quote the first sentence, which frankly, was a pleasure to read: “Some of the biggest investors on Wall Street are losing money with wrong-way bets in markets around the globe, a surprising black eye amid a rise in stock and bond prices.”

Hedge funds, with their millionaire investors and millionaire managers, were losing money as the markets were rising. Of course, their fortunes may reverse in the coming weeks, but it’s nice to know that even the allegedly smartest minds on Wall Street were no match for the averages. Many of those financial whiz-kids are used to earning multiple millions every year as a reward for their market-beating skills.

Do you think condolences are in order?

Bud Stevenson, a retired stockbroker, lives in Fairfield. Reach him at [email protected]

LEAVE A COMMENT

Discussion | 3 comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

  • Rick WoodJune 15, 2014 - 3:28 am

    People shouldn't be able to make billions doing what hedge fund managers do unless they have the risk also of losing billions if they are wrong. It's the easy money and government being the insurer of last resort (too big to fail) that is a problem with our system.

    Reply | Report abusive comment
  • John AndersonJune 15, 2014 - 6:29 am

    Hedge fund managers should have to report gains as ordinary income, subject to tax

    Reply | Report abusive comment
  • Dr russtJune 15, 2014 - 12:39 pm

    To portray the Hunts actions as those of greedy speculators, out to corner the silver market is disingenuous. The Hunts were acting to hedge against the Keynesian economic model that the government was following, which includes debasement of our money. They were then financially assassinated by the Fed, the CME and the CBOT. An investigation later revealed that board members of the CBOT had accumulated short positions prior to issuing new rules related to silver futures contracts. The Hunts goal was to issue silver backed bonds. If they were just looking to speculate, they could have done that through futures contracts. The fact that they took physical delivery and paid massive storage fees, proves to me that this was more about ideology than making a quick buck. Not to mention that they were quite successful before investing in silver.

    Reply | Report abusive comment
  • Recent Articles

  • Enter your email address to subscribe and receive notifications of new posts by email.

  • .

    Solano News

     
    Paint the Town Purple; and Roxie

    By Tony Wade | From Page: A2

     
    City Coach hosts first block party

    By Susan Hiland | From Page: A3

    Bid Corderos Park, city staff recommends

    By Ryan McCarthy | From Page: A3

     
    White minister fought for civil rights in the South

    By Amy Maginnis-Honey | From Page: A3, 1 Comment | Gallery

    Farmers markets herald return of summer

    By Susan Hiland | From Page: A3

     
    Denim and Diamonds fundraiser set May 16

    By Amy Maginnis-Honey | From Page: A4

     
    Crash claims life of Concord teen

    By Amy Maginnis-Honey | From Page: A4, 1 Comment

    Biz Buzz: Dutch Bros. plans ALS fundraiser

    By Susan Hiland | From Page: B7

     
    Biz Buzz: Company schedules pasta class

    By Susan Hiland | From Page: B7

     
    Biz Buzz: NorthBay offers extended hours for primary care

    By Kevin W. Green | From Page: B7, 1 Comment | Gallery

     
    Biz Buzz: Retail store helps those with autism

    By Susan Hiland | From Page: B7

    Biz Buzz: Committee schedules contractors breakfast

    By Kevin W. Green | From Page: B7

     
    Biz Buzz: Budweiser kicks off new parks campaign

    By Susan Hiland | From Page: B7

    .

    US / World

    Picture it: A 1,000-year exposure showing a changing Earth

    By The Associated Press | From Page: A1

     
    No time to lose: Global response to Nepal quake gears up

    By The Associated Press | From Page: A5

    Japan’s prime minister goes to US to showcase close ties

    By The Associated Press | From Page: A5

     
    Israel says airstrike on Syrian border targeted militants

    By The Associated Press | From Page: A5

    Family, friends in Baltimore mourn death of arrested man

    By The Associated Press | From Page: A5

     
    ‘Batman’ killer studied brain disorders before mass murder

    By The Associated Press | From Page: A5

    Image from the quake: Heavy damage in Nepal ancient city

    By The Associated Press | From Page: A5

     
    Fighting rages in Yemen’s 3rd-largest city, strikes continue

    By The Associated Press | From Page: A5

    Mountaineers, guides stream from Everest after avalanche

    By The Associated Press | From Page: A5

     
    Putin accuses US of supporting separatists in Russia

    By The Associated Press | From Page: A5

    Death toll in Nepal quake rises to more than 3,200

    By The Associated Press | From Page: A5

     
    Late spring complicates already perilous amphibian migration

    By The Associated Press | From Page: A5

     
    Quake agony revealed quietly on trip from Nepal airport

    By The Associated Press | From Page: A5

    Corinthian Colleges to shut down all 28 remaining campuses

    By The Associated Press | From Page: A5

     
    .

    Living

    Community Calendar: April 27, 2015

    By Susan Hiland | From Page: A2

     
    Today in history: Monday, April 27, 2015

    By The Associated Press | From Page: A2

    Parenting: How to set boundaries on screen time

    By The Washington Post | From Page: B5

     
    Horoscope: April 28, 2015

    By Holiday Mathis | From Page: B5

    Horoscope: April 27, 2015

    By Holiday Mathis | From Page: A7

     
    My husband doesn’t want me to redecorate home he had with first wife

    By Kathy Mitchell and Marcy Sugar | From Page: A7

    .

    Entertainment

    TVGrid April 27

    By Daily Republic Syndicated Content | From Page: B6

     
    TVGrid April 28

    By Daily Republic Syndicated Content | From Page: B7

    .

    Sports

    Warriors confident after sweep of Pelicans

    By The Associated Press | From Page: B1

     
    Giants-Rockies game postponed by rain

    By The Associated Press | From Page: B1

     
    Wall, Beal lead Wiz past Raptors 125-94 in Game 4 for sweep

    By The Associated Press | From Page: B2

    Paul, Clippers even series with 114-105 win over Spurs

    By The Associated Press | From Page: B2

     
    Ko wins Swinging Skirts for 2nd straight year

    By The Associated Press | From Page: B2

     
    Motorcycle rider from Livermore killed in Nevada race

    By The Associated Press | From Page: B2

    Billy Andrade and Joe Durant win Legends of Golf

    By The Associated Press | From Page: B2

     
    Cavs sweep Celts as James scores 27 in 101-93 victory

    By The Associated Press | From Page: B2

    It’s here: Fight week begins with Pacquiao caravan to Vegas

    By The Associated Press | From Page: B2

     
    American Pharoah completes final pre-Kentucky Derby workout

    By The Associated Press | From Page: B2

    Newgarden claims first IndyCar Series win not far from home

    By The Associated Press | From Page: B2

     
    Justin Rose wins in New Orleans for 7th PGA Tour title

    By The Associated Press | From Page: B2

    .

    Business

    .

    Obituaries

    Elizabeth Cepeda

    By Nancy Green | From Page: A4, 1 Comment

     
    Kirk Noonan

    By Nancy Green | From Page: A4, 3 Comments

    Sandra King

    By Nancy Green | From Page: A4

     
    Janis Ruth (Sefzik) Skinner

    By Nancy Green | From Page: A4

    .

    Comics

    Dilbert April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    B.C. April 28

    By Daily Republic Syndicated Content | From Page: B4

    Blondie April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    Frank and Ernest April 28

    By Daily Republic Syndicated Content | From Page: B4

    Wizard of Id April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    Peanuts April 28

    By Daily Republic Syndicated Content | From Page: B4

    Baldo April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    Garfield April 28

    By Daily Republic Syndicated Content | From Page: B4

    Beetle Bailey April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    For Better or Worse April 28

    By Daily Republic Syndicated Content | From Page: B4

    Sally Forth April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    Baby Blues April 28

    By Daily Republic Syndicated Content | From Page: B4

    Zits April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    Pickles April 28

    By Daily Republic Syndicated Content | From Page: B4

    Rose is Rose April 28

    By Daily Republic Syndicated Content | From Page: B4

     
    Get Fuzzy April 28

    By Daily Republic Syndicated Content | From Page: B4

    Cryptoquote April 28

    By Daily Republic Syndicated Content | From Page: B5

     
    Word Sleuth April 28

    By Daily Republic Syndicated Content | From Page: B5

    Crossword April 28

    By Daily Republic Syndicated Content | From Page: B5

     
    Sudoku April 28

    By Daily Republic Syndicated Content | From Page: B5

    Bridge April 28

    By Daily Republic Syndicated Content | From Page: B5

     
    Get Fuzzy April 27

    By Daily Republic Syndicated Content | From Page: A6

    Pickles April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Wizard of Id April 27

    By Daily Republic Syndicated Content | From Page: A6

    Baldo April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Rose is Rose April 27

    By Daily Republic Syndicated Content | From Page: A6

    For Better or Worse April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Zits April 27

    By Daily Republic Syndicated Content | From Page: A6

    Frank and Ernest April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Peanuts April 27

    By Daily Republic Syndicated Content | From Page: A6

    Dilbert April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Baby Blues April 27

    By Daily Republic Syndicated Content | From Page: A6

    Sally Forth April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    B.C. April 27

    By Daily Republic Syndicated Content | From Page: A6

    Garfield April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Beetle Bailey April 27

    By Daily Republic Syndicated Content | From Page: A6

    Blondie April 27

    By Daily Republic Syndicated Content | From Page: A6

     
    Cryptoquote April 27

    By Daily Republic Syndicated Content | From Page: A7

    Word Sleuth April 27

    By Daily Republic Syndicated Content | From Page: A7

     
    Sudoku April 27

    By Daily Republic Syndicated Content | From Page: A7

    Bridge April 27

    By Daily Republic Syndicated Content | From Page: A7

     
    Crossword April 27

    By Daily Republic Syndicated Content | From Page: A7