Wednesday, August 20, 2014
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 Bsteven254@aol.com.

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
.

Solano News

 
Memorial flight honors beloved Gordon Valley man

By Ian Thompson | From Page: A1, 2 Comments | Gallery

 
Vacaville school board candidates sound off during forum

By Susan Winlow | From Page: A1 | Gallery

Recology goes pink to trash cancer

By Glen Faison | From Page: A2 | Gallery

 
Caltrans advises Highway 12 delays likely

By Barry Eberling | From Page: A3, 3 Comments

 
Curtola park-and-ride bill goes to governor

By Barry Eberling | From Page: A3

 
City reaches milestone for train station project

By Barry Eberling | From Page: A3, 16 Comments | Gallery

 
Man convicted of failing to register as sex offender

By Ryan McCarthy | From Page: A5, 15 Comments | Gallery

 
DUI checkpoint nets arrests in Vacaville

By Ryan McCarthy | From Page: A5, 7 Comments

 
Library’s teen board to meet next week

By Glen Faison | From Page: A5

South Solano Dems schedule candidates meet, greet

By Glen Faison | From Page: A5

 
 
Geiger sworn in as Fairfield planning commissioner

By Ryan McCarthy | From Page: A6

 
Faith in Action puts out call for volunteers

By Glen Faison | From Page: A6

 
Love, a legend, come to theaters

By Amy Maginnis-Honey | From Page: A7

Fairfield police log: Aug. 18, 2014

By Susan Hiland | From Page: A12

 
Suisun City police log: Aug. 16, 2014

By Glen Faison | From Page: A12

Suisun City police log: Aug. 17, 2014

By Glen Faison | From Page: A12

 
Fairfield police log: Aug. 16, 2014

By Glen Faison | From Page: A12

Fairfield police log: Aug. 17, 2014

By Glen Faison | From Page: A12

 
Suisun City police log: Aug. 18, 2014

By Susan Hiland | From Page: A12

.

US / World

As protests rage, Obama struggles to find his role

By The Associated Press | From Page: A1 | Gallery

 
Ferguson pledges outreach efforts after shooting

By The Associated Press | From Page: A1

How can authorities restore order in Ferguson?

By The Associated Press | From Page: A1, 21 Comments | Gallery

 
Holder brings his civil rights push to Ferguson

By The Associated Press | From Page: A1, 3 Comments

Strong DOJ response to Ferguson seeks truth, calm

By The Associated Press | From Page: A1

 
Prison company pays $8 million in back wages

By The Associated Press | From Page: A6

Some evacuees of Yosemite-area fire can go home

By The Associated Press | From Page: A6 | Gallery

 
Officials say Lake Tahoe imperiled by wildfires

By The Associated Press | From Page: A8

Committee approves higher pension calculations

By The Associated Press | From Page: A8

 
Veteran rock climber killed in fall in Yosemite

By The Associated Press | From Page: A8 | Gallery

Texas Gov. Perry booked on abuse of power charges

By The Associated Press | From Page: A9, 3 Comments

 
US officials: Video shows American’s beheading

By The Associated Press | From Page: A9

NY took quick precautions after in-custody death

By The Associated Press | From Page: A10 | Gallery

 
AP Exclusive: US changing no-fly list rules

By The Associated Press | From Page: A10

Tens of thousands march on Pakistan’s parliament

By The Associated Press | From Page: A13 | Gallery

 
.

Opinion

No getting away from corruption in state government

By Thomas Elias | From Page: A11

 
Editorial cartoons for Aug. 20, 2014

By Daily Republic Syndicated Content | From Page: A11

 
Serve and protect? Certainly not

By Letter to the Editor | From Page: A11, 23 Comments

 
Question of the week: Does school start too soon?

By Daily Republic | From Page: A11

Government trying to steal rights

By Letter to the Editor | From Page: A11, 20 Comments

 
.

Living

Community Calendar: Aug. 20, 2014

By Susan Hiland | From Page: A2

 
Today in History: Aug. 20, 2014

By The Associated Press | From Page: A2

Horoscopes: Aug. 20, 2014

By Holiday Mathis | From Page: B5

 
Our daughter says she hates her mother and refuses to talk to us

By Kathy Mitchell and Marcy Sugar | From Page: B5

10 Things: 10 fresh ways to dress corn on the cob

By The Associated Press | From Page: B6

 
Think beyond the slice with refreshing watermelon

By J.M. Hirsch | From Page: B6

 
.

Entertainment

Dwayne ‘The Rock’ Johnson set for DC Comics film

By The Associated Press | From Page: A7, 1 Comment

 
Don Pardo, iconic TV announcer, dies at 96

By The Associated Press | From Page: A7

Wife to bury Kasem in Norway, cites heritage

By The Associated Press | From Page: A7, 1 Comment

 
TVGrid

By Daily Republic Syndicated Content | From Page: B7

.

Sports

49ers sign defensive lineman Dorsey to extension

By The Associated Press | From Page: B1

 
49ers’ Dawson eager to get back out kicking after misses

By The Associated Press | From Page: B1 | Gallery

 
Rancho Solano women’s team vying for spot in nationals

By Paul Farmer | From Page: B1 | Gallery

Joe Gibbs Racing hires Carl Edwards and Daniel Suarez

By The Associated Press | From Page: B2

 
Philadelphia’s Mo’ne Davis knows hoops, too

By The Associated Press | From Page: B2

Veteran NBA ref Bavetta retires after 39 years

By The Associated Press | From Page: B2

 
Raiders still waiting for Hayden to get healthy

By The Associated Press | From Page: B2 | Gallery

As Durant steps back, US team is moving forward

By The Associated Press | From Page: B2 | Gallery

 
Kluwe, Vikings reach settlement to avert lawsuit

By The Associated Press | From Page: B2

Islanders announce sale of minority stake of club

By The Associated Press | From Page: B2

 
Ohio State: Injured QB Miller done for the season

By The Associated Press | From Page: B2

Past US Open champs Djokovic, Federer seeded 1-2 in U.S. Open

By The Associated Press | From Page: B2

 
.

Business

Ballmer steps down from Microsoft board

By The Associated Press | From Page: B7

 
Competition heats up for Tesla’s gigafactory

By Mcclatchy-Tribune News Service | From Page: B7

Consumer prices edge up 0.1 percent in July

By The Associated Press | From Page: B8

 
Stocks rise as US home construction rebounds

By The Associated Press | From Page: B8

US home construction jumps 15.7 percent in July

By The Associated Press | From Page: B8, 1 Comment

 
Peanut, almond butter recalled for salmonella risk

By The Associated Press | From Page: B8, 1 Comment

McDonald’s to sell packaged coffee nationally

By The Associated Press | From Page: B8

 
.

Obituaries

Richard Ray Jr.

By Nancy Green | From Page: A4

 
Horace James Sam

By Nancy Green | From Page: A4

Joseph ‘Joey’ Kenneth Meyers

By Nancy Green | From Page: A4

 
Defrances Jean Freeman-Jefferson

By Susan Hiland | From Page: A4

Eddie Lee Staten

By Nancy Green | From Page: A4

 
June Canaris-Heath

By Brad Stanhope | From Page: A4

.

Comics

Beetle Bailey

By Daily Republic Syndicated Content | From Page: B4

 
For Better or Worse

By Daily Republic Syndicated Content | From Page: B4

Baby Blues

By Daily Republic Syndicated Content | From Page: B4

 
B.C.

By Daily Republic Syndicated Content | From Page: B4

Pickles

By Daily Republic Syndicated Content | From Page: B4

 
Baldo

By Daily Republic Syndicated Content | From Page: B4

Rose is Rose

By Daily Republic Syndicated Content | From Page: B4

 
Garfield

By Daily Republic Syndicated Content | From Page: B4

Wizard of Id

By Daily Republic Syndicated Content | From Page: B4

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: B4

Zits

By Daily Republic Syndicated Content | From Page: B4

 
Dilbert

By Daily Republic Syndicated Content | From Page: B4

Blondie

By Daily Republic Syndicated Content | From Page: B4

 
Sally Forth

By Daily Republic Syndicated Content | From Page: B4

Frank and Ernest

By Daily Republic Syndicated Content | From Page: B4

 
Peanuts

By Daily Republic Syndicated Content | From Page: B4

Crossword

By Daily Republic Syndicated Content | From Page: B5

 
Sudoku

By Daily Republic Syndicated Content | From Page: B5

Word Sleuth

By Daily Republic Syndicated Content | From Page: B5

 
Cryptoquote

By Daily Republic Syndicated Content | From Page: B5

Bridge

By Daily Republic Syndicated Content | From Page: B5