And NOW, the exciting conclusion! Preface to all four parts: with all the focus on precious metals lately, I wanted to share a chapter from my Panic Prosperity and Progress book about a germane period in financial history related to the Hunts and their attempt to corner the silver market. Part 1 is here, Part 2 is here and Part 3 is here.
Because the Hunts had started purchasing silver when it was much cheaper, the cost basis of their bullion was only about $10, which meant that even with the complete devastation that has been leveled against silver prices in the first couple months of 1980, they still had a small profit on their holdings. Their trouble wasn’t with the bullion, but with the massive amount of futures contracts they had secured with a price of about $35 per ounce.
The debts they owed on these obligations were enormous and so complex that no one was sure what the exact figure was, but the damage was in the neighborhood of $1.5 billion. On top of this, they already had an obligation to take delivery of silver to the tune of $665,000,000 to add to their already staggering pile of bullion. The Hunts had acquired much of their silver with leverage, which worked fabulously during silver’s unrelenting ascent, but had a devastating effect now that prices had fallen so hard.(more…)