The Hunt brothers were two American investors who, wary of US governmental inflationary policies, bought large amounts of physical silver and silver futures as a hedge against inflation.
The economic climate was just right for their investments moves. From about 1965, with President Johnson's Great Society programs, the health of the US dollar had been slowly worsening. Then, Pres. Nixon removed the United States from anything akin to a gold standard. The results of this were a devaluation of the US dollar, which were correlated with inflation.
By buying silver, the Hunt brothers did the best thing that they could do at the time. They began purchasing silver when it was only two dollars an ounce in continued to purchase both physical silver and silver futures. However, they purchased much more silver than was held in reserves by the major commodity exchanges. This caused many familiar with market and silver dynamics to fear that the commodity exchanges, especially COMEX, would be unable to meet their silver obligations and would default. In reality, they were probably right; the Hunt brothers held at least 550 million ounces in silver futures, whereas the two major US exchanges only held 120 million ounces of actual silver. When enough investors realized this, a panic began in the silver markets which caused the price of silver to rapidly increase.
Now, how were the Hunt brothers, who had invested so deftly and intelligently, rewarded? At this point silver was trading far above what they purchased it at, and they had made a very worthwhile investment. Unfortunately for them, the government stepped in and change the rules of how the silver markets work. First, they put limits on how many silver futures people could hold. This forced the Hunt Brothers to sell much of their silver futures.
They took a huge loss. All of this because of an entirely rational investment move that was based off of the fact that the US dollar was inflating heavily. This, after all, was the very reason why the Hunt brothers got into silver. They looked at the long-term trends in the US dollar and realized that inflation was here to stay; furthermore, they realized that there was the very real risk of hyperinflation, much like what was seen in Germany during the 1920s.
To add insult and more injury to injury, the Hunt brothers became the scapegoat of the silver price hike and had to pay millions of dollars in fees. Not only were they labeled as market manipulators, but Bunker Hunt was driven into declaring personal bankruptcy. It just goes to show you that no good deed goes unpunished!
J R TRADING PARTNERS LTD http://WWW.BULLIONUK.COM
Article Source: http://EzineArticles.com/?expert=Oscar_Heath
Article Source: http://EzineArticles.com/6197070
The economic climate was just right for their investments moves. From about 1965, with President Johnson's Great Society programs, the health of the US dollar had been slowly worsening. Then, Pres. Nixon removed the United States from anything akin to a gold standard. The results of this were a devaluation of the US dollar, which were correlated with inflation.
By buying silver, the Hunt brothers did the best thing that they could do at the time. They began purchasing silver when it was only two dollars an ounce in continued to purchase both physical silver and silver futures. However, they purchased much more silver than was held in reserves by the major commodity exchanges. This caused many familiar with market and silver dynamics to fear that the commodity exchanges, especially COMEX, would be unable to meet their silver obligations and would default. In reality, they were probably right; the Hunt brothers held at least 550 million ounces in silver futures, whereas the two major US exchanges only held 120 million ounces of actual silver. When enough investors realized this, a panic began in the silver markets which caused the price of silver to rapidly increase.
Now, how were the Hunt brothers, who had invested so deftly and intelligently, rewarded? At this point silver was trading far above what they purchased it at, and they had made a very worthwhile investment. Unfortunately for them, the government stepped in and change the rules of how the silver markets work. First, they put limits on how many silver futures people could hold. This forced the Hunt Brothers to sell much of their silver futures.
They took a huge loss. All of this because of an entirely rational investment move that was based off of the fact that the US dollar was inflating heavily. This, after all, was the very reason why the Hunt brothers got into silver. They looked at the long-term trends in the US dollar and realized that inflation was here to stay; furthermore, they realized that there was the very real risk of hyperinflation, much like what was seen in Germany during the 1920s.
To add insult and more injury to injury, the Hunt brothers became the scapegoat of the silver price hike and had to pay millions of dollars in fees. Not only were they labeled as market manipulators, but Bunker Hunt was driven into declaring personal bankruptcy. It just goes to show you that no good deed goes unpunished!
J R TRADING PARTNERS LTD http://WWW.BULLIONUK.COM
Article Source: http://EzineArticles.com/?expert=Oscar_Heath
Article Source: http://EzineArticles.com/6197070
No comments:
Post a Comment