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Cornering the Silver Market means to acquire enough shares of a particular security type like (Silver) those of a firm in a niche industry, or to hold a significant commodity position to be able to manipulate its price.
- The historical story behind Cornering the Silver Market is that on March 27, 1980 the price of silver collapsed. The collapse was precipitated by the failed attempt of three brothers Nelson Bunker, William Hunt, Herbert Hunt, Lamar Hunt to corner the Silver Market. In finance it is termed as “Silver Thursday”.
- They took their oil money boom and invested into the commodities market. The Hunt brothers believed that inflation would cause silver to become a haven, just like its more expensive cousin, gold. Nelson, especially, believed there would be inflationary pressures that would mangle the value of any investments denominated in or tied to paper currency.
- They reportedly bought more than 35 million ounces of silver, some of which they flew to Switzerland in specifically crafted airplanes guarded by armed Texas ranch hands. By stockpiling this silver and using their large cash reserves to buy up even more futures, the billions in demand caused the rise of silver to more than $50 per ounce.
- The silver-loving siblings continued to take delivery, borrowing heavily to snatch even more futures on silver once their immediate cash was all tied up. By 1980, with every dollar increase in the price of silver, the Hunts were making $100 million on paper.
- The silver futures market bottomed out by a third to $10.80. Around two months earlier, these contracts had been trading at four times that amount. The Hunts had put up oil and gas leases, real estate, coal leases, antiques, even a Mercedes and a Rolex, and lost them all, as the Seattle Times notes
In 1988, a New York City jury levied a penalty of over $130 million against the Hunts. The jury ruled that they had deliberately conspired to corner the silver market. The ripple-effect of the Hunt brothers story can be felt this decade.
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