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 Back in the 1980's, some of you
may remember that a Texas Oil Dynasty tried to buy a little silver in between
their oil deals. The tale of H.L. Hunt and his family (at one time, possibly
the richest family in the U.S.) is the stuff of legends in the South. While
this is the story of the silver deals of the sons of the first family, a
little family background makes for a better story.
H.L. Hunt was born in Illinois, where his father moved after the Civil War
(or War of Northern Aggression, as we like to call it) to escape the
hardships of reconstruction. H.L.'s father was becoming quite prosperous in Illinois, but H.L. hit the road and traveled out West at about age 16. He worked as a
dishwasher, a mule team driver, a logger, a farm worker, tried out for
semi-pro baseball, poured concrete on a construction crew, but most of all,
gambled at cards.
H.L.'s father died when he was 22 years old. He went home, collected his
inheritance and shortly thereafter moved to Southeast Arkansas to try his luck
with cotton farming. The days in Lake Village, Arkansas turned from farming
to land speculation and more gambling. He met and married his first wife
there, Lyda Bunker. Shortly afterwards, news of the Smackover Oilfield in
nearby El Dorado, Arkansas, reached Lake Village and H.L. promptly took
advantage of the boom times. As soon as he got off the train and looked
around, he told his companions, "All I need is a deck of cards and
some poker chips."
H.L. made money gambling at
cards and eventually started drilling for oil. His first well was successful.
He eventually moved his wife Lyda and small family to El Dorado and began
building up his "Poor Boy" Drilling Company. Always the gambler,
H.L. was never afraid to "push all his chips out on the table at once."
In 1925, the boom times in El Dorado were winding down, H.L. sold all his
production and traveled to Florida to try his luck in the current real estate
boom. There, he met and married his second wife, Frania Tye (yes, he was
still married to his first). She married him as "Franklin"
Hunt. H.L. and Frania honeymooned in New Orleans during Mardi Gras and
then set up residence in Shreveport, Louisiana, and began a family there. He
shuttled back and forth between both families in El Dorado and Shreveport, providing for them both.
He opened an oil office in El Dorado and operated out of the Washington -Youree Hotel in Shreveport. On any given day, over 100 oil men operated in the
great marble lobby of the Washington-Youree Hotel swapping oil leases, making
drilling deals and spreading rumors. H.L. was finally in his element,
working the oil fields of South Arkansas and North Louisiana with Jick
Justiss, Charlie Hardin and Old Man Bailey.
In 1930, H.L. moved his second family to Dallas, while his first family
remained in El Dorado (both of them were still growing in numbers at the
time). Then, the most significant financial event of his life occurred, when
a friend from El Dorado passed along some inside information about a little
test well in East Texas. Before it was all over, H.L. became a leading
independent producer in the largest oil field ever found to date, the great
East Texas oil field, near Kilgore, Texas. During the Great Depression, this
area of the country never suffered. It was the biggest boom of all the oil
booms to date. Oil was selling at over $1.00/bbl and fell to $.15/bbl after
the field was discovered and brought on line because of the oversupply that
it created. H.L. entered his East Texas deal at a time he was short on cash. With
a haberdasher, bachelor friend from El Dorado, H.L. sold a 20% interest for
$30,000 - H.L. proceeded to close one of the biggest oil deals in history
without any of his own money. He paid for the deal with production from the
very field he purchased. He tried to borrow money from the Shreveport banks
to develop his East Texas leases, but they would not loan money on in ground
reserves. He then went to the First National Bank in Dallas and obtained the
needed loans to drill and bring his production on line. A banking
relationship for the next 50 years was cemented in Dallas that day. Hunt was
dogged for years, in and out of court in East Texas, by Dad Joiner and others
who claimed H.L. cheated them out of their leases, but when it was all over,
H.L. came out on top.
He moved his first family to Tyler, Texas for a few years and then moved them
onto Dallas. Shortly thereafter, H.L.'s notoriety revealed to Frania that
Franklin Hunt was indeed H.L. Hunt. The relationship broke up and H.L. set up
trusts for his children with Frania and agreed to provide for Frania as well.
H.L. continued to prosper and build his oil empire. He also moved into the
food and cosmetic industry with disastrous results. I remember personally
meeting him at the Louisiana State Fair, where he was hawking his HL food
products in the 1960's.
In 1955, his first wife, Lyda died. Shortly thereafter, he married his third
wife, Ruth Ray with whom he already had four children, while still married to
Lyda. (In all, he had 15 children with these three women.) While Ruth tried
to bring everyone together, there were hard feelings between the three
separate families of H.L. Of these children, our story starts with the
three youngest children from the first family, Bunker, Herbert and Lamar,
along with a brother-in-law, Randy Kreiling, from the third family.
Hunt's eldest Hunt son, Hassie, amassed quite a fortune on his own in the oil
business before the age of 25 years, after a falling out with his father. Through
a strange and terrible twist, Hassie developed a mental condition that
eventually led to a frontal lobotomy and his incapacitation early in life. Ironically,
his personal oil business that he started continued to grow and prosper even
after his incapacitation into a rather large business in its own right.
Bunker, being the next oldest male child, fell heir to the kingdom. Bunker,
Herbert and Lamar owned and operated Penrod Drilling Company. All six of the
first family children owned Placid Oil Company. Hunt Oil was owned by H.L.
himself (later it was parceled out to his 14 surviving children). Bunker
started out by drilling a string of dry holes in Pakistan losing over $11
million dollars. He then went head to head against the major oil companies
and bid on leases in Libya. He obtained tracts #2 and #65. By then, he was in
such financial straits, as a result of his dry holes, that he sold a half
interest in tract #65 to BP. In 1961, the largest oil field in Africa to date was discovered on tract #65. Bunker's half interest was valued at about a
billion dollars making him the richest private individual in the world at age
35. He was also a little short on cash and had to borrow a million dollars
from H.L. to hold him over until he could get his production in Libya on line. While Bunker was out on his own, Herbert ran Hunt Oil and quietly built up
the company's oil reserves, as well as invested in real estate North of
Dallas during the 1960's. At the same time, Lamar was organizing the AFL
and his Kansas City Chiefs.
During the 1970's, Bunker was still the heavy hitter betting on one big
business deal after another, including oil, real estate (five million acres
throughout the world), cattle, sugar and pizza parlors. His Libyan oil leases,
in the late 1960's and early 1970's, were bringing in $30 million/year in
revenues (even at $3 per barrel). In 1970, when silver was at $1.50 per
ounce, Bunker decided to invest there as well. At that time, it was illegal
for U.S. citizens to own gold, so silver was a natural second choice. Inflation
was starting to gain steam, Vietnam was causing doubts about our government
and riots in our country, the Middle East was a powder keg and Libya (along with his valuable oil field) was in transition. Bunker personally believed
that the worldwide situation was going to get worse and as a result decided
to hedge his assets. But with the usual Hunt flair for "pushing all
the chips out on the table," it did not take long for a hedge to
become a very large position. Between 1970 and 1973, Bunker and Herbert
purchased 200,000 ounces or so and saw their silver double in value from
$1.50 per ounce to $3.00 per ounce.
At the same time, Col. Qaddafi in Libya shut out BP and then nationalized
Bunker's wells. The major oil companies soon afterwards caved in. The first
to break with the major oil companies was Armand Hammer, at Occidental
Petroleum, when he gave into Qaddafi's demands for a 51% royalty payment. After
Hammer, the other major oil companies lined up and gave in as well. The
results were an empowerment over the major oil companies, the middle east
countries had never before experienced that emboldened them to form OPEC and
embargo oil in 1973.
Bunker grew angry at the State Department's lack of support for his lost
Libyan oil field. He had hired John Connally to help negotiate with the
Libyan, but without any success. He blamed the big oil companies for using
him as a sacrificial lamb in Libya and then hanging him out to dry on his
own. At the head of the major oil companies were the Hunts arch enemies, the
Rockefellers. Bunker felt that the Washington - New York Eastern
establishment was being led down the road to socialism by the Rockefellers.
With inflation eating at his Libyan profits and no more to come, Bunker
started buying silver in a big way with his brother, Herbert. In 1973, they
started buying, and by early 1974, they had accumulated silver contracts
totaling 55 million ounces, or about 8% of the world's silver supply at that
time. The brothers then took delivery of all 55 million ounces of silver. Bunker
was concerned about government confiscation of his silver. He could not bring
it to Texas without paying a 5% franchise tax to the State. The brothers
decided to pick up the silver and drop it off in Switzerland for safekeeping.
Meanwhile, back at the ranch, (the Circle K Ranch in Texas) brother-in- law,
Randy Kreiling, and his brother, Tilmon, held a shooting contest amongst the
cowboys to find the best marksmen. The dozen best marksmen were hired for a
special assignment to ride shotgun on one of the largest private silver
transfers in history. The Circle K cowboys flew on three specially chartered
707 jets to Chicago and New York, where they were met by a convoy of armored
trucks during the middle of the night. Forty million ounces of silver was
loaded onto the planes, and they immediately flew to Zurich, where they were
met by another convoy of armored trucks. The cowboys loaded the trucks and
silver was dispersed to six different storage locations in Switzerland. The transfer cost Bunker and Herbert $200,000. The storage costs for the 40
million ounces in Switzerland and the 15 million ounces still in the U.S. amounted to $3 million per year.
By the spring of 1974, silver rose to over $6 per ounce and rumors were
flying that the Hunts were trying to corner the silver market. At the time,
annual production was 245 million ounces and annual demand was 450 million
ounces. The Hunt brothers had just taken delivery of 55 million ounces. The
big question was how much silver was out in private hands? Of the estimated
700 million ounces of silver, only about 200 million ounces was available for
delivery against futures contracts. That same Spring Bunker appeared on the
floor of COMEX in New York for the first time and declared that "almost
anything is better than paper money" and "any fool can run a
printing press." The silver market dropped down to the $3 to
$4 range after that, but Bunker and Herbert just held on and worked other
deals. Herbert's real estate deals in North Dallas paid off handsomely during
the 1970's, while Bunker's racehorse business did well. Penrod Drilling was
expanding all over the world and quickly moving to offshore rigs. Hunt Oil's
other holdings were also buoyed as the worldwide price of oil escalated. Then,
in 1974, at the age of 85, H.L. Hunt died.
In March of 1975, Bunker Hunt flew to Tehran to meet the shah's brother about
purchasing silver. Bunker and Herbert still had their 55 million ounces of
silver and the price was wallowing around $4 per ounce. In spite of the fact
that the boys were a little short on cash at the time, Bunker felt that if he
and Herbert could take on a partner to resume purchases of silver, the price
would rocket upwards. He met with the Iranian Finance Minister and suggested
that the Pahlevi family invest in several million ounces of silver. The
Finance Minister was not familiar with Bunker and asked him how much money he
made last year. Bunker hesitated (he always felt it was unlucky to count your
money - he also felt that anyone who knew how much he was worth, wasn't worth
much) because as a private individual, he was always downplaying his income
as much as possible for tax purposes. He finally said, "Somewhere
around $50 million dollars." Bunkers hesitation put off the
minister and the deal never went through.
Not to be discouraged, Bunker set up a meeting with King Faisal of Saudi Arabia for mid-April. In late March, the King was assassinated by his nephew.
In the fall of 1976, Bunker and Herbert took delivery of 20 million ounces of
silver through a public company they controlled called Great Western
United. Great Western was part of the HLH Foods Division and mainly
dealt in sugar and sugar futures. The brothers quickly devised a swap where
Great Western would trade 20 million ounces of silver to the Philippines for sugar for their refineries; the Philippines would then trade the silver to the
Saudis for oil. Herbert flew to the Philippines and worked out the deal with
President Marcos, but at the last minute the IMF killed the deal. The IMF
would not recognize the silver as an asset of the Philippine government and
would refuse other loans as a result. The deal fell through and the brothers
sold the 20 million ounces of silver the next year. Once again, Bunker felt
thwarted by the Eastern establishment.
In the spring of 1977, the brothers attempted a take over of the largest
silver mine in the U.S., the Sunshine Mine, through Great Western United. They
successfully acquired 28% of the stock, with an option to purchase the
balance at a later date.
The brothers then turned to another commodities play and invested in
soybeans. They were a little short on cash again, so they used their silver
as collateral. As usual, the brothers went into the market in a big way. The
legal limit for a single investor is three million bushels. The brothers
brought in family members and had a total stake of 22 million bushels. The
CFTC cried foul and filed suit against the Hunts. The Hunts claimed that
other large families did the same thing to get around the three
million-bushel limit, but since the Hunts were conservatives and were not
part of the Eastern liberal crowd, they were being unfairly targeted. After
the smoke cleared, they still made $40 million dollars profit on their
soybean futures. They were quickly gaining a reputation of playing fast and
loose with the rules concerning commodities trading.
By the late 1970's, the Hunt first family's fortune was estimated to be in
the range of $6 to 8 billion dollars. In 1978, John Connally introduced
Bunker to a Saudi sheik at the Mayflower Hotel in Washington. A year later,
International Metal Investment was incorporated in Bermuda between Bunker,
Herbert and two Saudi sheiks. It was speculated that the two sheiks were
fronting for members of the Saudi royal family.
In early 1979, the price of silver steadily rose to $8 per ounce, and the
Sunshine Mine deal fell apart. The stockholders demanded more money for the
balance of the purchase since the mine was now worth more due to the increase
in silver. The Hunt's tender offer failed, and they sold their interest back
to the management trust.
In the summer of 1979, the Hunt brothers started buying silver through the
International Metal Investment Group, along with their Saudi partners. Over
43 million ounces of silver contracts were purchased through the COMEX and
the CBOT with delivery to be taken that fall. In the fall of 1979, the silver
price doubled, from $8 to $16 per ounce, in only two months. Other
syndicates, with big money behind them, started buying silver. The COMEX and
the CBOT started to panic. In late 1979, the warehouses of the two exchanges
only held 120 million ounces of silver and that amount was traded in October
alone. Many people, including the Hunts through their International Metal
Investment group, were taking delivery on all their contracts! The Hunts
moved another 9 million ounces of silver to Europe through a silver swap (no
cowboys riding shotgun this time). The brothers were starting to fear another
confiscation by the U.S. government (FDR style) since things were coming to a
head.
Late in 1979, the CBOT changed the rules and stated that no investor could
hold over three million ounces of silver contracts and the margin requirement
were raised. All contracts over three million ounces per trader must be
liquidated by February of 1980. Bunker accused the COMEX and CBOT board
members of having a financial interest in the silver market themselves. Investigations
later found that many had substantial silver short positions. Bunker knew
that a shortage now existed or they would not be screaming so loudly. He
bought even more. The price on the last day of 1979 was $34.45 per ounce. At
this point, Bunker and Herbert held 40 million ounces in Switzerland and 90 million ounces of bullion they jointly owned through International
Metals. In addition to all that, International Metals had contracts on
another 90 million ounces, due for delivery that March from the COMEX. The
younger brother, Lamar, had even entered the arena and had taken a $300
million dollar silver position by the end of 1979.
Finally, on January 7th of 1980, the COMEX changed their rules to only allow
10 million ounces of contracts per trader and that all contracts over that
amount must be liquidated before February 18th. The CFTC promptly
backed up the ruling. On January 17th, silver hit $50 per ounce, Bunker had
continued to buy. At that point in time, the Hunt's silver position was worth
$4.5 billion dollars, bringing their profits in silver to $3.5 billion
dollars. On January 21st, the COMEX announced that it was suspending trading
in silver. They would only accept liquidation orders. Silver dropped $10 per
ounce and stayed around $39 per ounce until the end of January. Scrap silver,
old silver coin collections and silverware came into the market - about 22
million ounces in all. In early February, the Hunt group took delivery of
another 26 million ounces from Chicago. The Hunt's North Sea Oil, through
Placid Oil, was coming on line and generating $200 million per year from that
venture alone. There was talk of a takeover of Texaco Oil. Bunker was also
talking to other Middle Eastern rulers about putting together another silver
buying group.
By March 14th, silver was down to $21 per ounce. Volker had raised interest
rates and the dollar had firmed up (this also made borrowing to speculate on
silver more expensive). International Metals still held 60 million ounces of
futures contracts. Their margin calls on those contracts amounted to $10
million dollars a day!
Bunker still believed the price would go back up if only he could promote
more buying. He scrambled around Europe looking for a buying partner, but the
more the price dropped, the harder it was to borrow more money against his silver
holdings to buy even more silver to hold up the price. Finally, on March 25th
of 1980, the Hunt brothers ran out of cash. Bunker called Herbert and simply
said, "Shut it down." Herbert promptly told his broker the
following morning that they could not meet their $135 million dollar margin
call that day.
The Hunt's brokers promptly sold $100 million dollars worth of silver that
day. Their account only had $90 million dollars worth of equity, and they
were expected to loose all that the next day. The CFTC chairman, Chairman of
the Federal Reserve and U.S. Treasury Secretary began an around the clock
silver monitoring session.
On March 27th, called Silver Thursday, silver opened at $15.80 ounce and
closed at $10.80 per ounce. The stock market crashed on rumors of
Hunt's liquidations of stocks to cover his silver losses and then rallied to
close at about the same level. The next day, silver rallied back up to $12
per ounce. The Hunt's bullion purchases were all averaged around $10 per
ounce, but their futures contracts were purchased at or about $35 per ounce. When
it was all over, they owed $1.5 billion dollars.
Fed Chairman Volker gave approval for a bailout plan for the brothers fearing
a financial disaster. A group of banks agreed to loan the brothers $1.1
billion dollars. The family had to put up $8 billion in collateral with the
banks. The brother's older sister, Margaret finally put her foot down after
the silver collapse and demanded to know just what Bunker had intended to
accomplish? Bunker sheepishly replied, "I was just trying to
make some money."
After the smoke cleared, it appeared that the drama was not just a one- sided
manipulation by the Hunts. The shorts and the Eastern establishment had just
as much at stake as the Hunts. The difference was that the rules of the
exchanges were being changed by the big Eastern boys who held the short
positions. By the mid 1980's, silver was bumping $17 per ounce again. Shortly
thereafter, Reagan came into the presidency and a new optimism gripped the
country.
In 1988, Bunker filed for personal bankruptcy. In 1989, he left bankruptcy
with a net worth of $5 to $10 million dollars and a debt to the IRS of $90
million dollars, to be repaid in 15 years. Bunker's trusts, set up by his
father, H.L. Hunt, are currently valued at $200 million dollars. Last year
the payments to the IRS finally stopped.
Protect yourself and invest and save in real money, instead of our
current unlawful fiat. Invest at least ten percent of your assets in bullion
and take possession of them. DO NOT buy silver futures contracts
on margin. The Big Shorts are still out there waiting to have those
foolish silver bulls for lunch, from time to time! The only way to
win in the futures market is to pay in full and take possession.
It is a game that even the richest men in the world sometimes lose.
Larry Laborde
Silver Trading
Company
www.silvertrading.net
Larry lives in the occupied South with his wife Puddy and sells
precious metals at the Silver Trading Company. Larry can be contacted
at llabord@aol.com. You can view
his web site at www.silvertrading.net.
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