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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 US) is the stuff of legends in the South. While this is the
story of the silver deals of the sons of the 1st family a little family
background makes for a better story.
Mr. 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 Lake Village, Arkansas days 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 oilfield ever found
to date, the great East Texas oilfield near Kilgore,
TX. 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 to 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, TX 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 4 children with while still married to Lyda.
(In all, he had 15 children with these 3 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 3 youngest
children from the first family, Bunker, Herbert and Lamar along with a
brother in law, Randy Kreiling, from the third
family.
The eldest Hunt son was Hassie.
He amassed quite a fortune on his own before he was 25 years old in the oil
business 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 1/2 interest in tract #65 to BP. In 1961 the largest oilfield
in Africa to date was discovered on tract #65. Bunker’s 1/2 interest
was valued at about $7 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 $5 million 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 (5 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/bbl). In 1970 when
silver was at $1.50/oz Bunker decided to invest there as well. At that time
it was illegal for US 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
oz or so and saw their silver increase from $1.50/oz
to $3.00/oz.
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 oz or about 8% of the world’s silver supply at that
time. The brothers then took delivery of all 55 million oz 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 3 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 oz 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 oz in Switzerland and
the 15 million oz still in the US amounted to $3 million/year.
By the spring of 1974 silver rose to over $6/oz and rumors were flying that
the Hunts were trying to corner the silver market. At the time annual
production was 245 million oz and annual demand was 450 million oz. The Hunt
brothers had just taken delivery of 55 million oz. 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 oz of silver and the price was wallowing around
$4/oz. 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 oz 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 in 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 oz 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 oz 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 oz 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 US, the Sunshine Mine, through
Great Western United. They successfully acquired 28% if 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 3
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 3 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 fast 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/oz 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 oz 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/oz 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 oz 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 oz of silver to Europe through a
silver swap (no cowboys riding shotgun this time). The brothers were starting
to fear another confiscation by the US 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 3 million oz of silver contracts and the
margin requirement were raised. All contracts over 3 million oz 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/oz.
At this point Bunker and Herbert held 40 million oz in Switzerland and 90
million oz of bullion they jointly owned through International Metals. In
addition to all that, International Metals had contracts on another 90
million oz 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/oz 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/oz,
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/oz and stayed around $39/oz until the end of January.
Scrap silver, old silver coin collections and silverware came into the market
- about 22 million oz in all. In early February the Hunt group took delivery
of another 26 million oz from Chicago. The Hunt’s North Sea oil through
Placid Oil was coming on line and generating $200 million /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/oz.
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 oz 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 US Treasury
Secretary began an around the clock silver monitoring session.
On March 27th (silver Thursday) silver opened
at $15.80 and closed at $10.80. The stock market crashed on rumors of Hunt 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/oz. The Hunt’s bullion purchases were all
averaged around $10/oz but their futures contracts were purchased at or about
$35/oz. 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. By the mid
1980’s silver was bumping $17/oz 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 10% of your
assets in bullion and take possession - DO NOT BUY SILVER FUTURES CONTRACTS
ON MARGIN. THE BIG SHORTS ARE STILL OUT THERE AND WAITING TO HAVE THOSE
FOOLISH SILVER BULLS FOR LUNCH FROM TIME TO TIME. THE ONLY WAY TO WIN 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
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