The scheme was actually quite simple. The brothers hoarded silver in an attempt to drive up the price.
They then used the artificially high price to borrow money to finance their purchases. The scheme worked well until the exchange commission changed the rules to prevent this type of manipulation of silver as well as other metals and commodities.
The Hunt brothers Nelson and William, (or Bunker and Herbert), had invested heavily in futures contracts and with the drop in silver prices, were unable to maintain their system of ridiculous profit.
After years of living in financial turmoil, they ended up in bankruptcy in the late 1980's. This was a scenario that many predicted could never happen.
This notorious duo essentially caused the rapid increase in price just as they are also fully responsible for the rapid decrease in price that followed the untimely end to their scheme.
The plan had potential, at some point, to manipulate the silver market above and beyond anyone's wildest dreams.
The Newsweek Silver Story
Newsweek ran a very detailed story on the whole event back in 1980. It included a history of the Hunt family, the origins of their interest in silver, and of course, a detailed description of their downfall. it provides good reading for the financial enthusiast as well as any silver investor.
Their overall plan was to completely control the silver market. Along with their own physical holdings of silver bullion, they acquired the backing of some Middle-Eastern oil tycoons to invest as well. This enormous level of hoarding and investment drove the price of silver through the roof.
Eventually, however, their greed caught up with them and their downfall became a reality. The details of how and why can get a bit complicated for the average coin collector, but are fairly straightforward for someone familiar with Wall Street and the specific terms surrounding the stock market and paper investments.
To make a long story short, the Hunt Brothers were ultimately ruined financially because of the failed plot.
The day the silver market dropped in 1980 was later dubbed "Silver Thursday". If you look at twenty year silver charts, it is obvious where the market nose-dived. The market has slowly recovered but this scandal is permanently affixed to silver specifically. You will find the old Newsweek magazines listed on eBay from time to time featuring the Hunt Brothers story as it broke back in 1980.
The Newsweek story on the Hunt's silver gamble was printed in the April 7, 1980 issue. It is a very detailed account of the history of the Hunt's silver investments and features a precise description of how they attempted to corner the world's silver market. If you enjoy stock market investing, or finance in general, it will stimulate your senses.
Some of the financial jargon used to describe their scheme is greek to me, but the overall concept is obvious. They used creative methods and financial expertise to move the silver far higher than it should have been during this era. their cunning influenced other investors to join them in the plot, and in the end, they weren't the only ones to lose large amounts of their investment.
In hindsight, it can be viewed as a silver gamble. In the day, however, it had the potential of being one of the more clever financial schemes in decades. Their massive collection of physical silver simply added to the whole story and that's the part tat fascinates silver investors today.
The Hunt brothers are gone but not forgotten from the world of silver investing. In your travels you will hear many coin collectors and precious metal connoissuers mention their names and at least you will understand the basis of their involvement with today's silver prices.
Some people still blame the Hunt's for a lack of trust in the silver trade even though this particular incident happened roughly thirty years ago. So who can you trust? I will gladly share some common sense advice from what I have learned along the way.
Read more about who you can trust when buying silver.
See Also: Buying Silver Online | Silver Investing FAQ | Silver Investing 101 | Silver Showcase | Retiring with Silver | Silver in a 401K Retirement Plan | Coins, Rounds, or Bars | Get Rich with Silver | One Oz Silver Rounds | Where to Buy Silver Safely | Physical Silver VS Paper Investments