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WSJ 20080818 Let's Hunt

By David Bond      Printer Friendly Version
Aug 18 2008 11:33AM

www.silverminers.com

Let's Be Hunts

Wallace, Idaho – Forgive two rants so close apart, but no sooner had our tirade on the scarcity of retail silver appeared on Goldseek and LeMetropole Cafe – it would have appeared on our own Silverminers.com except we're still rebuilding the site from whoever hacked the hell out of it last month – than the U.S. Mint halted sales of its fabulously popular 1-ounce Gold Eagle coins to the American public.

That was last Thursday night, after we went to bed. Much has happened between Thursday night and this Sunday night. There's no retail 1-ounce silver left on the market; deliveries of 100-ounce Comex-grade bars won't happen until October 15th. The Gold Eagles are gone. GONE!!!!!!!

One would think, as we postulated last Thursday, that the reason the prices for gold and silver were so low was that nobody wanted them. That would be the classic Keynsian explanation. But instead we were told that the reason the prices were so low is that EVERYONE wanted silver and gold 1-ounce coins.

When the market starts talking such gibberish, it's time to start thinking about a Hunt. As in, Nelson Bunker and William Herbert Hunt. We remain amazed, 18 years later, that supposedly sophisticated investors regard the events of 1979 and 1980 as “that time when the Hunts tried to corner the silver market.”

This is one of those monster myths that is so incredible and so false it must be believed by the unwashed masses. Regrettably, detritus of these masses grow up to be Presidents of the United Snakes, or of some branch of the Federal Reserve Bank. Makes them no less idiots, their Ivy League pedigrees notwithstanding.

In 1977, Bunky Hunt surveyed a battlefield much as the one that confronts us: there was paper silver a-plenty for sale, but not a physical ounce in sight. Hunt and his brother, reared in the resource-rich ethic of mid-Texas and Oklahoma, saw a gaping hole in the illusion that is American wealth: a bunch of paper selling a commodity that could not be bought. These things occur from time to time in corn, soybean, and oil commodities, but only temporarily until the market quickly achieves contango – its balance. The only time a gaping imbalance between the paper and the physical market is allowed to persist, the only time the paper price is allowed to be lower, and lower for a long period of time, than the physical price of the commodity, is in the trading of silver and gold.

It is useful for a government like the one that has commandeered the United Snakes, such government and its banks, to permit such an imbalance to exist. If the paper price of silver and gold are severely lower than their actual value, the paper money that the United Snakes and its banks issue is theoretically more valuable – relative to silver and gold – than it really is. Push down the metals, up goes the U$ Dollar. This is our current situation.

And it is profitable for the United Snakes government until some kill-joy comes along and wants delivery. The Brothers Hunt saw that the absurdly-priced silver contract of $3.50 an ounce was a bargain, that $3.50 silver existed nowhere in the real world except in the paper futures pits, but there it was, for sale, on the Comex.

My late friend, Paul Sarnoff, watched the thing unfold from his front-row seat at Paine Weber. The Hunts were a client, as was a Catholic archdiocese and several Arabs, who were getting worried about the quality of the paper they were being paid for their oil. Put yourself back in those times: gas prices were going through the roof; home mortgages, if you could get one and had perfect credit, were going for 18 percent APR; we had a weak President facing unpopular situations in Iran (where there were hostages) and Afghanistan (where the Russians were being adventurous). There was a run on the U.S. dollar in Europe.

And there was no silver. Not since the United Snakes had kicked silver out of the U.S. monetary system had silver been more scarce. Yet there it was, for sale on the Comex, for sale by the likes of the big central banks and bullion banks of the world. But such was no big deal. Between 97 and 99 percent of those 5,000-ounce silver contracts were settled in paper.

But the Hunts and their friends – this was in 1977 – began buying this paper over a period of years. By October 1979, the Hunts and their pals had bought up the bullion dealers' paper positions to the tune of 192 million ounces. Nelson Bunker Hunt owned 79 million ounces of silver – on paper; William Herbert Hunt, another 48 million ounces; their pals, including the Arabs, another 65 million ounces.

Is it too much to ask, if you buy a car from a guy, and you pay him the cash and he signs over the title, that you might get the car? This, ladies and gentlemen, is all the Hunts ever asked. They did not ever “corner” the silver market. All they asked was for the bullion dealers to keep their promises, and deliver.

Chaos ensued. There was then – as there is now – no silver to be had. Not in London or New York warehouses nor in the ground. Not anywhere. And for the simple reason that the Hunts and their pals asked for the delivery of silver they were promised by contract, they were vilified. Driven to ruin. And they provoked their own ruin: Bunky said he'd issue silver certificates in lieu of paper dollars, if people wanted to play. When I was a child, silver certificates were the money of the land.

This writer carries no cross for the Hunts. They were forced to sell the brokerage, Bache, that had carried their contracts but bet against them. But they still have their race-horses in Paris, and I am sure they have not missed a meal.

But there is a monster short position in silver again. It probably exists to prop up the Bush puppetry until the November election. Presidential election years are always hard on metals and easy on mortgage rates, except this year, the mortgage market is done, so new paradigms are in the making. Metals may come back far sooner than is ordered by the Fed and the FDIC. And remember, here is no Jimmy Carter to sell a billion ounces of silver into the market to quiet the Dollar worries. Carter's still around, but those 1 billion ounces are long gone.

The Hunts shook the lying bankers to their boots – to the point where intervention by the Fed, Treasury, and the Defense Department were warranted – merely by asking for delivery of the 192 million ounces of silver they'd been promised. This was not a “cornering” of a market; it was the attempt to enforce a contract, same as you've got with your landlord or bank.

So let's all of us be Hunts. Ask delivery of $12.80 silver and $790 gold, today. There are 200 million of us. A single ounce of physical silver for every man, woman and child in the United Snakes would squeeze these rat-bastards harder than the Hunts could ever do. There were two Hunt brothers in 1979. There are 200 million of us in 2008. Even in this country, there aren't enough jail cells to hold us all. And we could take their pants off, once and for all.

David Bond

 

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Editor of The Silver Valley Mining Journal