Silver Thursday was an event that occurred in the United States silver

commodity market A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit and sugar. Hard commodities are mined, such as gold and oil. Futures contracts are the oldest way of investin ...

s on Thursday, March 27, 1980, following the attempt by brothers

Nelson Bunker Hunt Nelson Bunker Hunt (February 22, 1926 – October 21, 2014) was an American oil company executive. He was a billionaire whose fortune collapsed after he and his brothers William Herbert and Lamar tried to corner the world market in silver ...

William Herbert Hunt William Herbert Hunt (born March 6, 1929) is an American oil billionaire, who along with his brothers Nelson Bunker Hunt and Lamar Hunt tried but failed to corner the world market in silver. According to Forbes, as of January 2015 his net worth ...

and

Lamar Hunt Lamar Hunt (August 2, 1932 – December 13, 2006) was an American businessman most notable for his promotion of American football, soccer, and tennis in the United States. He was the principal founder of the American Football League (AFL) and ...

(also known as the Hunt Brothers) to corner the silver market. A subsequent steep fall in silver prices led to

panic Panic is a sudden sensation of fear, which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reac ...

on commodity and

futures exchange A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity o ...

Background

In 1979, the price for silver (based on the London Fix) jumped from $6.08 per troy ounce ($0.195/g) on January 1, 1979, to a record high of $49.45 per troy ounce ($1.590/g) on January 18, 1980, an increase of 713%, with silver futures reaching an intraday COMEX all-time high of $50.35 per troy ounce and a reduction of the gold/silver ratio down to 1:17.0. On that day, gold also peaked at $850 per troy ounce. In the last nine months of 1979, the Hunt brothers were estimated to be holding over 100 million troy ounces of silver and several large silver

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

s. The brothers were estimated to hold one third of the entire world supply of silver not held by governments. The situation for other prospective purchasers of silver was so dire that on March 26, 1980, the jeweller

Tiffany's Tiffany & Co. (colloquially known as Tiffany's) is a high-end luxury jewelry and specialty retailer, headquartered on Fifth Avenue in Manhattan. It sells jewelry, sterling silver, porcelain, crystal, stationery, fragrances, water bottles, watc ...

took out a full page ad in ''

The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...

'', condemning the Hunt Brothers and stating "We think it is unconscionable for anyone to hoard several billion, yes billion, dollars' worth of silver and thus drive the price up so high that others must pay artificially high prices for articles made of silver". On January 7, 1980, in response to the Hunts' accumulation, the exchange rules regarding leverage were changed; COMEX adopted "Silver Rule 7", which placed heavy restrictions on the purchase of commodities on

margin Margin may refer to: Physical or graphical edges * Margin (typography), the white space that surrounds the content of a page *Continental margin, the zone of the ocean floor that separates the thin oceanic crust from thick continental crust *Leaf ...

. The Hunt brothers had borrowed heavily to finance their purchases, and, as the price began to fall again, dropping over 50% in just four days, they were unable to meet their obligations, causing panic in the markets.

Climax

The Hunt brothers had invested heavily in

s through several brokers, including the brokerage firm Bache Halsey Stuart Shields, later

Prudential-Bache Securities Prudential Securities, also formerly known as Prudential Securities Incorporated (PSI), was the financial services arm of the insurer, Prudential Financial. In 2003, Prudential Securities was merged into Wachovia Securities, a division of Wachovi ...

and

Prudential Securities Prudential Securities, also formerly known as Prudential Securities Incorporated (PSI), was the financial services arm of the insurer, Prudential Financial. In 2003, Prudential Securities was merged into Wachovia Securities, a division of Wacho ...

. When the price of silver dropped below their minimum

requirement, they were issued a

margin call ''Margin Call'' is a 2011 American drama film written and directed by J. C. Chandor in his feature directorial debut. The principal story takes place over a 24-hour period at a large Wall Street investment bank during the initial stages of the ...

for $100 million. The Hunts were unable to meet the margin call, and, with the brothers facing a potential $1.7 billion loss, the ensuing panic was felt in the financial markets in general, as well as commodities and futures. Many government officials feared that if the Hunts were unable to meet their debts, some large Wall Street brokerage firms and banks might collapse. To save the situation, a consortium of US banks provided a $1.1 billion line of credit to the brothers which allowed them to pay Bache which, in turn, survived the ordeal. The U.S. Securities and Exchange Commission (SEC) later launched an investigation into the Hunt brothers, who had failed to disclose that they in fact held a 6.5% stake in Bache.

Stock market reaction

This day marked the end of a large stock market correction that year.

Aftermath

The Hunts lost over a billion dollars through this incident, but the family fortunes survived. They pledged most of their assets, including their stake in Placid Oil, as collateral for the rescue loan package they obtained. However, the value of their assets (mainly holdings in oil, sugar, and real estate) declined steadily during the 1980s, and their estimated net wealth declined from $5 billion in 1980 to less than $1 billion in 1988. By 1982, the London Silver Fix had collapsed by 90% to $4.90 per troy ounce. In 1988, the brothers were found responsible for civil charges of conspiracy to corner the market in silver. They were ordered to pay $134 million in compensation to a Peruvian mineral company that had lost money as a result of their actions. This forced the brothers to declare bankruptcy, in one of the biggest such filings in Texas history.

Background

Climax

Stock market reaction

Aftermath

See also

References

Further reading