Published: January 20, 2010
The year was 1971 and inflation was on the
rise. In the past, investors and average citizens alike had long
turned to gold coins and bullion as a store of wealth. There was
one little problem this time around: The United States had
abandoned the gold standard, and at the time, it was illegal to
own gold bullion.
Brothers Nelson Bunker Hunt and William Hunt, sons of the
legendary oilman H.L. Hunt, had a plan.
In 1973, the Hunt brothers began purchasing silver futures
contracts. Not satisfied to stop there, the brothers decided to
hold many of the contracts to maturity and take actual delivery
of the metal, an unusual tactic in a market in which virtually
all positions are offset before the contracts expire.
The strategy seemed to work: between 1973 and 1979, prices had
gone from $1.95 to $5.
The brothers figured if they bought enough silver, they could
corner the market. By 1979, they had nearly succeeded. That
year, prices rose to more than $50 an ounce, and the Hunt
brothers were rumored to hold about one-third of the world's
silver supply in storage.
But the story doesn't end there.
With prices so high, people began selling all the silver they
could get their hands on. Prices plummeted -50% in four days.
The Hunt brothers had overleveraged themselves to the point that
margin calls came in, they were left holding the bag.
The Commodity Futures Trading Commission would later change the
rules regarding margin trading and charge the Hunt brothers with
manipulating the silver market. Lawsuits ensued, and the Hunt
brothers were forced to pay millions in fines, back taxes and
interest as a result. All told, it's estimated the brothers
lost more than $1 billion in the endeavor.
I bring up this story not for your entertainment, but for an
important lesson -- three to be exact.
- Lesson #1:
Leverage can break you. It's regrettable, but 30 years
later it seems much of Wall Street still hasn't figured this
out. When used by experienced investors, a little leverage
can juice returns. Just don't get too greedy.
- Lesson #2: Uncle Sam can change the rules.
Investors: plan accordingly.
- Lesson #3: In times of inflation, gold is good.
But sometimes silver is better.
Nathan Slaughter has been preaching all three of these
lessons. Recently he
cautioned readers about the dangers of leveraged funds and
efforts by the feds to ramp up regulation in the commodities
markets. He's also
warned investors about the devastating effects of inflation.
Nathan is also bullish on silver. And for good reason: It's
actually outperformed gold. Yet, despite the run up this year,
it's still trading for about 1/60th the price of gold -- a low
ratio on a historical basis.
Besides being a store of wealth, silver has a host of real-world
uses ranging from medicine to the new
3-D screens being used in movie theaters. All told,
industrial applications use 60% of the world's silver supply
each year. When the global economy gets back on track, demand
There's one way to play this, pure and simple: buy silver.
Until recently, that was easier said than done. But Nathan has
found a unique investment that gives you the upside of silver
bullion without any storage or insurance costs. It doesn't mess
around with futures contracts and doesn't use any leverage,
It's already returned +13% since he recommended it, and since we
think silver could rally another +50% from here, there's plenty
of upside if you get in today.
Click here to learn more about this unique way to profit
-- Brad Briggs