"I Was Just Trying To Make Some Money."

That's how Bunker Hunt explained it to his sister having just bankrupted one of America's richest oil families. It took him just three months to lose a multi-billion dollar fortune.

Bunker and his brother Herbert will always be remembered as the fools who dared to corner “the market.” Starting in the early 1970s, the Hunts began buying as much silver as they could...silver futures, silver coins, silver ingots, silver mines. By January 1, 1980, they had accumulated over 192 million ounces of the metal, valued at $35 an ounce.

On the opposite side of the trade, a whole group of Wall Street types had gone short silver futures, and were getting 'squeezed' as silver prices climbed higher.

These firms had a legal obligation to “cover” their short positions and deliver silver at predetermined prices to the counter-parties in the trade. Only problem was, the counter-parties - the Hunts and the other silver bulls -already controlled the world's supply of silver. It would cost the short sellers a fortune to get out of the trade.

The 'shorts' were trapped, so what did they do? They changed the rules at the silver exchanges. Limits were placed on the amount of silver any one individual could own. Margin requirements (the minimum amount of money you need to enter a trade) were raised. Stability was the official justification.

It's one of Wall St.'s favorite tricks...if the rules don't work in your favor, you get 'em changed.

Whatever the case, the Hunts ran out of money. They couldn’t meet the new margin requirements and were forced to liquidate parts of their position. Silver crashed...from over $50 at its intra-day peak, to below $10 less than two months later.

The Hunts went bankrupt, and Federal Reserve Chairman Paul Volcker organized a $1.1 billion dollar loan to "prevent the very fabric of American finance from tearing apart."

The market has hated silver ever since. Adjusted for inflation, silver has fallen from over $100 an ounce in today’s dollars to less than $4.30 by October 2002, a loss of over 95%!

Here at DailyWealth, we’re always drawn to the investments everyone else hates. Before we buy into them though, we need to see evidence the bear market has ended. We want to see a bit of an up trend in place. Think of it like an insurance policy.

Look at the chart of silver above. The up trend is there. In fact, as I write, nominal silver is up 21 cents an ounce to $7.98. Except for a brief 5-day spike in April 2004, silver hasn’t traded this high since the late 1990s!

But how do we invest in silver?

The current situation with silver is always the way after punters lose interest in an investment... for twenty years, no one has made any effort to invent new silver-linked investments.

Unless you have an underground bunker in your backyard or the ability to buy silver futures, as it stands, there really is no satisfactory way to invest in pure silver.

With silver’s recent strength, however, that’s all about to change. The SEC is in the process of approving a silver Exchange Traded Fund (ETF) similar to existing gold ETFs like the iShares Comex Gold Trust (IAU). This ETF will allow you to purchase silver through your stockbroker and sock it away in your retirement account.

If you can’t wait for the SEC, the stock of large silver producers such as Coeur d’Alene Mines (CDE), Apex Silver Mines (SIL), and Pan American Silver Corp. (PAAS) will do the trick. It’s not a perfect solution...and investors who want to speculate should spread their investment over three or four different companies to avoid single-stock risk.

As for Bunker Hunt, he’s paid off his silver debts – including the $90,000,000 owed to the IRS. And although he still owns large quantities of silver, he prefers to speculate on horses these days. “Hattiesburg, a 3-year-old he bought for $20,000 in July 1999, has won $357,000. Asked about it, Hunt says, ‘I don’t really know anything. I am just trying to win a few races.’”

“...and make a little money,” he might have added.

Good investing,

Tom