|
Weekly Market Comments: 12/08/10
Silver Hits $30
We are back to $30 silver prices that bring memories of the Hunt Brother Silver Squeeze of 1979-80. In 1980, the prime interest rate hit 15% and the new home mortgage rate was at 13%. Fed Chairman Ben Bernake's recent quantitative easing (QE) monetary decision may be understandable but as a commodity price risk manager, have you thought about what corn price 'exposure' may look like in Dec 2011 in an imperfect growing season? Of course, you could say that this is the same person who predicted the psychology of weak U.S. disposable income data was going to keep a lid on corn prices this past summer, so much for reduced price volatility for the holidays.
 | | Click to enlarge. |
|
|
"A Billion Dollars isn't What it Used to Be" ~ Bunker Hunt on January 7, 1980 when confronted with a significant payment demand from Engelhard Mineral for silver.
If you want to know what happens when multiple long positions demand physical delivery of a commodity all at once, you need look no further than the Hunt Brothers Silver Saga of 1979-1980. They did nothing illegal, the Chicago Board of Trade (CBOT) and COMEX changed the rules in the middle of the game, the Commodity Futures Trading Commission (CFTC) implemented new regulations, and the Hunts were bankrupted unjustly. All they really did was request the delivery of the physical metal for which they held valid, legal contracts. The shorts were unable to meet the delivery at any price because enough deliverable silver did not exist - a classic short squeeze and the panic began. |
