"Bunker Hunt—Silver—China"

Twenty-five years ago I was in London when the famous journalist of The New York Times, Floyd Norris, called me to comment on Mr. Hunt's plan to float bonds against his silver holdings.
We were then talking about $4 billion worth of silver which was supposed to shake up the financial markets.

The other day I had the opportunity to speak a few words with Mr. Hunt. He still has a lively interest in silver and I managed to slip in a few questions about his current life and the world twenty-five years later.

I asked Mr. Hunt, "Did he foresee that major surplus countries would invest their money in gold or silver simply as a substitute currency?"

His answer was no. Negative. He said he invested in silver because he didn't trust the government. He didn't trust hyperinflation and he wanted to store money so that his buying power would not diminish.

For twenty-five years actually, not many people spoke of silver. For the same time period, actually there were only three years that people talked of gold and gold related financial assets at a governmental level.

As a securities analyst for forty years, I made the observation that just as the silver market of the late '70s produced two starring figures, Bunker Hunt and his brother Herbert Hunt, the gold market in the last five years produced a young Canadian, Robert McEwen, who built up Goldcorp., the third largest gold company in North America, and now he's starting again building a smaller gold company (much smaller), U.S. Gold with a market cap of about $100 million.

Going even further, fifteen years before Bunker Hunt, the world produced the late Edmund Safra, the Chairman of Republic National Bank, who created the Euro dollar market.

The common denominator of the three monies is that they have sort of a diversification of savings assets, whether it's Euro dollars, silver or gold--a move away from conventional currencies. Modern day bartender in the 20th century may be the real currency of 2010 or 2025!

It is curious to me that today there are more and more gold experts, more predictions, more consolidation on a worldwide basis in gold and nobody is talking about silver.

Quietly, new crisis is being built.

It is in official statistics that China is producing 64 million ounces of silver a year, the fourth largest silver producer in the world. However, the overall position of China and silver demand is heading towards a crisis that is manifold greater than what happened in Bunker Hunt's time. The Chinese had a surplus of 19 million ounces of silver in 2004, down from 26 million in 2001. It is estimated that today the surplus is about 3.2 million.

The silver demand in the Far East could be as much as $150 million in two years which at the $10 level represents a value of $1.5 billion.

Compare it to 1980: Mr. Hunt at any one time did not have more than $4 billion invested in silver. It has created an almost tenfold increase in price. In 1975, there was no question that any government would put money to silver as a storage of value.

In 2005, both the Chinese and the Russian governments have publicly stated that they are increasing their gold reserves. Now we are talking about government money.

The Chinese have $800 billion surplus capital at the government level and the Russian well over $100 billion. Very soon we are talking about $1 trillion.

If, besides the public and jewelry buyers, the Chinese alone decide to put $10 billion to silver (which is 2.5 times the size of the all-time record Hunt silver holding), we are talking about the silver market that we are lucky if it will stabilize at the $50 level.

We are actually talking about asset redeployment at the governmental level. In late 2005 many governments talk about asset redeployment as government money. We haven't as yet heard the asset redeployment in silver is government surpluses.

Scientists are often credited to foresee the future of what they create. Albert Einstein created the theory of relativity in the 1920s and only twenty years later did President Franklin Roosevelt set up the Manhattan Project. Edward Teller thought about antinuclear forces and nuclear power in the early 70s and twenty years later, President Reagan set up the Star Wars.

What really started with the Hunt Brothers original idea of personal, family asset redeployment, twenty years ago became government policy at the highest level in some of the most powerful countries in the world.

In five or ten years time, we will be talking about gold and silver backed government bonds, just like we talk about Treasuries.

The biggest leverage at the moment is not gold, but silver. It is highly unlikely that gold will go up to $2,000 in five years. But it is perfectly normal to believe that silver may go to $40 in five years.

Perhaps Bunker Hunt's dream has come true.

The truth of the matter is that in 1979, I did write a short article called "Gold and the Polish Debt." The late Governor John Connelly made a speech (partially with my help) that America should tell the Poles to stop coming here for refinancing their debt. Go to your friends, the Soviet Union. We want cash. In this article, I had a sentence, "If gold backing is required, maybe the Hunt Brother's dream will come true." And I recommend Bunker Hunt for Nobel Prize for Economics.

In Thanksgiving 2005, I repeat my recommendation. Bunker Hunt, his family, who foresaw one of the greatest monetary change in history should be granted a Nobel Prize for Economics.

To put it in a historical perspective twenty-five years ago, the Hunt Brothers discovered the necessity of asset redeployment to precious metals for paper currency.

Twenty-five years later Mr. Putin and China have joined the club. History will remember Bunker and Herbert Hunt and the Chinese Prime Minister with Mr. Putin who have opened up the way for nations, for individuals to buy into the new currencies of money that governments fail to control.

(Article 14 - posted November 28, 2005)

e-mail: mlikar@aol.com

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