Editor's Note: Every Sunday, Fortune publishes a favorite story from our archive. Editor-at-Large Shawn Tully introduces this story from the July 28, 1980 issue of Fortune:
This isn't the first time silver prices have boomed. The precious metal more than tripled in the late 1970s, and the biggest investors, and believers were the Hunt brothers of Texas. Oilmen Bunker and Herbert Hunt, convinced that inflation would keep raging and paper money would drastically shrink in value, watched their huge holdings rise to an estimated $13 billion as prices more than tripled to $50 in 1979.
But silver then cratered as people unloaded their cupboards and brought their tea sets and bracelets to Holiday Inns to sell for cash. So in the summer of 1980, veteran writer Roy Rowan and I went to Dallas and spent a weekend with the Hunts, listening to their account of the wild ride in silver in what Rowan described as a "moveable journalistic feast." It's instructive to recall the Hunt's crucial error: When sliver prices dropped in to the high $30s, they bought billions more, thinking that the selloff presented a matchless opportunity. But the free fall continued, as prices fell 80%, and remained at a fraction of their late-1970s for decades. Now, we'll see if those who buy on the recent dip are sages heralding a new era, or the Hunts of 2011. --Shawn Tully
By Roy Rowan, with reporting by Shawn Tully
FORTUNE -- Something about the Hunt brothers just doesn't inspire public sympathy. After taking a financial drubbing in their recent struggle to hang on to $4 billion worth of silver, both Nelson Bunker and brother William Herbert cried foul before congressional committees. They charged the New York Commodity Exchange's Board of Governors with "manipulative actions" that had crippled them. Stoically, both Congress and public managed to suppress any tiny quiver of compassion.
The Hunts' accusations were nevertheless quite pertinent and accurate. The chummy board members of the Comex -- as the New York exchange is called -- make up a club that had a powerful, personal, and collective interest in sending the price of silver into a tumble. They are still trying hard to mask their role as double agents-as governors and traders; rulers and ruled-in the seething Comex arena. All through silver's upward flight, they had stubbornly clung to their own short positions, binding them to being sellers at fixed future prices; and the carrying charges had come close to ruining them. But they found their remedy-by putting on their governors' robes in the exchange boardroom, switching regulations on their own trading, and neatly turning a misbegotten gamble into an assured success.
The performance of these acrobatics is no new stunt, of course. In the treacherous world of commodity trading, the alarm has long and often been sounded: "The foxes are guarding the chicken coop." To this, the typical retort is echoed anew by the 36-year-old Comex president, Lee Berendt: "Nonsense. The Hunts have been participating in this marketplace a long time. They know we are self-regulated and the rules can change."
Technically, according to lawyer Berendt, the rules weren't tampered with: "We merely executed our authority within parameters that we always had a right to do."
In this excerpt from The Asylum: The Renegades Who Hijacked the World's Oil Market, Leah McGrath Goodman witnesses a NYMEX energy trader hazing ritual and watches Bill O'Reilly uncover how those traders set the price of a barrel of oil.
By Leah McGrath Goodman, contributor
It was dawn when I received my first of many after-hours phone calls from Mark Bradley Fisher, otherwise known as the Fish. A self-made millionaire with a MOREMar 9, 2011 11:56 AM ET
|China's fastest-growing cities for millionaires|
|Google files First Amendment court case against NSA surveillance secrecy|
|Chrysler relents, agrees to recall 2.7 million Jeeps|
|Immigration bill could cut deficits by $175 billion - CBO|
|Why Apple's new MacBook Air is the ultimate road warrior's notebook|