The 1974 death of Texas oilman H.L. Hunt set off a chain of events that rocked the precious metals market for the rest of that decade.

Hunt’s sons, Bunker and Herbert, inherited a fortune from the man who was one of the richest in the world.

In the early 1970s, as inflation started to rise, the Hunt Brothers accumulated millions of ounces of silver, most of it probably in the $2-3/oz. range. But they didn't store it in Texas; they plunked it in Swiss vaults.

Then they started to buy up silver futures contracts.

Most of the time, futures are settled in cash. If the price rises, the contract seller settles by paying the profitable “long,” the buyer.

But the Hunts demanded physical silver delivery. The shorts had a problem: the Hunts had half the world's silver in the Swiss stash.

The price spiraled higher. Silver was in the digestible $4-6/oz. range in 1977/1978. By January 1980, it was up to $50.

A textbook “short squeeze.”

But the Hunts overplayed their hand. Turns out that regulators get angry...

...when a player makes their markets look unstable or casino-like. So the commodities exchange (the COMEX) suddenly changed the rules on the Hunts, putting a limit to how many contracts one party could have.

To square up with the new rules, the Hunts had to sell silver futures.

That was particularly problematic for them because the buyers knew that the rule change was plastered on the newspapers' front page.

Additionally, it turns out that plenty of regular people were willing to melt grandma's silverware set to collect $40 or $50 an ounce.

My family was in Philly back then, and many of my relatives tell stories of people lined up around the block -- in the dead of winter -- to sell off old rings, coins and silverware.

Much of that “junk silver” supply was sent off by the pawn shops and metals dealers for melting.

That was the end of the road for the Hunt Brothers. By 1982, the abundance of “junk” silver – the melted stuff – saturated the market, sending the price under $5/oz. The silver market remained dead money for two decades thereafter.

The Hunts lost everything.

Moral of the story: Be humble. Realize that short squeezes sometimes blow up. Realize that the game can be changed in an unforeseen way at any moment. The market is bigger than me and it’s bigger than you. Even the Hunt Brothers could get snagged.

And they did.