Investing

From silver to shark fin soup: a brief history of cornered markets

The plans don't always work.

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Recent reports that tennis superstar Novak Djokovic had purchased the world’s entire supply of donkey cheese set off a resounding chorus of…wait, what’s donkey cheese? But Djokovic is hardly the first businessman to attempt to corner an unregulated market. As far back as the sixth century B.C., Thales of Miletus is said to have enriched himself by dominating the market in olive-oil presses and setting prices in his favour. Here are some recent attempts at cornering markets. The plans sound great, but they don’t always work.

donkeycheese
2012: Donkey cheeseLate in 2012, Novak Djokovic announced he had bought the globe’s entire supply of “pule” cheese—about 100 kilograms worth—to be served at his chain of Serbian restaurants. Some worry that donkey cheese, which already sells for as much as $1,300/kg, will become even more expensive.

cocoa2010: CocoaBritish hedge fund trader Anthony Ward (the U.K. press dubbed him “Chocfinger”) was said to have made a $1-billion-plus bet on cocoa futures, buying up reserves equal to 7% of the world’s annual production. Ward successfully drove prices to a 30-year high before setting his sights on the cotton market.

plastichangers1996: Plastic hangersIn the 1990s, one U.S. firm began buying up plastic-hanger producers. By 2000, A&E Products Group had effectively cornered the market. “Who are you going to complain to,” asked one garment-supply distributor in a Wall Street Journal story. “They have a monopoly.” In 2006, A&E was bought by an even bigger hanger conglomerate: Italy’s Mainetti Group.

treasurybonds1992: U.S. treasury bondsWall Street brokerage house Solomon Inc. paid US$290 million to settle charges it had cornered the market in treasury bonds and “squeezed” large fees from rival firms who bought the securities. “The integrity of the markets is paramount,” said Warren Buffett at the time. “I absolutely believe in tough rules, tough cops and tough prosecutors.”

soviet1991: Soviet memorabiliaFollowing the fall of the USSR, Barq’s root beer sped to monopolize the market in Soviet memorabilia. The goal was not financial gain but a marketing coup: Barq’s announced a “Soviet Union Going Out of Business Sale” where Communist Party favours would be available with proof of purchase.

sharkfinsoup1985: Shark fin soupStarting in 1985, Japanese trader Kuniaki Takahashi bought Norway’s supply of basking shark fin (used in the production of shark fin soup and as “prestige” restaurant signs). As recently as 2002, according to The Economist, he remained convinced his stockpile would net him untold riches.

silver1979: SilverWhen the Hunt brothers of Texas (who controlled almost a third of the world’s silver supply) successfully muscled the price of a troy ounce from $6 to nearly $50, Tiffany & Co. bought a full-page ad in The New York Times calling their actions “unconscionable.” Rules restricting the purchase of commodities on margin were introduced, and the brothers lost more than US$1 billion.

onions1955: OnionsHaving amassed some 14 million kilograms of onions, Sam Seigel and Vincent Kosuga set to corner Chicago’s trade in onion futures. The trick: they purchased short positions on their contracts and flooded the market (a bag of onions was at one point selling for less than the bag that held them). The pair made millions until the U.S. enacted the Onion Futures Act to prohibit such manipulation.

(Photos: iStock; Shutterstock; Veer; Reuters)