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Canadian_Nickle
Penny Hoarding Member
Canada
938 Posts |
 Posted - 07/25/2007 : 10:28:04
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By Chuck Jaffe, MarketWatch
Last Update: 9:10 PM ET Jul 22, 2007
BOSTON (MarketWatch) -- A penny saved may still be a penny earned, but the real question for investors is whether a penny purchased is actually worth a nickel when it comes time to figure their return on investment.
Plenty of small-time investors are betting that the penny will someday be valued like its larger cousin, and so they are snapping up pennies. Taking pennies out of circulation and collecting them is one thing, but paying a premium to buy pre-1982 pennies for their copper value is another and, for most investors, it would be a Stupid Investment of the Week.
Stupid Investment of the Week highlights the concerns and characteristics that make an investment less than ideal for the average consumer and is written in the hope that spotlighting danger in one situation will make it easier to root out elsewhere.
The case of the penny is compelling, because everyone has pennies and can relate to the most common of coins. Moreover, the math behind the move to buy pennies looks compelling. The real question is one of practicality.
The case for buying pennies goes like this:
The rising price of copper has made it so that the metal content of pre-1982 one-cent pieces is now worth more than the one cent the coin represents, falling somewhere around 1.2 cents. You need roughly 155 of the pre-1982 coins to make a pound of copper. And with copper trading for more than $2 a pound -- and as much as $4 a pound a little over a year ago -- there's definitely some economic merit in hoarding the coins if every $1.55 is worth $2 or more.
But there's a difference between taking pre-1982 pennies out of circulation and putting them in a special place -- the way some people, myself included, have saved the so-called "wheat ear" pennies from the early 1900s for decades -- and plunking down investment dollars to buy pennies at a premium in order to cash in on their value as a commodity.
This is hardly the first time coins have been worth more as a metal than for their cash value. In fact, the same condition applies to nickels today (and some people would say that the five-cent piece is a better investment value). In 1964, the government stopped minting coins that had 90% silver content, which prompted many people (again, myself included) to keep pre-1965 coins. The value of those coins rose dramatically, in part for their metals value and in part for their collectible value.
In 1982, the content of the penny was changed, moving from mostly copper to the copper-clad zinc coin used today. That's why the penny investors want coins minted before 1982.
Two cents worth
James DiGeorgia, editor of the Gold and Energy Advisor newsletter, says the current opportunity is a particularly good one for the small investor, the person who wants a safe investment that includes a floor price -- because the penny will never be worth less than one cent -- and good potential.
"This is an opportunity just like what happened with silver in the 1960s, and it's something that everyone understands and can do," says DiGeorgia, who not only recommends that consumers hoard the pre-1982 pennies but who has suggested they buy $50 bags of the coins. "The value is obvious ... and if a penny from before 1982 becomes worth 10 cents -- and it might -- sooner or later there will be a way to melt it down and get that value out of it."
Later is an important consideration here, because last December the U.S. Mint enacted new rules that made it illegal to melt pennies and nickels. Exporting coins for melting also is illegal. Travelers may legally carry up to $5 in 1- and 5-cent coins out of the U.S. or ship $100 of the coins abroad, but only "for legitimate coinage and numismatic purposes." Violators face up to five years in prison and up to $10,000 in fines, plus the confiscation of coins or metals from melting schemes.
Similar laws were enacted temporarily in the 1960s and '70s to deal with rising metals prices, and the Mint may again ease the law at some point in the future. Until then, however, the penny investor is not looking at a liquid market.
"It's a young market that's not very liquid right now, with probably the best market currently being eBay," says Alec Nevalainen, founder of the Coinflation.com Web site. "While people will be rewarded for hoarding pennies and nickels, that's different from saying you want to make a play on copper right now. If you have real money to invest, go with the stocks [of publicly traded metals companies] rather than buying the pennies directly."
Meltdown
There are several problems with buying pennies for their melt value. For starters, if you buy them by the bag, you'll pay dealer prices, which will inflate your buying price and cut your ultimate selling price. A 50-cent roll of 1981 pennies sells for about $1 today, so you'll spend about $3 to get a pound's worth of copper, which basically eliminates most of the margin that's attracting investors to pennies in the first place.
And if you're buying uncirculated bags of pennies -- as DiGeorgia and others suggest -- you're paying an additional premium to get a collectible, even though your investment premise is the play on metals.
Then there's the problem of storing all of those pennies. A $50 bag of pennies weighs a bit more than 30 pounds. So a $10,000 investment in pennies -- even if it buys just $5,000 worth of coins -- weighs north of 1.5 tons.
"Having four or five shoeboxes of 'wheaties' is one thing, but the comebersome nature of really investing in pennies for their melt value makes this idea just insane on any larger scale," says Bret Leifer of Bret Leifer Numismatics in Wayland, Mass.
"Most people can't do it in this medium. ... It makes sense when you think of the melt value of the coins, but when you know the law against melting, when you think about how hard it would be to have a real stash of thousands of dollars in pennies, when you think about the dealer costs involved, this just isn't s strategy most people could pursue as a real investment in their portfolio."
Chuck Jaffe is a senior MarketWatch columnist. His work appears in dozens of U.S. newspapers.
________________________
"A nickel's nothing to scoff at."
C. Montgomery Burns
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c140cessna
Penny Collector Member
USA
419 Posts |
Posted - 07/25/2007 : 12:11:54
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We are starting to show up on the RADAR screens!!!! I wrote a reply to Mr. Jaffe letting him know that there are a few hard-core copper nuts out here. I'm curious if he will contact me.....
I'm stashing my copper away....anyone that has the means to automate and heavy hoard but is not doing it.....is missing the boat.....this game will not last forever...... |
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c140cessna
Penny Collector Member
USA
419 Posts |
Posted - 07/25/2007 : 13:34:50
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The following is the reply from Chuck Jaffe.....I guess we are all "Above Average Investors"....
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Interesting stuff, but as I have had to point out to several penny
hoarders, my column clearly says that it is for "average investors," and
you are far from it. Moreover, my column made it clear that pulling
pr-1982 pennies out of circulation is one thing, paying up to buy them
is something altogether different.
Cheers,
Chuck Jaffe
Senior Columnist, MarketWatch
Host, Your Money Radio (You must be logged in to see this link.)
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 07/25/2007 : 15:41:47
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Quote from article:
"if you're buying uncirculated bags of pennies -- as DiGeorgia and others suggest -- you're paying an additional premium to get a collectible, even though your investment premise is the play on metals."
I guess he didn't factor in the copper hunters who would buy $50 in pennies, keep the pre 82 and cash in the zinc, and keep going until the copper cents in circulation become as scarce as wheats.
I did buy 2 bags of $50 of cents (unopened) just to have them as a "double play", copper goes up, sell the coins on ebay to copper hoarders, copper goes down, I still have the cents to sell as uncirculated coins to collectors. I admit I paid double the face value, but I always wanted a bag or two of uncirculated coins from the mint.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 07/25/2007 : 15:52:27
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I picked up a mint sewn bag of 1977 cents the other day for $70. Since melt value is about $119 and I didn't even have to pay double face for it I suppose it is a reasonable price for the double play. Glad I didn't have to pay "Dealer prices" as Mr. Jaffe suggests. There is still plenty of copper out there to purchase for under double face if you didn't have the time or equipment to sort your own.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
Edited by - HoardCopperByTheTon on 07/26/2007 00:34:40 |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 07/25/2007 : 19:30:22
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Followup:
I checked on ebay,
someone is selling a 1973 bag of pennies from the mint for $199 plus $10 shipping.
Maybe this is the Dealer prices Mr. Jaffe refers to.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly.
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Edited by - pencilvanian on 07/25/2007 19:31:27 |
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Tourney64
1000+ Penny Miser Member
USA
1035 Posts |
Posted - 07/25/2007 : 20:04:16
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Mr Jaffe Wrote:
And with copper trading for more than $2 a pound -- and as much as $4 a pound a little over a year ago -- there's definitely some economic merit in hoarding the coins if every $1.55 is worth $2 or more.
Stupid Reporter!!! It's 3.57/lb right now and been around there since May and over no lower than $2.50 in 2007. It's a lot closer to $4, yet he refers to it as if it closer to $2. I hate biased reporters. He's the one that's STUPID. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 07/26/2007 : 00:35:38
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Where can I buy some at $2 a pound? I am a definate buyer at that price.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 07/28/2007 : 17:09:26
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The rising price of copper has made it so that the metal content of pre-1982 one-cent pieces is now worth more than the one cent the coin represents, falling somewhere around 1.2 cents. You need roughly 155 of the pre-1982 coins to make a pound of copper. And with copper trading for more than $2 a pound -- and as much as $4 a pound a little over a year ago -- there's definitely some economic merit in hoarding the coins if every $1.55 is worth $2 or more.
Please note. The weight of any coins is pending on the coins condition. Most early coins are worn and when worn, they loose weight. As an example I normally put 52 to 53 Lincoln Cents in one of those plastic rolls that normally holds 50. That shows you how much material has been lost due to wear.
I'm not sure exactly what this long, long article was supposed to be saying because I'm old and get bored to soon. If it was attempting to say hoarding coins in bulk is a waste of time and money, who knows. I agree that if they stop making pennies, the values may go up. However, not so with Beanie Babies so......
One thing for young people to remember is presently metals are a decent investment. I predict in the not to distant future the values of metals will drop drastically. Just as scientist can now and do make diamonds, soon all metals will be possible to be man made. Changing Aluminum into such things as Copper, Silver or even Gold will be just the proper bombardment of Nuclear particles eventually so then what will your Copper coins be worth then?
Carl |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 07/28/2007 : 18:21:03
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What will our copper coins be worth then?
Depends on supply & demand from collectors.
Coin collecting will still be popular even if they create a matter transforing device to turn garbage into gold, and yet such a device, if it can be made, is unlikely to be built for at least a couple of centuries.
consider the price that can be had for wheat cents, maybe 4¢ each, four times face value is a nice return. If the penny becomes obsolete they become collectable and sell fro a premium in spite of what the price of copper does.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly. |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 07/29/2007 : 09:59:40
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What will our copper coins be worth then?
Depends on supply & demand from collectors.
Coin collecting will still be popular even if they create a matter transforing device to turn garbage into gold, and yet such a device, if it can be made, is unlikely to be built for at least a couple of centuries.
Unlikely to be built??? Obviously you are not familiar with the Fermi Labs. They are presently coverting more materials than most people could understand. Converting materials? Just look up the
Atomic Chart? Many of the ones at the bottom are all man made. Ever hear of Plutonium. It is a man made element. Primarily Diamonds must now be lazer inscribed to differentiate the fakes from the real ones. Otherwise, no difference. The main reason there is not a greater push to create materials such as Copper is the cost to do that, not the improbability.
China is presently flooding the coin market with counterfeits and some so good they are even in slabs. Of course the slabs are counterfeits also.
Carl |
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43 Posts |
Posted - 07/31/2007 : 16:17:23
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| I don't understand how this writer thinks someone could make more money investing in mining stocks than hoarding copper pennies. The pennies are already worth about 260% more than face value, the day you bring them home. Plus, as far as I know, there is no tax on selling coins, so any profit should be tax free. Then, if they go up in value, you could be looking at something like a possible 500% tax free profit within a few years, especially if the melt ban is lifted. I think it highly unlikely one could achieve a 260%-500% tax free return on a mining stock within a few years. |
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c140cessna
Penny Collector Member
USA
419 Posts |
Posted - 07/31/2007 : 18:01:26
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Taxes must be paid on all investment profits including coin and metal appreciation. This is one of my favorite points to complain about....I call it the "Double F#$K Tax"......lets say you buy some gold or silver or copper .....all at current market value......then the FED inflates the devil out of the currency (like they have for the past 95 years....the dollar now has just 4% of purchase power it had in 1913!!!)....let's say gold goes from $650 to $1300....it doubles....and let's say it was all due to inflation and nothing to do with investment demand.....you have really made no profit in terms of purchasing power....you just held your own against inflation.....YOU STILL MUST PAY TAX ON $650 "PROFIT"....
Mind you - you paid tax the first time around on the pay you earned to even buy the metals.....so in effect.....we are being "Triple F#$Ked"...
You can either lose your butt to the "invisible tax" of inflation....or protect yourself with metals (or other inflation proof devices...) and pay tax on the "profits".....either way you give up your wealth and your purchasing power....
In a little way, we are all just slaves....like serfs working for the money men....
One could just buy/sell/trade/barter the wealth we currently have and keep that information to yourself.....but that is against the tax laws.. |
Edited by - c140cessna on 07/31/2007 18:10:53 |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 07/31/2007 : 18:26:22
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Unless you have the reciepts to prove when you bought the metals and for how much, it is your word vs the gub'ments word How Much you paid for the metals (not that I would ever say you should cheat the government, that would be dishonest, I am just saying reciepts get lost, memories are defective, when coins & such are sold on e-bay sellers sometimes forget how much they bought the coin for, etc. As long as it is a few coins at stake & it sounds legit the IRS will take your word for it.)
Another issue no one ever mentioned, Per the IRS, if you have foreign paper currency or coins from a trip overseas, and the foreign money appreciates in value, the IRS will not go after the increase in value.
The reasons:
The IRS does not have the manpower to after the last nickel and penny,
If the IRS did this taxpayers would scream bloody murder to congress (which is why the IRS now lives under much stricter laws since 1998, since the horror stories were brought before congress)
Unless you are in the business of currency trading the amounts are too small for the IRS to try to calculate.
Looks like holding some foreign currency (Swiss francs) might not be a bad idea.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 07/31/2007 : 22:19:44
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Of course the legitimate expenses of generating that income are deductable expenses. Things like your Ryedale sorter, rolling and counting machines, paper for the automatic rolling machines, carts to roll the pennies around on, mileage to pick up your pennies and drop off your zinc, the Hummer you need to transport the pennies ;-) Of course after you show a loss on the operation the government will say your venture is a hobby rather than a business.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
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Canadian_Nickle
Penny Hoarding Member
Canada
938 Posts |
Posted - 07/31/2007 : 23:33:29
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Sorry, I'm confused. Could somebody please direct me to the actual legislation requiring you to pay taxes?
________________________
"A nickel's nothing to scoff at."
C. Montgomery Burns
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CA10Ag250:CA50Ag100:CA25Ag30:CA500Ag48:US100Ag20:CA1000Ag16
How to read a HoardCode:
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 08/01/2007 : 00:02:22
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quote:
Originally posted by Canadian_Nickle
Sorry, I'm confused. Could somebody please direct me to the actual legislation requiring you to pay taxes?
I think it started about 1913 or so. Our government is a partner in all profitable ventures, even if that profit is just the result of inflation. If it is a losing venture then they like to consider it a hobby.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 08/01/2007 : 05:29:02
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Taxes on coins? Possibly. Anyone paying that? I doubt it. Around me there are people that go through the area in trucks picking up metal and selling to a metal recycler in the area. There are no questions asked by the recycler, by the picker upper, by the people that threw the stuff out. So unless the IRS has the use of spy stations in the sky, how would they know? At coin shows about half the dealers keep track of sales. These are out of town people that use traveling expenses, hotel bills, etc for tax purposes. The other half of the dealers are there as a weekend, off the record, no one knows job. They don't pay taxes on something that never happened. Friend of mine took a pile of coins to a metal recycler and was given cash, no questions asked, no info volunteered. TAXES? On what?
No one pays taxes on their sales from garage/yard/estate sales. Around me no one pays taxes that sells at flea markets. And that is close to big buisness lately. Pan handlers that play musical instruments on corners and collect money from people don't know what a tax statement would look like. On TV they interviewed some of them and found some make hundreds a day. TAXES?
Then naturally the 12,000,000 or so illigals that no one can find make money and pay nothing in taxes either but no one can find them so why should they pay taxes.
If our government could ever collect all the taxes on all the stuff and from all the people that are supposed to pay taxes, there would be enough money to actually not be in the red all the time.
Carl |
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c140cessna
Penny Collector Member
USA
419 Posts |
Posted - 08/01/2007 : 07:26:46
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When I had economics in college, the professor said that about 1 in 8 dollars spent in our economy was "black market/barter" and never showed up on the govt RADAR....thus no taxes. That sounded about right....that sure is a lot of exchange without tax.
As for the govt getting at this for taxes.....the problem is that the govt needs to be about 10% to 20% their current size...that would fix the debt problems. That said, if everyone did pay what the govt says they owe....it would in theory reduce the taxes the rest of us pay.....but we all know they will spend (and largely waste) every extra dollar they get... |
Edited by - c140cessna on 08/01/2007 07:28:55 |
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deleted
43 Posts |
Posted - 08/01/2007 : 10:37:40
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| I stand corrected on the tax issue. Officially you DO have to pay tax on coin profits. But, as was pointed out by others, most people may not do this and it would be hard to keep track of, depending on where the coins were sold. The advantage of claiming the profit is then you could deduct a home office and all other resultant business expenses. |
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Cerulean
Penny Hoarding Member
USA
993 Posts |
Posted - 08/01/2007 : 14:53:06
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Keep in mind that the standard deduction most people take, the alternative being the dreaded itemization form, assumes small profits made in found money or person-to person sales/barters. Unless you're making serious profits from "other" sources of income, you might be covered by taking the standard deduction.
(I am not now, nor have I ever been a taw lawyer, acountant, or expert in any way.)
RUNNING TOTAL
--------------------------
3217 zincs (1982-2007) 75.5%
1012 coppers (1959-1982) 23.8%
25 wheats (1920-1958)
6 Canadian (1968-1995)
1 dime (2004)
Wanna take money away from the Fed? Spend dollar coins! |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 08/01/2007 : 14:55:59
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I stand corrected on the tax issue. Officially you DO have to pay tax on coin profits. But, as was pointed out by others, most people may not do this and it would be hard to keep track of, depending on where the coins were sold. The advantage of claiming the profit is then you could deduct a home office and all other resultant business expenses.
What profit? No one makes money on selling coins, do they? Why surely everyone would pay taxes if they made a profit on selling coins, wouldn't they?
Carl |
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 08/01/2007 : 15:00:13
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quote:
Originally posted by just carl
Taxes on coins? Possibly. Anyone paying that? I doubt it. Around me there are people that go through the area in trucks picking up metal and selling to a metal recycler in the area. There are no questions asked by the recycler, by the picker upper, by the people that threw the stuff out. So unless the IRS has the use of spy stations in the sky, how would they know? At coin shows about half the dealers keep track of sales. These are out of town people that use traveling expenses, hotel bills, etc for tax purposes. The other half of the dealers are there as a weekend, off the record, no one knows job. They don't pay taxes on something that never happened. Friend of mine took a pile of coins to a metal recycler and was given cash, no questions asked, no info volunteered. TAXES? On what?
No one pays taxes on their sales from garage/yard/estate sales. Around me no one pays taxes that sells at flea markets. And that is close to big buisness lately. Pan handlers that play musical instruments on corners and collect money from people don't know what a tax statement would look like. On TV they interviewed some of them and found some make hundreds a day. TAXES?
Then naturally the 12,000,000 or so illigals that no one can find make money and pay nothing in taxes either but no one can find them so why should they pay taxes.
If our government could ever collect all the taxes on all the stuff and from all the people that are supposed to pay taxes, there would be enough money to actually not be in the red all the time.
Carl
It would be a help Carl but I don't think we could tax our way out of the national debt at the rate goverment is spending.
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Fanaticism is doubling one's efforts, yet forgetting one's purpose.
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 08/01/2007 : 20:21:50
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I am a firm believer that it doesn't matter how much they collect, they will find a way to spend more than that.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
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just carl
Penny Hoarding Member
USA
601 Posts |
Posted - 08/02/2007 : 07:02:21
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It would be a help Carl but I don't think we could tax our way out of the national debt at the rate goverment is spending.
I stand corrected of course. Just to true that when they pay over a hundred dollars for a hammer, reported not long ago, that regardless of how much taxes they collect, it will vanish somewhere.
I still remember way, way back when here in Illinois the government said we are going to have a lottery and the profits will pay for the school systems so taxes will deminish. Our school system is now broke, we pay higher taxes and no one knows where the money from the lottery go to.
Carl |
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deleted
43 Posts |
Posted - 08/02/2007 : 08:56:10
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Here's the thing that's different with pennies. With silver coins, it is most likely that the seller did not buy the coins at face value, so it is more difficult for an outsider to determine if the seller actually made any profit on the deal. With pennies, however, it may be assumed that the seller purchased the coins at face value, so it the seller sells the coins at 3 or 5 times face value, the government may automatically assume a profit of that much.
What happens when people sell stuff on ebay? Who is watching over them to make sure they accurately report their profit? I think the selling of pennies would be similar. And speaking of Ebay, if a market ever really develops for boxes of pennies, they can be shipped to the buyer for a flat rate of $8.95 anywhere in the U.S. In fact, the UPS makes flat rate shoe boxes that would fit a $25.00 box of pennies perfectly. |
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Hoarding is for dorks.
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