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n/a
deleted
17 Posts |
 Posted - 04/05/2007 : 13:52:36
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I began to touch on this in another thread I started, but will avoid hijacking it further by starting a new thread.
I understand many of you plan to hoard for the long term, perhaps even indefinite term, but the bottom line is that pre-1982 pennies, and all nickels, have immediate value above face. That means that hoarding coins is no longer speculation; they have tangible value above government mandated 'face' value *today*.
For simplification I am going to focus on Nickels, which removes the factor of sorting and acquisition efforts required to stockpile. I can have my bank order me any amount of Nickels I want within a week. No sorting, no effort.
Current metal prices value a Nickel at ~$.075, or 75% above face. Factor in say 25% for smelting costs and you should still turn 50% profit for something that requires zero effort to acquire in ANY desired quantity. This shows there is some level of profit potential. Unlike other investments this profit is *not* based on speculation and is *immediate.* There are not many other theoretical investments where you can hand someone $100 and get $150 in change.
I may be ignoring the difficulties of separating the Nickel from the Copper, if anyone has information on the difficulty/cost of this please share.
Now for the point. That 50% gain is an unrealized gain. If your stock portfolio goes up $100 today you can't go out and spend $100 during the day and consider yourself even. You need to 'cash out.' An old saying in coin collecting is a coin is worth what someone will pay for it, regardless of what any price guide claims. How do you get someone to pay $.075 for a Nickel.
First instinct is to melt it down and sell it as scrap. You probably won't get as much as the New York Mercantile Exchange lists, but somewhere in that neighborhood (ie the person buying your copper/nickel isn't doing charity work, they need profit margins too.) Recent bans make melting your coinage, or exporting it, illegal. So unless your interested in breaking the law this is not a good way to realize your gains.
So the million dollar question is, how do you 'cash out.' Even if metal prices double again, and the nickel is worth $.15 what can you do with them besides pile them up in jars?
Intuitively it seems that buying up nickels produce instant gains, and they do, but those are unrealized gains, and I see no realistic way of realizing that profit.
So, you pile them up and save them hoping for one of the following to occur:
1: The nickel is debased (steel, or whatever) and after several years of both the public and government pulling out older CU/NI nickels they are uncommon enough that ban is lifted from smelting (similar to 1964).
Potential Problems: Will the public pull out the old nickels? Copper and Nickel certainly do not have the public appeal that Silver has. If the public does not begin to hoard, the government has no reason to pull out the coinage themselves.
Time Period: Rebasing would likely be soon, but I would guess at LEAST 10 years to see profits. The public may slowly grab the coins, but it will not be a 'gold rush' like silver was. Most people do not recognize significant value from CU/NI scrap.
Worthwhile?: I would lean towards no. During that time period you would have to outperform alternative investments. Historical S&P gains about 8% a year, take out say 3% for average inflation, and you still will have a hard time making money over 10+ years with hoarding.
2: The nickel is debased or removed from circulation and due to hoarding the numistic value of the coins is higher than face.
Potential problems: The number of nickels and pennies is ENORMOUS. People realize that they could have value, and are saved in huge quantities. Couple that with the metals having little significance to the general public and they likely would not ever have numistic value above melt value.
Time period: Again rebaseing could be very soon, but years and years to create any rarity. At least 20 years, and even then unlikely.
Worthwhile: Longer time period and even less likely then increasing melt value, again I would say no.
3: Metal prices rise high enough that people are willing to break the law to profit.
Potential problems: At current levels the risk is probably not worth the reward. Considering the scale that would be needed to make serious money an individual would have to be seriously committed to try this. Will metal prices raise that high? Will the dollar really sink that low?
Time period: No idea. Things could stay steady, could reverse, or could continue. China certainly needs lots of metals.
Worthwhile?: Again I wouldn't bet on it. Conventional investments are likely more worthwhile.
4: That leaves the crap hitting the fan scenario. I personally am more optimistic than many on this forum. I don't see a US or Global economy collapse any more imminent than global warming, asteroids, mega-volcanoes, etc. I think it is a serious threat and a serious concern, but I'm not really to call doomsday yet.
Potential problems: If I were convinced of an economy collapse I would put all my money into containers and gasoline reserves. In a time of true crisis I am certain that would provide much more security then chunks of copper.
Worthwhile?: No. If a SHTF scenario happens I think a firearm, case of bullets, and a good head on your shoulders would fare much better than stockpiling old coins.
Any other obvious scenarios? Is this actually profitable?
Questions, comments, concerns, beef?
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Edited by - n/a on 04/05/2007 13:54:22 |
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Canadian_Nickle
Penny Hoarding Member
Canada
938 Posts |
Posted - 04/05/2007 : 14:16:20
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"I don't see a US or Global economy collapse any more imminent than global warming, asteroids, mega-volcanoes, etc."
No, those are all scheduled for roughly the same time in 2012.
________________________
"A nickel's nothing to scoff at."
C. Montgomery Burns
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CA10Ag250:CA50Ag100:CA25Ag30:CA500Ag48:US100Ag20:CA1000Ag16
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n/a
deleted
4 Posts |
Posted - 04/05/2007 : 14:23:09
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“Will the public pull out the old nickels? Copper and Nickel certainly do not have the public appeal that Silver has.”
This forum is proof that the ‘public’ will sort, but the ‘public’ only has to be a few hundred people in Canada and a few thousand in the US. I did research a year ago that suggests there are 40 nickels per capita in Canada, or 1.2 billion total. Canadian Nickel has sorted almost 200,000 mostly by hand. Conservatively with his new Ryedale he can multiply that by ten in a year. That’s 2 million nickels a year.
“Worthwhile?: I would lean towards no. During that time period you would have to outperform alternative investments. Historical S&P gains about 8% a year, take out say 3% for average inflation, and you still will have a hard time making money over 10+ years with hoarding.”
Historical S&P returns are irrelevant right now; we are in the commodities phase of the eternal commodities versus paper assets business cycle. The same factors that have guaranteed negative real returns on the S&P over the last six years have caused an eightfold increase in the price of nickel. We are less than halfway into this phase of the macro-cycle. And inflation is our friend; it is always prominent in the commodities phase of the cycle, not the paper phase, and it guarantees, at least for awhile, rising prices for things like nickel.
“ Metal prices rise high enough that people are willing to break the law to profit.”
No need to break the law. The junk copper and nickel coin market is developing right now, identically to the junk silver coin market development in the 70’s. |
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Canadian_Nickle
Penny Hoarding Member
Canada
938 Posts |
Posted - 04/05/2007 : 14:24:04
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What is the actual wording of the melt ban? 'Cause this is what I've been doing:
For each nickel I get, I make my computer print out a 5-cent credit note in the name of my numbered corporation. Now those cents exist apart from the metal itself, as debit notes against that same value. I throw the coins in a large acid pool to dissolve them, and then using fractional electrolosys to a dual-alloy bar, pull out an amorphous cone of copper with a cap of pure nickel. I saw off the cap and then sell the two lumps, plus the suitcases full of debit notes, to a scrapyard.
________________________
"A nickel's nothing to scoff at."
C. Montgomery Burns
HoardCode0.1: M28/5CAON:CA5Ni35000:CA1Cu1200:CA100Ag345:
CA10Ag250:CA50Ag100:CA25Ag30:CA500Ag48:US100Ag20:CA1000Ag16
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n/a
deleted
17 Posts |
Posted - 04/05/2007 : 14:29:01
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quote:
"I don't see a US or Global economy collapse any more imminent than global warming, asteroids, mega-volcanoes, etc."
No, those are all scheduled for roughly the same time in 2012.
You know what I mean. People have been forecasting collapses and societal failures forever. They have occurred locally around the globe, sure, but the closest thing in the States was the great depression (I know your in Canada, but our fates are likely similar).
My point is that if anything like that was inevitable with 100% certainty within my or your lifetime then I don't think anyone would argue that hoarding pennies/nickels would be more effective than things such as hunting supplies, oil/gasoline, generators, and the like which would be *FAR* more effective and useful then hunks of copper/nickel.
Could it happen? Sure. But if it happened I think my investment portfolio would be pretty low on the list of significant concerns.
quote:
This forum is proof that the ‘public’ will sort, but the ‘public’ only has to be a few hundred people in Canada and a few thousand in the US. I did research a year ago that suggests there are 40 nickels per capita in Canada, or 1.2 billion total. Canadian Nickel has sorted almost 200,000 mostly by hand. Conservatively with his new Ryedale he can multiply that by ten in a year. That’s 2 million nickels a year.
This forum represents a very select few of the public. Most 'general public' people wouldn't be able to tell you the difference between a pre and post 1982 penny, and debasing happened 25 years ago. Now the increase in copper prices is what has brought interest. The mint estimates between 140 and 200 Billion pennies in circulation. It will take more than a few thousand people pulling US coins to make a significant dent. If we go with a low estimate of 100billion pennies, 25billion of which are copper pre-1982, and go with 'a couple thousand' meaning 100,000 people aggressively pulling coins thats 250,000 pennies a piece for each of those 100,000 people. We certainly have our work cut out for us.
I am simply saying that copper does not have the allure that silver does, so things *may* not play out just like the 1960's. I don't claim to have any answers.
quote:
Historical S&P returns are irrelevant right now; we are in the commodities phase of the eternal commodities versus paper assets business cycle. The same factors that have guaranteed negative real returns on the S&P over the last six years have caused an eightfold increase in the price of nickel. We are less than halfway into this phase of the macro-cycle. And inflation is our friend; it is always prominent in the commodities phase of the cycle, not the paper phase, and it guarantees, at least for awhile, rising prices for things like nickel.
I think S&P returns are very relevant. $100 invested in 1982 (year pennies changed, 25 years ago) would need to be worth $210 to be 'even money.' Investing in metals PRESERVE wealth, they do not create it. I like the saying that "An ounce of gold buys a nice suit" and it has been pretty accurate. That $100 over 25 years of 8% would be worth $685. So if you invested in the S&P instead of 'inflation hedges' for that period of time you would be better off.
Now if you have reason to believe that over the next 25 years the S&P will not yield returns like it has in the past, and by enough of a margin to not keep up with inflation, then you have a strong argument for metals. At the same rate if you think the increase of, say, Nickel will outperform alternative markets (due to Chinese/Indian demand, etc) than that is a sound investment.
quote:
What is the actual wording of the melt ban?
"The United States Mint has implemented regulations to limit the exportation, melting, or treatment of one-cent (penny) and 5-cent (nickel) United States coins, to safeguard against a potential shortage of these coins in circulation."
I suppose an acid bath counts as treatment 
My point is that a Nickel is worth more than $.05 TODAY. Immediately. But, you can not realize that profit. What in the FUTURE is going to change that fact? |
Edited by - n/a on 04/05/2007 15:07:14 |
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n/a
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4 Posts |
Posted - 04/05/2007 : 17:20:14
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quote:
This forum represents a very select few of the public. Most 'general public' people wouldn't be able to tell you the difference between a pre and post 1982 penny, and debasing happened 25 years ago. Now the increase in copper prices is what has brought interest. The mint estimates between 140 and 200 Billion pennies in circulation. It will take more than a few thousand people pulling US coins to make a significant dent. If we go with a low estimate of 100billion pennies, 25billion of which are copper pre-1982, and go with 'a couple thousand' meaning 100,000 people aggressively pulling coins thats 250,000 pennies a piece for each of those 100,000 people. We certainly have our work cut out for us.
You are right about copper. I got carried away and forgot my basic decision over the year I’ve been researching this (a little at a time). My basic decision is that any effort for copper would be far better spent on Canadian nickel, where the potential dwarfs copper.
For Canadian nickel though, I do maintain that a few hundred serious Canadian sorters is all it takes. In fact, the US mint estimate of 140 to 200 billion pennies is my own source for nickels; I believe they estimate about 12 billion American nickels; I just extrapolated that to about 1.2 billion Canadian nickels.
Even for US copper, it’s not inconceivable that 100,000 people could get serious enough to sort a million pennies each. I’ll bet anyone with a Ryedale will probably sort a million over the next five years or so. I too doubt it’ll get to 100,000 people though, but even 10,000 serious sorters, plus 10 million casual sorters, could make a serious dent in the 25% content that is currently copper.
quote:
I think S&P returns are very relevant. $100 invested in 1982 (year pennies changed, 25 years ago) would need to be worth $210 to be 'even money.' Investing in metals PRESERVE wealth, they do not create it. I like the saying that "An ounce of gold buys a nice suit" and it has been pretty accurate. That $100 over 25 years of 8% would be worth $685. So if you invested in the S&P instead of 'inflation hedges' for that period of time you would be better off.
Now if you have reason to believe that over the next 25 years the S&P will not yield returns like it has in the past, and by enough of a margin to not keep up with inflation, then you have a strong argument for metals. At the same rate if you think the increase of, say, Nickel will outperform alternative markets (due to Chinese/Indian demand, etc) than that is a sound investment.
Of course going back to 1982 appears to make the S&P relevant, but you just happen to have chosen the end of the previous commodities phase in the business cycle. However, it is not the 1982-2000 paper phase that is relevant to coin sorters, it is the current commodities phase that started about 2001. And it is that very phase that has made BOTH coin sorting relevant for the last six years AND made the S&P a bad investment for the last six years. The point is not whether your money is best invested in the S&P versus an undervalued commodity (copper and nickel coins) for some period of 25 years or longer, the point is whether your money is best invested in the S&P versus the coins NOW.
The last commodities cycle lasted only 10-11 years; 1971-1981. It seems virtually certain that this one will be much longer; we are already six years into it and we have seen nothing like the politics, volatility and real gains of the 70’s, even though the potential for these is much greater now than the 70’s.
quote:
My point is that a Nickel is worth more than $.05 TODAY. Immediately. But, you can not realize that profit. What in the FUTURE is going to change that fact?
Some here can probably answer this better than I, but from the sound of it, there are ebay lots of true nickel Canadian nickels going for nearly melt value (currently about 5 times face) right now. In the future, this and similar market venues will grow. |
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n/a
deleted
17 Posts |
Posted - 04/05/2007 : 17:57:46
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quote:
For Canadian nickel though, I do maintain that a few hundred serious Canadian sorters is all it takes. In fact, the US mint estimate of 140 to 200 billion pennies is my own source for nickels; I believe they estimate about 12 billion American nickels; I just extrapolated that to about 1.2 billion Canadian nickels.
Very likely. For those of us south of the boarder its a different ballgame. Its easier to corner the market when its small. American nickels are still being produced, so for every one you pull out the mint will just make another. Granted they would do so at a financial loss, and would expedite the inevitable re/debaseing.
quote:
Even for US copper, it’s not inconceivable that 100,000 people could get serious enough to sort a million pennies each. I’ll bet anyone with a Ryedale will probably sort a million over the next five years or so. I too doubt it’ll get to 100,000 people though, but even 10,000 serious sorters, plus 10 million casual sorters, could make a serious dent in the 25% content that is currently copper.
Again very possible. However finding enough people with $10,000 spare cash AND the ability/dedication to sort and horde the copper would be a difficult task. More likely would be a scenario of increased public awareness where 50%+ of the population get into the habit of pulling out and tossing coppers in jars. Public awareness is key....if we get to the point of Zinc's being worth $.02 and coppers being in git $.04 neighborhood I think that would be the 'tipping point.'
quote:
The last commodities cycle lasted only 10-11 years; 1971-1981. It seems virtually certain that this one will be much longer; we are already six years into it and we have seen nothing like the politics, volatility and real gains of the 70’s, even though the potential for these is much greater now than the 70’s.
Great points. Short term commodities and metals can be great investments. They may very well outperform other sectors in the near future. Only careful research and a bit of luck can tell you whether thats the case.
Too many people read 'Buy Gold!' pamphlets or websites and think its a novel new guaranteed investment. Metals may be a great investment, they certainly have been for the last few years, but in 100 years an ounce of gold will be worth an ounce of gold (the old 1ounce=nice suit). How many dollars/Euros/Canadian$s does it take to buy that ounce of gold is the real question.
SHORT TERM (say less than 10-15years) metals can be an investment and used for capital accomeulation. LONG TERM metals act as capital preservation.
So next 5 years? Who knows. We would all love to have a crystal ball, and despite many claims, no one actually does.
quote:
Some here can probably answer this better than I, but from the sound of it, there are ebay lots of true nickel Canadian nickels going for nearly melt value (currently about 5 times face) right now. In the future, this and similar market venues will grow.
I have little knowledge of the market for Canadian coins. I do know that the market for sorted pre-1982 pennies is thin at best, and a market for nickels is non-existent.
At this point you need to accept, regardless of daily metal values and coinflation.com statistics, that until the melting ban is lifted OR a solid secondary marketplace for copper pennies (and afterwards Nickels, as they will very very likely be rebased soon) develops that any value you place on pennies/nickels is purely paper money and they are only worth face value. |
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n/a
deleted
37 Posts |
Posted - 04/05/2007 : 19:41:39
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A very interesting topic and very well thought out replies!
I look at it from a simpler, pragmatic viewpoint. Diversification is the key to building a solid portfolio for whatever the future holds. I own precious metals, stocks, bonds, mutual funds, as well as copper and nickel. (Not to mention a S&W .22 revolver and SIG 9mm) 
Since no one can tell the future, makes sense to me to spread it around, cover your bases, and hope for the best and plan for the worse.
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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 04/05/2007 : 20:46:56
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Did you all check out You must be logged in to see this link. today. Both copper and nickel were down but look at this.....
1909-1982 Cent (95% copper) * $0.01 $0.0215236 215.23%
1946-2007 Nickel $0.05 $0.0889196 177.83%
1982-2007 Cent (97.5% zinc) * $0.01 $0.0087156 87.15%
By the way, isn't coinflation a heck of a site? My point here is that this coin metal melt value idea is not as big a secret as some of you may think thanks to coinflation and sites such as ours.
Copper and nickel fever is growing red hot!
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For good times to come or bad times to come, now is the time to save your copper or nickel coins. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 04/06/2007 : 04:29:29
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quote:
Originally posted by Magua
[quote]This forum represents a very select few of the public. Most 'general public' people wouldn't be able to tell you the difference between a pre and post 1982 penny, and debasing happened 25 years ago. Now the increase in copper prices is what has brought interest. The mint estimates between 140 and 200 Billion pennies in circulation. It will take more than a few thousand people pulling US coins to make a significant dent. If we go with a low estimate of 100billion pennies, 25billion of which are copper pre-1982, and go with 'a couple thousand' meaning 100,000 people aggressively pulling coins thats 250,000 pennies a piece for each of those 100,000 people. We certainly have our work cut out for us.
I got my share.. but I am greedy.. I want more! <G>
Alas, my bank won't order Canadian Nickels for me.. so I guess I will just hoard more pennies.
Great thread.. thanks for starting it.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
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n/a
deleted
17 Posts |
Posted - 04/06/2007 : 07:40:08
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Ardent, you are spot on when you point out growing awareness. A quick search on google can prove that.
In some ways the melt ban took things from "Crazy old men hiding pennies in their basements" to a significant concern and profit potential verified by government statements (USMint). |
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 04/06/2007 : 07:59:37
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quote:
Originally posted by Magua
Ardent, you are spot on when you point out growing awareness. A quick search on google can prove that.
In some ways the melt ban took things from "Crazy old men hiding pennies in their basements" to a significant concern and profit potential verified by government statements (USMint).
The ban did confirm the melt value of such coins. Speculators will always be at least one step ahead of the goverment.
You post great threads. We are expecting to hear a lot more from you around here.
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For good times to come or bad times to come, now is the time to save your copper or nickel coins. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 04/06/2007 : 08:18:12
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"Worthwhile?: I would lean towards no. During that time period you would have to outperform alternative investments. Historical S&P gains about 8% a year, take out say 3% for average inflation, and you still will have a hard time making money over 10+ years with hoarding."
Your arguement has some serious flaws.
First thing unless you are living in a cave, you should have noticed that inflation is running way more 3%. Most sources that have tried to calculate it themselves (not using made up government numbers) find that it is running closer to 7%-9%.
Second thing is you are comparing the return rates of a high risk investment to that of a low risk investment. In all investments there is a risk/reward ration. And you can not compare the rate of return of an investment that can go down (S&P) to one that can not go down without taking a serious look at the risk side of the equation.
The third thing is that Nickels and Pennies are a hedge against inflation! If inflation goes up 7%-9% a year, the metal content in Nickels and Pennies will go up 7%-9%. At this does not factor in possibilty of continued increasing demand from China for base metals. In an inflationary environment, this is better than investments of similiar risk such as a CD or savings a account.
The worst case scenario for Pennies and Nickels is a protracted period of deflation in the US that takes the Chinese economy down with it (we are not buying and the Chinese can't find anybody else to sell to). In this case, you will get your initial investment back and lose out on the CD or savings account interest that you could have been making.
Now if you are looking to make larger returns on riskier investments that is another story altogether, a story not really related to Nickel/Penny investment. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 04/06/2007 : 08:28:06
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"Breaking the law" "Considering the scale that would be needed to make serious money an individual would have to be seriously committed to try this."
5 boxes of nickels per bank, 10 banks a day, and assuming $50 profit per box is $2500 per day profit. 5 days a week is 650k a year.
The maximum penalty is $10,000 and 5 years in prison. I figure a small time 1-2 person operation first offender family man gets parole and the 10k fine. Unless of course you are the first to get caught and they want to make an example of you...then you get the max.
I also suggest search on cupola furnace. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 04/06/2007 : 08:33:13
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"American nickels are still being produced, so for every one you pull out the mint will just make another. Granted they would do so at a financial loss, and would expedite the inevitable re/debaseing."
The US Mint is losing about 4 mil a month making nickels or 48 mil a year. This is based on their average monthly nickle production. This loss is occurring with hoarders having negligable impact on the production so far. So even if there was 0 hoarding there is still 48 mil per year in pressure on the US Mint to change the nickel. |
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 04/06/2007 : 11:53:48
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quote:
Originally posted by horgad
"American nickels are still being produced, so for every one you pull out the mint will just make another. Granted they would do so at a financial loss, and would expedite the inevitable re/debaseing."
The US Mint is losing about 4 mil a month making nickels or 48 mil a year. This is based on their average monthly nickle production. This loss is occurring with hoarders having negligable impact on the production so far. So even if there was 0 hoarding there is still 48 mil per year in pressure on the US Mint to change the nickel.
Since when has the government worried about losses? They will just chunk out another batch of Dollars and scoff at the miniscule negative sienorage on those nickels. But I agree, with or without hoarders, they will probably change the composition in the next few years.
"Preserving coinage.. 2 tons at a time"
HoardCode0.1:M48/14USCA:US1Cu639700:US5Ni2400:CA5Ni46 |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 04/06/2007 : 12:26:17
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"Since when has the government worried about losses?"
I agree. The government could easily ignore a 48 mil loss per year for a long time and like you said the mint is making a ton on those dollar coins. But history is on our side:) The mint has a pretty good record of changing money losing coin compositions...albeit slowly.
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Edited by - horgad on 04/06/2007 12:27:08 |
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n/a
deleted
17 Posts |
Posted - 04/06/2007 : 12:57:03
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quote:
First thing unless you are living in a cave, you should have noticed that inflation is running way more 3%. Most sources that have tried to calculate it themselves (not using made up government numbers) find that it is running closer to 7%-9%.
Haven't seen any numbers reflecting 7-9%, have any sources? Heres a set of data I found from the last 50 years or so.
""
U.S. Retail Price Inflation 1950-2007
1950 = 1.3%
1951 = 7.9%
1952 = 1.9%
1953 = 0.8%
1954 = 0.7%
1955 = -0.4%
1956 = 1.5%
1957 = 3.30%
1958 = 2.8%
1959 = 0.7%
1960 = 1.70%
1961 = 1.0%
1962 = 1.0%
1963 = 1.3%
1964 = 1.3%
1965 = 1.6%
1966 = 2.9%
1967 = 3.1%
1968 = 4.2%
1969 = 5.5%
1970 = 5.7%
1971 = 4.4%
1972 = 3.2%
1973 = 6.2%
1974 = 11.0%
1975 = 9.1%
1976 = 5.8%
1977 = 6.5%
1978 = 7.6%
1979 = 11.3%
1980 = 13.5%
1981 = 10.3%
1982 = 6.2%
1983 = 3.2%
1984 = 4.3%
1985 = 3.60%
1986 = 1.9%
1987 = 3.60%
1988 = 4.1%
1989 = 4.8%
1990 = 5.4%
1991 = 4.2%
1992 = 3.0%
1993 = 3.0%
1994 = 2.6%
1995 = 2.8%
1996 = 3.0%
1997 = 2.3%
1998 = 1.6%
1999 = 2.2%
2000 = 3.40%
2001 = 2.8%
2002 = 1.6%
2003 = 2.3%
2004 = 2.68%
2005 = 3.40%
2006 = 3.2%
2007 = 2.2%
""
quote:
Second thing is you are comparing the return rates of a high risk investment to that of a low risk investment. In all investments there is a risk/reward ration. And you can not compare the rate of return of an investment that can go down (S&P) to one that can not go down without taking a serious look at the risk side of the equation.
You are right about the risk/reward. Hoarding pennies/nickels has zero down side risk, or at least very little (if metal dips below face value you lose to inflation), they will always be worth face value. However every year they sit in your stash you "lose" what money you would have gained from traditional investments. So, although very safe, you have to consider the possiblity that a low risk index fund may be superior.
S&P index funds are not high risk investments. They are the lowest risk of any stock type investment. Yes, they absolutely can go down, but they won't go to zero, and because of that, you won't triple your money in a year. In any 10 year period your chances of losing money is very low, and losses over a 20 year period have never occurred to my knowledge (may not have even occurred over a 10 year period). Admittedly an S&P fund certainly contains more risk then penny/nickel stockpiling, but is still low risk so long as you aren't going to be forced to withdraw funds in the immediate future (good for retirement, etc).
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The third thing is that Nickels and Pennies are a hedge against inflation! If inflation goes up 7%-9% a year, the metal content in Nickels and Pennies will go up 7%-9%. At this does not factor in possibilty of continued increasing demand from China for base metals. In an inflationary environment, this is better than investments of similiar risk such as a CD or savings a account.
Which is exactly my point. Metal stockpiles are capital *preservation* not capital appreciation, unless you are betting on metal prices rising, in which case you are really investing in commodity futures which is risky business.
If you have $100 in gold/silver/copper/nickel/whatever in 10 years you will have approximately $100 adjusted for the last 10 years of inflation. You haven't made any money, only prevented the monetary loss you would have incurred due to inflation if that $100 was in paper money. |
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17 Posts |
Posted - 04/06/2007 : 13:22:43
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By the way I am not saying that hoarding coins is a bad investment. What I am saying is that the rate of annual return on coin hoarding needs to be at least in the same ballpark as alternative investments to be worthwhile. And, I believe it can be, IF you are able to realize those gains in a relatively short term. If you are forced to hold the stockpile for years and years the return you could have had in a relatively safe investment such as an S&P index fund becomes harder and harder to beat.
I view CU/NI hoarding is similar to commodity futures, EXCEPT you are able to have an entry point far far below market value, which you would *never* have the opportunity to do on the street. If you are investing in commodity futures you are basically betting whether prices will rise or fall based on TODAY's values. With coin hoarding you are able to (in the case of the pre-82 penny) 'buy' futures at HALF (1penny=2.2cents) market value which makes it a very safe investment. Even if prices of metals fall they will likely be above face value, and in the remote chance they fall way back below face you can always 'cash out' and only lose out based on inflation.
Every pre-82 penny you acquire you have theoretically doubled your money. Now how do you take that unrealized paper profit and turn it into a realized profit? The sooner you are able to realize that profit the better, as the longer you hold the stockpile the more year-over-year returns on other investments (whether it be index funds, money market funds, CDs, or whatever) begin to gain and become more efficient as they are tools of capital appreciation, not just preservation.
So to me thats the million dollar question, how do you realize your theoretical paper profits? If you can't than even if pennies were cast of pure gold, there is no money to be made.
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 04/06/2007 : 14:04:30
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"Haven't seen any numbers reflecting 7-9%, have any sources? Heres a set of data I found from the last 50 years or so."
"U.S. Retail Price Inflation 1950-2007"
<SNIP>
The problem is the government keeps changing the calculation and by mere coincidence the inflation numbers always are lower post change than prechange. A few people, kudos to them, are calculating inflation on their own. For example: if you use the Government's own method from 1990 you get current inflation at 5.7% and if you use the Government's own method from 1980 you get current inflation at 10% Comparing government official past inflation rates to current rate is meaningless because the calculation methods keep changing. It makes it a comparison to apples and oranges. Assumming your list is the official rate, Id say inflation today is similiar to inflation in the late 70s. 10 percent today using the old method and 10 percent than using the old method...
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 04/06/2007 : 14:18:11
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"What I am saying is that the rate of annual return on coin hoarding needs to be at least in the same ballpark as alternative investments to be worthwhile."
I expect my gain on the nickels that I am buying today to be the real rate of inflation + 75%. The plus 75% is because I am currently buying them at a 75% discount. I have no problems sitting on them for years for that kind of return.
I don't mind sceptics...I happen to be one myself. But free is free and if someone is going to offer to sell me .089 cents worth of nickel and copper for .05 cents you better believe that I am going to jump on it. |
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17 Posts |
Posted - 04/06/2007 : 15:15:09
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I expect my gain on the nickels that I am buying today to be the real rate of inflation + 75%. The plus 75% is because I am currently buying them at a 75% discount. I have no problems sitting on them for years for that kind of return.
Don't forget you need to divide that 75% by the period held to get annualized returns. The penny was debased 25 years ago and there is just beginning to be a market for sorted copper pennies. If the nickel was debased today, and a market willing to pay melt value didn't develop for 25 years that 75% 'head start' equates to 2.25% annually + actual inflation rate.
If that same market develops in 5 years the 75% 'head start' equates to 12% annually + actual inflation...which would be nearly impossible to do reliably through stocks/mutual funds/CDs/etc.
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I don't mind sceptics...I happen to be one myself. But free is free and if someone is going to offer to sell me .089 cents worth of nickel and copper for .05 cents you better believe that I am going to jump on it.
I am willing to jump on it as well, so long as I can redeem that profit in a timely fashion. The sooner you can capitalize on your profits the better.
Ideally one would want to capitalize on the profits Today. The sooner the better. If you could turn your .089 in NI/CU into actual money today you could essentially act as an arbitrageur using differential market prices for theoretically unlimited profit ($100 in nickels becomes $175, spent on nickels becomes $300, etc, etc).
What I am stressing is that each year that passes causes your annualized returns drop significantly.
I am not informed enough to really talk about actual inflation vs reported inflation figures. I can say from day to day experiences that 7-10% seems way high. 10% inflation would mean things today are 35% more expensive than they were 3 years ago in 2004. As an example that would be a $2.00 increase in the cost of a McDonald's Value Meal in 3 years. 3% does not seem that far fetched to me. I have my gripes with the government, but there are plenty of people out there that take the "they are out to get us" attitude beyond logical limits. There is a line between skeptical and conspiracy theorist.
That website for reporting inflation rates seems a bit 'conspiracy theory-ish' to me, trying to sell the "real numbers" in a newsletter for $175 a year. Just my $.02. |
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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
Posted - 04/06/2007 : 16:31:14
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While we are on the subject on how to profit from our coins, realized vs unrealized value, There are uses for nickels and pennies that have been overlooked.
Coin Jewelry.
Coin objects of art.
I recall owning an ashtray made from Mexican 20 centavo coins, I can't recall how many coins there were that made up the ashtray, but you can be sure that the object sold for more than face value.
Could there be a market for coin art someday?
I once saw a bracelet made from buffalo nickels selling for more than face value. Granted, buffalo nickels always sell for a premium, but what law is there preventing coins being turned into jewelry? If there is such a law, is it that strictly enforced? I have seen gold eagles turned into high end jewelry, so why not nickels? (Maybe gold plated nickels turned into a bracelet.)
Cut coins? There used to be a demand for coins that were cut with a fine saw, the outline was cut out and the image inside was left behind. I bought a silver carabu pin that was made form a Canadian Coin, you could see part of Queen Elizabeth from the back.
Painted coins, like state quarters with their backs colorized and sold for a premium is an idea, though the westward series would be easier to colorize and sell than the plain backed nickels.
We need to alter our thinking as far as metal value-coin value are concerned.
Creative thinking was responsible for turning a funny looking tension spring into the slinky, and creative thinking turned some drinking straws and odd bits of plastic into K'NEX.
Don't limit yourself to just metal/coins. Maybe there is a crazy but profitable idea out there for our coins.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly. |
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Realized vs Unrealized Gains and Value
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