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Mass Inflation Ahead – Save Your Nickels!
mrearlygold
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Mass Inflation Ahead – Save Your Nickels!
by James Wesley, Rawles
I've often mused about how fun it would be to have a time machine and travel back to the early 1960s, and go on a pre-inflation shopping spree. In that era, most used cars were less than $800, and a new-in-the box Colt .45 Automatic sold for $60. In particular, it would be great to go back and get a huge pile of rolls of then-circulating US silver dimes, quarters, and half dollars at face value. (With silver presently around $15.50 per ounce, the US 90% silver (1964 and earlier) coinage is selling wholesale at 11 times face value – that is $11,000 for a $1,000 face value bag.)
The disappearance of 90% silver coins from circulation in the US in the mid-1960s beautifully illustrated Gresham's Law: "Bad Money Drives Out Good." People quickly realized that the debased copper sandwich coins were bogus, so anyone with half a brain saved every pre-'65 (90% silver) coin that they could find. (This resulted in a coin shortage from 1965 to 1967, while the mint frantically played catch up, producing millions of cupronickel "clad" coins. This production was so hurried that they even skipped putting mint marks on coins from 1965 to 1967.)
Alas, there are no time machines. But what if I were to tell you that there is a similar,albeit smaller-scale opportunity? Consider the lowly US five cent piece – the "nickel."
Unlike US dimes and quarters, which stopped being made of 90% silver after 1964, the composition of a nickel has essentially been unchanged since the end of World War II. It is still a 5 gram coin that is an alloy of 75% copper and 25% nickel. (An aside: Some 1942 to 1945 five cent coins were made with 35% silver, because nickel was badly-needed for wartime industrial use. Those "War Nickels" have long since been culled from circulation, by collectors.) According to www.Coinflation.com, the 1946–2008 Nickel (with a 5 cent face value) recently had a base metal value of $0.0677413. That was 135.48% of its face value. (In recent months, with the recession, and a decline in industrial demand for copper, the base metal value of a nickel has dropped. But even at today's commodities prices, you will start out with a 10% gain by amassing a stockpile of nickels.)
SAVE THOSE NICKELS!
by James Wesley, Rawles
I've often mused about how fun it would be to have a time machine and travel back to the early 1960s, and go on a pre-inflation shopping spree. In that era, most used cars were less than $800, and a new-in-the box Colt .45 Automatic sold for $60. In particular, it would be great to go back and get a huge pile of rolls of then-circulating US silver dimes, quarters, and half dollars at face value. (With silver presently around $15.50 per ounce, the US 90% silver (1964 and earlier) coinage is selling wholesale at 11 times face value – that is $11,000 for a $1,000 face value bag.)
The disappearance of 90% silver coins from circulation in the US in the mid-1960s beautifully illustrated Gresham's Law: "Bad Money Drives Out Good." People quickly realized that the debased copper sandwich coins were bogus, so anyone with half a brain saved every pre-'65 (90% silver) coin that they could find. (This resulted in a coin shortage from 1965 to 1967, while the mint frantically played catch up, producing millions of cupronickel "clad" coins. This production was so hurried that they even skipped putting mint marks on coins from 1965 to 1967.)
Alas, there are no time machines. But what if I were to tell you that there is a similar,albeit smaller-scale opportunity? Consider the lowly US five cent piece – the "nickel."
Unlike US dimes and quarters, which stopped being made of 90% silver after 1964, the composition of a nickel has essentially been unchanged since the end of World War II. It is still a 5 gram coin that is an alloy of 75% copper and 25% nickel. (An aside: Some 1942 to 1945 five cent coins were made with 35% silver, because nickel was badly-needed for wartime industrial use. Those "War Nickels" have long since been culled from circulation, by collectors.) According to www.Coinflation.com, the 1946–2008 Nickel (with a 5 cent face value) recently had a base metal value of $0.0677413. That was 135.48% of its face value. (In recent months, with the recession, and a decline in industrial demand for copper, the base metal value of a nickel has dropped. But even at today's commodities prices, you will start out with a 10% gain by amassing a stockpile of nickels.)
SAVE THOSE NICKELS!
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
0
Comments
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
<< <i>How expensive will it be for refiners to seperate the copper from the nickel? >>
Why would they be melted down?
Do they melt wheat cents?
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
audience, each owning thousands (or more), which causes the premium above face value. Nickels
currently do not have that audience. If they did, they might jump to a dime each. The only problem
is that the U.S. Mint is still making them for 5 cents each, killing the premium until they discontinue
the denomination.
<< <i>
<< <i>How expensive will it be for refiners to seperate the copper from the nickel? >>
Why would they be melted down?
Do they melt wheat cents? >>
Wheat cents are collectable unlike common nickels.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
If you can't melt or export them, how would you take advantage of the real value??
A nickel worth six cents is like having a great big penny jar - in others, not worth very much and a big hassle to deal with.
Now a 50c or dollar nickel starts making the scheme practical.......
Besides, isn't it illegal to melt down pennies and nickels?
<< <i>It's one thing to have a silver dime that is worth a dollar, or two dollars.
A nickel worth six cents is like having a great big penny jar - in others, not worth very much and a big hassle to deal with.
Now a 50c or dollar nickel starts making the scheme practical.......
Besides, isn't it illegal to melt down pennies and nickels? >>
Nickels will be traded just like 90% silver coins are traded now. No need to melt them.
In the worst situation, nickels will be money along with silver coins. The clad coins
and paper currency will be worthless or worth less.
Wondercoin
Once they stop making nickels the way they do, the math might change, but for now, I prefer to put money to work in the more compact silver, and even better in platinum and gold
Liberty: Parent of Science & Industry
<< <i>Did the math on starting saving nickels and pre-82 pennies, not sure what bulk of these is recommended to make the endevor worthwhile, but my number is too heavy and takes up too much space, and ties up too much capital that can be applied elsewhere in the meantime.
Once they stop making nickels the way they do, the math might change, but for now, I prefer to put money to work in the more compact silver, and even better in platinum and gold >>
That about sums it up for me
<< <i>So, at todays prices, $.125??
If you can't melt or export them, how would you take advantage of the real value?? >>
... How about filling up sand bags to hold down the trailer on account of a tornado ? Let's think practical and logical.
Practice makes perfect & nobody is perfect. So, practice being nobody and be perfect !
<< <i>Go for i believe pre 1982 canadian nickles as they have more nickle in them and are worth double face value if you want to do that sort of thing. >>
I find enough of them, even back to GVI where I live - but they are dropping off the radar because the RCM is actively pulling them from circulation and melting them.
<< <i>
<< <i>So, at todays prices, $.125??
If you can't melt or export them, how would you take advantage of the real value?? >>
... How about filling up sand bags to hold down the trailer on account of a tornado ? Let's think practical and logical. >>
If we did that we would of been buying truck loads of those $60.00 NIB 45's.
He who knows he has enough is rich.
A 'Bucket List' for Better Diversification
By JASON ZWEIG
If you care about risk, not just return, you could be forgiven for just wanting to bury your money in your backyard.
With bond prices near all-time highs and yields near record lows, the returns on many bonds are doomed to be negative after inflation. Since 2000, the U.S. stock market has fallen by more than 40% from top to bottom—twice—but still looks overvalued by some measures. Real-estate investment trusts are at their highest prices in five years. Gold has sextupled in price since 2000.
The past decade also has shown that traditional diversification—parceling out your money across U.S. and international stocks and bonds, along with a variety of other assets—can leave investors exposed to the risk of severe losses.
Thinking about diversification in a different way—what we might call "differsification"—might change your views entirely. Instead of spreading your bets to protect against a plunge in the U.S. stock market, you should regard your portfolio as a set of bets on basic economic conditions and create one bucket for each: expansion, recession, inflation and deflation.
How does this approach differ from traditional diversification?
Financial planners have long built portfolios based on historical correlations, or the extent to which various investments have moved up and down together in the past. The theory is that when stocks zig, bonds and other investments will zag; market declines in one asset will be buffered by rising values for others.
Unfortunately, markets forget all about theory during a financial panic.
"You'd like different assets to move together when markets are doing well and then to deviate from each other when markets do badly," says Mark Kritzman, chief executive of Windham Capital Management, an investment firm in Boston that oversees $1.3 billion. "But history shows you tend to get the exact opposite."
In calm markets, Mr. Kritzman's research shows, various investments tend to have sharply different returns. But in a financial crisis, almost everything crashes—exposing you to losses in lock step at the very moment when protecting against a collapse in U.S. stocks is most valuable.
Furthermore, past correlations don't predict the future. For much of the 1980s and 1990s, U.S. Treasury bonds and U.S. stocks tended to move up and down in price together. During the 2008-2009 financial crisis, Treasury bonds were the only major asset that went up as U.S. stocks crashed. Next time, who knows?
Peter Joers, co-founder of Greenline Partners, an investment-advisory and consulting firm in New York, has a twist on diversifying. All financial assets, he points out, respond predictably to changes in the "basic drivers" of growth and inflation.
Viewed this way, the challenge you face isn't figuring out which assets are cheap today. It's building a portfolio that can prosper regardless of whether economic growth is high or low or whether prices are rising or falling.
By spreading your money across mental buckets customized for each scenario, you give up the hope of striking it rich with a few great calls about how the future will unfold. But you get what Mr. Joers calls "dependable diversification." You also can "see your bets more clearly," he says.
In your "expansion" bucket, for the scenario in which the economy grows faster than forecast, you want stocks, real estate and, if you can tolerate their risk, commodities. In your recession bucket, for times when economic growth falters, you want bonds. The inflation bucket, for periods when the cost of living rises faster than expected, holds Treasury inflation-protected securities, or TIPS, and, if you can stand the volatility, commodities. Finally, in your deflation bucket, for times when prices are falling, you want stocks and conventional bonds like U.S. Treasurys.
Of course, prices can rise or fall as the economy grows, and a shrinking economy can experience either surprisingly high or low inflation—which is precisely why you need money in each bucket.
How does differsification work in practice? If you own no TIPS, your inflation bucket is perilously empty, and you need to fill it. Otherwise you are gambling that the cost of living won't rise higher or faster than most people expect—and that is an expensive bet to get wrong.
Investors are predicting an inflation rate over the next 10 years of roughly 2.5% annually, says Gemma Wright-Casparius, manager of the Vanguard Inflation-Protected Securities Fund . If inflation runs higher than that, TIPS will guard you against a loss of your purchasing power. If it doesn't, you could lose money on your TIPS—but your other buckets should do well.
Instead of constantly sloshing your money around, put some in each bucket and keep it there as lifelong insurance against everyone's ignorance of the future. Play around the edges every once in a while, if you must. But sticking to basic differsification will give you peace of mind—and probably the last laugh.
—intelligentinvestor@wsj.com; twitter.com/jasonzweigwsj
a valuable metal with increasing industrial demand.
edited to add: or any other collectible coin, or any non-coin collectible, or a share of a stock or mutual fund, or pay down your credit card or mortgage, etc etc.
I find it interesting that it is suggested that $36 worth of nickels (or $3600, or $36,000) is the best way to invest that money for the future (unless someone REALLY loves nickels)
Liberty: Parent of Science & Industry
I think a nickel would have to be worth $1.00 or so in melt value for people to begin taking them seriously as bullion, but that's just my speculation. I do believe, however, that the price of copper will continue rising enough so that one day, "hoarding copper pennies" will be more profitable (and popular) than what it is now.
Interests:
Pre-Jump Grade Project
Toned Commemoratives
Long before the bullion value of a nickel reaches 25 cents, I think they will all have disappeared from circulation.
As historical precedent, hoarding of war nickels in a big way began in 1963, when their metal value was only 7 cents each.
current nickels will quickly disappear from circulation. They will be hoarded.
Don't forget that nickel was so valuable during WWII the government switched to silver for nickels.
<< <i>Presently, I don't see anyone melting nickels for their melt value. I'll be generous (for the sake of my argument) and suppose that each nickel is worth $0.055. That's a 10% return, only from factoring the nickel as your cost. Now factor in other expenses, like getting huge pieces of equipment so you can DIY. (Why would you DIY-melt-a-coin? Because melting US currency is illegal, and you wouldn't want anyone to know about it). Bottom line, your 10% rate of return shoots down to a pretty low return- unless you're working with hundreds of thousands of nickels. Acquiring that many nickels just might be a waste of time.
I think a nickel would have to be worth $1.00 or so in melt value for people to begin taking them seriously as bullion, but that's just my speculation. I do believe, however, that the price of copper will continue rising enough so that one day, "hoarding copper pennies" will be more profitable (and popular) than what it is now. >>
The cents are 150%, that seems like a good return. Eventually they'll be legal to melt.