And there’s a lot more potential for that trade to get even better.
Silver shot up about fourfold, while real estate plummeted by a quarter or a third. That’s “so far.” Silver’s price could multiply again — even if does dip in the interim — while housing could drop even more.
Even if you didn’t catch the peak, but just saw the writing on the wall in 2000-2005, you’d still have done pretty well by selling your home and buying silver. You wouldn’t have gotten quite as much for your house, but you would have gotten silver at around $4 instead of $9.
Silver probably has another trick or two up its sleeve. It probably has a lot more upside than gold. It will probably play catch up till the silver/gold price ratio gets larger. Who knows?
Look at the other coin that was debased: the lowly penny…
Prior to 1984, the penny was almost all copper. Now those old pennies have been driven out of circulation and hoarded (Gresham’s Law strikes again). And they’re worth just under three times their face value: Almost three cents for the old one-cent piece.
Copper hasn’t had quite the success that silver has. Non-debased silver coinage has been worth 35 times face value and is currently worth 20 times face value and climbing. Copper coins’ triple-bagger over nearly thirty years doesn’t seem nearly as impressive. That’s because it’s not. But it is telling.
The thing is, silver now has transaction costs. Whether you buy bars, rounds or pre-debasement coins, you have to pay a middleman. You have to pay shipping if you get it online.
Meanwhile, copper pennies are still floating around, but hard to find. It’s really not worth the effort to gather underpriced copper this way.
But nickels? That’s a different story. Every single circulating nickel still has 3.75 pennies’ worth of copper each…along with 1.25 grams of nickel. The silver dimes and quarters and the copper pennies are gone, but the copper-nickel or cupronickel nickel is still the only kind of nickel there is. For now…
What if you could have simply been there to start collecting silver quarters and dimes when they were actually circulating? You’d just have had to walk up to your bank and withdraw your money as quarters and dimes. This would have worked up to 1963. After that you’d have to sort through your quarters and dimes to make sure you didn’t have one of the new, non-silver ones.
The best opportunity with silver coins has long passed. But there is still a similar opportunity with silver’s humble cousin, the cupronickel five-cent coin.
Buy Two, Get One Free
Copper is currently about $4.60/lb. Nickel is currently about $13.00/lb
(Check Coinflation.com for current Nickel value.)
120 five-cent pieces is $6.00. Those 120 coins contain a pound of copper and 1/3 pound of nickel. That's about $8.93.
If you deposit $6 in any bank in the nation, then withdraw your money as nickels, you get almost $9 worth of metal. That’s an immediate 50% return. That’s like paying for two things and getting three.
You can’t legally cash in on it now (anti-smelting laws for pennies and nickels were introduced in late 2006). But the bullion market for cupronickel coins will develop, just as it did for silver U.S. coins. This will happen once the government starts minting five-cent pieces made out of cheaper metals.
To those who doubt this will happen, I refer you to the bags of silver coins trading as bullion for over 20 times their face value. You can easily order such a bag right now by going to any of a number of online bullion dealers. These bags of coins sell right alongside silver bars and rounds.
Right now, the government is subsidizing your copper and nickel purchases…and cutting out the middleman. As much as we complain about government, we ought to stop and offer them a little thanks for this.
The debasement of the U.S. nickel is looking very likely. Right now you have another opportunity to do what the silver coin hoarders did back in the early 1960’s.
Hoarding nickels right now gives you an immediate benefit. You get between $0.07 and $0.08 of copper and nickel for a mere $0.05. Thanks to Uncle Sam. But your good uncle won’t subsidize this forever. He can’t afford it.
What’s even more is that there is a hedge against deflation risk that you just don’t get with bullion. You see this discounted metal is minted. It will always have a nominal value of what’s stamped on it by its issuer.
So if the dollar strengthens and copper, silver, and gold all get cheaper in dollar terms, you can still spend your nickels just like any other money. Your purchasing power stays the same, maybe even increases.
But if the dollar declines, then the value of the cupronickel in the currency will rise against the face value. Eventually — at two or three times face value — these five-cent pieces will trade as bullion just as 90% silver quarters and dimes did and still do.
Again, there is currently no transaction cost to saving in nickels and no risk from plummeting metal prices. There is literally nothing (in case of deflation) to lose and everything (in case of inflation) to gain.
Your only real problem is storage; a few thousand dollars of nickels takes up a lot of space…and it’s heavy. But people had the same problem with silver when it was cheap. I doubt they’re complaining now.
Having “too much” cupronickel won’t seem like much of a problem if inflation continues to drive the cupronickel in five-cent pieces far in excess of face value.
At worse the dollar strengthens and you’ve just saved money whose purchasing power has increased. That is not a bad worse case scenario at all.
The cupronickel is the last bit of honest U.S. currency there is. Right now it’s dying slow, like the others did. But things could speed up quick.
The cupronickel could surprise us all. Gold and silver are having their day. Maybe eventually cupronickel will, too. What cannot be dismissed is the current discount on the stuff (thanks, Uncle Sam) and the extremely limited downside.
, Looks like Jefferson gets the last laugh ..
Never put off till tomorrow what you can do today.
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