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About Those Nickels ?

And now, how about those nickels we occasionally go on about? A longtime friend of the Whiskey Bar writes:
"Gary,
"As always, great article. However, this nickel thing still puzzles me. I bought $1,000 of nickels a while back. Even if it goes up five times, that isn't really a whole lot. And $1,000 of nickels takes up space. I can't imagine where I would store $10,000. This one I don't get.
"Rgds, Jim"
First, we'd take a 500% return any day of the week...no matter what a pain in the ass storage was!
But consider how crazy it must have seemed to store 90% silver dimes in this fashion prior to the Kennedy assassination.
Sure, dimes are smaller than nickels and you get twice the (face) value stored in slightly less space.
Still, saving massive quantities of silver dimes in the early 1960s would have been almost as cumbersome. And yet incredibly rewarding. You would have been able to sell those dimes for 35 times face value a few years later at silver's peak in 1980.
Worth the storage problems, if you ask us.
We make no promises about the nickel's profit potential. It could match the return on silver coins (as high as 35 times face value in 1980 and 2011, and still around 25 times right now)...or it could not. Or it may exceed it.
Who knows? We don't. We just know that the nickel is the perfect hedge and there are no transaction costs to obtain it. That makes the storage headaches worth it to us.
And how much storage are we talking anyway? We can easily fit 50 $100 "bricks" of nickels under our queen-sized bed. $2,000 worth of these bricks can be arranged to take up about the same amount of space as a human skeleton. (And we can tell you from experience that several of those things would easily fit in a closet.)
Undoubtedly, it helps to have a basement or attic to store thousands of dollars worth of these $100 bricks. It may not be worth it to go out of your way to get extra space for nickel hoarding. (Millionaire investor Kyle Bass thinks it's worth it. He's bought 20 million nickels.)
But think of nickels as at least potentially very useful for smaller purchases of daily food and energy in case of severe dollar weakening...even if you are unwilling to store enough to pay off your house or fund your retirement.
When a sandwich or a gallon of gas costs $50 in Federal Reserve Notes, that might be only a couple of $2 rolls of nickels. At that point you will be glad you turned your $2 into nickels back in 2012 instead of keeping it as paper that will then be virtually worthless (or post-1964 dimes or quarters).
Let's go over those pros and cons again...
Cons:
* Low value per unit so any significant investment is heavy and takes up a lot of space
Pros:
* Hedge against both dollar strength...simultaneously will benefit from dollar weakness
* Currently no premium to buy, as they are currently circulating as currency.
* Easily recognizable value thanks to official Treasury stamping with date.
* Low value per unit so any significant investment is heavy and takes up a lot of space...
Waitaminit? Wasn't that last one the con?
Ah, but it's a pro as well. The bulk and weight of the nickels provide a great deal of security. Not very much value could be stolen in one go. You ever try to run with just a $100 worth of nickels in a box?
Even if you have just a few thousand dollars worth of nickels, it would be hard for thieves to make off with your entire stash, or even very much of it at all. Without some serious coordination, manpower and a vehicle, it would be just about impossible. They may as well try to steal your house.
If we are going to remain in the U.S. and possibly be trapped here when the nation tips over into a hyperinflation-ravaged police state, we at least want to have an inflation-proof, (currently) legal form of real money for our daily transactions.
Despite all our fretting about whether -- or when -- to give up our legal ties to the U.S. government, we manage to sleep soundly at night and it's largely due to our growing stash of nickels.
Feel free to call nickel hoarders crazy. We're just as crazy as the dime and quarter hoarders prior to 1965. Or as crazy as the people hoarding silver instead of buying houses prior to 2006.
Regards,
Gary Gibson
Managing editor, Whiskey & Gunpowder
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