John T. Reed has an interesting investment strategy. How much are your coins worth? His comments below: Last night, my wife and I attended the 50th wedding anniversary of a mildly famous friend—Leigh Robinson, author of the Landlording books. He gave each attendee an interesting gift: a 1964 (year of his wedding and my high school graduation) U.S. quarter. He had obtained them from the revenue of his coin-operated laundry machines in the late 1960s when he owned apartment buildings. . When his assistant handed me our two coins I immediately noticed the year and said to her, “Hey, these are worth about $4 each. You need to tell everyone that or they’ll be putting them into parking meters or spending them as regular quarters.” She assured me that Leigh would be explaining that in later remarks, which he did. But just as a room full of 1964 high school graduates, like my high school reunion last month, is full of 67 and 68-year-olds, a 50th-wedding-anniversary celebration is full of people in their 70s and older. I fear many did not hear or understand the value of the quarters explanation and will trade them for 25¢ worth of something. . In 1965, the U.S. mint announced it would no longer make silver coins, namely the dime, quarter, and half-dollar. At that same time, the law against melting or exporting those coins was repealed. But for years, you would still see pre-1965 dimes, quarters, and half-dollars in circulation. You still do on rare occasions—especially in the pockets of old people. I recently got a bunch of pennies from an older group in a charity situation and found far more pre-1983 pennies in that batch than normal. Smart Americans saved pre-1965 dimes, quarters and half dollars after they stopped making them. In the coin business, they are called “junk silver.” . They are much better than gold coins because they require no assay, come in convenient melt-value denominations (they are worth about 15 times face value at the moment, that is, $1.50, $3.75, and $7.50 respectively) and are at virtually no risk of counterfeit because of their relatively low melt value. Unfortunately, they are still overpriced at the moment. The historical average value of silver is $13.41 in 2010 dollars; $20.86 2014 dollars is the current price. . I mention this because U.S. pennies and nickels are the pre-1965 dimes, quarters and half-dollars of 2014. As in the early 1960s, melting or exporting pennies or nickels is now illegal. Any day, they U.S. mint will announce it is no longer going to make those coins. Very simply, inflation has made it near impossible to manufacture such small denomination coins without losing money on the metal purchase by the Mint. Canada already got rid of pennies. Here are the melt values of these coins: pre-1983 penny 2¢ post-1982 penny .57¢ nickel 4.8¢ . If you could buy $1 million dollars worth of pre-1983 pennies for their $1 million face value, you would make an instant $1 million profit. They are a “heads you win tails the government loses” investment. If you buy gold, including coins, it can go up or down with inflation and deflation. But nickels can go up (melt value) if there’s inflation, but they cannot go down even if their melt value goes down because the words “five cents” are engraved on them. Pre-1983 pennies are already up to twice their face value. Post-1982 pennies have a sort of .43¢ deductible as inflation protection, but they are still the coin that has the highest melt-value-to-face-value ratio of all U.S. coins other than the nickel. coinflation . My book How to Protect Your Life Savings from Hyperinflation & Depression, 2nd edition (johntreed/hyperinflationdepression.html) has a time line of historical inflation and deflation. It often says “specie payments were suspended.” That means for a time, you could not turn in paper U.S. currency (called gold certificates and silver certificates) for coins like gold and silver coins. . At the moment, and it will not last, U.S. paper currency is essentially copper and nickel certificates, that is, you can convert them to pennies and nickels which are actually worth (melt value) their face value, as opposed to paper, which is worth nothing intrinsically. Current pennies and nickels are now the sort of specie that you could not trade U.S. paper currency for back in the day. . Any day now, they will stop minting the pennies and nickels. That will result in an end on the ban against melting or exporting them, but it will also make them increasingly hard to find. In post-World War II Germany, the Nazi Reichsmark paper currency became worthless, but a guy I know who lived there then as a German kid, said his mom had been hoarding German coins instead of paper currency during the war, and benefited greatly by having them when the war ended because their melt value survived the end of the Third Reich. . Don’t say I didn’t warn you.
Posted on: Fri, 27 Jun 2014 23:04:41 +0000
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