More on investing in copper pennies

Heck why not one more post about pennies. Yesterday I did a pretty long post extolling the virtues of pre 82 pennies as a simple and small investment. Again I want to restate this isn’t a “way to get rich” but it is a really cool and fun little inflation hedge and about as risk free and low cost as any form of investing has a right to be.

Anyway I found a really cool little resource that reinforces my point that 95% copper pennies that are still in circulation are a pretty hot little item to set aside right now.

The site is called CoinFlation and I have put it into my book marks so I can always find it in the future. One of the coolest tools is a coin melt value calculator that tells you the exact value of coins when you melt them down. They have two calculators one for silver coins (pre 65 dimes, quarters, halves, etc) and one for coins currently in circulation. To give you an idea of how “valuable” pennies made prior to 1982 are. I decided to run all the comparisons at a 100 dollar face value. So lets look at some of the out of circulation silver coins that you can’t find today out side of a coin shop, some of today’s other coins and their “real value” and then compare them to the humble copper penny. Of course this is “raw

• 100 dollars face value of silver dimes, silver quarters or silver half dollars is worth $1017.81 at today’s current metal prices. They are all the same because each represented a fraction of an ounce of silver as in 1/10th, 1/4th, 1/2 ounce etc. So these coins represent about a 917% return of investment just in metal value for those who had the forsight to pull them from circulation in the 60s, 70s and for a bit of the 80s when they were still around.

• Now if you took 100 dollars worth of today’s quarters you end up with about $18.33 in raw metal value or an 81.7% “instant loss”.

• How about 100 dollars worth of today’s pennies (anything minted after 1982) you get a whopping $58.80 in raw value or a 41.2% “instant loss”.

• What about 100 dollars worth of Kennedy Half Dollars? Everyone loves those right? Same formula as the modern quarter. Melt em down and you get $18.33 in raw metal value or an 81.7% “instant loss”.

• What about the nickel? There is a lot of copper in a nickel and it is a thick coin so it does ok. Try a raw value of $113.75 or an instant return on investment of 13.7% Perhaps storing nickels ain’t a bad idea either?

So how does our humble penny add up against all this? Today’s metal prices for copper and zinc put the value of 100 dollars in pre 82 pennies in raw metal at $193.61. That is easy math an instant ROI of 93.61%! Sure the penny isn’t currently holding pace with those old silver coins and it will never catch up to them. As copper goes up you can bet silver will to. Yet that is my point you can’t just go around picking up a dozen silver dimes a day any more but you can pick up a good amount of pennies from prior to 82.

Sure even with copper at say 5 - 6 dollars a pound you would need a lot of pennies to be worth even say 10,000 dollars. Yet just think about it, each day you sort and toss some into a jar. Painless and foolproof, what do you have to loose other then a bit of space?

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Double your money in the metal market with no investment

Ok, hold on, don’t get to excited. Indeed I am going to tell you exactly how to get an almost immediate 2 fold return on your money. I am also going to show you how to do it with out spending any money, hiring a broker or even with out doing any paperwork. However, I have to tell you right up front you are not going to get rich with this technique.

In fact this technique is first and foremost fun to do, second it is designed again to program you mind in how you think about words like “money” and “value” and finally last it is about actually making/investing money.

Now that big lump to the left is a chunk of raw copper. Copper has skyrocketed in both price and demand over the last ten years. Copper is used in countless industrial activities and as countries like China, Indonesia and India continue to modernize the demand will continue to grow and often to out pace production capacity. This issue will be compounded by the boom in coal, gold and silver. Consider that you are a mining company and you are choosing where to go and what to do next. You can either mine coal which is far easier then any metal or you can mine silver or gold which is worth far more then copper. Or last you can mine copper which is profitable but if you had the option what would you mine?

Great! So how does this help you double your money with out spending it? The answer is in the humble penny. Currently and since mid 1982 all U.S. pennies are made from mostly zinc with a copper cladding, basically a zinc coin with a very thin layer of copper on the outside. Such pennies are worth damn near nothing from a metal stand point. However, any penny that is older then 1982 is 95% copper and 5% zinc alloy. What does this mean? Let’s do some math.

Step one - When you look at pennies that are made from 1981 back they are heavier then today’s. In fact there are 146 pennies to a pound. Yet we must consider that such pennies are only 95% copper so 1.05 x 146 = 154 pennies make one pound of pure copper.

Step Two - 154 pennies even those from 1981 back are “worth” in currency a whopping $1.54

Step Three - Copper is currently trading at the time of this writing for $2.84 per pound. Hence 154 pennies are “worth” $2.84 in raw copper and copper is a commodity you can actually sell it for very close to the current spot price.

Step Four - Calculation of our return by simply dropping an 1981 or earlier penny into a “special” jar or container is as follows. $2.84 - $1.54 = $1.30 of “profit”. Now take you profit of $1.30 and devide it by your “initial investment” of $1.54 and you have a “instant return of investment” of 84%. Not quite double but as soon as copper goes back over 3 dollars a pound (which analysts believe will be quite soon) and you are at a full 100% return.

We should also consider that copper was trading for about 60-70 cents just 20 years ago and you start to realize just how high your “return” can be if you just start tossing all you pre 82 pennies into a jar for the next twenty years.

This is a great project for adults and kids alike. The bad news is again you are never going to get rich with this and in fact copper will have to go up to say 6 bucks a pound before you will really be able to “cash in” pennies in any real volume. The good news though is there is no doubt that over the years that will happen and because we are talking pennies not many people are making an effort to store away copper pennies.

In 1959 the U.S. stopped making the “wheat cent” and while most of those have been horded away by collectors from 1959 to 1981 100% of pennies produced in the US are 95% copper and virtually no one have really collectively valued them at anything more then one cent. That is 22 years worth of pennies still traveling around in circulation which means their are hundreds of millions of these pennies out there being spent every day. I always drop my pre 82 pennies in a jar and about 1 out of 5 tend to be pre 81’s. Over the years that is a lot of pennies.

So why do this? I mean save 4 dollars a month this way and you make about 4 in return and you have another 400 fricken pennies to deal with right? Short sighted my friend, the key is you don’t do very much to earn that return and most people are making less on their interest bearing savings accounts a month in America. All you do is follow my advice and “spend cash” and each day go through your pennies and drop any 81 or earlier examples into some special container. How much easier can “investing” be?

Just consider if in 10 years you had 15,400 pennies or $154 bucks. Those pennies if copper is at 6 bucks by then will be worth about get this, 600 dollars. Retirement money? Heck no! Just another little store house of money. Additionally while I never get to concerned with numismatic value because of how highly subjective it is there is another opportunity here.

See first let me warn you if you are currently thinking of buying 200,000 or so pennies from a bank, sorting them out and melting the older ones don’t do it! The U.S. Government will frown on that and possibly make you wear some silver bracelets and break a few rocks for a few years. Such activity is illegal for now anyway. Yet as copper keeps going up (and it will) sooner or later the mint will begin to “retire” the old copper. That is a nice way to say they will take the pennies out of circulation and harvest the copper for use. Of course the government is free to do that. This will make a lot of these 60s ad 70s pennies harder to come buy and add some numasmatic value to them as well.

That is many years into the future but let me ask you this. How cool would it have been if say your grandfather started collecting 1964 and earlier silver dimes for you when we stopped making them in 65? For about 10 good years it was easy to pluck silver quarters, dimes and half dollars from circulation. Today it is very rare to find one. I happen to own a huge pile of such coins put away for me by a very smart grandparent. This led to my love of silver in the first place. Today we have the opportunity to start doing something like that for our children, their children and possibly their children’s children. What would 100,000 Indian head pennies be worth today?

There is more at work here though tied to the production of pennies and the metal price. Do you know why 1982 was the year that the penny changed to a zinc core? In the early 80s all metal prices spiked for a while and even then a penny was worth more as copper then as a penny! So zinc was a cheap alternative and coating it in copper kept the penny looking like well, “a penny”.

Today though even zinc is rising in price and it costs about 8/10ths of a cent in raw metal to make a penny. That is before production costs, etc. This means the US Mint is Loosing Money to make pennies. Additionaly so long as people spend cash we can’t get rid of the penny we have to have something in order to make change of a dollar with. I predict therefore that the days of the humble Lincoln cent are numbered! The easy solution is to come up with coin made of something perhaps even cheaper then zinc and make it smaller too.

Since no vending machines take pennies there is no problem with changing the size of the penny. Don’t think it can’t happen either, they did it with the dollar coin. When sooner or later this change occurs it will be another numismatic bump in the value of all pennies and even more so to the all copper variety. So I encourage you to take the phrase, “save your pennies” with a new vision. Start plucking the little copper disks from circulation today and just put them away.

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