Friday, November 18, 2011

The Man Who Bought One Million Dollars Worth of Nickels

Kyle Bass has acquired one million dollars worth of nickels (20 million coins) because their value as scrap metal marginally exceeds their value as money. He obviously is expecting a strong price inflation that will boost the metal value of the coins much more. Which will result in their disappearing from general circulation, just like the 1932-1964 Washington quarters and the 1946-1964 Roosevelt dimes have. The metal value of the Washington quarter is now $5.89 and the Roosevelt dime melt value is $2.34.

As recently as the early 1970s, both coins could be picked out of change. Quite an investment, with no downside risk! If price-inflation heats up, the nickel will provide the same type inflation protection hedge and, again, no downside. If there is no price inflation (unlikely) just spend the nickels.

For the record, J. Kyle Bass is a Managing Partner and Principal at Hayman Capital Partners, LP. He also acts as a mortgage credit portfolio advisor to several other asset management firms and manages or advises over $4 billion of investments in the residential mortgage-backed securities market. Bass is also a Director of the Asset Backed Securities at Credit Derivatives Users Association.

16 comments:

  1. I bought a bunch of nickels, maybe $2000 worth, back when the melt value was almost 7 cents. Today it is 5.03 cents.

    I am saving up to buy more.

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  2. I have a few water jugs filled with nickels and pennies (a lot are pre-1982). I never set out to collect them, I just never use nickels and pennies and I took to putting them in the jugs.

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    1. me too they just happen to pile up over the years.

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  3. All well and good until the government passes a law or makes up some criminal pretext and seizes his coins never to be seen again.

    It's a good idea, he just never should have made it public.

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    1. He would sue the fuck out of them... it is his constitutional right to save/use his money in the best way he sees fit regardless of its currency form.
      some will also argue "it is illegal to destroy u.s currency, however he would claim he bought raw nickel using his nickels and would get away with it. In the end the government would be foolish to fuck with this man.

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    2. He would sue the shit out of them... it is his constitutional right to save/use his money in the best way he sees fit regardless of its currency form.
      some will also argue "it is illegal to destroy u.s currency, however he would claim he bought raw nickel using his nickels and would get away with it. In the end the government would be foolish to mess with this man.

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    3. https://iscrapapp.com/blog/can-i-scrap-copper-pennies-no/

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  4. As long as the nickel is still circulating, I can't see a market developing where people pay above face value. It'll probably happen eventually, as it did for junk silver. I keep my nickels, but they're bulky. I won't be going out to buy them.

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  5. Just curious: if it is illegal to melt down US coinage, why does junk silver sell for its silver content, is it melted down outside the US?

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    1. Because it isnt illegal to melt down coins unless you do it for fraudulent purposes. I.E. melting them and making coins of higher value.

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    2. It's also illegal to ship the coins overseas. But in this day and age where nobody does time for their crimes - at least the rich - who cares about the law?

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  6. Difster, when FDR confiscated gold back in '33, relatively few Americans were dumb enough to turn their gold in, Milton Friedman found (gold coins turned in only accounted for 22% of the gold coin supply in circulation):
    http://www.fgmr.com/the-confiscation-threat.html

    Two words for you: civil disobedience.

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    1. FDR had to "confiscate" gold then - he couldn't devalue the dollar otherwise. Since our worthless fiat isn't worth the paper it's printed on these days - it's unlikely another government confiscation will take place. Besides, would you turn in your Gold if they told you to? I won't.

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  7. I know a guy who owns 590,000,000 pre 1982 pennies stored in a warehouse in Brooklyn. He is currently in an agreement with VISION COMMODITIES to sell them for 2 cents each. His carry cost and accumulation cost of the pennies is approx 1.73c. HE WAS JUST RECENTLY BEEN AUDITED BY THE US MINT AND TREASURY DEPT. making sure he doesnt melt any. He also revealed he is lobbying congress to end the melt ban, and signed a new deal with Brinks, Coinstar, and a few other depositories to purchase their change. He estimates there are 2.5 billion pre 1982 pennies left in circulation and he wants every one.

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  8. Gresham's law. Current nickels will become collectors items once the govt changes the composition.

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  9. How 0.01 cents becomes worth billions of billions dollars

    http://www.live-counter.com/compound-interest/

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