SDS Daily Briefing for Saturday, October 22, 2011

Are You Saving Your Nickels?

If I were to give you a dollar for twenty nickels, would you take me up on it?  And if so, who got the better deal?

Well, depending on the price of copper and nickel on the day of the transaction, it's clear one of us came out ahead.  The government makes nickels using the same formula it's used for the last 65 years - 75% copper, 25% nickel.  Thus, if the price of these two metals increase, a nickel is actually worth more than five cents.  Similarly, if the price of copper tanks, as it has recently, a nickel is worth less than five cents.

Coininflation keeps track of the melt value of various coins.  As the name implies, "melt value" is simply the value of the metal in the coin if we melted it down.  Before you go outside and start taking a blowtorch to your piggy bank's contents, note well there are some restrictions on melting pennies and nickels to extract their metal content. 

Jim Rawles wrote an excellent piece on this, updated just last week.  I encourage you to read it.  It's a fun and simple way to participate in metals speculation with essentially no risk.  Kids will love doing it as well.  As for me, my piggy bank where I dump my change every day filled up recently, so I took all of the nickels out of it and stored them away.  In a worse case scenario, they're still worth five cents.  However, should the U.S. Mint reformulate the nickel's composition (and assuming at some point, the price of copper rebounds), the "old" nickels could be worth much more.

And if you do elect to do this, you will be in good company.  Successful Texas hedge fund manager Kyle Bass reportedly holds 20,000,000 nickels as an investment. 

Big Ol' Bucket Of Powdered Milk

This weekend's to do list includes cleaning out more closet space to make way for more storeable foods.  In my latest purchase from Emergency Essentials, I bought a bucket of no-fat, fortified instant milk.  I like the taste of it, and it's comparably priced with what you get at the grocery store.

I also received some food grade buckets, and if I can find some dry ice this weekend, I'm going to pack them with some bulk beans and rice.  The dry ice method works well for these items.