Friday, March 4, 2011

Penny for Your Thoughts?

It's probably not terribly noteworthy, with the value of copper rising, so to is the value of pennies minted before the switch from copper to zinc composition.  In fact, at this particular point in time, pre-1982 pennies (and a portion of 1982 pennies as well) are worth nearly three cents in metal value.  This is the reason that the switch was made in the first place; it was too expensive to keep making them out of copper.  As a sidenote, from the previous link, you can see that it won't be long before the composition of nickels will change, as they cost mints well over five cents to make, and the cost is rising.

The reason we see these in circulation still (and we don't see silver coins) is that in general, each penny would net you two cents in value (if it were legal to melt it down; it will be someday, but not now), whereas silver coins are worth more than twenty times their face value.  It's a large return (who would scoff at a 200% ROE?), but it's on such a small scale, it takes up lots of space, and as of right now, it can't be realized.

Regardless, I'm preparing for the future (I wish I'd done this with silver coins years ago), and every Friday, I am buying $10 in pennies from the bank.  It generally nets me between 250 and 300 copper pennies, which I'm pretty happy with.  I figure even if copper values decline or we are never allowed to melt them for bullion, I don't lose any value (other than the interest on $2.50/week, which amounts to a whole load of JACK SQUAT!).  Today, I also was treated to eleven wheat back pennies (a new personal record for $10 worth of pennies).

I'm not necessarily suggesting that you do this as well, but it seems like in expected value, the returns are strictly positive.  Hey, it's better than obtaining copper like this poor bastard...


1 comment:

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