Ashtray
Outperforming My 401K
Alec
Nevalainen
Coinflation.com
January 10, 2006
Losing money making money. That sounds strange, but that's exactly
what occurred when The United States Mint produced 95% copper/5%
zinc cents in 1982. Material and production costs exceeded $0.01
to manufacture the cent and they changed the composition to 97.5%
zinc mid-year (how they're still made today).
Now, the copper in the pre-1982 cent wasn't worth more than a
cent at the time - it took 23 years for that to happen. On February
18, 2005 copper settled at $1.5126/lb and the pre-1982 copper
cent had an intrinsic value of $0.01006437.
I thought the milestone was interesting, so I wrote an article
titled, "Gresham's Law
Returns."
321gold and PrudentBear published
a link to it, but the response was little to none. It's only
one cent, not exactly front-page news.
Fast forward to January 6, 2006 where copper settled at $2.1208/lb.
To calculate the intrinsic value of the pre-1982 cent, use the
following:
2.1208
(copper price per pound) x .0022046 (this value converts the
copper price from pounds to grams) x 3.11 (gram weight of the
copper cent) x .95 (percentage of copper in total weight) + .8849
(zinc price per pound) x .0022046 x 3.11 x .05 (percentage of
zinc in total weight).
Do
the math and you come up with $0.0141171. What does that
mean? If you have 100 pre-1982 cents, you now have $1.41 in copper/zinc
(40% gain in one year).
On a percentage basis, the coins in my car ashtray doubled the
gains made in my 401K last year. Now, I'm not expecting to retire
on what's in the ashtray, but it's an illustration of
what's happening right now in the metal markets... and money
with intrinsic value.
To find out the intrinsic value of U.S. Coins (including pre-1965
silver), visit http://www.coinflation.com.
Alec Nevalainen
email: alec@rockbend.com
website: coinflation.com
Copyright ©2006 coinflation.com. All Rights Reserved.
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