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Tuesday night I spent commercial time doing my annual piggy bank "roll up."
Yup, I am one of those people who dump their spare change into a large glass piggy bank and once a year pull it out and roll up the coins. As I was rolling up the coins, it dawned on me how non-precious they have become. The pennies are no longer significantly copper, the "nickels" aren't nickel, or the dimes silver. I am sure someone out there knows (and cares) about the exact composition of the coins being minted today, but I don't want to dwell on that. The point is that U.S. coinage is "cheap." It's like they are made in China (wink, wink). Anyhow, I decided it was time to trade in fake money for real money. Ron Paul would be proud of me.
But what kind of real money do I want to own today?
My SeekingAlpha readers already know that I believe oil is the new world reserve currency. I would love to buy a bunch of oil and just store it in some tanks buried in my backyard. But that's impractical and probably against my local zoning ordinances. So, my choices really boil down to gold or silver or some other precious metal.
Although my mind tells me gold is going much much higher, my body won't let me pay more than $1,000 for an American gold eagle. Imagine this: A small stack of 22 American gold eagles is now the equivalent of a Toyota Prius. Amazing.
Of course, the game being played now is "the dollar game," where everyone agrees that the dollar is going to weaken, and thus gold and silver are going higher. The big question is: when will the Fed start raising interest rates and what happens then?
Here's my take: the Fed won't significantly hike interest rates until the employment picture brightens. I think that is at least a couple of quarters away. The employment picture will only brighten if the economy picks up. If that ever happens (which is not a given), industrial demand should pick up and we should see a corresponding uptick in silver demand. So, I decided to take advantage of the two day dollar rally (ha!) and pick up some silver. I bought some silver eagles for $18.22. Yeah, I know I paid a very high price. Let's look at the 5-year chart (courtesy of Kitco):
We can see the $20+ top set in during the early 2008 euphoria. We can also clearly see silver falling off a cliff during the deleveraging meltdown beginning in mid-2008. I believe the lows in October 2008 were overblown on the downside, just as the $20+ top was overblown on the upside. However, if we go back to the beginning breakout in October 2005 and draw a trend line on the bottom, it shows a potential for silver to breakout to new highs over $20 in the next 6 months or so. But that's just chart stuff. So, let's look at policy.
The U.S. government and the Obama administration believe they are "fixing" the oil import-led trade deficit by continuing the weak dollar policy of the Bush administration. Now, I'm not an economist, but in the long run what good does it do to weaken the currency to fix the trade deficit if the biggest component of the trade deficit (oil) is priced in U.S. dollars and goes up in price? Further, what good does it do when your largest trade deficit is with a country (China) that plays this game by holding their currency pegged to yours? It doesn't make sense to me, but I'm an engineer, not an economist.
The only threat to long-term appreciation of gold and silver (caused by a weakening U.S. currency) is if America solves its foreign oil import crisis by adopting natural gas transportation. But the Obama administration is "agnostic" about natural gas transportation and Congress, well, Congress is Congress. Enough said. The oil company executives at Exxon Mobil (XOM), ConocoPhillips (COP) and Chevron (CVX) know what is ahead for the US when it comes to the oil crisis, but still they refuse to belly up to the bar and support natural gas transportation. So, I see clear sailing ahead for gold and silver (and obviously oil).
So, buy yourself some silver eagles and bulk silver bars. If you have an IRA that you've had for a decade and seen go nowhere (or more likely, down), you could participate in the precious metals rally by owning the SLV or GLD ETFs.
That said, if we have a full-blown currency crisis, which is certainly possible if China decides to fight an oil war with the U.S. by placing all their U.S. treasury notes on the market at the same time (I wish Congress would think about that when considering the Natural Gas Act legislation....), I wonder what good a paper ETF would be. Me? I'd rather take my real money silver coins down to the creek and bury them in the trunk of an old dead tree. I'll probably bump into Ron Paul....
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This article has 43 comments:
The US should encourage those in the NorthEast that are still heating with fuel oil to convert to natural gas.
That said, silver will probably outperform gold over the next several years.
On Oct 29 06:30 PM brianr wrote:
> I would recommend "junk silver", which is just coins that were once
> in circulation and are about 90% silver. You don
On Oct 29 08:06 PM Jimbo wrote:
> The only conclusion I can deduce from the current administration
> is that they expect an oil crisis that will cause a magical solution
> involving alternative fuels and alternative energy. The technical
> and logistical issues in this are incredible in scope.
I think you overpaid by maybe a factor of two?
Best of Luck
AFAHMASP
On Oct 29 08:30 PM Speedspirit wrote:
> Junk Silver is 71% silver, just picked up 185 silver quarters that
> totaled almost 33 ounces for $1210.00
On Oct 29 08:30 PM Speedspirit wrote:
> Junk Silver is 71% silver, just picked up 185 silver quarters that
> totaled almost 33 ounces for $1210.00
Greenspan advocated a return to the gold standard. I must agree. The Gold Eagle has been minted in the following denominations.
1 ounce: $50 face value
1/2 ounce: $25 face value
1/4 ounce: $10 face value
1/10 ounce: $5 face value
Conveniently the Silver Eagle has a one dollar face value and assumes the value of silver as 1/50th that of gold.
GoldBarron: yeah, but what percent silver and copper??
yellowhoard: well, hopefully you could securely hide both. i'd hate to place all my precious metals bets in either gold or silver, why not own some of both?
jimbo: yeah, same as the last administration. we've had two terrible presidents in a row just when we needed the best presidents. very sad, and makes one wonder just who is behind the curtain turning the knobs....
options: yeah, i just worry about bartering with palladium.
speedspirit: you overpaid bud.
anarchist: the american public are sheep. they don't get riled about stupid wars, $145/barrel oil, or fascists in control of the gov giving their tax money away to rich executives. americans are asleep at the switch, and we deserve the disfunctional government we had. i mean look, the american public gave bush a second term after witnessing his first term! i rest my case.
brianr: i just don't see the logic in junk silver when you can buy .999 (or canadian .9999) pure silver for a slight premium and have some quality silver. i dunno, am i missing something here?
taxpro: if you are referring to silver eagles, they are .999% silver. if you are talking about dimes, there is no way dimes are 90% silver. so, i'm not sure what coinage you are referring to...could you clarify?
bill: you can do much better than ebay, even kitco is better than ebay. greenspan supported the gold standard?? i don't think so...greenspan was the start of the big problem!! and bernanke is just another goon following in his sloppy footsteps. wrt to the minting values, you're correct, but i think the amount on the coins is irrelevant at this point. it's only ounces that matter.
I am a gas system operator and contrary to popular belief we import over 16% of our natural gas.
www.eia.doe.gov/pub/oi...
On Oct 29 08:30 PM Speedspirit wrote:
> Junk Silver is 71% silver, just picked up 185 silver quarters that
> totaled almost 33 ounces for $1210.00
The Only Threat to Long Term Gold and Silver appreciation Is a Strong US Dollar since their Appreciation is "caused by a weakening US Currency".
The USD will continue to decline because of Printing Presses Gone wild. The Printing Presses will be exacerbated by a move to Nat. Gas. Transportation.
Lets accelerate the Demise of the USD, Print more dollars, the currency declines, Gold and Silver appreciate faster. And so does every single Dollar denominated Commodity on the Planet, the result, Hyperinflation.
Nat Gas transportation is the "Only" solution?
You asked about content of Jefferson nickels....Nickels do not contain any silver (except 1942-1946 - they contain 35% silver) they contain 75% copper and 25% nickel. As of tonight, the actual metal value of a Jefferson nickel is 4.79 cents. Early in 2008, a nickel was worth 8 cents.
Any US penny struck before 1983 is 90% copper. As of today a penny contains almost 2 cents worth of copper. In 2008 when copper peaked a penny was worth over 3 cents.
In 2008, the government passed a law that made it illegal to melt down pennies and nickels because some guys doing just that. They figured if they went to the bank and withdrew $1000 worth of pennies, they could melt it down and sell it for well over a $1000.
Here is a good site that gives actual metal value of each US coin.
coinflation.com
Enjoy! :)
composition,
.900 silver
.100 copper
net weight .18084 oz. Pure silver
185 silver quarters weigh 33.4554 oz.
Take a little off for wear and you have 33 oz
Dimes are a pain to check in less you have mercury heads Roosevelt were made in silver and clad (you have to look at all dates)Quarters get a little easie. Half dollars are a pain to if there all kennedy because they made them in 90% 40% and clad.Your best bet is with half dollars,are Franklins.
On Oct 29 08:59 PM bitemeX2 wrote:
> Silverspirit -I will gladly sell you 185 silver quarters (face value
> $46.25) for - say $1000.
>
> I think you overpaid by maybe a factor of two?
>
> Best of Luck
>
> AFAHMASP
seekingalpha.com/insta... Oct 29 11:24 PM Michael Fitzsimmons wrote:
> MellowGuy: yup - and not only should we be getting people off fuel
> oil for home heating, but we should also be using natural gas for
> electricity generation (shut down the coal plants) and for transportation.
> Natural gas, not coal, should be "America
Even if we get solar and wind to account for 10% percent of the energy used, that will be in an environment where energy demand is growing world wide. So the net effect is no real reduction in fossil fuel demand.
Now don't get me worng, I am not saying we shouldn't invest in renewables, we should, however, we have to realize it will not make a sigificant reduction in the demand for fossil fuel .
> …In 2008, the government passed a law that made it illegal to melt
> down pennies and nickels because some guys doing just that. They
> figured if they went to the bank and withdrew $1000 worth of pennies,
> they could melt it down and sell it for well over a $1000…
My understanding is that all "currency" is actually “owned” by the issuing agency and it is only in circulation at the good graces of the governing authority. As kids we used to speculate on the penalty we faced by this authority when we placed coins on the train track to flatten them out. And I still find it amusing to call the trading of goods and services with silver rounds “bartering”. Long live US citizen sovereignty.
Personally I like Bright Uncirculated (BU) silver dollar rolls, BU Franklin half rolls, and 1964 Kennedy halves. They are easily spent and recognized by almost everyone. BU will show you are a collector or US coinage. BU is a nice eye candy when it cones time to sell.
On Oct 29 06:32 PM brianr wrote:
> You can buy it a reputable coin dealer and don't have to pay the
> premium for silver eagles. They sell at the spot price of silver
> usually. Paying an extra $2 / ounce of silver (premium for silver
> eagles) seems like highway robbery.
Dopamine: thank you.
sdavid: well, if i am gonna invest in silver, the silver eagles are .999 pure silver, and silver rounds or bars are usually the same (or .9999). the premium isn
GoldBarron: thanks for the good info
Dopamine: thank you.
sdavid: well, if i am gonna invest in silver, the silver eagles are .999 pure silver, and silver rounds or bars are usually the same (or .9999). the premium isn't that much (imho) and i think these would be great bartering chips.
blacksilver: i guess my question is, why buy these low percentage silver coins at all? if you're going to invest in silver as a precious metal, why not just buy pure silver coins? you can barter with them, and as an investment, i would also think they'd be easier to sell. to each his/her own i suppose.
speedspirit: sorry, but i don't agree. depsite all the clamor about water table damage, the track record of natural gas drilling over the past 25 years or so is actually excellent considering the huge number of wells drilled and the very low rate of ecological or water table damage. compare that against coal, where there are many well documented serious problems, our rivers, lakes and streams are full of mercury, and the fish in these waters are chock full of all kind of toxic metals. like i tell people who want to argue this with me, go down to the tennessee river, catch some fish and eat them. that is, if you can find any still alive that have the strength to bite your hook!
doubleguns: awesome post!! good one man.
SSALarry: two things: first, you should have known what the energy production of those installations would be prior to installing them so there shouldn't have been a big surprise. secondly, your discussion is missing the bigger point: transportation. transportation accounts for 70% of U.S. oil consumption. the only way we can signficantly reduce our addiction to foreign oil is to adopt natural gas in the transportation sector. i'm all for wind and solar, but they generate electricity and where are the affordable electric cars? meantime, we're sitting on abundant, clean, and cheap natural gas reserves, doing nothing, and continuing to import foreign oil. seriously stupid policy. btw, watch jim cramer's mad money tonite, he went to OK and is talking to some natural gas heavy weights. i am sure this subject will be broached.
BoxedMerlot: you said: "And I still find it amusing to call the trading of goods and services with silver rounds “bartering”." can you explain why you find it amusing?
When you do decide to sell coins,eagles and small bars are very easy to sell anywhere,large bars sometimes have to be sent out to be assayed.
But what ever you do just buy some physical silver and hold on to it.
Long term it will be the best investment you ever made.
the last time we had real money in the u.s was 1964 - after that the 10c,25c were all cupronickel sandwich. cheap to produce, the govt make a profit (called seigneurage i believe) when they put it into circulation.
the need for fake money arose when we switched to a vending machine economy. silver is too valuable to feed to a vending machine. tokens work better & you don't have to keep cleaning the silver dust out of the bottom of the machine all the time. this happened after the minimum wage was raised in the late 1940's. some soda jerk-sandwich counter jobs were simply not worth the legal minimum. another example of those unintended consequences we keep hearing about.
> jack
Joe Silver
On Oct 29 08:59 PM bitemeX2 wrote:
> Silverspirit -I will gladly sell you 185 silver quarters (face value
> $46.25) for - say $1000.
>
> I think you overpaid by maybe a factor of two?
>
> Best of Luck
>
> AFAHMASP
babysdaddy: yeah, and another reason is seperating out the real silver - that's time and expense. who knows, in the future they might be a reason to just melt down a silver eagle for the actual silver. although this is against the law and i personally would never do such a thing.
joe silver: thanks for the info and i'll take your word that you know what you are talking about simply because you had better with a handle like "joe silver". that said, i'll stick with the .999 and .9999 pure silver eagles and maples (respectively).
dannyfurman: you bring up an interesting point...i guess it depends on how much you trust the seller and how good you are at spotting fakes. i have a hard time believing one of the bigger and more reputable dealers would trade silver eagles because one report of that would put them out of business. of course, it may have already happened and i just don't know about it. please let me know if you know of cases where that has happened and which dealer it was. thanks.
Now, overall, that won't kill off the general premise of using Nat Gas for transport; LNG will keep the price low for a while. But it does get us back into a dependency we'd rather not have. Going forward, big LNG exporters will be Qataris, Iranians, Russians and Australians. Only one of which I feel totally comfortable with!
"even the LNG terminals are not receiving imports and the foreign supply that was supposed to come to the U.S. are now going to europe and asia."
I own it, too bad about keeping up with the news.
Here's a Nice link back to another Fitzsimmons Insta:
seekingalpha.com/insta...
Speedspirit posted numerous links to YouTube videos which give you a small inkling of the Damage being done. But "the Few have to Suffer" in the Grand Scheme.
New struck coins will by the way never be more worth in silver then the coin value itself, else they will increase the denomination.
regards,
Hans
www.silver-coins.org
Hans: perhaps i misunderstood your post, but i think i have to disagree. i can sell a $1 american silver eagle right now for over $16....soooo, newly minted silver coins *can* be worth more than the "coin value" itself.