-->#315 - Move Over, Gold...
The Investment U E-Letter
Friday, February 27, 2004
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Move Over, Gold...
Here's why it might be time to start burying pennies and nickels in your back yard, too...
By Dr. Steve Sjuggerud
President, Investment U
You need to make some room next to the gold buried in your backyard... Room for pennies and nickels...
I'm only half joking. Starting this year, pennies and nickels may be worth more for their metal content than for their purchasing power. It's true...
The U.S. dollar has been crashing in value in the last two years... so much so that in 2004, the U.S. Mint will likely lose money minting pennies and nickels... This is no joke...
In 2003, it cost the U.S. Mint 0.98 cents to make a penny. This used to be an easy profit game for the government... In 2002, it cost 0.88 cents to make a penny. And in 2001, it cost 0.80 cents. But now, in 2004, it is almost assured that the government will lose money minting pennies.
The good news: These unfortunate times for the dollar will equate to great times for another investment, an investment that almost no one out there is buying right now.
Before I tell you what that investment is, let's look a little deeper into what's going on with the dollar...
A Loss on Every Penny and Nickel in 2004
The U.S. Mint counts September 30, 2003 as the end of its fiscal year. Since then, the price of copper has risen by 62%. Copper, you may be surprised to learn, is the main ingredient in a nickel.
In 2003, it cost the government 3.78 cents to make a nickel. Easy profits right? But the government didn't count on the dollar crashing. If the price of copper, the main ingredient in a nickel, stays the same, it's possible that the cost of could rise by 62% in 2004. Then it'll cost the government over six cents to produce a nickel.
The situation is similar with the penny. The main ingredient in pennies is not copper, but zinc. Actually, zinc makes up 97.5% of a penny. Zinc is up nearly 40% since the end of the 2003 fiscal year. So if the cost of producing a penny rises by 40%, it'll cost the government 1.38 cents to make a penny.
How can the government get out of this mess? Oh that's an easy one... change the metal content of the coins. I'm sure it's only a matter of time. Maybe next year we'll be spending poker chips instead of pennies. And just think, someday down the road, even those poker chips will have more intrinsic value than a paper dollar.
So How Can You Play this Downturn in the Dollar?
What can you do? One option is to dig a hole in your backyard next to your gold. And fill it with pennies and nickels - coins that have more metal value than spending value...
Another option is to start considering commodities and commodity-related investments. I have been writing about commodity-type investments in these letters for a while now. It's worked out fabulously. As I said in this letter, since September 30, 2003 alone, copper is up 62%, and nickel is up 49%.
There are many ways to get in on commodities like precious metals, as we've covered in past IU E-Letters. One that represents a decent value today is 100-year-old U.S. gold coins.
Commodities in some form deserve a place in your portfolio, in my opinion, for the rest of this decade, at least. What more evidence do you need that the dollar ain't worth what it used to be?
<ul> ~ Der ideale Kompromiß für Edelmetall- und Cash-Horter</ul>
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