Nice news story with realcent in story.
Posted: Thu Sep 27, 2012 10:09 amFrom--http://www.investopedia.com/financial-edge/0912/why-are-people-hoarding-coins.aspx?partner=SFGate#axzz27gOBVEO9
Why Are People Hoarding Coins?
September 26, 2012 | Filed Under ยป Commodities, Currencies
Stocks and bonds are common investment vehicles which are owned, directly or indirectly, by investors and pension holders. Metals also have a market value; silver and gold, for example are traded daily. Other metals also have value and a new breed of investors is emerging: the coin hoarder.
What's in Your Change?
All American coins are made from a variety of base metals. Prior to 1965, dimes and quarters were made primarily of silver, until the soaring cost of silver forced the United States Mint to change the composition of the coins to a cheaper alloy. Prior to 1982, pennies were composed of 95% copper, until lower-cost zinc replaced a substantial amount of it. Nickels are still composed of 25% nickel and 75% copper. As the underlying values of the metals rise, the coins become theoretically more valuable. At today's prices for copper and nickel, a five-cent piece is worth almost seven cents. There's a catch, however. Since 2006, it has been illegal to melt down pennies and nickels.
While they can't melt them down, there's nothing stopping hoarders from stockpiling the coins. Online sales sites, such as eBay, allow for trading coins in bulk. Coin hoarders gather on online discussion forums, such as Realcent.org, to discuss everything from coin sorting methods to building hidden bulk storage in their homes. Small-time hoarders get their coins from their local bank tellers, whereas more serious ones buy online in bulk.
Investor or Hoarder?
There is a fine line between investing and hoarding. Coin investors buy and sell based on the value of the coin itself, taking into account its history and rarity. Hoarders are only interested in the underlying scrap value of the base metals. Their investments won't pay off unless the government lifts the restriction on melting currency.
Pennies and nickels are the most popular with hoarders, based on their high copper content. Nickels are easier to collect, as they still contain the same metal levels as always, so there is no sorting required. Pennies take longer to check dates and sort by hand, although some hoarders have devised systems to automatically sort them. The high silver content in pre-1965 dimes and quarters has resulted in most of them already having been removed from circulation by collectors, and they are rarely seen mixed in with other coins.
Hoarders have many different reasons for tucking coins away. Some are waiting for the day when the U.S. Mint stops producing pennies and lifts the melt ban. Others feel that the coins will be a valuable currency if the U.S. government collapses. Some simply get a rush from what they see as a subversive act.
Is This a Unknown Lucrative Investment?
Does hoarding coins really make sense from an investing perspective? The melt ban makes realizing the value of the investment uncertain at best. Metal prices change daily and they could once again drop, making the coins worth less than their face value. On the other hand, the risk of the investment is zero - the coins will always be worth at least their face values. Finding coins and sorting them takes a substantial amount of time, which could be spent on other investing or income-earning activities. The cost of storage also lessens any potential net profit. Based on all of these factors, coin hoarding is more akin to a hobby than an investment.
Coin hoarding in the United States is not yet affecting the amount of coinage in circulation, but it is having significant impact in other countries. Argentina is facing a coin crisis, especially in Buenos Aires. In the Philippines, laws are being contemplated to criminalize hoarding of more than a nominal number of coins. The U.S. Mint can simply forge more coins if it recognizes a shortage down the road, but it will likely be reluctant to do so with input prices so high.
The Bottom Line
As the value of metals such as copper and nickel rises, investors are increasingly interested in tucking away vast amounts of pennies and nickels, hoping that their investments pay off some day. Based on the amount of time needed to collect the coins and the opportunity cost of the investment, it may be a losing, albeit fun, enterprise.
by Angie Mohr
Angie Mohr is a Chartered Accountant and Certified Management Accountant who has worked with thousands of business and personal finance clients from home-based entrepreneurs to rock bands to celebrity chefs. She is also the author of the Numbers 101 for Small Business series of books which have been translated into several languages and are sold worldwide. Her new book: Money$marts: Teaching Your Kids the Value of a Buck will be released in the fall of 2011.
Angie also freelances for several newspapers and magazines, both in print and online. She is passionate about gardening, cooking and bringing more local foods into our diet. She is Canadian through and through but lives by the ocean in Savannah, Georgia with her husband, two children, six cats and innumerable chickens. Follow Angie on Twitter @angiewritergirl.
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