Consider US 40% silver coin as part of your wealth storage
Posted: Tue Sep 24, 2013 8:17 pm(A developing work in progress... I keep finding minor typos)
Other than coin searchers who still pull these coin from circulation at face value there are not a lot of well-documented supporters. But are the detractors missing some key points? Does it make sense to include these in a strategy? Let's dig into this.
While also available in NIFC (non-intended for circulation) Eisenhower dollar coins, we will focus especially on the common circulated 1965-69 JFK half dollar, which is often available in bulk at a discount to many other silver forms. Physically this coin is the same diameter and thickness as the traditional US half dollar design but the alloy was changed in 1965 from the traditional 90% Ag content coin silver alloy to a clad (sandwich) coin with an average content of 40% silver and 60% copper. The clad construction uses outer layers of 80/20 silver/copper alloy (same as was used for Canadian silver coin for many years) over a copper-dominated inner core of nominal 20/80 silver/copper alloy (actually 20.9/79.1 for the core alloy, to be precise). The resulting weight is less than the coin it replaced due to the lower silver content: the clad coin weighs-in at a nominal 11.50 grams compared to 12.50 grams for the traditional 90/10 coin silver alloy. The circulated versions of these coins were minted in large quantities and have essentially no numismatic value. No circulated half of any type was minted in 1970, and in 1971 the circulated coin alloy for the half dollar was changed to the current nickel/copper clad design. The 40% half was minted in 1970 but only released as NIFC for inclusion in mint sets (the mint did not revealed that the end of the circulated coin was 1969 until after the 1970 mint set sales were ended). The other (and last) 40% half is the NIFC 1976S bicentennial coin.
For many years the 40% half had an intrinsic value well below face value so there was little reason for the population to hoard it. These silver-clad halves were increasingly ignored during the 1970s as common circulation of the half dollar went out of favor; eventually their greatest use became as gambling tokens. Even now examples of these coins can sometimes still be found hiding within bank change orders delivered by armored car services, mixed in with the far more numerous nickel/copper clad coin. With accumulated surface dirt and tarnish they are often fairly unattractive in their native state and due to the clad copper-dominated core - which has a copper-ish hue - they are often confused by many people who mistake them for the common nickel/copper clad coins that are far more common.
There are two primary (and valid) negatives of 40% silver coin:
1) The silver content is low and with that they are less desired by many because they are not considered bullion silver. It's hard to argue against this; in truth the lower alloy content is not favored by bullion investors who seek the advantages of 99.9% Ag. And for alloy coin fans the long-standing circulating composition of US 90% Ag (or Canadian 80%) coin silver is more widely respected than the 40% silver coin. The truth is that for the portion of your store of wealth that you want to be pure silver you should simply buy pure silver. However, the fact of lower silver content doesn't have to be a defining criterion that eliminates it completely from consideration as part of your store - more on this below.
2) If you are trying to create a large store of weath then eventually the 60% portion of copper adds undesirable weight and bulk. To store up large amounts of silver content with the 40% coin requires you to store by weight 1.5 times that same weight in copper (and the percentage of volume bulk is even higher). Yep, that's all true as well. If you are strongly challenged by either volume or weight constraints then 40% silver coin isn't the ideal solution for you.
So given the above drawbacks to the coin what are the positives? What part, if any, should it play in your personal archive of wealth preservation? Here are eight reasons to consider 40% silver halves:
1) they are often available at or below spot silver prices, while other forms often have a premium.
2) each contains 4.6 grams of pure silver, just over one-seventh of a troy ounce.
3) these coin possess the lowest ratio of intrinsic value to face value of any common coin (currently 6-6.5:1) - arguably a good thing. If the value of silver was to go to zero these will never be worth less than 50 cents.
4) the JFK design is timeless and widely recognized; in a SHTF scenario this coin would arguably be more easily tradable and less subject to wear issues than bullion.
5) the metals used in it are simple duplex alloys; if they were to be separated back into their constituents there are none of the complicating factors such as seen with the 35% silver "war nickel" of 1942-45.
6) the second alloy element copper, is itself widely valued as a key base metal, at 6.9 grams of pure copper per coin.
7) being little circulated there is generally little to no wear on most examples of this style.
8) while these coins often come out of circulation poor in appearance, they usually clean up well with Tarn-X tarnish remover. With 1965-69 dates being accepted as non-numismatic coins, the only ones with collectable value above face or instrinsic value are special polish die strikes (65-67) or proof strikes (68-69), or oddball strikes that might therefore be worth far more in an uncleaned state. This link is a good starting point: http://en.wikipedia.org/wiki/Kennedy_ha ... Collecting. Except for these off-nominal strikes (which should be extracted and saved separately without cleaning) there doesn't need to be any reluctance to clean them, and after cleaning they usually present as a very attractive coin and at that point are clearly recognizable as silver.
The difference in both weight and content sometimes makes comparison confusing for those unaccustomed to them, so just keep this little rule of thumb in mind. The 4.6 grams of silver vs. 11.25 grams silver in a nominal weight 90% half happens to yield 40.88% of the silver content of the heavier 90% half. So five 40% coins contains roughly the same amount of silver (just slightly more) as two 90% halves (or any other $1 face of fractional 90% coin).
What to watch out for? Wear - because the bulk of the silver for this coin is in the exterior layers, heavy wear of the 40% clad coin has a more devastating affect on the net silver content, as described in this other post viewtopic.php?f=9&t=23637&p=219936
Two other important views to consider, especially if you are interested in trading or arbitrage, are presented in these posts:
viewtopic.php?f=9&t=26248&p=237915#p237955
viewtopic.php?f=9&t=26248&p=237915#p238027
Other than coin searchers who still pull these coin from circulation at face value there are not a lot of well-documented supporters. But are the detractors missing some key points? Does it make sense to include these in a strategy? Let's dig into this.
While also available in NIFC (non-intended for circulation) Eisenhower dollar coins, we will focus especially on the common circulated 1965-69 JFK half dollar, which is often available in bulk at a discount to many other silver forms. Physically this coin is the same diameter and thickness as the traditional US half dollar design but the alloy was changed in 1965 from the traditional 90% Ag content coin silver alloy to a clad (sandwich) coin with an average content of 40% silver and 60% copper. The clad construction uses outer layers of 80/20 silver/copper alloy (same as was used for Canadian silver coin for many years) over a copper-dominated inner core of nominal 20/80 silver/copper alloy (actually 20.9/79.1 for the core alloy, to be precise). The resulting weight is less than the coin it replaced due to the lower silver content: the clad coin weighs-in at a nominal 11.50 grams compared to 12.50 grams for the traditional 90/10 coin silver alloy. The circulated versions of these coins were minted in large quantities and have essentially no numismatic value. No circulated half of any type was minted in 1970, and in 1971 the circulated coin alloy for the half dollar was changed to the current nickel/copper clad design. The 40% half was minted in 1970 but only released as NIFC for inclusion in mint sets (the mint did not revealed that the end of the circulated coin was 1969 until after the 1970 mint set sales were ended). The other (and last) 40% half is the NIFC 1976S bicentennial coin.
For many years the 40% half had an intrinsic value well below face value so there was little reason for the population to hoard it. These silver-clad halves were increasingly ignored during the 1970s as common circulation of the half dollar went out of favor; eventually their greatest use became as gambling tokens. Even now examples of these coins can sometimes still be found hiding within bank change orders delivered by armored car services, mixed in with the far more numerous nickel/copper clad coin. With accumulated surface dirt and tarnish they are often fairly unattractive in their native state and due to the clad copper-dominated core - which has a copper-ish hue - they are often confused by many people who mistake them for the common nickel/copper clad coins that are far more common.
There are two primary (and valid) negatives of 40% silver coin:
1) The silver content is low and with that they are less desired by many because they are not considered bullion silver. It's hard to argue against this; in truth the lower alloy content is not favored by bullion investors who seek the advantages of 99.9% Ag. And for alloy coin fans the long-standing circulating composition of US 90% Ag (or Canadian 80%) coin silver is more widely respected than the 40% silver coin. The truth is that for the portion of your store of wealth that you want to be pure silver you should simply buy pure silver. However, the fact of lower silver content doesn't have to be a defining criterion that eliminates it completely from consideration as part of your store - more on this below.
2) If you are trying to create a large store of weath then eventually the 60% portion of copper adds undesirable weight and bulk. To store up large amounts of silver content with the 40% coin requires you to store by weight 1.5 times that same weight in copper (and the percentage of volume bulk is even higher). Yep, that's all true as well. If you are strongly challenged by either volume or weight constraints then 40% silver coin isn't the ideal solution for you.
So given the above drawbacks to the coin what are the positives? What part, if any, should it play in your personal archive of wealth preservation? Here are eight reasons to consider 40% silver halves:
1) they are often available at or below spot silver prices, while other forms often have a premium.
2) each contains 4.6 grams of pure silver, just over one-seventh of a troy ounce.
3) these coin possess the lowest ratio of intrinsic value to face value of any common coin (currently 6-6.5:1) - arguably a good thing. If the value of silver was to go to zero these will never be worth less than 50 cents.
4) the JFK design is timeless and widely recognized; in a SHTF scenario this coin would arguably be more easily tradable and less subject to wear issues than bullion.
5) the metals used in it are simple duplex alloys; if they were to be separated back into their constituents there are none of the complicating factors such as seen with the 35% silver "war nickel" of 1942-45.
6) the second alloy element copper, is itself widely valued as a key base metal, at 6.9 grams of pure copper per coin.
7) being little circulated there is generally little to no wear on most examples of this style.
8) while these coins often come out of circulation poor in appearance, they usually clean up well with Tarn-X tarnish remover. With 1965-69 dates being accepted as non-numismatic coins, the only ones with collectable value above face or instrinsic value are special polish die strikes (65-67) or proof strikes (68-69), or oddball strikes that might therefore be worth far more in an uncleaned state. This link is a good starting point: http://en.wikipedia.org/wiki/Kennedy_ha ... Collecting. Except for these off-nominal strikes (which should be extracted and saved separately without cleaning) there doesn't need to be any reluctance to clean them, and after cleaning they usually present as a very attractive coin and at that point are clearly recognizable as silver.
The difference in both weight and content sometimes makes comparison confusing for those unaccustomed to them, so just keep this little rule of thumb in mind. The 4.6 grams of silver vs. 11.25 grams silver in a nominal weight 90% half happens to yield 40.88% of the silver content of the heavier 90% half. So five 40% coins contains roughly the same amount of silver (just slightly more) as two 90% halves (or any other $1 face of fractional 90% coin).
What to watch out for? Wear - because the bulk of the silver for this coin is in the exterior layers, heavy wear of the 40% clad coin has a more devastating affect on the net silver content, as described in this other post viewtopic.php?f=9&t=23637&p=219936
Two other important views to consider, especially if you are interested in trading or arbitrage, are presented in these posts:
viewtopic.php?f=9&t=26248&p=237915#p237955
viewtopic.php?f=9&t=26248&p=237915#p238027
