Sponsored Link: Own Gold For Less than A Penny-Per-Ounce

A Guaranteed Investment Scheme?

By Dr. Steve Sjuggerud, Chairman, Investment U
Thursday, July 14, 2005: Issue #452

Here’s a guaranteed investment scheme.

You and I buy up all the nickels we can get our hands on. Since the underlying metal in a nickel today is worth about 6 cents, we lock ourselves in at a guaranteed 20% profit by selling short the coin’s metal in the financial markets today. Then, to guarantee this investment scheme, all we need to do is melt down the nickels.

Okay, so it’s not so easy. And there’s probably some sort of law against this. But the reality is, at current metals prices, it costs the U.S. government about six cents to produce a nickel.

Leave it to the U.S. government to LOSE money by PRINTING money

In fiscal year 2003 (ending in September), it cost the U.S. government 3.78 cents to produce a nickel. In fiscal year 2004, it cost the government 4.56 cents to produce a nickel. And so far this fiscal year (from October 1, 2004 to present), the price of copper (which is the most prevalent metal in a nickel) is well above its fiscal year 2004 levels, meaning that it’ll likely cost the government about 6 cents to produce a nickel.

The penny is in the same boat as the nickel. Again, leave it to our government to lose money in something that should be enormously profitable. After all, the government can print as many dollar bills as it wants simply by printing the paper.

How can you LOSE money when you MAKE the money?

Of course, the government will not lose this game (though our fictitious investment scheme does prove a valuable point). The government will eventually be the one to earn the profit on the melt value of the coins as it takes them out of circulation. And no doubt, the government will soon change the metal content of the nickel and the penny, debasing the intrinsic value of the coins, as governments have done for centuries. (At the amazing rate of the destruction of the value of a dollar, chances are we’ll be spending plastic poker chips instead of metal coins in the not-too-distant future.)

Investment Schemes Aside, What’s the Right Thing to Do?

It’s not to bury a mountain of pennies and nickels in the backyard. And commandeering a fleet of trucks to collect nickels and melt them for their metal content as an investment strategy seems pretty extreme, and the scheme would most likely run afoul of government laws somewhere along the way.

The right thing to do is simply to have less paper and more metal in your assets.

The government can debase money. But it can’t mess with your metal. Two years ago, a nickel cost less than 4 cents to produce. Last year, a nickel cost almost 5 cents to produce. And this year, a nickel will likely cost the government 6 cents to produce.

The reality is, our paper dollars become more and more worthless every day. Based on the government’s own inflation statistics (the CPI), the dollar has already lost 80% of its purchasing power just since 1970. Said another way, what cost $2 in 1970 now costs $10 today.

They say “a nickel ain’t worth a dime anymore,” and it’s true. A nickel back in 1970 is actually worth 25 cents a quarter today.

The more I look for “no-brainer” assets, the more I’m drawn to investing in precious metals / commodity plays, including gold. While every other asset out there (stocks, bonds and real estate) has appreciated dramatically over the past 25 years, commodities, and gold in particular, have gotten cheaper and cheaper. Adjusted for inflation, gold is unbelievably cheap.

Commodity plays, even though they have risen, are still worth owning. At the very least, I feel that you must own some of my recommended commodities and gold plays, simply to hedge your risk of the hidden loss in value every year of owning paper assets.

And if all else fails, there’s always the copper nickel investment scheme.

Good investing,

Steve

Today’s Investment U Crib Sheet

Related Investment U Articles:

Sign Up now and receive this Free report:

Collect 122% in the Next 12 Months From Gold's Surge.




Could you use an extra $600 - or more - each month?

If so, you’ll want to check out the details of an overlooked government-backed program in THIS REPORT.

It shows you why the government is set to distribute $457 million to a small group of recipients, how to get your name on the list and the exact deadline you must meet in order to qualify.

Share Investment U:
  • email
  • Print
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Google Bookmarks
  • Propeller
  • StumbleUpon
  • Technorati
  • Yahoo! Buzz
  • Reddit
  • NewsVine
  • SphereIt
  • Twitter

Comments

**By submitting your comment you agree to adhere to our Comment Policy and Privacy Policy.

Check out our selection of daily Investment Research:

IU Blackboard IU Archives




We Respect Your Privacy



What is Investment U?

Since 1999, Investment U has provided impartial, no-nonsense investment advice on how to build long-lasting wealth.



Recent Articles

 

Search Investment U


 

Platinum Services

Oxford Club
The Oxford Club
is an exclusive, global network of investors, who collectively participate in the pursuit of prosperity and wealth. The Club is renowned for its market-beating, tried-and-true investment principles.

White Cap The White Cap Report exclusively identifies companies, White Caps, which - by being among the earliest to gain traction - have secured dominant positions within untapped, billion-dollar markets.

XPR With an elite trading team at the helm, the Xcelerated Profits Report shows any investor how to "invest like a pro," using high-level, yet easy-to-execute strategies that "xcelerate" profits while minimizing risk.




What Readers Are Saying...

"Always enjoy what you have to say, and learn something new (and useful) almost every time. Thanks again for your outstanding work." Jeff K.

"I just want to say a quick thank you to Alexander Green for not only his sage advise, but his reassuring words of encouragement that we all need right now." Bryan W.