There is a distinct smell in the air. The pungent odor of deflation and a poorly timed trade.
In April, I suggested loading up on nickels since the metal value at that time exceeded the face value and I expected more QE interventions from the Fed to devalue the dollar even further. Since then, the prices of copper and nickel have plunged in a frightening way. This morning, nickel opened down about 35% and has lost more than 50% since my original article. I am still looking for news that would explain the 1/3 haircut in a single day, so far without success.
The good news is that there was almost no down side risk to hoarding nickels. Even though the metal value has dropped well below face value, they are still worth face value and there is no transaction cost to depositing them back into a bank or credit union.
I am still prepared to wait 10-15 years for a pay off, but I might trade some of them in for I-bonds or silver and to free up storage space. In the short run, it is clear that I was way off base on base metals. Doh!
UPDATE: FLASH CRASH! According to Kitco, the price of nickel is now back to pre-crash levels at $8.38/pound. The price anomaly lasted a good few hours, but has now been erased from existence. I should have taken a screenshot. While prices are still way down from a year ago, the puzzling 35% drop from this morning is gone without a trace. That explains the lack of news but raises a question about what happened to the price reporting.
I absolutely love the title of this post, lol.
ReplyDeleteThe good news is that no matter what happens collecting nickels is at least as good as pickling fish in a barrel. On a relative basis, you simply can't lose. ;)
In all seriousness, I think you should factor in your downside risk.
ReplyDeleteThe 3-month treasury bill yields 0.01%.
That means $1000 worth of nickels (20,000 of them) will lose 2 nickels worth of interest if held a year. That's 2 nickels you won't have to spend on 10% of a McDonald's Dollar menu item, lol.
I said I was all serious. I wasn't. Sorry! ;)
Mark,
ReplyDeleteI was really thrown off by the apparent 35% drop this morning, which has since vanished. Poof! Nickels are still down a lot in metal value, but are closer to face value, so still worth holding. For better or worse, nickel hoarding is not my primary retirement plan. It is a lot of fun, though!
For better or worse, nickel hoarding is not my primary retirement plan. It is a lot of fun, though!
ReplyDeleteNickels are to your retirement plan and fun what toilet paper is to my retirement plan and fun.
That said, I keep hearing that we should invest in ourselves.
Look what $60,000 could buy us, lol.