Monday, January 4, 2010

Copper Millions

Some of you are wondering why I cleverly named this blog Copper Millions? Perhaps, you might think, it's because I expect to become wealthy from encouraging others to invest in copper cents as a commodity, thereby driving up the value of my own investment? Nope. Close, but no cigar. Others might think that it relates to the scale of my holdings? That it's necessary to amass millions of pennies, to accrue significant worth in copper? Truth is, all the good names were taken. My search for a site name was therefore somewhat constricted due to availability.

I'm investing in copper as a commodity, as you should. But I'm using Lincoln cents, rather than futures or equities. One of my goals in using real tangible metal is to preserve my purchasing power in this era of rampant inflation. The diminishing dollar has now declined 96% since 1913, when the FED was created. The financial world had grown accustomed to using a figure of ninety-five percent. However, since September 2008 the monetary base has increased nearly 140%, exacerbating that number. Only the British Pound Sterling is in worse shape than the dollar. It's too late to go to the gym.

Ramifications of this sudden influx of new currency are impossible to quantify, but one sure consequence is massive inflation. This incredible surge in the tide of liquidity will have an insidious effect on the dollar. Glenn Beck makes reference to this economic debacle and, with tongue-not-so-firmly-in-cheek, offers a disparaging aside to Al Gore, when he refers to his line graph as An Inconvenient Debt. He displays a graph with a hockey stick formation that demonstrates a parabolic increase in the monetary base, and warns that the threat of hyperinflation is real.

You've heard this before, but this is a good time to repeat it. "By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens." That quote is attributed to John Maynard Keynes. The English economist lived from 1883 to 1946, but what he said is more relevant today than ever. Another economist, Milton Friedman, said "Inflation is the one form of taxation that can be imposed without legislation." Pithy aphorisms aside, our dollars don't buy what they used to.

Within the investment community, probably less than one half of one percent takes action to purchase precious metals. Call it our own small fractional reserve. Sure, they'll give it lip service, but just knowing that silver and gold serve as insurance against the loss of your purchasing power is not enough. Action is required. They can't act as a safe haven if you don't hold them in your hot little hands. Copper and nickel function as money now, and silver and gold will resume that role when fiat currency is recognized to have no more value than an expired coupon.

This is where my blog title could be construed as apropos. Sure, I'd like to think that someday I'll become a "high net worth" individual. Copper as an investment vehicle certainly has the horsepower to transport anyone to that destination, should they be able to put more gas in the tank than the amount of capital I can currently deploy to that task. My goals are more defined. I would like to be able to say that I've got millions of copper cents in my cache. $20,000 amassed in cents would accomplish that feat. That's a concrete target attainable by any number of investors.

That number might be mere pennies, comparitively, to investors who deal in dollar figures tens, hundreds, or even thousands of times as great. But, don't be dismissive of a goal this size. If you recall, I am recommending copper as a commodity play - for those who are already established via asset allocation into silver and gold - as a further means of diversification. And, the primary emphasis of these articles is to encourage participation for beginning investors. Any resolve one can articulate is respectable, as long as it stimulates the initiative to accomplish it. As well, a finite number is less nebulous - thereby providing focus for ambition - rather than one simply entertaining reveries of wealth.

Speaking of fantasies, wouldn't it be nice to imagine yourself The Man of Steel? Only, in this case, you could be The Man of Copper. You could daydream of sitting in your Fortress of Solitude; Superman surrounded by mounds of gleaming pre-1982 copper cents. Like an aurora borealis - shimmering copper-hued above virtual reddish-brown mountains ranged about you - the radiated candescence of their scintillating luster would reflect in flickering chiarascuro upon your chiseled-granite features. You could use one of your special abilities to examine each individual coin in a frenzied flurry of super speed.

When you discovered a MS69 brilliant uncirculated 1909-S VDB penny, along with other rarities, you could cackle with resounding 150 decibel glee. Last heard by homo sapiens at your unfortunate eardrum-shattering incident during the Fifth Annual Smallville, Kansas Hog Holler and Hootenanny while a teenager, the magnitude of your megaphonic laugh - reverberating across the frozen field like the colossal sonic boom of Glamorous Glennis, the X-1 aircraft - would fracture the ice causing the glacial cliffs to calve like catastrophic climate change gone berzerk. But I digress.

Let's do some number crunching. If less than half of one percent of the investing community actually buys precious metals, how many people is that actually equivalent to? I'm talking about holding actual silver and gold in your safekeeping, not investing in allocated pools like the Perth Mint program or Monex, or figurative paper ownership through ETF's like the ISHARES silver trust SLV, or the SPDR gold shares GLD. If seventy percent of households are simply ekeing out an existence, living paycheck to paycheck, I think it would be safe to exclude them from our equations.

More than at any time in the history of the United States, greater wealth is concentrated in fewer hands. The affluent top decile of earners control nearly 50% of all assets. The disparity is even greater if you examine only the top percentile. A recently updated paper, by University of California, Berkeley Professor Emmanuel Saez, Saez calculates that in 2007 the top .01 percent of American earners took home 6 percent of total U.S. wages, a figure that has nearly doubled since 2000.

What does this mean? In July 2008, census statisticians estimate there were 304,059,724 people living in the United States. Babies are being born at the rate of about four million a year, the relevance of which I will explain in a moment. Let's just say that, allowing for extrapolation, there are close to three hundred million Americans at least three years old. Of that three hundred million then, what number have actually purchased gold in one form or another? Half of one percent? I'm being generous if we use a figure that high. But that would be 1,500,000 precious metals investors.

It's unlikely that more than ten percent of that number actually take possession of physical bullion that they hold in close control. So let's say that 150,000 people in this country own tangible gold coins and bars. Most people have never even touched gold. They wouldn't know how or where to purchase it, even if they had the means. Show most people a $20 St. Gauden's Double Eagle and they'll likely express amazement at how much it seems to weigh. A look of wonder may cross their face, and their eyes might fill with a furtive gypsy glint as they scheme how to palm the gold and replace it with a foil-wrapped chocolate.

But very few people will ever touch gold. How about silver? Well silver was once much more accessible than it is now, since prior to 1965 all dimes, quarters, and half dollars minted in the USA were 90% silver. The Baby Boomers remember using this form of coinage when we were kids. It disappeared from circulation, thanks to Gresham's Law, shortly after 1965, when silver was removed from American coins, with the exception of the half dollar, where the content was reduced to 40 percent for four more years. Then that denomination, too, converted to an alloy of cupronickel referred to as "clad." So, many more people have held silver in their palm.

Riffle a stack of silver dollars in the presence of someone younger than thirty, and watch their face. Hand them the stack, and they'll repeat what you just demonstrated. They can't get over how different they sound compared to clad. The clarity of the timbre. The ring of real money. It's not necessary to delineate a number to buttress my theme, but let's assign a nominal value anyway. Let's say three million actually own silver coins or bullion. Perhaps fifty million have let them pass out of their possession and, when silver rises stratospheric, will rue that day. They'll become like a fisherman who bemoans the loss of a 1200 pound swordfish, "the one that got away."

So, a tiny percentage have touched an ounce of gold. A small minority have held an ounce of silver. How many have cupped an ounce of copper in their palms? A little more than nine copper cents? How about 300,000,000 people? Virtually everyone in this country, over the age of two, has at one time or another handled an ounce of copper. But they give not the least contemplation to the consideration that the lowly penny might someday have a higher value. Even now, as illustrated by a visit to, the intrinsic worth of a pre-1982 copper penny is approximately 2.2 times its face value.

Someday soon, copper will increase in value by multiples, commensurate with hyperinflation. Now is the time to sort through your change and save the copper cents. If you wait, they'll disappear from circulation like the silver did. It's bad enough the dollar is pulling a disappearing act, don't let that happen to your purchasing power as well. One day millions who once touched copper will regret they didn't act on this opportunity. Why not instead be one who takes advantage of this opportune moment to accumulate your own copper millions?

Buy Silver. Buy Gold. Save Copper. Start Now.

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