The 'Kyle Bass' Trade And How The Penny Cost Taxpayers $436mm

Tyler Durden's picture




 

It has been a few years since Kyle Bass suggested the 'nickel trade' and the idea remains as profitable for those with large wheel-barrows now as it ever was. As Bloomberg notes, the penny currently costs almost 2 cents to make and the nickel more than 10 cents - more than double the cost from 2006. In those seven years, the US taxpayer has lost a stunning $436 million thanks to the inflationary devaluation of the USD relative to the metals involved, and while a former Arizona congressman (Jim Kolbe) tried to sponsor a bill to abolish the penny (to save the cost of minting), President Obama noted that "given all the big issues, we're not able to get to it," even as the Canadian Mint just stopped distributing pennies - saving $11mm annually. It seems, while the production process may have costs, the 100% markup for pennies and nickels remains an intriguing disconnect.

 

 

 

 

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Wed, 02/20/2013 - 16:39 | 3260980 Say What Again
Say What Again's picture

I have huge jars full of old nickels, dimes, & quaters.

Not nearly as much as Mr. Bass, but good for me.

Wed, 02/20/2013 - 16:42 | 3260998 strannick
strannick's picture

So you can buy 2 cents worth of copper (pre- 1996 in Canada) for a penny?

Good deal.

Wed, 02/20/2013 - 16:46 | 3261019 Pladizow
Pladizow's picture

Coin melt values, see: http://www.coinflation.com/

Wed, 02/20/2013 - 16:55 | 3261038 hedgeless_horseman
hedgeless_horseman's picture

 

 

A little copper can be useful in a crunch.

http://en.wikipedia.org/wiki/Explosively_formed_penetrator

Wed, 02/20/2013 - 17:06 | 3261088 ParkAveFlasher
ParkAveFlasher's picture

Nice.  If I may add, I just read that Thermite is a 50/50 mix of iron (III) oxide (aka rust) and powdered aluminum.  You can light it with a July 4th sparkler.  Add a little magnesium and ratchet up the fun.

Wed, 02/20/2013 - 17:18 | 3261141 hedgeless_horseman
hedgeless_horseman's picture

 

 

Here is another reason for owning physical copper...

http://www.coppermoonshinestills.com/

Wed, 02/20/2013 - 17:45 | 3261241 Stackers
Stackers's picture

Federal Reserve:  Mr. Bass. Why do you want $1 million in nickels ?

Mr. Bass: I just like nickels

Wed, 02/20/2013 - 20:25 | 3261700 FEDbuster
FEDbuster's picture

I like to stockpile copper that is wrapped around lead stuck in a brass case filled with black powder.

Wed, 02/20/2013 - 17:50 | 3261253 espirit
espirit's picture

Does Mrs. H know you look at this stuff on the internet?

Wed, 02/20/2013 - 18:18 | 3261353 smlbizman
smlbizman's picture

hold on now, i'm in baltimore and for a mere 587 mill. we can find out for sure about this data if it is accurate.....

Wed, 02/20/2013 - 17:46 | 3261243 1100-TACTICAL-12
1100-TACTICAL-12's picture

Hedgeless have your potatoes in yet ?

Wed, 02/20/2013 - 18:32 | 3261273 hedgeless_horseman
hedgeless_horseman's picture

 

 

Mrs. Horseman has been digging around out there quite a bit, but I am not sure what she has planted for this go 'round.  Here is last night's carrot soup and garden salad with real ginger dressing.  I do know that to say we are long lettuce at this time is an understatement.

 

Here is one of the little horsemen transfering some black gold from the Chateau du Poulet to Compost Pile 3-A, Block 12, Sublevel 2.

Wed, 02/20/2013 - 20:16 | 3261670 1100-TACTICAL-12
1100-TACTICAL-12's picture

cool, hard to get my little 1100-tactical-,410's going but they get better as they get older. I have a feeling bugs will be bad this year , no winter to speak of in the hill country this year. I like NEEM OIL do you have a secret recipe that might be a little easier on the fiatscos?

Wed, 02/20/2013 - 20:17 | 3261675 MisterMousePotato
MisterMousePotato's picture

How droll.

Thu, 02/21/2013 - 17:41 | 3264889 Chuck Walla
Chuck Walla's picture

A little copper can be useful in a crunch.

So can a copper jacket....

FORWARD SOVIET!

Wed, 02/20/2013 - 16:52 | 3261048 Pinto Currency
Pinto Currency's picture

 

The penny was discontinued in Canada because it cost ~ $1 Trillion Zimbabwean Dollars to produce.

Wed, 02/20/2013 - 17:04 | 3261080 SilverIsKing
SilverIsKing's picture

Since you posted that, the cost has risen to $2 Trillion Zimbabwean Dollars.

Wed, 02/20/2013 - 17:13 | 3261118 Joe Sixpack
Joe Sixpack's picture

Since you posted that the cost has risen to 200 Quadrillion Zimbabwe dollars, and the Zimbabwean stock market indices increased 1000 X.

Wed, 02/20/2013 - 18:15 | 3261345 Grinder74
Grinder74's picture

Since you posted that, a 1000-ton meteor has crashed into Zimbabwe and turned it into one giant copper-filled crater.

Wed, 02/20/2013 - 21:00 | 3261794 Whatta
Whatta's picture

Since you posted that Obama has invaded Zimbabwe, droned 1000 kids, opened a US SEAL base and is looking for "terrorists".

Wed, 02/20/2013 - 17:27 | 3261176 Stock Tips Inve...
Stock Tips Investment's picture

Very good example of the effects of the loss of value of the Dollar. Very good deal for someone.

Wed, 02/20/2013 - 17:51 | 3261258 Albertarocks
Albertarocks's picture

Retailers up here are actually ceasing operations using pennies.  Rounding off to the nearest nickel.  I'm dead serious.

Wed, 02/20/2013 - 20:07 | 3261641 FEDbuster
FEDbuster's picture

Let me guess. They are rounding up, not down.

Thu, 02/21/2013 - 06:19 | 3262539 Albertarocks
Albertarocks's picture

Nope.  They're being fair about it and rounding to the nearest.  If it's lower, the retailer takes the big hit.

Wed, 02/20/2013 - 16:42 | 3261000 malusDiaz
malusDiaz's picture

it took 3 weeks to get 100$ in pennies delivered... 

 

The bank was very confused when I wanted several hundred dollars in Nickels, dimes, and quarters... almost like I wanted to rob them of their metal!

 

Muahahhaha they only have zinc and copper in their vaults...

 

100$ per person in the USA is how much incirculation small change is out there... get it while you still can. 

Wed, 02/20/2013 - 16:49 | 3261034 Pladizow
Pladizow's picture

With regards to pennies only the pre 1982's are worth it.

And even then, probably less the 5% of pennies in circulation are pre 1982.

Wed, 02/20/2013 - 16:59 | 3261069 Ahmeexnal
Ahmeexnal's picture

zzaktly.
should have ordered nothing but nickels.

Wed, 02/20/2013 - 17:09 | 3261096 scatterbrains
scatterbrains's picture

It must have been luck then when I separated $10 dollars worth of pennies (20 rolls) and found on average that 24.9% were pre 1982... I like to think of them as 1/2 nickles as they're worth 2.45 cents each or so I thought at  the time I did this which was a while ago.

Wed, 02/20/2013 - 17:55 | 3261269 msmith9962
msmith9962's picture

I have my kids sort through them for me.  The post 82 and 64 (not much there of course) stuff goes in their piggy banks, the good stuff and nickles go in mine. 

Wed, 02/20/2013 - 18:25 | 3261374 smlbizman
smlbizman's picture

ive been getting 12- 15 82s and prior per roll...also pulled a 1912 s wheaty....25.00 minimum..

Wed, 02/20/2013 - 16:50 | 3261039 Bad Attitude
Bad Attitude's picture

Nickels actually have a nickel's worth of metal. A copper penny has over two cents of copper. A zinc penny has about a half cent of metal.

This web site has the melt value for US coins.
http://www.coinflation.com/

Wed, 02/20/2013 - 17:16 | 3261130 CuriousPasserby
CuriousPasserby's picture

I'd keep the nickels but cash in the dimes and quarters to buy silver eagles.

Wed, 02/20/2013 - 21:01 | 3261766 James
James's picture

O/T but this will open your eyes to the truth!

The UCC Connection, by Howard Freeman

If that intrigued you read this too.

BEAT THE LAW HOW TO GET DIPLOMATIC IMMUNITY

No wonder they  want the guns.

Thu, 02/21/2013 - 00:02 | 3262219 LongBalls
LongBalls's picture

Only in this damn country can people think that using Dollar denominations (a false weight and measure) that creates an illision of "to expensive to continue" is not worth the resources it extracts.  Whereas in reality worthless paper extracts real resources because ingnorat sluts have confidence in the false weight and measure. THANKS PUBLIC SCHOOLS!

Wed, 02/20/2013 - 16:40 | 3260990 DoChenRollingBearing
DoChenRollingBearing's picture

The rumors, and just rumors, I have heard is that early in 2013 the Mint will stop making the pennies and nickels here.  While it *my* not be worthwhile to sort pennies for the copper ones (1981 and before), it is easy to just throw nicklels into the jug...  Or just go to the banks and get $100 worth whenever you have the inclination.

Wed, 02/20/2013 - 16:47 | 3261023 malusDiaz
malusDiaz's picture

it will be a 3 week wait for 100$ in pennies.

 

even the new pennies are worth more then their melt value...

 

100$ per person buying small change (1c, 5c, 10c, 25c) and all the change will disapear....

Wed, 02/20/2013 - 20:12 | 3261654 FEDbuster
FEDbuster's picture

They plan to ditch the penny, debase the nickel and eliminate the dollar bill for the dollar coin.  Long term, they want to eliminate cash altogether.

Wed, 02/20/2013 - 16:41 | 3260995 azengrcat
azengrcat's picture

My dad has a metric_F_ton of copper pennies.  May be the original "copper bug".

Wed, 02/20/2013 - 16:45 | 3261018 Winston Churchill
Winston Churchill's picture

What the fuck is a metric ton. ?

I was brought up on metric and imperial, side by side.

Never once heard that abortion of a phrase.

Wed, 02/20/2013 - 16:52 | 3261045 Henry Chinaski
Henry Chinaski's picture

metric buttload > metric ton > standard buttload

Wed, 02/20/2013 - 21:37 | 3261868 PaJoad
PaJoad's picture

MANY a beer has been sacrificed among our humble brain trust proving beyond a shadow of doubt that a shit-load is the largest quantity known to man. In case you're wondering....

Thu, 02/21/2013 - 01:41 | 3262375 Harlequin001
Harlequin001's picture

Yep, but I can absolutely assure you that a shit-load is less than half of what you can shake a big stick at.

Wed, 02/20/2013 - 16:56 | 3261059 fuu
Wed, 02/20/2013 - 16:56 | 3261062 DoChenRollingBearing
DoChenRollingBearing's picture

 

 

A metric tonne (or just "tonne") is 1000 kg (approx 2200 lbs).

Wed, 02/20/2013 - 17:05 | 3261084 Winston Churchill
Winston Churchill's picture

2205lbs .actually.

Its like saying one Guinnea equal one  rouble.

No wonder were all fucked.Fiat for weghts and measures.

Wed, 02/20/2013 - 16:42 | 3260997 koaj
koaj's picture

silver is getting cheaper by the day, while WTI and gas is going up. makes sense. come to $26 Ag and i will buy lots of you

Thu, 02/21/2013 - 00:11 | 3262237 otto skorzeny
otto skorzeny's picture

coin dealers by me are asking $6 above spot and he said he'll keep charging $36 for the rest of the year. I said "what if it gets in the $20s"-he mumbled something and hung up

Wed, 02/20/2013 - 16:42 | 3260999 earleflorida
earleflorida's picture

$4.99 9/10 per gallon
???

Wed, 02/20/2013 - 16:49 | 3261031 Thomas
Thomas's picture

fucking Kernan was talking about record gas prices. Instead of recognizing it for what it is--inflation--he saw the deflationary effects of the high price, declaring that the Fed would need to keep the rates low because of it. MIT degree or not, that is just dumb god damned logic.

Wed, 02/20/2013 - 16:43 | 3261003 fnordfnordfnord
fnordfnordfnord's picture

Maybe Kyle Bass is a fan of Hank & John Green of vice versa https://www.youtube.com/watch?v=77C47XYm_3c

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