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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Banksters's picture

Fuck this 90 pt drop,  You wanna see a market hissy fit, or should I say algo fit,  raise interest rates a quarter point

Glass Seagull's picture



Fewer coins, more food scrip.



Cursive's picture

Save the Penny!  Dump BernanQE!

CaptainSpaulding's picture

This just in from Bud Fox..."Blue Horseshoe loves Coinstar"


a growing concern's picture

Nickels are a great arbitrage play. It's not like you're making any money in your savings account, so you may as well hold some of that in nickels. They have the added bonus of being extremely hard to steal, as they weigh a ton.

msmith9962's picture

Fill a sock with them and you have security too.

maskone909's picture

lol i actually thought about penny hoarding. the only prob is that it costs more in gas to transport them then the profit margin togain. jusr imagine 10k in profit would require almost 700,000 pennies at a 1.5cent conversion

smlbizman's picture

the value will be realized when they pull the pennies and nickles out of circulation, than they will sell like the 64's, for their metal..

Henry Chinaski's picture

People think I oppose everything Obama favors, but they are wrong.  I stand with the president on getting rid of the penny and having a college football playoff.

besnook's picture

time to make paper pennies.


cash will be obsolete as soon as they figure out how to buy and sell illegal drugs, weapons and other criminal goods and services with plastic. wells fargo is working on that.

Ahmeexnal's picture

isn't that the reason Goldman Sachs created BitCoin?

espirit's picture

And all this this time, I thought HSBC had cornered the market on profit from illegal substances.

Oh well, guess it's all fair game now.

Dr Benway's picture

I guess the gov is penny foolish, pound foolish.


So what kind of costs could reasonably be expected for an investor one day selling copper pennies for the 2c in metal? Would be interesting to know at what volumes it becomes worth it.

ParkAveFlasher's picture

As my father would say, "don't take any wooden nickels".

Dealer's picture

I love Kyle Bass.  I'd suck his dick but I'm afraid I'd be labeled a cocksucker for life.

MisterMousePotato's picture

You're going to regret writing that when you sober up, you know?

Dr. Kenneth Noisewater's picture

Change your oil ONCE, and they don't think you're a mechanic.

Wear a tuxedo ONCE, and they don't think you're a millionaire.

But suck just ONE cock..


wcvarones's picture

There's a lot of minting costs in those figures.

The actual metal value is only 5.1 cents in a nickel, and half a cent in a penny:

Nickels have been worth more than 7 cents in the last few years, but declined with the recent commodity pullback.

Kreditanstalt's picture

Don't be ridiculous.

They should be FORCED to continue minting pennies (and for that matter they should be the 100% copper they once were).

The enemy here is not "the penny", not "the cost" nor the goal "saving taxpayers money".  The enemy is CURRENCY DEBASEMENT and the penny should be maintained as a reminder that the real villains are GOVERNMENTS.

rotagen's picture

Lets get on topic, you don't need a crystal ball to see what's going down.


And theres only one solution.

tony bonn's picture

"...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..."

talk about majoring in the minors and re-arranging deck chairs on the titanic, this farticle rises to imbecility....removing the penny is pure fraud.....the same with a many items jump by more than 5% in price because of that stupid move? not everything which loses money should be ended, including the post office.....there truly are some services which should be maintained at a loss....

with 1.5 trillion usd deficits, whining about an average 60 million usd loss per year is the biggest sanctimonious horse shit i have heard in a long time....

if you want to save real money, slash and burn the cia, defense, debt, and bureaucrats.....that would be savings you could crow the mean time, we will have to listen to this chicken shit about the cost of the penny and the post office.

smartstrike's picture

...that was just a plug for Kyle Bass to keep his name in the limelight.

hardcleareye's picture

Nope, that was a "Tyler Troll"... wasting my time....  lol

If you want to read what Bass is saying these days go to his blog

Dollar Bill Hiccup's picture

I think that the US should start minting SUB PENNY coins!

Mi Naem's picture

It is unfortunate that copper, zinc, and nickel have gone up in price. 

What we need is for everybody to wear WIN buttons.  (for "Whip Inflation Now") 

Those buttons bring prices down, which is what causes inflation.  This was one of the good ideas that Gerald Ford (American President and frequent star on Saturday Night Live)  came up with.  It worked in the 70's, and helped get him re-elected.

Honey Badger's picture

"In those seven years, the US taxpayer has lost a stunning $436 million ..."

To put that into context, the Fed prints $2.79 billion every DAY.   

Weyland_Yutani's picture

I guess the expression "worth every penny" is void?

Fredo Corleone's picture


"Building Better Worlds"

Monedas's picture

Many of the world's government mint coins are sold at a loss .... paper markets are a rip off .... crocked government casino with bottomless pockets .... even Monedas could make money with those advantages .... while mint coins are heavily subsidized .... moral .... buy phizz govmint coins .... it's a no brainer !    While they are auditing US gold .... let's see a "real" audit of the US and Canadian mints .... nevah gonna happen !       Monedas     1929     Comedy Jihad World Tour    Fatwas issued while you wait !

Pancho Villa's picture

I'm afraid that the penny and the nickel are doomed. But we don't really need them. In the 1960's, a penny had at least as much purchasing power as the dime does now. For example, four pennies would buy a first class stamp and 25 pennies would buy a gallon of gas. Now, four dimes will get you a first class stamp and 25 dimes will NOT get you a gallon of gas.

We don't need pennies and nickels and whenever the melt value of a coin becomes significantly higher than its face value, people start hanging onto them and they cease to circulate.

MisterMousePotato's picture

When I was a kid, a nickle would buy a pack of gum (five sticks of Juicy Fruit [probably real sugar]. Or was it ten sticks?). Ten cents bought a large(ish) candy bar. Four ounces? Six? Eight even? Can't recall. This was 1960 +- or thereabouts. Twenty-five or fifty cents was some real money for a kid back then.

Rick Blaine's picture

Some of the critics of Bass' "nickel trade" crack me up.

They often cite how it is illegal to melt down, or otherwise destroy, he'll never be able to truly benefit from it...

The way I see it, he really can't lose on least if you consider the two extreme outcomes of all of "this."

If (when?) we eventually experience a legit currency crisis, and we pretty much go SHTF, no one is going to give a damn about laws like that...and the nickels will hold their value to at least some degree because of the raw materials...assuming of course he/his clients have physical possession of them...

...and if we ever let true deflation ever take hold (like we should have done in '08), the nickels will go up in value as a currency.

Either way, he has succeeded in at least preserving some of the wealth of his clients - and if you listen to his various speeches, etc., that's what he's really trying to do.  He's not necessary trying to make a killing on each and every "bet" he places.

I THINK the only way he could "lose" on this bet is if we see a steady, controlled "inflation" - but IMHO, that's less likely to happen than either of the two "extreme" outcomes.  Shit, Japan has been trying to do inflate their way out of their debt problems for 20 years...and all they're done is add more debt....

Antifaschistische's picture

by the way Mr. Blaine, is currently illegal to "melt" coin.   But if you did, there's not a recycler in the US that's going to question where you big block of copper came from.   Though, with nickels at 75% copper, they may want to assay it first....and you won't be able to melt this on your kitchen stove.

Rick Blaine's picture may not be "easy" to get to make that material "usable"...but at least he/his clients will "have" it.

The only commodities I own are in the form of thousands of small pieces of lead...most of which are covered by a thin copper "jacket."

I figure no matter what happens, they'll always be worth something.


Antifaschistische's picture

For the fun of it, I've purchased a few hundred pounds of pennies from "sorters" like   They pull the pre-1982 pennies.  There are other sorters on ebay.

Out of rebellion, I throw every other penny I get into the trash, or into the street to show others how worthless it is, and to force the US Treasury to spend a few cents to remake and redistribute replacement pennies.

Please join me.

Acidtest Dummy's picture

You should cut off your nose to spite your face? Nah, keep the '82 and older pennies and buy nickels with the newer ones. I thought everyone knew that.

SKY85hawk's picture

What's with pre-1982 pennies?


Acidtest Dummy's picture

Predebasement or before the debasement, 1982 was the last year pennies were 90 percent copper, 10 percent zinc. 1983 was the first year pennies are 90 percent zinc, 10 percent copper.


Herdee's picture

Maybe the U.S. Government should get their penny and nickel and the rest of the coinage made in China in order to save money (they let Corporations destroy America this way).Or even better,sell the U.S. Mint to China.I was reading today that the Chinese have already bought enough oil and gas assets worldwide that the production from the assets is more than Saudi's now.Seems like everybody is selling out to them.

cynicalskeptic's picture

China is converting all the $US they've gotten making crap for us into HARD ASSETS, knowing damn well that the value of the dollar is tanking.  China is converting dollars into equity stakes in Australian and South American mines, African farmland and energy sources all over the world.

robertocarlos's picture

My small grocery store stopped using pennies except in the price of goods. If you buy a $1.99 item and hand them a twoonie, you get no change. It's ridiculus.

Old Poor Richard's picture

Keep harping on it, you dipshit.  If you keep calling the USGov stupid long enough, they're finally going to cave and start making our money like those toxic, smelly slugs that come out of Europe.  Ever jangle a handful of Euro fractional coins compared with a handful of US coins?  Ever get a whif of Euro coins?  As a taxpayer, I'm happy to have some of my tax money go to making sure our coinage isn't skanky and slug-like.


cynicalskeptic's picture

Pennies no longer made from coper because the metal value is higher and now even the 'cheaper metal version is worth more for its metal value - so time to make a 'cheaper' coin AGAIN.

Doesn't this count as 'debasing' coinage? - not as bad as removving all the silver from coinage in '64 but still a debasement.  

And wasn't debasement a capital offense in th eoriginal Constitution?