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Ashtray Outperforming My 401K

Published January 9, 2006
Written by Alec Nevalainen

Losing money making money. That sounds strange, but that's exactly what occurred when The United States Mint produced 95% copper/5% zinc cents in 1982. Material and production costs exceeded $0.01 to manufacture the cent and they changed the composition to 97.5% zinc mid-year (how they're still made today).

Now, the copper in the pre-1982 cent wasn't worth more than a cent at the time---it took 23 years for that to happen. On February 18, 2005 copper settled at $1.5126/lb and the pre-1982 copper cent had an intrinsic value of $0.01006437.

I thought the milestone was interesting, so I wrote an article titled, "Gresham's Law Returns". 321gold and PrudentBear published a link to it, but the response was little to none. It's only one cent, not exactly front-page news.

Fast forward to January 6, 2006 where copper settled at $2.1208/lb. To calculate the intrinsic value of the pre-1982 cent, use the following:
2.1208 (copper price per pound) * .0022046 (this value converts the copper price from pounds to grams) * 3.11 (gram weight of the copper cent) * .95 (percentage of copper in total weight) + .8849 (zinc price per pound) * .0022046 * 3.11 * .05 (percentage of zinc in total weight)
Do the math and you come up with $0.0141171. What does that mean? If you have 100 pre-1982 cents, you now have $1.41 in copper/zinc (40% gain in one year).

On a percentage basis, the coins in my car ashtray doubled the gains made in my 401K last year. Now, I'm not expecting to retire on what's in the ashtray, but it's an illustration of what's happening right now in the metal markets...and money with intrinsic value.

To find out the intrinsic value of U.S. Coins (including pre-1965 silver), visit https://www.coinflation.com.

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