THE BOOK--Playing The Percentages In Baseball

If it’s illegal to transport more than $5 of pennies out of the country, couldn’t they melt the pennies down before exporting them? After melting they wouldn’t be pennies anymore.

The problem is that they would need to do that themselves, they could not hire somebody to do it for them. At least not over the table.

The summer between high school and college I worked for a coin dealer who made $10 million overnight in the mid 1960s on this kind of arbitrage.  He collected war nickels, nickels minted during WWII that contained silver, since nickel was needed for the war effort.  He ran a chain of laundromats, and had his children go through the change picking out the silver nickels.  He also bought rolls of them for $2.50, $0.50 over face value. 

When the US switched from silver coins to clad in 1964, Congress passed a law that made it illegal to melt US dimes, quarter, half dollars and dollars for their silver.  They did not mention nickles, however, and Sam was able to sell his nickles for $4.50 a roll to a Canadian smelter.

David, I would have to question the amount of money that that coin dealer made.  Depending on the exact year, silver in the mid 1960’s was around 1.50 an an ounce.  It was briefly 2.00 in around 1968.  Let’s call it 1.75.  A nickel weighs 5 grams.  35% was silver in the war years.  That is 1.75 grams of silver per coin or around 10.8 cents per nickel for a profit of 5.8 cents. Between the cost of melting, selling, storing, etc., we’ll call that a net profit of 5 cents per nickel. In order to earn 10 million dollars, he would have had to collect 200 million nickels.  They would weigh 2.2 million pounds. That would also be around 1/5 of all the silver nickels minted in the U.S.

Highly unlikely.

I also don’t believe the penny thing.  It is not worth the collecting and storing of the pennies, I don’t think.

Hank, it is also illegal to melt pennies.

man i sure hope they stop minting pennies. just cut everything off after one decimal, its plenty. the less pirate money i have to account for the better.

MGL,

I too have some doubts about the amount of money he made.  It’s quite possible that I don’t remember the story properly.  However, he did make some multiple of millions of dollars, enough to retire from the laundry business and open a coin shop in Westport, CT.

"However, he did make some multiple of millions of dollars.”

It’s no big deal, but even that is highly unlikely, Dave.  There were around a billion silver nickels minted.  Other people were probably doing the same thing.  How many of those billion could your uncle have possibly collected?  1%?  That would be 10 million nickels which would be half a million bucks in profit.  And how many nickels do you think his kids could find in his laundromats?  Come on dude!  Either your uncle told you a tall tale, or you are misremembering…

To make $1,000,000, he would have needed between 400,000 and 500,000 roll of nickels.  Nickels would probably be stored in $200 bags, so he would need about 4000 to 5000 of those.  Two of those would take a cubic foot of volume, so you would need about a 16 x 16 x 10 foot room to store them.  People were willing to sell them at a 25% markup, which means not a lot of people were betting that the government would make a mistake.

It’s also quite possible he bought options on the coins, so he never had to actually possess them.

Nothing personal Dave, of course, but I am a born skeptic.

“To make $1,000,000, he would have needed between 400,000 and 500,000 roll of nickels.”

I estimated a 5 cent profit per nickel. 500,000 rolls is 10 million nickels, which is only $500,000 profit.  It is not even possible to get 10 cents profit per nickle, even if you use the peak price of silver in the 60’s.

So we are down to 1/2 a million profit from 10 million, and again, that is assuming that he somehow procured 1% of all the silver nickels ever minted, which I find highly unlikely.  Something like .1% would be more reasonable I would think ($50,000 profit).

And from buying other people’s nickels at a 25% markup (now we are down to less than 4 cents profit per nickel) and his kids scrounging up millions of coins from his laundromats, we are down to “buying options on nickels?” I never heard of that.  Options on silver, yes.  Coins?  Never heard of that.  Anyway, a good red flag for whether a story is true or not is whether the facts surrounding it change.

Dave, that’s a tall tale. Not that it matters and not that anyone knows but your dear uncle. But I would lay 10-1 that somehow the figure got inflated by 20-100 times…

MGL said,

I would have to question the amount of money that that coin dealer made.  Depending on the exact year, silver in the mid 1960’s was around 1.50 an an ounce.  It was briefly 2.00 in around 1968.  Let’s call it 1.75.  A nickel weighs 5 grams.  35% was silver in the war years.  That is 1.75 grams of silver per coin or around 10.8 cents per nickel for a profit of 5.8 cents. Between the cost of melting, selling, storing, etc., we’ll call that a net profit of 5 cents per nickel.

He would have been paid something for the value of the 3.25 grams of nickel per five cent piece also, wouldn’t he? Not that it would substantially change your math.

MGL, are you a numismatist or just good at looking up this data?  I’ve been collecting for 20 years so I am rather enjoying this thread.

Minor typo in the posts above - there are 40 nickels in a roll so 500,000 rolls is 20 million nickels.  Of course, if what was meant was $500,000 in nickels, then that would be 10 million nickels as you stated.

No definitely not a numismatist.  Right, my bad on the rolls. Honestly considering there has to be a substantial cost for melting, separating the metals, turning into bars, selling, storing, etc., I sort of doubt the whole story.  Sure I guess the value of nickel or zinc or whatever the rest if the coin is made from would have to come into play.

I sold some silver coins back when the metal was around $47/oz and I asked if they would be melted.  I was surprised when the dealer said that you’re not supposed to melt them.  This makes some sense, as a coin will always be worth at least as much as its previous metal content.  Although with the nickels, the storage cost is much greater than for 90% silver coins, you still don’t actually need to melt them to secure a profit. (Which is not to say that many of don’t eventually get sold to places where they do want to melt them).