The Nickel-Hoarding Billionaire

by Al Doyle ………

Imagine being very wealthy – possibly a billionaire according to some accounts. If a person had that kind of capital, what coins would they buy?

At a minimum, some rolls of $20 Libertys and Saint-Gaudens would make a nice stash for a high roller. If rare coins are sought, anything from U.S. Mint issues of the 1790s to condition census rare dates in various series are definitely a possibility.

What if the wealthy numismatist was interested in nickels? The 1913 Liberty 5-cent piece that recently sold at auction for $3,172,500 is definitely the kind of trophy that attracts big bidders. Dallas-based hedge fund manager Kyle Bass has a serious interest in nickels, but he takes a dramatically different approach than what might be expected.

Kyle bass The Nickel Hoarding BillionaireBass could easily afford coins in the six-figure and up range, but (for now) he is targeting much more mundane pieces. The contrarian investor sunk exactly $1 million into U.S. coins, but his purchase didn’t require numismatic expertise or third-party grading. That’s because Bass purchsed 20 million common-date Jeffersons at face value.

Why would a guy who deals in big numbers and sophisticated investing strategies bother with lowly nickels?

At the time of the mega-purchase of 20 million circulated nickels in 2011, the coins contained 6.8 cents apiece in metallic value per planchet. Nickel and copper have dropped since that time, and the current melt price is just under face value according to the Coinflation web site. Since Bass paid face value for his nickel hoard, there was no downside risk.

Obtaining such a vast amount of 5-cent pieces obviously requires more than ordering the coins through normal channels such as armored car companies. This multi-ton request had to be filled by the Federal Reserve. When the Fed asked Bass why he wanted a cool million in Jeffersons, he calmly replied “I like nickels.”

The purchase involved deeper motives than what might be perceived as an eccentric act. Bass made his reputation on successfully betting against heavily indebted nations such as Greece and Ireland as well as the large pool of subprime mortgages in America. That naturally led Bass to invest in gold and platinum through his Hayman Capital hedge fund as well as with his own money. Since Bass has no fear in going against conventional thinking, the world’s largest nickel hoard wasn’t a huge stretch for him.

jeff nickels bass The Nickel Hoarding BillionaireWhen famed author Michael Lewis interviewed Bass for his best-selling book Boomerang, Bass pulled a large gold bar out of his desk.

“We’ve bought a lot of this stuff,” Bass told a startled Lewis. In Bass’ case, he was talking about the real thing. No futures, no contracts, no “paper gold”.

“Not gold futures. You need physical gold,” Bass declared to Lewis. When the author asked Bass what investment advice he would offer to his mother, the reply was a blunt “Guns and gold.”

Want to invest like one of the most successful hedge fund managers of the 21st century? You might not be able to afford gold, but anyone who buys firearms, ammo and nickels at face value will be doing a dead-on Kyle Bass impersonation.

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26 Comments on "The Nickel-Hoarding Billionaire"

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  1. Sean says:

    This seems like nothing more than a publicity stunt. A 1 million dollar investment for a billionaire is hardly worth his time unless he is doing it to make a statement. He won’t see a meaningful return that will impact his overall well being. For a small time investor, making a return that is meaningful is possible though. However, I think it will be many years before it could happen.

    • thomas says:

      No, I don’t think it was just a public stunt. Rich people or poor, both hoard their own, of course on different levels. Bass bought a $1 million in nickels. So what? There is no risk. He can always take a $200 block / box to pay someone… weighs about 16 pounds though. And the investment is also relatively secure since it takes a lot of labor to empty his vault. I know, I had 3000$ worth of nickles and that was a back breaker to get them out of my basement. It’s just good common sense these days to run your money past the “Banco de la Matrazza” (Bank of the Mattress). Rich or poor? The poor can easily at least stash a 200$ block full of rolled nickels. Even pennies (pre 1983)are a good common sense stash (although much more back breaking labor is required to move your stash). It’s the poor man’s stash. And if the rich are getting into it, what does that tell you?

      • nickelboy says:

        $200 in nickels weighs approx. 44 pounds. a nickel is 5 grams. 20 nickels (a dollar) is 100 grams. a hundred dollars worth of nickels is 10 kilograms, approx. 22 pounds.

        i’m just a thousandaire, but i hoard nickels too. there’s no downside risk, and when inflation comes, your nickels will hold their value when your paper dollars fail. i recommend large sections of pvc pipe stuffed with rolls of nickels and stuffed in turn into thick shrubbery on your land until the melt value is at least 3x parity, which won’t be long if the fed keeps jacking up the money supply.

  2. QUINNOTAUR says:

    While I agree that a million isn’t a lot for a billionaire to part with (being 1/1,000 of a billion…) I don’t believe it was about garnering a return on investment but rather the preservation of wealth.

  3. Josh says:

    He is betting on the Fed doing the same thing to nickels as it did to dimes and quarters after 1964. If you bought $1M in dimes in 1963, they would be worth over $16M now. If any person could get 7% gains every year for 40 years… you’d be a legend.

    Just think of how much less copper and nickel will be on the planet in the next 25 years. Our species is consuming natural resources exponentially with no end in sight.

    • Steve says:

      “Just think of how much less copper and nickel will be on the planet in the next 25 years.” – Josh

      My guess is 100% +/- 0.00000000001% from meteorites and rockets.

    • Billl in Montgomery says:

      Correct. If you sold those 1963 coins in 1980 when Silver was $50 might have been easiest and greatest 16-year return on investment ever. At some point copper and nickel will soar. Might be in 10 years or 25. Start a collection for your newborn and see how much It’s worth in 18 years. of course the mint’s days of making copper nickels are numbered. it costs about 10 cents to produce a 5 cent coin. even Uncle Sam knows it can’t keep that up. don’t know why more aren’t hoarding, but I’m glad they aren’t. makes my teller much more likely to give me my weekly quota.

  4. JC says:

    Josh,
    You need to remeber that $16M today probably can’t even buy what $1M could back in 1963. As a results, I’d say this hypotheitcal character LOST a little purchasing power. He’s have relatively effectively hedged against inflation though.

  5. Jason says:

    Well, I’d take him seriously about the nickels if he hadn’t added the guns thing. If he’s so rich, why isn’t he smart?

    • thomas says:

      Jason, now that is not a very smart thing to say about the gun stash. Any smart and enabled person stashes gold,silver, guns and ammo, and….. ” F O O D ” (either in physical form or in agricultural land with water. No matter how poor or rich, anything of that kind is better than nothing. You need to think about the basic preservation. Food, Water, Shelter, Clothing, Heat, trading/bartering, and production of some kind of a product that you can consume and trade. Prioritize!

      Regarding your gun comment, I take it you are anti gun, anti second amendment and totally pro anarchy and pro Adolf Obama. Guns are a political agenda these days. In Argentina, I read, people are starting to hoard cars as a hedge against inflation…. How ‘stupid’ is that? Well, I guess anything is better than nothing, all according to anyone’s level of desperation. Rethink your anti gun comment.

    • ole jim says:

      How much have you got?????

    • Jason says:

      You “take” a lot from my 7 words, “if he hadn’t added the guns thing.” And then, you run on about eleven things that were not in the article. From those points, I take it you’re a gun nut, a screwball, a crank, a fascist himself who likes to call Obama by a fascist name but gets all confused about that. Or was that fair of me to “take it?” Hey, Thomas, we we were talking, I think, about a billionaire saving nickels. A billionaire could very well hire a small army with their guns to protect him. Do these comments or yours sound like a desperate man…especially when you are apparently psychopathically worried about “Food, Water, Shelter, Clothing, Heat, trading/bartering, and production of some kind of product.” I have prioritized and I’m quite secure, thank you. How long have you been out of work?

  6. tony says:

    Let me see if this makes sense. I am a Billionaire and I decide to invest in nickels. Since I have the means I buy a bizzioion of them and sit on them. How much space does a Million nickels or pennies take up. Smart investment. Nickel 5.0 > 6.8= 36% profit. Not bad for a day’s work. How about the penny .01 > .02 = 100%(82 & before). That’s even better. But the 64 dollar question is how to get the zinc or copper from the nickel or penny. Easy melt it down and bingo you have a new house in Malibu or a penthouse in the Upper East Side. Screech to a halt when the Federal Agents arrive at your door with a warrant for your arrest because you broke a federal law prohibiting melting of the penny & nickel. Now you get fined and possibly a vacation in prison. Total ROI a loss! The only way to melt is if the FED decides to eliminate the nickel or penny from circulation.
    In simple terms. A very foolish move.

    • thomas says:

      think out of the box, Tony. How can you proof what’s inside of your metal bar when you melt your coins? A nickel or a penny is stamped. Everybody knows how much nickel and copper content (and zinc) each coin may have. If you melt it (besides the illegality if melted before you legally can), then nobody knows what you have for sure until they throw it into their furnace. I would advise against melting, especially while the nickel and the penny is a legal tender currency of the USA, but even after, don’t melt your stash. What if you have a very rare valuable coin and you melt it?…. just a thought against melting your stash.

    • nickelboy says:

      the prohibition of melting nickels is relatively recent. when a hoard of nickels is melted down into cupronickel ingots, the date marks on the nickels disappear. i don’t have the means to melt nickels myself, but i bet kyle bass does.

  7. Martin says:

    Actually, JC, you would only need $7.60 to purchase what $1.00 would have purchased in 1963, so in effect,one would have doubled their money over and above inflation…

  8. Jason says:

    The only loss of real “purchasing power” comes when you’re at the checkout counter, the price label said $12.79 for a twelve-pack, and the checkout person rings it up as $18.50. All else is hypothetical, including this scenario.

  9. JL says:

    Look – Kyle isn’t always right on his calls, he’s missed a huge move in the equity markets. Lets not forget he was born with a gold spoon in his mouth. I do like his contrairian calls on investments. However the long gold call is not the right side of the trade. The nickel story is cute ; its probably some sort of ‘melt’ play and his trying to prove a point-my guess. Cheers.

  10. Billl in Montgomery says:

    I’m doing same thing on small scale. Get about $20/week in nickels in anticipation of selling then for melt value in say 18 years. Melt value was 7.3 cents per nickel not long ago. I think somewhere in next 20 years it will be at least 15 to 20 cents if not much higher. Quarters and dimes appreciated about 40 times between 1965 and 1980. Won’t be long before nickel is no longer made of copper and nickel. At some point law will be changed and you will be able to sell nickels for melt value. Government will make a killing selling nickels but will also have to let me and you do same thing. Think silver coins post ’65. Exact same thing will happen. I don’t see how you have much to lose from converting dollar bills to nickels and a whole lot you may gain if copper soars in price one day. Everybody will start doing this when mint announces they are discontinuing copper nickel. Might as well start before the masses when you know all nickels are made of copper.

    • thomas says:

      and it’s great exercise to drag those $100 dollar blocks around with 2000 nickels inside. Plus, if you want to commit suicide, one bar around your neck will keep you under water just fine. Plus, while not 100 % burglar proof, you make your burglar at least work for his money. Each $100 block weighs around 16 lbs. And you have legal tender currency at home, as good as cash, it is cash…. And nickels are more likely accepted than pennies when you buy a big ticket item. If you are short on cash, you can always lean on your nickel boxes!

      • thomas says:

        forgot one more benefit: Fire proof? Depending on your house fire, you stand a better chance preserving some value as with paper cash. At least the insurance inspector will more likely be able to see some melt residue of your stash than with paper…

      • nickelboy says:

        each $100 block weighs approx. 22 pounds (calculation upthread).

  11. Jason says:

    If only “Your comment is waiting moderation” meant, “We’re checking to see if you’re really as stupid as you sound.”

  12. Dennis says:

    While I expect metals prices to rise in the future, possibly the best reason to hold nickels rather than paper federal reserve notes is to protect yourself from the government “zero-lop.”

    Zimbabwe’s last zero lop was FIVE zeros. If you were there during that time, and had $1 million Zimbabwe dollars in your bank account, you awoke the next morning to find that your bank balance was now $10 in terms of the newly issued currency.

    However, no country in history that did a zero lop EVER messed with the coinage. A nickel in the old currency was still a nickel in terms of the new post-zero-lop currency.

    In terms of increasing purchasing power, that five zero-lop would have INCREASED the purchasing power of each nickel by a factor of 100,000. In effect, each nickel would be worth $5,000 in terms of the old currency.

    The Kyle Bass $1 million investment in nickels would exactly protect his $1 billion net worth with only a THREE digit zero lop. A FIVE digit zero lop would actually INCREASE the purchasing power of his $1 billion by 100 times.

    Some people may believe that hyperinflation cannot happen in America. The truth is that nobody knows what the future holds. Kyle Bass has protected himself with an insurance policy that cost him nothing.

  13. Dave says:

    I am more interested in how many war nickels or other rare nickels are in that million dollar hoard.

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