If you’ve been treading the boards at the good ol’ Gumshoe Theater of Oddities for more than a few months, this teaser for silver may sound familiar to you:
“How To Buy U.S. Government Created Silver For $2.08″
The tease is an attempt to get you to sign up for Dr. David Eifrig’s Retirement Millionaire newsletter from Stansberry & Associates, and the versions of the ad I’ve seen play off of publisher Porter Stansberry’s conviction (and he’s certainly not alone in this) that silver will be one of the best safe havens/inflation hedges in the year to come due to the fact that it has underperformed gold during the long gold bull market (though it has substantially outperformed gold more recently, like this year).
Still, I think it’s been a year or so since I last looked at a teaser like this, so it seemed time to revisit. Here’s the pitch:
“The U.S. government has created a little-known way to own silver – real, hold-in-your-hand silver – for just $2.08.
“This has nothing to do with stocks. And nothing to do with options or anything risky like that.
“Why should this government-created silver investment be of interest to you?
“Well, I believe silver is set to explode in the coming years… and this is one of the best and cheapest ways to own it.”
The basic arguments in favor of silver are probably ones you’ve heard before: “Silver is real money,” meaning it can’t be created from nothing like dollars and it should perform well if the dollar is effectively devalued by inflation; “Silver is cheap” because it’s far, far below the all-time highs and at a thousand-year inflation adjusted low using the chart that you may have seen before that puts the all-time high for silver around $1,000 back when Christopher Columbus was in his mother’s womb; Silver is “Disappearing” because, unlike gold, it has a lot of non-decorative uses and gets consumed by industry (batteries, medical devices, still some in photography, etc.).
And we’re told that this “$2.08 Silver” was produced by the government, but that production ceased in 1965. And then we get a bit more detail — actually, more detail than is usually provided in these kinds of teasers, so they’re not obfuscating as much as they could:
“There are 3 unique properties of this U.S. government-created Silver that make it such an ideal investment:
“This silver is widely recognized and therefore liquid. It has always had an eager market for owners who want to sell it.
“It is easily divisible should you need to “cash-in” a portion of your investment or use it to buy goods and services in the future.
“It is already “pre-certified” and should not need independent verification of purity and value like silver bars, silver rounds, or collectible grade coins… because every piece of silver is date-stamped and has official U.S. Government markings.
“As I mentioned, you can buy this silver investment in very small increments (for as little as $2.08). You’ll basically pay the “spot” price, which you can find quoted in many places on the Internet… plus 2% to 4%. (Remember… most silver bullion you buy will have a mark-up as much as 10-times higher.) “
So … in case that still sounds confusing, let me just quickly explain what this is. $2.08 silver would be, in all likelihood, a scuffed and scarred 1960s Roosevelt dime. And actually, as of the last silver price I saw it probably wouldn’t be $2.08, you’d probably pay more like $2.20 apiece if you were buying a small number of ‘em.
Still sound odd? This ad is teasing what’s usually called “junk silver,” pre-1964 circulating coins (dimes, quarters, half dollars and dollars) that were made of 90% silver. Silver was removed from most circulating coins in 1965, in part because those coins were being hoarded for their silver content, and though you’ll still occasionally find a “silver dime” in your change, almost all of these coins are held now by collectors or silver enthusiasts as a relatively inexpensive way to buy silver.
And the tease is right — there are some nice things about these coins: since the smallest denomination is the dime, which does indeed have just about two bucks worth of silver in it at the moment, they are easily divisible and if the world goes to hell in a handbasket and we move to a barter system where you have to produce “real” value in exchange for goods, you could use your old silver dimes to pay for stuff; and yes, they are just as government-certified as the American Eagle silver coins that you could also buy if you prefer just straight silver; and, despite the fact that I don’t think it’s legal to melt down the coins to extract the silver, there is a pretty active market for “junk silver” and you should be able to sell it in the future.
Of course, “junk silver” isn’t exactly a secret — most coin dealers would happily chat with you about it, and those who deal in collectible coins probably keep a little jar on their desk to toss in the silver-content coins that are marred or scratched or otherwise have no collectible value, so probably anyone in the business has at least a few of these little unimpressive-looking coins hanging around (and “unimpressive” is no exaggeration — some of the “junk” coins I’ve seen are so worn that they’re barely recognizable).
The basics to know are this: these coins, which largely consist of Mercury and Roosevelt dimes, Standing Liberty and Washington Quarters, and Walking Liberty and Franklin half dollars from 1916-1964 (there are earlier coins, too, those from after the Civil War almost all have the same silver values, but you almost never see them), have a silver content that’s directly correlated to their face value — you may not have noticed, but these are all 90% silver coins and the weight of those coins is precisely correlated, too, so a half dollar weighs five times as much as a dime… and since the silver content is the same proportion, it’s also worth five times as much today as a silver investment.
There are two exceptions that you may have noted for the silver coins — nickels and silver dollars. Nickels don’t count in this equation, since they were largely made of nickel and copper instead of silver (as you’ve noticed, they’re a lot bigger than dimes — a proportionate silver nickel would have been too small to handle, though I think there were some tiny ones in the 1800s). There are some silver-content nickels from the WWII years (nickel shortage) that are also collected as such (they’re worth more than half a dime, more like $1.60 at the moment) … and, actually, modern nickels also have a melt value that’s slightly above their currency value, with about three cents worth of each copper and nickel included in a 2010 nickel.
And silver dollars are worth slightly more than ten nickels or four quarters — so Morgan and Peace dollars, both of which are also 90% silver, weigh in with a current value of about $22. Not sure if this is just because they get proportionately less wear, or maybe they were slightly heavier … doesn’t really matter for our purposes, other than that if you want to focus on silver dollars as junk silver, you’ll pay slightly more.
When silver was out of favor and not seen as an important precious metals hedge against calamity, inflation or whatever more dire survivalist picture you wish to paint, junk silver was typically sold at a discount to the silver value and you might have been able to buy it for, just as an example, a 5 or 10% discount to the “melt value” … in part because you’re not really allowed to melt it down and it’s not “pure” silver like an American Eagle silver coin or other investment or industrial grade silver.
Those days are over, at least for now, so you will in all likelihood pay a premium over the melt price for “junk silver” — but since premiums are pretty high on silver coins and bars right now, it will seem cheaper since “junk silver” probably still has the lowest average premium (I’m no coin expert, but the sites I’ve checked quickly indicate as much). You can always find junk silver changing hands on eBay, with a roll of silver dimes here and an assorted pile of old Washington quarters there, at prices that usually end up closing at a premium of at least a few percent (plus the transaction costs of shipping, etc.).
There are also some big dealers who usually have junk silver and typically sell it by the face-value bag. $100 worth of these dimes, quarters and half dollars has an estimated 71.5 ounces of silver in it, $1,000 in face value represents 715 ounces, so some dealers sell bags of these culled coins — APMEX, for example, will sell you a $100 face value bag for $2,093 with silver at $28.85. If you want to do the math, that comes out to being a premium of just 1.5% — at that price you’re effectively paying $29.27 for an ounce of silver. So, pretty reasonable compared to the pretty large premium that dealers get for American Eagle coins these days (you’ll often pay a $3 or so premium for a small order, which is more than a 10% premium), though it may be similar to what you would pay for similarly “junky” random silver bars or rounds, or for a big block of industrial silver (like a 100 oz bar, for example).
The only way to buy silver much cheaper is to buy something like the Silver ETF — the iShares Silver Trust, for example, has a .5% management fee and is supposed to match the price of silver minus that fee, so that’s sort of like paying a half percent premium … though the ETF does sometimes also trade at a premium to that value, as of the close on Friday it was at more than a 1% premium so that works out to be about the same as “junk silver” — and since most of the ETFs use derivatives and other foofaraw to match the silver price and you don’t get to hold the silver in your hand, it’s just not the same as a mittful of grubby old dimes and quarters.
So yes, you probably can buy silver for just a bit over $2, depending on the fluctuation of the spot price and the premium that you end up having to pay — but it won’t be an ounce of silver, a “junk silver” dime, the smallest amount of silver that you can reasonably buy, has about .07 troy ounces worth of silver. Just multiply .0715 by the spot price of silver, and that’s the equivalent fair price for a “junk silver” pre-1965 dime (assuming you’re willing to pay the market price of silver for the coin). You can see the current (or at least, frequently updated — not current to the minute) values of “junk silver” coins at coinflation.com.
I personally hold some “junk” silver, and some nice shiny new silver that I basically hold as a form of savings (even better than a bank account, because it’s hard to spend!) … I hope it will hold its value since I do expect the dollar to continue the long-term trend of losing value over time, though I don’t expect it will be enough to get the propane tank filled if we end up in some kind of a post-apocalyptic Road Warrior existence in the decades to come. And of course, I’m going to need to have a reminder postcard sent to me before the apocalypse so I can take them out of the safe deposit box and fill my rucksack.
That’s just a quickie to get you started on this pre-holiday week — if you’ve got any thoughts on silver, junk or otherwise, just let us know with a comment below.