Letter Re: Nickels or Pennies?

Thanks to SurvivalBlog, I have stashed away my share of nickels, but I began to wonder if it could make sense to sort and store pre-1982 pennies, which are 95 percent copper.  I’ve done some hands-on research in this area, and I believe there’s a way to accumulate pennies, and do so relatively easily and from an investment point of view, more effectively than nickels.

The Numbers

First, the numbers: If one stashed away $1,000 in nickels, one would have 20,000 coins; each coin is 5 grams, of which 75% is copper and 25% nickel.  So, $1000 in nickels is 75,000 grams of copper and 25,000 grams of nickel.  That’s just over 165 pounds of copper and 55 pounds of nickel.

However, if one stashed away $1,000 in pre-1982 pennies, one would have 100,000 coins, each weighing about 3.1 grams, of which 95 percent is copper and 5 percent zinc.  So, $1,000 in pennies contains 310,000 grams of metal, of which 649 pounds is copper and 34 pounds is zinc.

While the bulk [and weight] of pennies is greater for the money stashed, the amount of valuable metal is greater as well–and the resulting value much greater.

Another way of looking at it is that $1,000 of nickels, as of today’s writing and according to Coinflation.com, has a melt value of  $1,261; the equivalent dollar-value of pre-1982 pennies, however, has a melt value more than double that at $2,607.

You certainly get more bang for your storage buck with nickels, but you get more bang for your investment buck with pre-1982 pennies.

For anyone for whom dollars come dearly, finding a way to accumulate pennies should pay off better in the long run than nickels, and while it is somewhat more time consuming to collect pennies that way, one is trading time for greater long-term value.  And those who are unemployed or otherwise with time on their hands will find this a reasonable way to leverage their assets.

Penny Sorting Machines

I’d spent time thinking about how to create that “density-measuring” penny sorter that you describe in your “Nickels” blog post.  On a whim, I did some surfing, and confirmed that such machines exist!  There are at least three basic approaches:

First is a machine that literally weighs the pennies, dropping the good 95% copper pennies–which weigh more–through a counterweighted trap door and allowing the zinc pennies–which weigh less–to pass over without triggering the mechanism.  This system is effective, though a bit slow, and relatively inexpensive at about $100.  

Second is a coin comparator which is used in vending machines to reject slugs and other nonconforming coins; put a coin of the type you are searching for in the comparator, and it will separate the good from the bad.  This device has to be fed the pennies manually, and while faster than the weighing machine above, still takes a significant amount of time.  This is the least expensive of the lot, and can be purchased on eBay for around $40.  (On eBay, search “copper penny sorter”)

Third is the Cadillac of penny sorters, the Ryedale.  This machine also uses a coin comparator but has a feed system which will allow it to sort 18,000 pennies per hour.  It is lightning fast, and helps solve the time consuming problem of sorting the good from the bad.  It is, however, the priciest at roughly $520, or $550 with extra feed wheel and hopper expanders.

Being a cost-effective sort of person, I first decided to try the cheap route, buying a coin comparator on eBay.  It works, and works effectively, with well less than a 1% error rate, but I did not find it easy to feed.  I found myself spending much too much time feeding that comparator, sorting only perhaps $30 of pennies an hour.  At a 30 percent yield that was $9 of copper pennies an hour; I found that too slow, and my attempts to create a faster feeding system were for naught.

I looked into the Ryedale some more, and found that used machines on eBay were being snapped up by bidders, returning 75% of the purchase cost.  That made my decision easy–I could buy a Ryedale, sort the pennies I wanted, and recover most of the cost of the sorter on eBay.  This is what I did.

Once I found these machines online, there remained two details to address:is the yield of pre-1982 pennies sufficient to justify my time sorting them and can I get pennies in bulk?

Sufficient Yield?

I live in rural Southern Wisconsin, and so my next task was to see what yield I would get in pennies.  I went to three local banks and obtained $5, $10, and $20 in penny rolls from them, or $35 total.

I found a yield of about 35 percent with these pennies, which seemed satisfactory to me.  I’ve read that some people sorting pennies achieve only a 20 percent yield, but here in my area I’m consistently in the low 30s on average.  I once had a 92 percent yield in a $50 bag, but also once had only a 5 percent yield.  It averages out.

Obviously, one trick is to make sure you don’t get your own sorted pennies back.  Pennies I get from one specific bank I never take back there for counting and credit.  Pennies I get at my other bank–where I take the “bad” pennies for counting and credit–are always pre-rolled and delivered from the regional bank, not from the local supply to which I’m contributing only zinc pennies.

I buy pennies generally in rolls and usually in $50 or more lots.  One bank is willing to order and allow me to buy $500-worth of rolled pennies at a time.  Another bank also allows me to buy pennies up to $200 at a time in rolls.  I have also managed to make an arrangement with them–when they sort coins into bags, they also allow me to buy those $50 bags of unrolled coins, which saves the time of taking the pennies out of the rolls.  This is the bank to which I never return my sorted pennies, so those bags never contain my rejects.

One thing I do is make friends with the tellers.  What I’m doing is kind of a pain for them, so I’m friendly and engaging.  I have taken in some of my “finds” to show them, as they think I’m searching for rare coins as a coin collector–which I am, but I’m also doing more.  Last week I found an 1890 Indian Head penny in remarkable shape in one of my rolls, and I took that in to show the tellers as one of the “lunkers” I found during my “fishing” expeditions.  They like to hear my stories, and I always oblige.

Unwrapping Rolls

I use an old-fashioned bottle opener such as is used for removing a bottle cap.  I use the “hook” which grips the lip of the bottle cap to break open the rolled ends where the paper ends, and it’s easy to unroll them at that point.  I unwrap them into a small plastic bowl so I can easily see if there are any paper fragments to be removed.  One has to make sure that paper fragments don’t mix in with the coins as they can get caught in the Ryedale sorter.  I can unwrap 10 to 12 rolls a minute.

A Few Rare Finds

As I unroll and sort the pennies, I keep my eyes open for older pennies with the Sheaves of Wheat design on the reverse (“Wheats”) or any other rarities.  I ran across an 1890 Indian Head, and have found numerous older pennies from the teens and 1920s.  I keep the Wheats separate, as I know a local coin dealer that pays 2.5 cents apiece for common “wheats”.  And I expect, sooner or later, to hit big on a rare penny.  

How I Store Pennies

I’m closing in on my first $1,000 in pre-1982 pennies; I’ve been rolling them in coin wrappers, and storing in boxes which contain $25 in pennies.  This makes storing easy as they’re compact, but there is additional cost in buying penny wrappers and the boxes.  This makes it easy to demonstrate the pennies are all pre-1982 as each $25 box of pennies will weigh 17+ pounds if they’re 95 percent copper.

There is a time cost in putting the pennies in wrappers.  I bought coin counting tubes from MMF Industries which allow one to easily get to about 50 pennies in a hurry.  I slide these into a preformed tubular wrapper, and place on a scale to double-check the count (they should be about 155-156 grams).  While not overly fast, I find this relaxing, oddly enough, and I have a feeling of accomplishment and satisfaction each time I complete a $25 box.

I’ve also stored some pennies in plastic coffee cans, in which I can fit $35 in pennies.  Either way, I’m heading toward my long-term goal of at least a half-ton of valuable copper stored in penny form, and I may even try for a ton. 

Eventually, I believe those pennies will have real instead of theoretical melt value; I also believe copper prices will rise significantly over time.  And if not, they’ll still be worth a penny each.

Thanks to SurvivalBlog, I have a pretty good stash of nickels.  I’ve now shifted gears to pennies.  But I’d appreciate it if everyone would wait to descend on the banks until after I have my share. – Mike D.

JWR Replies: Your advocacy of seeking a greater “amount of valuable metal” is arguable, since for many years nickel has has been worth nearly three times as much as copper. In my estimation, saving coins with a higher dollar density makes the most sense. (For that matter, if any significant number of silver coins were still in circulation, then those would be what I’d stockpile “at face value.” But, alas, I was born a generation too late to take advantage of that window of opportunity.)

The key questions for anyone contemplating searching for pre-1982 (95% copper) pennies are: 1.) How strong is my back? 2.) How much storage space do I have?, and 3.) What is my time worth? Those factors are what pushed me toward nickels. At least for now, virtually ALL of the nickels presently in circulation are 75% copper and 25% nickel. (The few 20% silver “War Nickels” minted from 1942 to 1945 are just a nice bonus.) This universality means that asking my teller for $40 in nickels each time I go to the bank takes a negligible amount of time, since there is no sorting required. All of those rolls of nickels go right into .30 caliber ammo cans when I get home. That is “No muss and no fuss.” But how many hours does it take to un-roll, sort and re-roll $1,000 worth of pennies? (Not to mention the time required to return 70% of them, as rejects.) So for me, the choice was clear: Nickels!

But of course your mileage may vary. For someone who is underemployed or retired but yet still has a strong back, the 95% copper penny hunt might be worth pursuing.

In closing, keep in mind that the window of opportunity to acquire large quantities of genuine “Nickels with nickel” without any sorting will likely close in 2012. Once they have been debased, we will be forced to sort nickels. Stock up now, or you’ll kick yourself later for not doing so!