Last week I invested almost $2,500 in a bag of American coins with a face value of $100. Sounds pretty stupid right?
Well, when the coins are 90% silver, it’s a good deal.
Dimes, quarters, half dollars and dollar coins made in 1964 and consist of 90% silver and 10% copper. These coins are commonly referred to as junk silver. Yes, I spent about $2.5k on junk!
Don’t let the name fool you though; the “junk” designation just means the coins aren’t rare or collectable. They don’t have value as collectors items, but they do have value because of the silver content in the coins
.
Why Do I Need Junk Silver?
Many Financial Advisors Recommend having 10% of Your Portfolio in Precious Metals – This is an easy one. Buying precious metals like gold and silver increases the diversification of your portfolio. There’s nothing ground breaking here; it’s just a smart, responsible financial decision.
For most people, investing in silver (or any precious metal) stops right there. And that’s great; diversification is important and is a good enough reason to invest in precious metals.
But if the economy starts getting really ugly and the world starts going a little crazy, you’ll be very glad you have junk silver stored safely in your home. Here are a few reasons why you might need junk silver in the future.
Prepare for the Worst
The Fed Won’t Stop Printing Money – The Federal Reserve prints money every day, which means every dollar you own becomes less valuable over time. Silver and other precious metals are a good hedge against inflation. It’s simple; for every new dollar that’s printed the dollars in your bank account are less valuable and your junk silver is more valuable.
America has about $31.47 Trillion in Debt and it’s Growing! – As of today, the United States federal government is in debt to the tune of about $31.47 trillion dollars, and that number grows every day. And, sadly the only politicians who have had a serious plan to cut spending and balance the budget within a reasonable time frame of a few years, such as Ron Paul, haven’t been able to win the presidency. So, you can be sure American debt will grow more and more every year.
At some point, the government might start printing money to pay our debts, which would cause hyperinflation and the dollar could lose so much value it would become almost worthless. And if a dollar is worthless, many experts believe people will start bartering with junk silver due to its inherent value as a precious metal and the widespread existence of junk silver coins.
I know this sounds insane, but just take a look at Europe’s historical debt crisis and you’ll see that this isn’t so far fetched. And speaking of Europe…
Europe Could Send the World into a Depression – Maybe you don’t believe America will cause a huge financial meltdown, but we still might be the victim of one coming out of Europe. Right now Europe has having sever economic troubles due to the war in Ukraine and, could send all of Europe and the rest of the world into a depression if they can’t get their act together.
In times of economic uncertainty, people turn to precious metals. At the very least your precious metals will increase in value dramatically. At worst, junk silver becomes the default barter currency in a global financial market failure and you are one of the few people to have any.
Nuclear War and/or a Doomsday Scenarios – The Middle East is a dangerous place right now and Iran is trying to develop nuclear weapons. Nuclear war between Israel and any of their neighbors (Iran [if they develop the weapons] or Pakistan) would not only have a devastating impact on human life and the planet, but would definitely send the world economy into a free fall.
Maybe the next is elected president and goes too hard on his “bully China” rhetoric and starts a war with them. Maybe terrorists get a nuclear weapon. Maybe North Korea decides to bomb South Korea. It could all happen and precious metals will be extremely valuable in any of these cases.
And maybe you believe in the Mayan calendar or any of those other crazy things. In any situation where the world goes crazy, precious metals are the safest place to be.
It’s Better to be Safe than Sorry
Look, I’m not predicting the end of the world. I hope all countries figure out their debt problems and there’s never another nuclear war. I hope the federal reserve gets audited and eventually ended. I hope there is never another war on this planet, much less a nuclear war.
But if something, anything, sends the world economy into a tailspin, and you won’t want a gold or silver ETF either; you’ll want that stuff in your house. You’re going to want precious metals
. And best case scenario, nothing bad happens and you’ve just diversified your portfolio with some precious metals. It’s a win-win.
If you want to buy junk silver, you’ll want to do some research. Mine started here at Free Money Finance in this interview with expert Doug Eberhardt. That article and some independent research led me to buy my junk silver at APMEX. I did cost comparisons among a number of sites, and APMEX had the best price on a $100 face value bag of 90% junk silver.
Other forms of silver, like silver bars and coins, are also offered as investments.
As soon as my silver is delivered, I will talk about where to keep your valuables to ensure they are safe in the event of a fire, robbery, or oblivious kid looking for quarters for the gumball machine.
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Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
I’m of the opinion that when it really gets bad – i.e. the doomsday scenario – any precious metal’s value will be solely on its utility. At that point, I’d rather have a gun, food, water, medical skills, and zombie-evading abilities.
That’s a great point. Over the next few weeks I’m going to write more articles on how to prepare for doomsday scenarios. All of those are important aspects of preparation.
I like junk silver, but then again I also collect coins and have had some nice finds in a bag of “junk.” There is nothing wrong with purchasing some PMs but sometimes you can get a better deal at a local coin shop than you can from APMEX (which I do use and recommend).
I also Agree with Well Heeled, that when it really hits the fan, guns and bullets are probably going to be more useful than some shiny metal.
I look forward to your doomsday scenarios (I already have a couple plans for the impending zombie apocalypse). Even the CDC is in on the game:
http://www.bt.cdc.gov/socialmedia/zombies_blog.asp
Keep up the great work I really enjoy reading your posts!
Thanks Brian. A gun and ammo are both definitely on my list of things I need to buy in the near future. I gotta exercise my 2nd amendment rights while they still exist!
Ehh, I’m not much into the idea that precious metals will retain any value in a end of the world environment. Food, alcohol, cigarettes would probably be a much better investment.
Silver is, in my view, a better play on economic expansion. Unlike gold, the largest source of demand is industry. In particular, I like the exposure silver has to the boom in solar panels and photovoltaics in general. Thanks to generous subsidies from China, and tax credits in the United States, solar panels provide a very good, non-market correlated investment for both businesses and individuals.
I’m really not trying to spam you, Kevin, but I think you’d find this article interesting if you’re into silver: http://moneymamba.com/solar-panel-lease-business-model/ The convergence of record interest rates, solar panel prices, and a growing trend toward “eco-friendly” energy sources could put a very serious strain on silver supplies. This year, photovoltaics will consume some 14% of all silver output.
Also, silver is a by-product mining for other metals, especially copper. So, silver production is heavily tied to copper prices…and copper recently took a 30% nosedive. That’s sure to keep the supply-side weak for some time, while demand remains strong.
I cover the commodities industry as an outside analyst for a few companies. I’d say silver and oil both have a very bright future anyway you slice it. I (unfortunately) unloaded most of my silver holdings way too early, and haven’t found recent prices attractive enough for another investment. It’s really hard to price something with as many variables as silver, and there are, in my view, too many attractive equity investments to make commodities a key part of my portfolio.
I agree in things like food and alcohol being valuable, but to think people will ever give up their desire for shiny metal is an absurd thought to me.
Precious metals have been, well, precious throughout all of civilization. I never mattered how much or little people had to eat or how well the economy was doing. People always want silver and gold. I never expect that to stop.
I began your silver post with skepticism. The second someone tells me I “should” do something, I’m out the door. Here’s why I kept reading and really like your argument:
1) I’m a recovering advisor and was one of those dudes recommending 10 percent in commodities. You’re right on. It’s responsible.
2) It doesn’t appear that you invested the entire 10 percent in silver. Staying diversified even in metals hedges against a sudden fall in prices right when you need to cash out.
I was going to have more points, but I’m prepping the bunker with enough doughnuts to outlast the first several weeks of a zombie-pocalypse. Great post.
I’m glad you liked it! I actually do have all of my personal 10% in silver, but that’s because my net worth is only about $25k and I couldn’t find any junk silver cheaper than $2,500. My next precious metals purchase will be a different metal though.
Are you trying to be a “level 100” prepper? 🙂 I was re-reading this article last night http://www.survivalblog.com/2010/11/from_beginning_prepper_to_full.html which talks about being prepared for emergencies. (The latest snow storm in CT had the power out for 13 days). One of the things it suggests is to have 100 junk silver dimes. I was thinking about buying them this month, so it is weird that you had the very same idea!
That’s a pretty cool website. I had never seen it before. And I hope I get dimes when my silver is delivered. I’d rather have the smaller denominations if I’m ever in a situation where I need to barter with my silver. APMEX said I could get either dimes or quarters. We’ll see in a few days!
I think 10% is a huge portion of the portfolio to put in precious metal. I’ll probably put 2-3% in gold/silver when the price is right. They are too expensive right now.
Some people see the prices of precious metals going up as a precious metal bubble. I see it as a result of the Fed printing ridiculous amounts of money. And since I don’t think the Fed will stop doing that any time soon, I’m inclined to believe it will continue to go up.
I aree with retirebyforty. if anything platnum is cheap right now. But Im not buying that either. Altough, some silver coins could be a usefull edition to your emergency planning stash, I don’t like physical metals as an investment because they are not very liquid.
My engagement ring is platinum… does that count? 😉
Absolutely! The one I gave my wife is platnum too, and it is worth a lot more now, since I purchased it for her over 11 years ago. I guess I could barter with it if zombies were comeing, but until then, Im not selling.
Zombies will not be deterred by shiny things! (wait, will they? my viewing of The Walking Dead and I Am Legend did not elucidate me on that issue).
The zombies in I Am Legend couldn’t handle sunlight. Maybe the reflection off a shiny silver coin would deter them too???
Liquidity is a huge issue with physical coins. If it weren’t for the emergency planning aspect of this purchase, I definitely would have picked an ETF instead of physical coins.
That’s a big chunk to lay down at one time. I admire/applaud your intestinal fortitude. We accumulated junk silver and silver eagles back when it was 12 to 14 face value, mostly on Ebay and local dealers. I got lucky once at a flea market with seven silver eagles bought for the then-current spot price of $17. I’ve been meaning to write a post on how we use and trade junk silver in the nano-economy that is our household, reading this post is a good motivator.
A lot of good information here, thanks!There’s a convenient junk silver calculator here: http://www.teslamap.com/public/silver/index.php It makes those calculations a lot easier. The page also has a nice gallery of junk silver coins.Also, I think Ron Paul is the last hope for America.