I just “scored” an email from the Sovereign Society – I love them, here’s a link to their site, we’re not an affiliate but check them out, and tell them we’d be HAPPY to cover their Total Wealth Symposium – and I started thinking that my idea about Stockpiling Silver in the Basement might be leapfrogged by another idea: Junk Silver to the Rescue!
Here’s what I mean and/or what got me all verklempt, from an ad in their email:
For the first time in years, bags of 90% U.S. silver coins are more cost-effective than silver coins and rounds.
As one of our best selling products, junk silver offers more than just divisibility and low premiums. Now, you can take advantage of both lower premiums AND lower silver prices.
While supplies last, these low premiums are only available to you for a short time. Get the benefits of fiat currency and precious metals today by calling Asset Strategies International.”
When we clicked through, we discovered some interesting tidbits – that a $100 “face value” bag will contain 71.5 ounces of silver. Multiply it by a spot price of $20 an ounce and you’re looking at $1,430 worth of silver.
So…how is it “more cost-effective than silver coins and rounds?”
Tip: Always Go Straight to the Source
The source is Rich Checkan, who is President & COO of Asset Strategies International. We got a bit of a lesson from Rich, who certainly knows about junk silver, economics, fiat currencies and a lot more. Here’s an (edited) excerpt of our discussion:
10K: Please explain the difference between “junk silver” and other kinds of silver.
RC: For this discussion, we’re talking about three different types of silver.
Group 1 is the pre-1965 U.S. Silver Coins (half dollars, quarters, dimes). These are 90% silver in content. So, Each $1,000 Face Value (2,000 half dollars, 4,000 quarters, 10,000 dimes) contains 715 troy ounces of pure silver if you melt them down and extract the impurities. They are a great, and therefore very popular, way to own silver, as you can own silver in small amounts. This gives divisibility to your precious metals holdings. It is easier to buy a loaf of bread with a 90% dime worth about $1.60, than to do so with a 1-ounce gold coin worth about $1,300.
The second group is “Government Minted Coins” – like the U.S. Silver Eagle. The U.S. Mint buys silver from the mines, mints it into a coin, sells it to source distributors, who sell it to retailers like us, who sell it to retail customers. Each step, from the mine to the customer, adds a margin…the biggest coming from the mint as they have to cover cost of silver from mine, cost to produce and they make a profit as well. Governments ONLY sell proof coins directly to public, and these carry much higher premiums as they go through more strikes at the mint for greater detail, are highly polished and packaged for collectors. Bullion silver coins are more cost-effective for investors, but cannot be purchased directly from the mint.
Third group: Rounds or Coins Issued by Private Mints. These have a very similar story to government minted coins…with the exception that they are minted by private mints. They’re not Legal Tender, so you’re buying them just for the value of the silver.
10K: The email I quoted from makes it sound like the underlying economics have really shifted, so adding junk silver to your portfolio makes more sense now. Why?
RC: So, all three options carry premiums. Given similar premiums, many clients will opt for the 90% (Junk) Silver because they get more divisibility for no additional premium.
Four years ago, we could sell 90% silver at premiums below those of rounds and coins. Even better.
Then, there was a supply squeeze. No new 90% coins have been minted since 1964. What’s out there is it, and many bags were melted down over the years. So, supply is dwindling.
At the same time as supply dried up, demand surged. Economics 101…premiums went up. From 4-6% over spot four years ago, to 20-24% over spot about 15 months ago.
This year, new sellers have entered the market, supply stress has eased, and premiums have been steadily dropping.
Then, a few days ago, we had a couple suppliers…with limited supply…offer 90% to us at a price that allowed us to sell it to the client…with shipping, handling, and insurance included…at 6%. We haven’t been able to get this much desired product to our clients at that low premium in 4 years. In fact, as mentioned, 15 months ago, the premium was 4 times what we are able to offer now.
So, Dave here again, I think this makes more than a little sense, and it’s likely a pretty easy way to add precious metals as a hedge and not pay through the nose for them.
Experts such as Rich – and those at this “Wikihow” page explaining junk silver – suggest that, first, you make sure you don’t have silver coins that have numismatic value. If you’re going to the bank and asking for half-dollars or dollars, you could conceivably end up with something valuable. However, any other avenue that gets you junk silver has already gone through the coins to see if they have value beyond the silver itself.
From there, it’s really quick math:
I whipped up a pretty quick spreadsheet, multiplying the value of silver in each coin by a theoretical spot price of $20 an ounce. In this example, each junk dime – before 1965 – is worth $1.43.
You’ve got two options, IMHO, if you want to add junk silver to your portfolio…option 1 is to go from bank to bank and get a whole bunch of coins, pore through them to see whether or not there’s anything valuable, pull out the junk silver, and see if that adds up.
Option 2 probably makes more sense for the time-crunched: talk to somebody like Rich and see about getting some junk silver.