Issue 13
10/24/04
The US Mint Lost Money This Year
Issue #13 - The US Mint Lost Money This Year
1. The US Mint Lost Money This Year
2. IWM Index, Phone Help & RSS Feeds
3. Another Subscriber Comment
4. My Wage - A Poem
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Dear Friends,
Welcome to Issue #13, to most it would seem to be an unlucky number,
but I like #13. You see both my brother and I were born on the 13th
of the month, so it's always been considered a lucky number in our
family.
But enough about luck, let's discuss being on the wrong side of
commodities v. the right side. Additionally, I have some updates
regarding services provided by Investing With Mom over the next few
weeks. So let's get right to it.
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The US Mint Lost Money This Year
In my last issue, I discussed the 2 main reasons why I believe
commodities will continue to increase in value over the next 5-10
years. Today however, I'd like to discuss a couple of aspects
regarding commodities that we should keep our eyes on.
First of all, while the US Mint has yet to release their annual
report for Fiscal Year 2004, which only just ended Sept. 30th, it is
fairly safe to say that they lost money on the production of pennies
and nickels.
In FY 2003, it cost the US Mint 0.98 cents to make a penny and 3.78
cents to make a nickel. Now in order to decifer what their cost of
production was in 2004, we must know what pennies and nickels are
made of, and I'm glad you asked because it just so happens that I
do know what's in a penny and a nickel.
A copper penny is actually 97.5% zinc, whereas nickels are made
with copper, bet you didn't know that one. Now let's take a look at
how these 2 commodities have performed over the last year.
When we do so, we find that on average zinc is up over 20% when
compared to prices in 2003, but copper spent most of 2004 up about
55% as compared to 2003's average prices. This translates to a cost
of 1.18 cents for pennies and 5.9 cents for nickels for the whole
year.
Granted the US Mint literally "makes a mint" on each of the other
coins it produces, but keep a lookout for any announcements about
any changes in the metal content of coins over the next year or two.
If that happens, you may get a pretty decent return on any pennies
and nickels you bury in your backyard for a couple of years.
Second, many companies will come and go claiming to have discovered
enormous deposits of one commodity or another. Whether they really
have what they claim will be difficult, if not impossible, for
average folks like us to verify.
This does not mean however that we have to settle for stodgy
returns. Large cap commodities stocks can be more sensitive to
changing market prices than normal large cap stocks. An example from
our own portfolio would be Anglogold (AU - NYSE).
AU has not only outperformed the markets since my mom and I bought
it back in May, AU has also nearly doubled the performance of gold
over the same time frame. While this is not always the case, it is
nice to know that you don't have to look for a high risk company in
order to profit from a commodity's rise.
There are of course exceptions, but there's usually a good reason
for the exception, like ExxonMobil (XOM - NYSE). While XOM has moved
13% since mid-May, crude oil has jumped 40%, or 3 times the returns
offered by the $300 billion company.
This is mainly due to XOM's high exposure to the manufacturing side
of crude oil. Since XOM is no longer an exploration company in the
purest sense, it doesn't rise or fall as quickly.
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IWM Index, Phone Help & RSS Feeds
My apologies with regards to last issue's mention of the new IWM
Index. I had been so busy over the course of last weekend, that the
IWM Index failed to account for Chesapeake's and PetroChina's
dividends.
The former was paid last Friday and the later this past Monday. The
correct numbers make the returns look even better, as they should
have been:
IWMI . . . . 1712 . . 1861 . . 8.68% . . 25.15%
Unfortunately, it also makes the drop in the portfolio this week
look bigger, oh well. Here is the latest IWMI, through the end of
Friday's market action, and including the portfolio adjustments that
we discussed in the mid-month Advisory Newsletter update:
IWMI . . . . 1824 . . -1.99% return since Mon. 10/18/04
S&P500 . . . . . . . -1.62%
NASDAQ . . . . . . . -1.08%
DJIA . . . . . . . . -1.99%
The IWM Index will be published on the website within another few
days. At first, it will only be available on the Portfolio page, but
we'll soon have a graphic on the homepage as well. Which leads me to
mention several other upcoming changes and additions to the website
and the services offered.
Beginning next week, I'm hoping to be able to publish the newsletter
through a new e-mail service. We are switching providers because it
will allow us greater flexibility and personalization. While the new
service should seem as if it's coming from the same e-mail address,
I will let you know if anything changes, so you can adjust your
whitelisting of IWM to avoid interruptions in delivery.
This change will also enable me to send Advisory subscribers their
latest issues directly, instead of them being forced to login to the
website, each time they want to read, or reread an update.
Additionally, I'm finally going to be able to have a paid phone
consulting option for non Advisory subscribers. It will cost no more
than $2.49/min. and will be available anywhere on the website. For
Advisory subscribers, all you have to do is send me an e-mail
requesting a phone consultation, and I'll call you free of charge.
I have found a brilliant website that will be handling the phone
consulting service, including billing, for me. As soon as my account
is fully operational, I'll be giving everyone a full update on the
services available, as this will greatly expand our online reach.
Finally, I'm hoping to be able to turn IWM into an RSS feed sometime
early next month. If anyone has any suggestions, in terms of a
publisher to use or anything like that, I'm definitely open. I
realize not everyone is going to be interested in an RSS feed, but I
want to offer as many options as I can.
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Another Subscriber Comment
Just so everyone knows, I always appreciate subscriber comments and
I do my best to follow up with each one ASAP. With that in mind,
here's a recent comment from Bonnie in Toledo, Ohio:
"I just love your newsletter, Investing With Mom! It is really
informative, interesting and really helps me to learn about
investing. Thank You - Keep up the great work!"
Thank you, Bonnie and I look forward to hearing from everyone else,
too.
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My Wage - A Poem
Finally, I'd like to leave you with a poem, I read many years ago. I
believe it applies to all areas of life, but it is especially useful
in investing, whether for the short or long term. Enjoy.
My Wage
I bargained with Life for a penny,
And Life would pay no more,
However I begged at evening,
When I counted my scanty score.
For Life is a just employer,
He gives you what you ask,
But once you have set the wages,
You must bear the task.
I worked for a menial's hire,
Only to learn, dismayed,
That any wage I asked of Life,
Life would have paid.
- Jessie B. Rittenhouse
Investments good for my mom and you,
Andy Prior
