The 'Kyle Bass' Trade And How The Penny Cost Taxpayers $436mm
It has been a few years since Kyle Bass suggested the 'nickel trade' and the idea remains as profitable for those with large wheel-barrows now as it ever was. As Bloomberg notes, the penny currently costs almost 2 cents to make and the nickel more than 10 cents - more than double the cost from 2006. In those seven years, the US taxpayer has lost a stunning $436 million thanks to the inflationary devaluation of the USD relative to the metals involved, and while a former Arizona congressman (Jim Kolbe) tried to sponsor a bill to abolish the penny (to save the cost of minting), President Obama noted that "given all the big issues, we're not able to get to it," even as the Canadian Mint just stopped distributing pennies - saving $11mm annually. It seems, while the production process may have costs, the 100% markup for pennies and nickels remains an intriguing disconnect.......
Charts: Bloomberg
As we saw in "Is Hayman Capital Management's Kyle Bass About to Get Crushed in Physical Commodities?" that first sentence is not true. Using our handy Coinflation base metal calculator we see that the present melt value of a U.S. nickel is down to $0.0503764 which is a heck of a lot lower than the number Michael Lewis quoted in Boomerang:
...“The value of the metal in a nickel is worth six point eight cents,” he said. “Did you know that?”...
