For the last few years, I have been asked by Maurice Rosen, publisher of the excellent Rosen Numismatic Advisory newsletter, to be a contributor to his annual Crystal Ball survey. This feature, which generally has the participation of a half dozen or so very knowledgeable dealers, is an excellent way for me to analyze the coin market and the questions asked by Maurice are diverse and interesting. Here are my answers to the 2008/2009 RNA Crystal Ball Survey. Please note that due to the length of this article it will appear in two parts. 1. What's your outlook for the coin market in 2008/2009?
I think the market will be mostly strong in 2008 although I think we will see continued bifurcation as we have the last few years. By this I mean I think there will be great strength at the absolute upper end of the market and we will also see good demand for interesting lower priced coins but the middle market will continue to be weak; possibly more so than in 2007. I foresee some weakness in the economy in 2008 and I would imagine that because of the housing slowdown we will see fewer people throwing sizable amount of disposable income at things like coins. Really good coins, though, are going to do awfully well in the coming years. There just aren’t many of them around.
2. What areas of the market look to be the best performers in 2008/2009? Please state your reasons.
I think type coins will be a very strong performer in 2008, especially Seated and Barber coins in MS64 to MS67 and PR64 to PR67. Coins like this have been too cheap for too long and people have finally gotten wise to this. Early coins have gotten too expensive for most people (in higher grades) and the grading standards tend to be pretty atrocious in this area. I think a number of collectors are realizing that a smart place to be is in the Seated and Barber arena. You can still buy really nice coins that are 100+ years old for less than $5,000.
I expect that rarities and trophy coins will be extremely strong this year. I find it amazing that an 1804 $10 sold for $5 million dollars recently and I’ve got to think that $1 million dollar sales are going to be reasonably routine in 2008 and 2009.
I would expect that Proof Gold will do nicely in 2008 as will better date $5 Indians and $10 Indians.
In rare date and early gold, I think anything that is choice and original will be in demand this year. I am already noticing a large price spread between crusty coins and scrubbed coins and I think this will continue as originality becomes more and more in vogue in 2008. Here’s my advice for collectors and investors in 2008, 2009 and beyond. Buy coins that are interesting and which have good aesthetic appeal.
3. What areas look to be the weakest? Again, please state why.
I would expect that silver commemoratives are going to stay very weak in 2008 unless some large marketing firm decides to promote them. They seem like great values right now but there are just too many of the little buggers around and unless you can count on selling thousands and thousands of coins, you can’t control the promotion.
I would have to think we will see some weakness in Registry Set coins that are perceived to be overvalued.
I also think that, with the exception of gold dollars, small-sized coins are not going to do well. As collectors get older and older, few people are able to see coins like Three Cent silvers and half dimes.
This is going to sound a little bit general but coins that are ugly are going to do poorly in 2008. No matter what the plastic says, if a coin is off quality, it will be hard to sell.
4. Since the 2001 lows, coin prices by some averages are up 20-50% but gold is up about 200%.
A) Have your clients expressed concerns about this?
How could they not express concern? While some areas of the market have done fabulously since 2001 (early type, early gold, rarities) many other areas have been extremely flat. In some cases, truly rare coins in relatively popular series are actually down in value since 2001, especially if you take out the gradeflation factor(s).
B) What do you tell them?
The truth. Which is, in my opinion, that as much as I love coins and the coin market in general, there are some problems that need to be cleaned up. These include accurate price reporting and the need for greater consistency among the grading services.
C) How do you see coins and gold performing from here on?
I think we’ll see gold break through the $1000 barrier but I’m not really sure where the short-term and medium-term caps are going to be. Perhaps $1250-1500-- after that, who really knows? I think price performance in the coin market is going to be selective. As I mentioned above, the market is becoming more and more bifurcated. I think there are going to be fewer collectors in the future but there will be more extremely rich people dabbling. If you buy the right coins and hold them long enough, you should do well. If you buy so-so or average quality coins you won’t do as well. Investors should learn to think like collectors and buy the sort of collector-quality coins (and, no, the expression “collector quality” does not mean 1901-S quarters in Fine) that have traditionally appreciated well over the course of time.
5. The U.S. Mint is the biggest coin dealer. Are they helping or hurting the coin market? Please explain in detail.
I can’t possibly imagine that it’s helping the coin market that hundreds and hundreds of millions of dollars are being spent on modern products that might (or might not...) be spent on rare coins. At least the Mint is now far more receptive to collectors than in the past and they seem to have extended the olive branch to the collecting community after years and years of disliking us.
6. Coin grading has come a long way since PCGS started in 1986. A) What further advances are needed? B) How would they impact the market?
I’ve spoken with clients of mine who are involved in hedge funds or private equity groups and most of them won’t do a coin deal because the numbers are just too small. These guys are looking at doing $250 million+ deals (in many cases more than this) and a little $25 million to $50 million coin deal is just too small for them. That said, there is always the chance that a hedge fund guy who loves coins might do a fund as sort of a lark. But every time we’ve seen large funds in the coin market, the results have not been good.
If a fund were to be established, it needs to be run by someone like John Albanese who is very smart and very ethical. I assume that a fund run by someone like John would focus on really rare coins like Proof gold, early type (silver and gold), classic rarities and popular individual issues like High Reliefs, Pan-Pac Octagonal and Round $50’s, etc. This is essentially what the Ohio Fund was focusing on and I think they did a very good job in terms of buying coins and focusing on specific market areas.
7. A) How do you feel about the concept of "seals of approval" on graded coins?
I wish they weren’t needed but I think at this point in time they are a good idea—provided, of course, that the people involved with them are doing it for the right reasons.
B) What will the effects be of such slab labeling?
I think we are already seeing an effect. At least one of the services has become considerably more conservative in their grading in the past six to nine months.
8.Coin auctions: A) What's your best advice to consignors?
1. Don’t assume that auctions are always the best way to sell all coins.
2. Learn which firms sell which types of coins for the most money. As an example, I use one auction firm exclusively for any very low population 20th century coin I own as they get much better prices for these coins than anyone else. Conversely, I use another firm exclusively for more “sophisticated” coins as they do a better job describing them and their audience seems to be a bit more dialed in to these sorts of coins.
3. Don’t choose an auction firm solely based on their consignment rate. You get what you pay for.
4. The best times of the year to sell coins at auction are at FUN in January and at the ANA in July or August.
5. Hire an advisor to help you decide how to best market and sell your collection even if you think you know what you are doing. If you do it totally on your own the chances are good that you will leave money on the table.
B) What's your best advice to bidders?
1. Hire a well-qualified representative to bid for you at auction. It is the best 5% you will ever spend.
2. Never bid sight unseen on any coin at auction worth more than $1,000. And, no, you can’t accurately grade a coin based on images!
3. If you attend an auction in person, come prepared. Know what you what to bid on, what you want to spend and how much you are willing to stretch on any coin.
4. Sometimes the best auctions are the ones you don’t buy out of but which you learn from.
9. Two sophisticated investors come to you to provide them a portfolio for a 5 to 10 year hold, one investing $25,000, the other $250,000.
A) How would you construct the portfolios?
$25,000 portfolio, as follows:
1. Stars Obverse Liberty Seated Dime, PCGS or NGC MS66, cost $4,000-5,000+. I think this has the potential to be a $7,500 coin.
2. No Motto Liberty Seated Quarter, PCGS or NGC MS65, cost $5,000-7,000+. If possible I would try to find a coin dated in the 1840’s and pay a premium of 20-40% for it. This could easily become a $10,000++ coin.
3. Barber Half Dollar, PCGS MS66, cost $4,000-5,000. I can see this coin becoming worth $7,500-10,000.
4. Liberty Quarter Eagle, PCGS or NGC PR65 Cameo, cost $12,500-15,000. I think this has the potential to become a $20,000 coin.
For the silver coins, I would try to buy very pretty originally toned pieces and for the Proof gold coin I’d try to find a coin that was not over-conserved.
$250,000 portfolio as follows:
1. A neat early copper coin, such as a 1793 half cent in AU or a nice Wreath cent or a pretty 1794 Cent with a good pedigree. I would avoid a Chain Cent as I think these are currently overpriced. I’d spend around $25,000 on this coin and I think it has the potential to double in the next five years.
2. A cool $25,000 early silver coin. It might be a really nice AU 1795 half dollar or a very pretty early dollar (preferably a 1796, 1797 or 1798).
3. A Large Size Bust Quarter in PCGS or NGC MS65. I’d be very selective when buying this coin and would hold out for a coin that had great original color, minimal friction on Liberty’s cheek and a good strike. I’d be willing to spend up to $25,000 on the right coin. This type could be worth $35,000-45,000 in a really hot market.
4. A great looking piece of early gold in the $25,000-35,000 range. I might look for a nice MS63 to MS64 Capped Bust Right half eagle or a Fat Head half eagle (1813, 1814, 1818 or 1820) in MS63. Again, I’d be ultra-selective and avoid a piece that has been processed. Although early gold has gone up a lot in price in the last five years, nice coins still have upside potential.
5. A small group (four to six coins) of Colonials priced in the $2,500-5,000 per coin range. I would use an expert in this area to be my guide and would shoot for coins that he thought were accurately graded and really attractive for the issue. This is a $10,000-20,000 investment that could double in the next decade.
6. A really neat New Orleans half eagle or eagle from the 1840’s worth $20,000-25,000 would be my next purchase. Having focused a significant amount of attention on these coins in the last few years, I know how incredibly rare they are and I think they are still wildly undervalued.
7. I’d finish the portfolio off with one or more of the following: a great piece of Proof gold from the 19th century, preferably in PR65 or higher and preferably with an original mintage figure of less than 50 coins; a few great No Motto Liberty Seated silver coins, preferably No Motto mintmarked coins in MS63 to MS65 with pleasing original color and a few neat collector coins—things like perfect EF Carson City half dollars or lovely original AU Bust halves. All of these areas still seem like good values to me and have excellent upside.