Pricing "Difficult" Coins: A Real World Model
/I have written a number of blogs in the past few years about how I price rare coins. Despite this, I still get many questions from new and experienced collectors about pricing. I'd like to share a specific coin that I recently handled and explain how I came up with buy/sell prices. As I have written, I find many of the published price guides to be of little or no use when it comes to complex, infrequently traded coins. When I make decisions at shows, in my office, or in the auction room on what to pay for a coin, I tend to put a lot more credence in auction records. So, if you'd like to play at home, I suggest that you follow along with the PCGS auction archives on pcgs.com as this is a major source of information for me when I make pricing decisions. Here is a "real world" model and the thought process(es) that went along with my pricing decision.
1863 Half Eagle, Graded MS60 by NGC and CAC approved
This is a coin I handled earlier this year and it is one of the first pieces in a while that, as soon as I saw it, I said "I have to own this." Before I discuss my thoughts about how to price it, let me discuss a little about the issue and about the coin itself.
Only 2,442 business strikes of this year were made and my experience is that the 1863 half eagle is rare in all grades, especially in AU50 or better. I jogged my memory and couldn't recall having seen an example I thought was better than AU53 to AU55 in more than a decade. And, I remembered that this was an issue that typically comes with zero in the way of eye appeal. A quick look online showed me that the PCGS population was none for Uncirculated coins and five for AU58; NGC had graded two in Uncirculated (an MS60 and an MS61) and five in AU58. At the time, CAC hadn't approved a single 1863 in any grade; a good indication that the eye appeal of the typical example was not good.
(How can you, even without my experience, make the same conclusions? Look at the pictures of the 1863 half eagles sold at auction during the last ten years. Are the coin fresh and original or are they bright, abraded and processed? Then, look at the number of auction records. A quick scan of the PCGS archives showed a total of 30 records since 1941. What was immediately impressive to me about this figure was that the highly-regarded 1864-S half eagle had 32 auction records in that time period!)
Of course, all these statistics are just gobbledygook if the coin itself isn't "all there." As you can see from the photo above, this coin had really good eye appeal. In fact, my first question was "why is this only in a 60 holder?" (I recently overheard heard a wholesale dealer, who I regard as one of the top three graders in the world, refer to the MS60 grade as "dumb" and that he "hated it." I tend to agree with him but, in this case, I was smitten with the coin; even it was in the funkiest of all Mint State grades.)
So, at this point I was sold. What would I pay?
With no auction records for an Uncirculated coin, I looked at AU58's. The two most recent sales were $14,950 by Stacks Bowers in August 2012 and $14,375 by Heritage in May 2010. A quick look at images for both coins showed two pieces that were no better, in my opinion, than AU53 to AU55. So, after digesting this, I decided that I would pay at least $17,500-20,000 for a coin that was a real, CAC-quality AU58 (the last "real 58" I had seen was the Bass II coin which sold for $13,800 back in 1999...).
Having concluded that a "real" AU58 was worth as much as $20,000, I figured it would be OK to pay at least $30,000 for a really nice MS60. I wanted confirmation and then decided to see if there were comparable coins that had recent auction records in this grade. Back to the archives I went.
I didn't really find any good comparables for the 1864-P and 1865-P, two dates that I regard as somewhat similar to the 1863; at least in terms of overall desirability. I then looked at the 1863-S; an issue with 17,000 struck but a low survival rate. I believe that this date is about twice as available as its Philadelphia counterpart but, like the 1863-S, it is extremely rare in AU58 and above.
In their June 2011 auction, Stacks Bowers sold a nice NGC AU58+ 1863-S for a remarkable $25,875. This was the single best example of the date that I had seen in years and I thought the price realized would be strong but I was clearly not expecting a winning bid of over $25,000. But this was as good a comparable as I could find and it made me think that if a "gem slider" 1863-S half eagle was worth nearly $26,000 then a somewhat nicer example of a decidedly rarer date (the 1863-P) had to be worth at least $30,000-32,500.
After negotiations, I was able to purchase the 1863 half eagle in this price range. I sent it to CAC where it was approved, thus becoming the first and only stickered example of this date. I listed it for sale in the mid-30's and within a few hours I sold it to a specialist who had been looking for a high grade 1863 half eagle for many years.
And what exactly does this all prove? Here are a few thoughts that I gleamed:
1. With CDN Monthly Summary showing a "bid" of $20,000 for this date in MS60, I knew that I wasn't going to get any help from published price sheets. But that's not a surprise, given that no MS60 coin had ever traded.
2. A few things convinced me to stretch on this coin: its true rarity in all grades, its Civil War date of issue and its great eye appeal. But if I had been offered an 1863-P half eagle in MS60 that was ugly and processed, I might not have figured it for much more than the $20,000 or so that I decided a properly graded, attractive AU58 was worth; maybe even less, in fact.
3. When you are contemplating a purchase of a coin such as this 1863 half eagle, you have to be prepared to stretch. My quick analysis made me think it was a great deal at $25,000 and probably too much of a stretch at $40,000. So, at $30,000 I was still all in and at $35,000 I probably would have been as well but not without some complaining to the seller.
4. How effective is the comparable method I mentioned above for determining value? It can be very effective but it is fraught with potential landmines. Let's say there was just one comparable and it was from over a decade ago--would that be effective? Or what if there were three records and one was 100% higher for a comparable coin) than the other two--would you, as an informed buyer, know the circumstances behind this sale? Is it effective to compare a coin like an 1863 half eagle to, say, an 1863 eagle? Or is this too much of an "apples to oranges" scenario.
5. The bottom line is that no matter how pseudo-scientific we as dealers or collectors try to make pricing, a lot of the numbers that get placed on really rare coins are instinctual. If you are knowledgeable, you'll have a gut feeling that the price is "right" or its "wrong."
Would you like to read more about my thoughts on coin pricing? If so, feel free to email me at dwn@ont.com and fire away with some off your questions.
