Why the Rare Coin Market Isn't the Art Market

As much as coin dealers--myself included--try to compare the coin market to the art market, the more you look at coins, the more you realize how insignificant this market (currently) is when compared to art. Will the coin market ever "catch up" to the art market and is it fair to make any coin vs. art comparisons? I'd like to share my thoughts on this with you. If you look at art from an outsider's perspective, the prices that great objects bring seem baffling. $50 million dollar Warhols? $100 million Giacometti sculptures? And what seems all the more baffling are that prices like this are for items that not everybody agrees is a masterpiece.

But examine the art market with a little bit more perspective and the prices that make coin dealers exclaim that MS64 Indian Head half eagles at $3,500 are a smoking value seem less relevant.

The market for seven, eight and even nine figure art objects is extensive and it is world-wide. If a Vermeer painting was discovered and authenticated, there would be a deep pool of buyers waiting to purchase it; even if the final price realized at auction was in excess of $200 million. Compare this to a famous rare coin like a 1913 Nickel or an 1804 Dollar. Sure, these are famous and desirable coins and an example of either would bring $5 to $10 million in the right market conditions. But the number of buyers who would be competing for these classic rarities is probably less than ten; maybe even as few as five.

The lack of depth in the coin market is even more apparent in thinly traded areas like Territorial gold or Patterns. A coin can be extremely rare and there might only be three examples known. But if there are only two strong buyers for that issue and both already have the coin, the thinness of the market is detrimental. This tends not to be the case in the art market which is deeper and which has institutional buyers as well.

There are hundreds of art museums in the Western world and a small but significant number of these have the money available at most times to buy great art that fits into their collection. Sadly, the Mint Museum in Charlotte has no budget (or desire) to purchase a great Charlotte quarter eagle if it becomes available. The Getty Museum, on the other hand, has been a major buyer of antiquities and photography for years and has helped to push values upwards in those areas.

The art world does a wonderful job of cultivating new buyers. In addition to museums there are active art scenes in cities like New York, London, Berlin and Los Angeles that have beautiful, high-end galleries where collectors (or potential collectors) can go to learn about new art, view exhibits and socialize with other collectors. The number of high-end coin stores in the United States is next to none, and I somehow can't imagine hedge-fund directors in New York or trust-fund kids in London spending Saturday mornings chatting with the proprietor of the local coin shop.

While I personally love rare coins and I do think the market has come a long way in the past decade or two, it still has a long, long way to go as far as self-promotion goes. Art shows are much more upscale than coin shows, and gallery exhibits introduce new works to collectors or reinforce the greatness of existing masters. When's the last time you went to your local museum to see a coin exhibit?

The rare coin market has become increasingly internet-driven and I think that's a great thing; I know that it has certainly helped my business immeasurably. But the personal interaction between dealers and collectors in the art world remains more sophisticated and "better" than in the coin world and I think the art world is healthier for this.

Another thing to remember about the art market is that it is far more international and cosmopolitan the the coin market. When a great French Impressionist painting is offered at auction, it is possible that the winning bidder might be American, British, French, German, Swiss, Russian, or even Chinese. When a great Liberty Head half eagle is made available, the chances remain very strong that it is going to sell to an American buyer.

Buying art serves an important social function that doesn't yet (and may never) apply to coins. When a billionaire Russian oligarch wants to makes a splash in the West, he does three things: buys an English Premier League soccer team, purchases a great apartment in New York, and makes a splash at the season's Christie's and Sotheby's Contemporary and Modern Art sale.

Coins are not on the radar of many big money buyers because they are too small to display and you can't impress your friends by laying out a PCGS box full of Gem rare date Saints.

But I think that the transportability and compactness of coins may ultimately appeal to big money buyers. Its a lot easier to move your coins from New York to London to Dubai than it is your art collection. As the world becomes a more complex, dangerous place the ability to quickly transport significant amounts of personal wealth gains in importance.

Would the rare coin market have a sudden transformation if coins, as a category, were suddenly included in Sotheby's and Christie's roster of sales? Probably not. There are not enough expensive coins around to keep these two firms interested in maintaining departments and both firms don't appear to want to fool with art objects that are worth much less than $25,000-50,000 and up. And even when Sotheby's and Christie's had coin departments, their sales were primarily attended by American dealers.

If anyone is going to take the coin market to an international audience, it's Heritage and I would assume that selling coins to Chinese industrialists is on their radar. And let's not forget that both PCGS and NGC have overseas offices and are focusing considerable time, energy and marketing dollars on appealing to foreign collectors and dealers.

For the United States coin market to become more like the art market, I think a few things need to happen. Some of these are possible, some are already happening, and others seem more like a pipe-dream.

1. There needs to be more and better high-quality general numismatic reference books. We are in a golden age of numismatic research but most of the books published appeal to a narrow range of specialists. We need more books like "The 100 Greatest U.S. Coins." A superb quality coffee table book on United States gold coins, for example, would be a great way to get more high net worth individuals interested in coins.

2. There needs to be a few upscale coin stores in New York. Manhattan remains the financial and social capital of the world and it is filled with superb art galleries. But there is no place a hedge fund manager can go and look at great coins for sale in comfort and privacy. Heritage has launched a New York office and Stack's-Bowers will become more retail friendly (I assume), but there is still a huge void in New York.

3. The Smithsonian collection needs to reopen and there need to be touring exhibits of great American coins at locations more accessible than coin shows. There are hundreds of places in the United States to view great American art. There are only a handful of institutional collections available to view in this country.

4. There needs to be at least one or two upmarket coin shows in New York every year. Captains of Industry aren't going to fly to Rosemont or Long Beach to go to shows. I doubt if an Armory-style show for coins would work but I'd be curious to see what happened if a coin dealer were allowed to exhibit at a fancy east coast art and antiques show.

5. The coin market needs to think with a long-term perspective. Dealers need to be thinking about the market in 2021 and 2031, not just in 2011. Coin doctoring is bad for the long-term health of the rare coin market just like scandals in the art market can hurt that industry in the long run. In a good market, coin dealers are too busy to promote numismatics and in a down market, they are too poor. There are times I wish there was a Benevolent Dictator in the coin business who told us dealers what to do and how to do it.

6. The professional side of the coin business desperately needs an infusion of fresh young faces. The art market has the advantage of hundreds--if not thousands--of smart, enthusiastic Art History majors who enter the market each year from college. The coin market has a lot of the same faces who have been around for two, three, and even four decades.

That said, I still like the future of the rare coin market. I think there is real value in selected areas of American numismatics. The relative affordability of Classic American Rarities is a compelling factor for wealthy collectors used to seeing average quality artwork priced in the millions of dollars. And the fact that the $5 Indian in MS64 that I mentioned above is within the price range of most upper middle-class Americans means that coins have the potential for much more widespread appeal than great (or even good) art.

What are your thoughts about the coin market versus the art market? Leave your comments about this below.