The "Deal Shopping" Mentality and Rare Coin Prices

I had an interesting experience at the Long Beach show that I thought was worth sharing. A new-to-the-market collector/investor came up to my table and asked to see my “best coins.” I was happy to share them with him and pulled out a gorgeous 1802 quarter eagle in PCGS AU58 and a lovely 1798/7 eagle in PCGS AU55. After some back-and-forth negotiating, I could see this deal was not going to get done. The reasons why it didn’t are what I want to briefly discuss. Now let me say in advance that the individual that I was dealing with is younger than I am, better looking than I am, smarter than I am and without a doubt much, much richer than I am. He’s someone whose family has had tremendous success investing in other areas and he is a recent convert to the rare coin market. But I think he’s approaching coins from a totally wrong perspective.

This guy likes deals. And he likes sexy, interesting coins. In other words, he wants to buy the best coins that I (or other dealers) have but he wants to buy them at levels that are unqualified, unquestionable “deals.” Good market or bad market, I don’t see this happening.

One thing that I have learned as a dealer in the last few years is that really good coins are really hard to find. Most of the great old-time collections have been dispersed and you just don’t see many “old time Gems” any more. Any when you do, like in the instance of the recent Naftzger Collection of late date Large Cents, the pent-up demand for the fresh, superb coins is so strong that they sell for crazy prices.

The investor I mentioned comes from a real estate background and he is, no doubt, used to panic sellers who have a nice piece of property but who are in over their heads and have to bail. Quickly. This doesn’t really seem to happen much anymore in the coin market. The speculators who bought the “deals” in the last Bull Market are the guys who bought the overgraded, overrated “stuff” that, in retrospect, maybe wasn’t such a good deal after all. The guys who bought the great coins and paid up for them aren’t selling. They aren’t selling because they don’t have to and because they know that what they have can’t be easily replaced. The "stuff" is what you tend to see, over and over, in auctions.

In the coin market, price buyers invariably wind-up with the worst possible coins for the grade. As I have mentioned before, there are coins with huge variations of value within a specific grade. For example, there are MS65 1795 half eagles that I think are worth well over $500,000 And there are MS65 1795 half eagles that I wouldn’t pay $350,000 for. The guys who “like the deals” are always going to wind up with the substandard coin. No ands, ifs or buts. It always works out this way.

That’s not to say that there aren’t good values in the coin market. I can think of dozens and dozens of coins that are undervalued in relation to their rarity and level of demand. I think that’s what the deal-hunters don’t understand. The real deals in numismatics come with knowledge of coins, not buying something for 10% less than Greysheet Bid. The Greysheet is never going to teach you that, as an example, an 1864-S eagle is a sensational value at double current published levels.

I realize that this sounds like a self-serving dealer blog justifying the “need” to stick a high price tag on nice coins. It’s not meant to be that but I can understand that interpretation. I just was sorry to see a potentially great customer pass on two incredible coins for his collection because they weren’t “deals.”

TFSB or the Theory of Frontloaded Set Building

In my recent April newsletter I mentioned one of my rare coin theories: EEEES or Easy Explanation Equals Easy Sales. In the spirit of wacky acronyms, here’s another one for you: TFSB or the Theory of Frontloaded Set Building. Assuming that you are collecting coins with the completion of some sort of set as a goal, you are probably building your set the wrong way. Typically, collectors are stingy when it comes to key issues and they tend to overdo more common issues.

Here’s an example of what I mean. When I have the chance to look at a complete set of coins (whether it is a date/mintmark run or a type set) the first thing I do is look at the keys. If someone has a date set of Dahlonega half eagles, I am going to be much more interested in how their 1861-D looks than their 1847-D. In nine cases out of ten I find that the 1861-D is one of the lowest grade coins in the set and generally has poor eye appeal while the more mundane 1847-D is among the nicer coins.

If I were building this set I would do the exact opposite. I would have the 1861-D be among the nicer coins in the set (perhaps even the nicest) and not worry as much about the less rare coins.

One of the reasons I find the Duke’s Creek collection of Dahlonega gold to be interesting is that it was (knowingly) assembled using the TFSB. As an example, in the gold dollar set, the two best coins are the 1855-D and the 1861-D. This makes sense since they are the two rarest. Now think about how the overall impact of the collection would have been if these same two coins were the lowest grade members of the gold dollar date run. Still an impressive set, no doubt, but not nearly as memorable as a set in which the two keys coins are also the two highest ever slabbed by a third-party grading service.

One of the negative impacts of Registry Mania is the tendency for people to get carried away about common coins in uncommon grades. In order to score more registry points, collectors will pay very high premiums for common coins, just to get some needed set value points. Rare gold coins are not really affected by this (yet) but it is possible that Registry Mania could force future collectors to make some purchases that do not adhere to the TFSB. I would caution any set collector to weigh his decisions carefully and to always save his “stretches” for the key date coins that will add panache to a set over the long term.