Can Coin Dealers be Coin Collectors?

A recent question from a client got me thinking: is it possible for a coin dealer to be a coin collector? My answer short and sweet: certainly yes — but with a large asterisk.

In most collectibles fields, many of the greatest collections ever formed were by dealers. This is especially true in the art world where the line between what is a “collection” and what is “inventory” is blurry; certainly far more so than in the world of coins.

Focusing on coins, I’d say that you want to buy from someone who is a coin weenie; someone who loves coins every bit as much as you do. I know I admire those dealers who really love coins more than those for whom numismatics is just a business, and who don’t really care that one 1845-O quarter eagle is choice and original while another is abraded and processed.

In the 19th and early 20th century, many of the most prominent U.S. dealers were collectors as well. Lyman Low, John Haseltine, David Proskey, Ed. Frossard, M.H. Bolender, Al Overton, and others assembled great specialized collections which were sold during their lifetimes and for which they are remembered even today.

Numismatics has evolved from an esoteric hobby into a big multi-national business since World War II, and for every post-war dealer like John Ford or David Akers who owned great coins, there are dealers who either do not care to collect or who do not want to be placed in a position where they are competing with their clients.

Let me give you an example. I recently bought a beautiful PCGS AU58 1846-O half eagle. This is exactly the type of coin I’d put away if I were a collector. So here was my predicament: do I keep the coin or sell it to any one of the dozen or so collectors who I work with on Liberty Head half eagle or New Orleans gold collections? I agonized for a second or two and quickly decided to sell the coin to a good collector. It was a simple; I’m a coin dealer not a coin collector. And here is another conundrum: if I were putting together a set of Liberty Head half eagles and I needed an 1846-O, why would I sell such a coin as perfect as the aforementioned example to a “competitor?”

But I still want to collect, and I’m not going to be relegated to something totally out of numismatics in order to escape potential conflicts of interest. My solution is pretty simple: I collect paper money, coin books, cool numismatic knick-knacks, and silver coins that do not typically appear in my inventory. Once or twice a year I do buy a gold coin for myself that is so unusual (from the standpoint of appearance) or so undervalued that I put it away. Such coins usually stay in my safe deposit box for a year or two until I have a client who I feel will appreciate the coin (and will sell it back to me when he tires of it) or if the market has risen enough to motivate me to take my profit (in the case of a Civil War eagle I recently sold).

So that’s my answer. A coin dealer should be a coin collector, just not in the area in which he specializes. Your thoughts?

 

Do you buy rare gold coins?

Do you have coins to sell?

Would you like to have the world’s leading expert with you assembling a set of coins?

Contact me, Doug Winter, directly at (214) 675-9897 or by email at dwn@ont.com.

Advice to a Young Coin Dealer

The Professional Numismatist Guild (PNG) recently announced the establishment of the Edward Milas Memorial Fund which creates internships at established firms for as many as four qualified dealers/aspiring dealers aged 21-32. These internships are scheduled to be available by next summer.

I applaud the PNG for the creation of this program. I have written before that perhaps the biggest problem facing the professional side of the coin business is the aging of its dealers. Formerly young dealers like myself are now middle-aged, and when I go to shows, I can't help but notice the small number of dealers who will be factors in the market come 2023 or 2033.

The pool of dealers now basically consists of three groups: the guys in their 60's (and older) who became interested in coins during the roll craze of the 1960's, the guys in their 50's who became interested because of the gold and silver booms in the late 1970's, and the guys in their 40's who became interested after third-party grading became entrenched in the mid-1980's. There are not many dealers in their 30's, and even fewer in their 20's.

There are many reasons for this lack of young dealers. It is very expensive to run a business and this discourages young people. Interesting coins can't be found in circulation any more - and this means fewer people become collectors. The industry lacks the panache of wall Street or hedge funds and doesn't attract many of the best young financial minds; even though the chances to make an excellent income are probably better at an A-level rare coin company than at a B-level bank or hedge fund. And, for a long list of reasons, coins just aren't viewed as being "cool" like they might have been to my generation.

I love being a coin dealer and I am thankful for having the opportunity to do something I enjoy and get well paid for it. The Milas internships might add five or ten potentially good dealers to the bourse floor and I hope that I can mentor at least one or two of them once they get their foot in the door. I have a few pieces of advice for any of these potential interns (or any other young person reading this blog who is thinking of becoming or already is a coin a dealer) and I'd like to share them.

1.  Try Not to Ruin Original Coins Unless You Absolutely Have To.  

I'm not proud to admit this but my generation (and the Roll Craze dealers who came of age in the 1960's and early 1970's) has probably ruined more nice, original coins in the name of profit than all other generations combined. All I have to do to remind myself this is to go to a show and look at case after case of dipped, processed coins or attend an auction and reject a large percentage of the non-fresh coins for quality issues. I'm a purist but I'm not naive; I understand that there are circumstances where the temptation to dip a coin to make $5,000 is so strong that its foolish not to. But remember this: as a dealer you have an obligation not to ravage every coin which passes through your hands in attempt to maximize your profit. And this means, in particular, not to do anything much worse than dipping: no puttying, no carving full heads, no lasers, nothing which can be considered deception. The next time you, as a dealer, have a gorgeous MS64 No Motto half eagle with great color, think twice about dipping it and turning it into a bright and shiny MS65.

2.  Leave Some Money on the Table.  

There are essentially two types of dealers: those who let you make money when you buy from them and those who fight you for every penny.

My favorite sources for coins are the dealers who leave a little on the table in every deal. As an example, one of my best sources for buying coins is very savvy about pricing, but he understands that I would like to make 10% on the coins I buy from him. He is smart enough to realize that if I spend $75,000 with him at a show and he makes a fair margin it will work out much better for him in the long run than if he makes it hard to buy from him.

There is a dealer who I used to do a ton of business with who has a reputation as someone who squeezes you for every last penny on every coin he sells. Let's say he's got a decent quality common date Dahlonega half eagle in stock and the last three APR's for this issue are $2,600, $2,800 and $3,000. This is a coin I'd like to be in at $2,750-2,800 and sell for $3,000. But this dealer is not content to sell it for $2,750; he has to charge $3,000 even if he's making a good deal of money on the coin or it's not special and doesn't deserve PQ money. After becoming frustrated with him for squeezing and squeezing, I gave up buying from him and don't even look at his coins anymore.

3.  Give Back to the Hobby.  

As the PNG Internship program shows, it is critical to give back to the hobby.  This means writing books, teaching classes at the ANA Summer Seminar, contributing money to the Smithsonian and the ANS pledge drives, helping out at a local coin club, or just being there for a young(er) dealer. Some of the most successful coin dealers do nothing but take from the hobby and I have little admiration for them. Others give purely out of selfish motivation (to get a better ANA table or to have access to wealthy, powerful collectors) but whatever their motive, at least they are making positive contributions to the hobby.

If you ask the typical coin dealer, what is his stance on education, he is going to answer "I am pro-education! Let's do this for the kids!" I don't totally agree with this. I'd personally rather help an aspiring 25 year old further his career in numismatics than a 15 year old because the latter is unlikely to become a professional. That's one reason I really like the PNG internship program: it targets younger people who are ready to enter the coin business today not those who might possibly enter it in five or ten years.

4.  Learn to Do At Least One Thing Really Well and Embrace That Skill.

When the market was less complex than it is today, it was possible to be really good at a number of things. There are some dealers whose knowledge runs the gamut of United States coinage and they are also competent when it comes to paper money and foreign coins. Today, it is harder and harder to be really good at a lot of things. This is not only true with numismatic knowledge, it is true with business skill sets as well.

In rare coin dealing, people often aspire to be something they are not. Someone might be a great salesperson but might have only mediocre skills when it comes to grading. Typically, this sort of person fails to embrace his very important skill set (selling) and, instead, tries to convince himself (and others) that he can grade as well as a dealer who makes a living cracking coins out. It's not easy to admit that you aren't a great grader or that you can't sell well. But the sooner you learn to play to your strengths and get help with your weaknesses, the better a coin dealer you will become.

5.  Your Reputation Precedes You. 

Nearly every coin dealer I know has some sort of reputation (good or bad) and they earned this when they were in their 20's: bad check writer, hard partier, untrustworthy, always in debt...not exactly what you want to have to live down in your 30's and 40's.

You can salvage a bad reputation but it's not easy. I can remember seeing a bounced check in the case of a once-powerful dealer about 15 years ago. It was displayed along with a handwritten sign that said something to the effect of "don't do business with Dealer X." Today, the dealer who displayed the sign is essentially out of the business and bankrupt while the dealer who wrote the bad check is highly regarded and does tens of millions in business each year.  Dealers have long memories but they become curiously short, in terms of common sense, when it comes to money. I've heard it said on more than one occasion that a known serial killer could come to a coin show and many dealers would be happy to take his check so long as they thought there was a decent chance it wouldn't bounce.

6.  Turnover Your Inventory

At nearly every show I go to, there are a few dealers who have reasonably nice coins but are impossible to buy from. I can think of three dealers, in particular, who have had literally the exact same inventory for five years. This includes coins priced at under $1,000 and it also includes generic gold coins whose value has dropped appreciably in the last six months. It also includes coins which these dealers disagree with the grade which PCGS or NGC has assigned and they'll price their MS64 Bust Half Dollar as an MS65 or MS66; never lowering the price even after crackout dealers have had their chance to buy the "misgraded" coins.

I try and turn my inventory over at least once every month to six weeks. As a dealer whose coins are  exposed on a well-browsed website, I know how important it is to have fresh coins. In the World of Internet Retail sales, anything which is more than a month or two old is considered stale and stale inventory is hard to sell, even if it is fairly priced. This isn't necessarily as true for dealers who sell primarily on a wholesale basis, but I can tell you that most sharp dealers remember the good coins in other dealers' inventories. Remember what I said above about earning a reputation? You don't want the reputation as someone whose inventory is as stale as year-old bread.

7.  Don't Be Afraid to Sell Coins For Losses. 

Which brings us to the next point. Young dealers are often afraid to sell coins for losses. When you are working with a small budget, you can't afford to make many really bad decisions but you have to understand the value of money. Tying up money on bad purchases and let them stack up is going to ultimately poison your inventory. After you sell off the good deals, you will be left with a growing pile of bad deals and sooner or later they will really add up.

Let's say you bought an MS64 $10 Liberty for $2,000 because you thought it was a "lock" to grade MS65 and you could then sell it for $3,500. You've tried it six times for grading at PCGS and its graded MS64 every time. Your actual cost in the coin is now close to $2,500 with the PCGS fees, shipping and the value of your money being tied up for months. At this point, the best thing to do might be to sell it for as close to your original cost as you can and move on. It's a poor use of your money at this point and you stand a better chance to make it back on the next deal you do with the original $2,000.

Some dealers refuse to sell coins for losses. Others will stick with a coin which makes sense. Let me give you two quick examples. I might have a nice Dahlonega quarter eagle in stock for a month. Its a fresh, pleasing coin which I feel is fairly priced but its not selling because it doesn't have a CAC sticker. Assuming it won't sticker even if resubmitted, I might still believe in this coin even though it hasn't yet sold. In this case I might hang on to it another month or two before I give up on it and sell it wholesale or consign it to a Heritage auction.

Or, I might have a $10 Lib in an AU55 holder which I paid $6,000 for and which I truly believe grades AU58. It's worth $12,000 in a 58 holder. The value spread is enough that I might try this coin ten times at PCGS and NGC (over the course of six months) if I really believe in it.

As you become more experienced, you'll learn when to hold 'em and when to fold 'em but just remember that sometimes its better business to sell your losses and just move on...

8.  Find Someone You Trust to Split Deals With. 

When you are just starting out as a dealer and your money is likely to be tight, it can make a big difference to find someone to split deals with you. By this, I mean finding a partner who will put up half the money and share in your profit or loss. I did this for many years, back when my budget was more limited than it is now, and had mostly positive experiences.

It is important to choose someone you trust to split a deal with and it is important that this person has something to offer that you don't. As an example, if you are a dealer who is knowledgeable about 20th century gold and you offered a nice deal of early gold, it makes sense to split this with someone who knows more about these coins than you do. If you are going to enter into a full 50/50 split with another dealer, try and choose someone whose skill set doesn't overlap yours. If you are primarily a wholesaler, it's great to choose a partner who can sell the coins to end-users; or vice-versa.

9.  You Can't Get Collector Privileges If You Are a Dealer. 

As a collector, you are entitled to certain privileges in transactions. You can, from time to time, put coins on hold for a few hours or even days to "think" about purchasing them, show them to a collector or dealer for another opinion, send them to PCGS for crossover or CAC for approval, and even, in certain circumstances, renege on a "done deal." You don't get to do this, with rare exceptions, as a dealer.

If you are a young(ish) numismatists making the transition from collector to dealer, you have to be ready to swim with the sharks; typically with no repellent at hand.  It also means that you have to be more decisive as a dealer than you were as a collector.

10. Embrace Your Inner Accountant. 

As much as I'd like to tell you that most of my time as a professional numismatist is spent buying and selling coins, quite a bit of it entails doing paperwork. I don't necessarily like this part of my job but its something I have become fairly good at and its something that I choose to do myself as opposed to turning it over to someone else.

Some of the best coin dealers I know are terrible businessmen. They are unorganized and too impatient to do their own grading submissions, accounting, correspondence and basic record-keeping. As a result, they work for larger firms where they often give away significant amount of their profits in order to stay organized.

I was an English major in college and never took a business class so I pretty much had to learn how to keep track of my inventory and my finances on the fly. But I'm glad I've learned to do a reasonably competent job of this and haven't had to give up my freedom as a dealer in order to be properly "managed."

I look forward to meeting and eventually doing business with the winners of the Milas/PNG Internships. And if you are a young person thinking of becoming a full-time coin dealer, I encourage you to find a mentor who can help you grow and prosper in what I think is a fantastic field. I would be happy to answer any questions you might have and encourage you to email me at dwn@ont.com.

 

 

How To Succesfully Negotiate a Trade With Your Coin Dealer

You see a $25,000 coin in a dealer's inventory and you really want it. The problem is you are short of funds and you are the sort of person who has made a promise  to never take on debt to finance his hobby. Do you pass on the coin? Maybe you don't have to. My guess is that if you are a long-time collector you have at least $25,000 worth of coins in your collection that range from" junk" to" stuff" to "I kind of like this but it really doesn't fit into my collection anymore." I'd like to suggest that you can obtain that $25,000 coin by trading miscellaneous coins with the dealer in order to achieve your goal. And if you do the trade the right way, the best possible thing happens: a scenario in which both you and the dealer are happy and walk away thinking "I liked that trade and I'd do it again."

Some dealers don't like to trade and the advice which I give in this article will be for naught. Others--myself included--like to trade, especially if they have the opportunity to shed some older inventory and bring in some interesting new coins without the effort of going to a show.

A trade is mostly likely going to work if you know the dealer already and the dealer knows you. I have a few clients who, it seems, would almost always rather work out a trade than write me a check for a coin and I am happy to oblige them. They understand the dynamics of trading.

In a nutshell, trades only work if both parties feel they are getting good value. I am less likely to trade a great new coin that I just added to my website than one which has been in stock for a few weeks (or months) . Conversely, collectors want to trade for coins which will improve their collections. They are sophisticated enough to understand that not every great coin owned by a specific dealer sells quickly (that's a topic which deserves a blog...) and ultimately they want a collection that contains more neat coins and less "stuff."

The inherent problem with many coin trades is that collectors want one really good coin from a dealer but are not willing to give up anything in return. It's the numismatic equivalent of a baseball trade in which one team is offering a proven star player while the other team offers either unproven young prospects or overpaid, over-the-hill players on their roster. Some sort of compromise has to be made by both parties for a trade to work.

When someone proposes a trade with me, I immediately have to categorize what is being offered by the other party. Some trades are incredibly easy. I have a $10,000 Dahlonega half eagle in stock and my potential trading partner has two $5,000 Dahlonega half eagles. Those kind of deals are a piece of cake and get done very easily.

But trades are usually more complicated than that.

Let's look at the categories in which potential trade coins can fall into. I'll make a few pertinent comments about each.

1.  Coins Purchased From Me Recently

In theory, the coins I should want most are the ones which he has recently sold, right? Actually this is often not the case and the reasons why are not often so obvious. Let's say I had a reasonably memorable coin in stock a few months ago and it comes back in a trade. My worry is that potential customers will recognize it and wonder "hey, there's that MS63 Charlotte quarter eagle...what's it doing back in Doug's stock?" In the case of really obvious coins,  this is something that might keep me from getting a trade done.    

How do I value coins that I sold within, say, the last year which are being offered back to me in trade? I generally work on a 10-15% margin (sometimes less) so if I sold a coin for $5,000, it is likely that my cost was $4,250-4,500. I'm going to want to take that coin back at my original cost so that when I re-offer I can price it once more at around $5,000.

Some dealers do something disingenuous when it comes to taking coins back in trade. Let's say they sold a coin for $5,000 and their cost was $4,500. They will offer to take the coin back at $5,000 (which is technically a $500 loss for them) and make this up on the sell side where they will quietly jack-up the price of another coin from $5,000 to $5,500.

The bottom line is if you use a recently purchased coin as part of a trade, you can expect to get around 80-90% of what you paid for it but only if you are trading it back to the dealer from who you purchased it. If the coin is not from me, I don't feel the obligation to do this.

2. Coins Purchased From Me a Number of Years Ago

What if I get offered a group of coins which I sold back in 2003? The chances are good that the owner is going to be in a profit position but how much of one can become a grey area. Before I get into that, let me tell you how I'd figure them, value-wise.

Typically, if these are "cut and dry" sorts of coins (say like a common date Dahlonega half eagle in PCGS AU55) I'm going to see what the last few auction trades were and offer somewhere in the middle of the range. In other words, if the last three trades were $3,000, $3,300 and $3,600 I am going to figure the coin at around $3,300.

Let's say I get in a bunch of coins in trade and they are in older holders with a possible chance to upgrade. What do you I then? To me, the ethical thing to do in this situation is to let the collector know that there is possibly some extra value in the coins. I might tell him, "I am going to crack this coin out to regrade it. I'll figure it in the trade at $3,300 regardless of what happens but if it upgrades, I will pay you more."

If a dealer sells nice coins, he should be happy to get back a group which he sold years ago and this would be an ideal scenario for a trade.

3.  Coins I Don't Specialize in But Which I Like

As a dealer who specializes in rare United States gold coins from the 18th and 19th century, these are obviously the sort of coin that would interest me most in a trade. But I wouldn't rule out coins that I don't typically deal in. For me to accept non-gold coins in a trade, they have to be either something that I find interesting enough that I would put them on my website (and hope that it sells) or something that I think would sell for a price close to (or over) what I paid for them if I wholesaled them or put them into an auction.

I recently traded a high quality early gold coin for a group of coins which I don't deal in but found interesting. The main reason I made the trade, however, was because I think the collector who proposed the trade has an excellent eye and he understands value very well. I might not have made the exact same trade if it was proposed by someone who I didn't respect ability-wise. But this was a guy who impresses me and I was happy with the coins I received.

There is a limit to what I will take in trade. As an example, a few months ago, someone proposed a trade in which I would ship him a very cool Proof gold coin in exchange for what seemed to be some good quality Buffalo Nickels and Lincoln Cents. Even though it seemed like a reasonably fair trade, I passed. I don't know the Buffalo Nickel and Lincoln Cent markets very well; certainly not well enough to start taking in $5,000 examples in NGC holders. I suggested that he offer these coins to a specialist who would be more interested in them than I would and then use the proceeds to buy my coin.

4.  Coins I Don't Deal in And Don't Like    

Never say never, as the cliche goes, but it is going to be hard me to take in a bunch of off-quality coins that I don't like and I don't specialize in order to make a trade. I guess if I had a few complete duds in stock which I hated and I was desperate to get out of them...the good news, for me, is that I infrequently purchase disastrous coins and when I do, I tend to wash my hands of them as quickly and painlessly as possible by throwing them into auction and washing my hands of them.

Ready for a brief aside?

There is a well-known but frequently cash-strapped dealer who is (in)famous for trading coins. He is the worst trader that I have ever seen and I know a few dealers (myself included) who have totally gotten the better of him when we make trades. My strategy was to take the oldest, most expensive retreads in my inventory (always gold coins) and trade them for lower priced, reasonably fresh non-gold coins which he owned.  He always botched trades by taking in high priced coins at too high a price (I was always able to steer him towards the coins I owned that were the worst values) and exchanging them for less expensive, far more liquid coins.

5.  Bullion

I don't deal in bullion but I stayed at a Holiday Inn last night and can offer a fair trade price for bullion, knowing that I can lay it off at those numbers or even a small profit. Most dealers are happy to take bullion in trade. I suggest that if you offer bullion, you call a few national dealers and get an idea of what they are paying. I should be allowed to make a small amount on your bullion but I should not be allowed to make 10 or 15%. Don't undervalue or overvalue your bullion!

6.  Modern Crap AKA Your Boxes Full of Junque

This is where most collectors have the greatest amount of unrealized potential trade value in their collections. Let me give you an example.

I have been working with a collector for a few years who is trying to pare down his holdings. He wants to own a small number of really good coins but his business is cash intensive and he doesn't always have the available funds to buy good items as they become available. I went to his house a few months ago and he had pulled out literally hundreds of proof sets, rolls of silver coins, sets of low grade pieces and miscellaneous "stuff."

This isn't the sort of material I typically deal in but I like this guy, we've done a lot of business and I had the feeling that his junk was going to add up to a decent chunk of change. By the time I got his coins home, sorted through them, sent the good coins to PCGS and NGC and taken pen to paper, we were up to close to $75,000. That's a lot of "junk" and that, in turn, bought him a few really good coins which he now has stored in one small box instead of in three huge safety deposit boxes.

As a dealer, this isn't the sort of deal I like to do. It is very labor intensive and I still have nightmares about washing my hands every three minutes as I sortd through bag after bag  of circulated Indian Cents and Mercury Dimes looking for key dates. But I was working on 10% and got the collector to promise that I would be able to trade for his good coins when the time came.

Most times I'm not going to trade, say, a Proof Liberty Head double eagle worth $75,000 for a trunk full of modern crap. But if you are a good client and you do most of the work (i.e, you ship me your stuff neatly packaged and reasonably well-organized) I will consider trading my one great coin for your boatload o' crap.

I've probably made the whole trading process seem more complicated than it really is. If you don't have two compatible trade partners, you'll probably never make a deal work.

I'd love to hear your stories about good trades and bad trades. Please comment on them at the end of this article. And if you have coins which you would lke to trade, please feel free to email me at dwn@ont.com

How to Assemble A World-Class Collection of Coins

You can have unlimited funds but without adhering to a basic core group of numismatic fundamentals, I believe it is very difficult--if not impossible--to build a great collection of coins. Some of the best collections I have seen in the last few decades were built by collectors with average discretionary income levels. But these people were true collectors and they understood most of the points that I am going to raise and address in this article. There are literally dozens of fundamental rules that a collector could follow. I am going to stick with ten and give you some insight as to how these rules help me when I make my own decisions on what to purchase and what to avoid.

1. Learn to Identify Value. Some coins are good values while others are poor values. The smart collector is one who is able to identify the coins that are the best values and then takes advantage of this situation. There are numerous 18th and 19th century that are very undervalued. Some of these are likely to remain undervalued because they are in series that are likely to never become popular. Others, however, are part of series (such as Liberty Head half eagles or eagles) that are either just on the cusp of becoming popular or, in the case of eagles, are already coming into their own.

How do you identify coins that are really good values and not those that are being hyped by dealers who'd like you to believe that they are? In this day and age, it is easy to have access to a tremendous amount of numismatic information. The PCGS and NGC population reports, while not perfect, offer insights into rarity and availability that are unparalleled. The PCGS and Heritage auction result archives allow collectors to determine how frequently a coin appears at auction and in the case of the Heritage archives, has photos of each coin sold. Virtually all major dealers now list coins for sale on their websites and this is another good way to determine what is available and what isn't.

A world-class collector is able to identify coins that are good values before they become widely known. The collector who, a decade ago, bought undervalued issues like the 1854-O and 1856-O double eagle, saw tremendous returns on their purchases. What will the next undervalued rarities be?

2. Carpe Diem. Translated into English, this term means "seize the day." In the case of building a great collection, fast and clear thinking is very important. Really nice coins are incredibly hard to find right now and the collectors who are able to buy them are the ones that make fast decisions. In the case of my company (Douglas Winter Numismatics), when I buy coins, I typically put them on my website on a first-come-first-served basis. I constantly hear from collectors who wish they had pulled the trigger faster.

Here's an interesting story. At the recent Philadelphia coin show, I was talking to a very sophisticated collector about his coins. He couldn't really remember everything he bought; understandably so when you consider that he owns hundreds of great coins. But he did remember every single coin that he should have bought but which were the ones that "got away." And I don't think that this gentleman is alone. Most collectors who have great sets of coins grew these sets by intelligent, quick decisions; not hemming and hawing for three days.

3. Learn How to Determine What's a Nice Coin. Notice I didn't say "learn how to grade." I've written this statement before and I've come to realize that this is not a realistic goal for most collectors. It's like a doctor telling me to learn how to self-diagnose. Even if I had the time, I don't have the skill(s) to learn this. And neither do most collectors.

But you can learn to determine what makes a coin nice versus what makes one ordinary. You can learn how to determine if a coin has original surfaces or if it is bright and shiny from a recent processing. You can learn what color a Charlotte gold dollar from the 1850's is supposed to be and learn to pass on coins that aren't "right."

How are some of the ways you can learn this? Study photos online. Look at which coins have CAC stickers and pay attention to these higher-end coins. Go to auction lot viewing and check out the coins which are relevant to your field of specialty. Most importantly, don't sweat the small stuff when it comes to grading. Its more important to learn the difference between a nice MS62 Dahlonega gold dollar and a low-end one than it is to be able to tell the difference between an MS61 and an MS62.

4. Cultivate a Trusted Source. It's likely that some readers will misconstrue the intentions of this point and say "Oh, he's a dealer and he's just trying to drum up business for his firm." This is partly true; I do write these articles partly to boost the DWN brand. But I also like share information and feel it is important to mentor new collectors. And I think having a good source for your coins is really important. As someone who collects paper money, I can tell you that you can't build a great collection all by yourself; you need an expert to provide you with a second opinion.

If you have a real job, you are never going to be able to compete against a full-time coin dealer like myself. (If it makes you feel better, I have no visions about being able to compete against you in your business. But I will be happy to play you in a one-on-one basketball grudge match...)

Bottom line: find a dealer who you like, who you trust, who has nice coins and who is fair with you. They are out there.

5. Learn How to Sell. From time to time, you will need to purge your collection. You might have a duplicate that you want to sell or you might have generic Saints that are in a profit position. Learn how to sell them and how to maximize what you have to sell.

Not everyone wants to sell coins the same way. Some collectors want to micro-manage their sales and decide to conduct the process by themselves. Other collectors want limited involvement and decide to put their duplicates in auction. I like the option of using your trusted dealer (see #4 above) as a selling source.

Coin collecting is a two-way market. People spend lots of time learning how to buy coins but seldom learn the selling aspects. The best collectors that I've met understand both and have had positive selling experiences.

6. Build a Library. I have a pretty nice working library and seldom does a day go past that I don't use it. Books and catalogs help me make intelligent buying decisions. They help me establish pedigrees. They help me determine how rare a coin is. I can't imagine being involved in numismatics and not maintaining at least a small coin library.

You don't need to overdo this. If you collect U.S. gold coins, an essential working library might consist of about 10 to 15 books (I'd like to think that at least a few of them will be ones that I've written...) and maybe two to three dozen auction catalogs. To be honest with you, I don't use probably 90% of the auction catalogs that are in my library and over the course of time its likely that I'll jettison the ones that I don't regard as essential. To build a good gold coin library you are talking about $500 to $1,000. It's the best money you'll spend. Trust me on this one; even if you don't believe me on any of the other points I'm trying to make here.

7. Be a Mensch. Yeah, I know the cliche is that "nice guys finish last." And I know that to buy coins you have to be aggressive and even a bit pushy. But you can be a nice guy when doing this and being a nice guy is going to score a lot more points with dealers, auction houses and other collectors than being a jerk.

Many of the men that come to mind when I think "great collector" are really nice guys. People like Barry Enholm, Tom Bender, Steve Duckor, Robert Kanterman, and Dale Friend. These guys are A+ collectors but they are also the types of people I'd actually like to go out with and have a nice dinner. And there is a reason that these guys get offered great coins. Hint: its not only because they are serious and they can write a check for a big coin. It's because they are nice guys who are easy to deal with and whose word you can take to the bank.

8. Really Learn Your Market Area(s). I love dealing with smart collectors and I try to do everything I can to make collectors smarter. But I often meet collectors who have made really bad decisions because they didn't learn their market area(s).

I understand that people are busy and they can't become overnight experts. This is one reason why I've always liked the concept of specializing. It's easier to be very knowledgeable about a few dozen issues (say, Dahlonega quarter eagles and half eagles) then it is to try and learn the ins and outs of the entire early gold market.

But this doesn't mean that you can't learn a few basic market skills. Learn how to see what coins are selling for at auction so you don't wind-up overpaying. Become savvy enough to determine which population figures are reasonably accurate and which are obviously inflated by resubmissions. Analyze what sort of premiums CAC coins are selling for. I believe that the time you take to learn your market areas will pay great dividends for you.

9. Patience, Patience, Patience. You can assemble a set of Dahlonega gold coins in a few months. Believe me, I've seen these rushed sets and the results are usually not very pretty. The collector who has rushed through a set might be lucky and one-third of his coins are be nice. But it is more likely that most will be over-graded and many will be hideous.

Or you can assemble a set slowly and carefully. Its likely that a few coins won't be high-end but most are going to be very nice. You'll have more fun buying one coin here and one coin there. And when you go to sell your coins, your bottom line should be a lot more exciting. Remember: relax, have fun. Collecting is a marathon and not a sprint.

10. Don't Take It So Seriously. As I mentioned above, no one likes a passionate collector more than I do. I feel lucky to be working with collectors who love coins as much as I do. But sometimes I meet a collector who takes things a little too seriously.

Relax. Its just a hobby. Have fun. Coin collecting is supposed to be therapeutic; not something that puts you into therapy.

I could go on and on with suggestions on how to assemble a great collection and how to be a great collector. I'd like to hear your suggestions and welcome your comments.

Traits of Successful Coin Dealers

Coin dealers are an “interesting” (yes, this is an ironic use of quotes) group. If you were to take the top fifty professionals in this field and examine their personalities, I believe that a number of the same traits would be seen in a majority of these individuals. What are some of these traits? And do you have what it takes to be a successful coin dealer? With very few exceptions, most of the top coin dealers have been involved in coins since they were very young. I can’t think of more than one or two coin dealers who I regard as being at the top level of the industry who were not buying and selling coins by the time they were in their early teens (or in some case, before this). Many people have asked me why this is the case. I think that being a good coin dealer is something that is almost genetic in its origin. You can’t really teach an adult the skills to be a truly good dealer. It’s almost as if the top dealers were born with a “coin dealing gene.” If you are a 42 year old insurance salesman with a passing interest in coins, it’s pretty unlikely that, within a few years, you are going to be a force on the bourse floor.

And speaking of genes, I think that every good coin dealer has what I call the “collecting gene.” Even though I don’t really collect coins anymore, there are a number of other areas that I avidly collect. Virtually every great dealer I know is also a serious collector of something; and many have multiple non-numismatic collections. These range from paper money to vintage photographs to globes to muscle cars. If you do not have a passion for collecting, you probably aren’t going to amount to much when it comes to dealing.

Coin dealers have exceptional memories when it comes to coins. I think I qualify pretty highly in this regard but my memory is very selective. As an example, it usually takes me a number of times meeting a collector until I remember his name. But I can generally remember this collector’s coins that he showed me in 1984 and, more distressingly, in great detail. I find the same to be true with many other of the dealers who I respect. They have an absolutely uncanny ability to remember coins they have handled, deals they have done, auctions they have attended, etc. If you have a poor memory when it comes to details, you are not likely to become a good dealer, let alone a great one.

You may not agree with me on this point, but I contend that most very successful coin dealers are extremely intelligent. Note that I did not say that they are “highly intellectual.” As you can probably imagine, post-show coin dealer conversations do not tend to involve favorite philosophers, the merits of particle physics or favorite 17th century English poets. But I think f if you measured the IQ level of most dealers, you would find it to be well above average. In a nutshell, if you are not extremely bright, you are not likely to be a good coin dealer.

Really good coin dealers are also really good entrepreneurs. Very few of them work well in a corporate setting and this is why it never seems to work when a “real” company tries to buy a coin company or when a coin company brings in a “real” businessman to manage it. If you’ve spent years working at XYZ Corporation in a management capacity, you are going to be freaked out by the coin business. But if you are 22 and a recent college graduate who paid for your education by selling vintage rock T-shirts on Ebay, you might find the coin business to be right up your alley.

The best coin dealers are also excellent at risk management. As an example, they can look at coin or a collection and quickly figure out what their upside and downside risk is. I find that most of the coin dealers who I regard as exceptionally talented are risk takers but they understand how to control their risk. The coin dealers who scare me are the loose cannons who take crazy “shots” at coins in auctions (i.e., buying a coin in an MS63 holder and paying an MS65 price in the hope that it will upgrade two points) or who are overly-leveraged. The insane risk-takers are the guys who get much of the publicity at shows or auctions but the smart guys are the ones who, at the end of the day, walk away from their bourse tables (or their office desks) with a smile on their face.

Good coin dealers have to work very hard and slackers do not do well in what has become an extremely competitive industry. There are a number of underachievers in the coin market but they tend to be guys who bounce from company to company as employees or low-level wheeler-dealers whose inventory rarely changes. In the current market, you need to be willing to travel extensively and work long hours to stay ahead of the competition.

Some of the coin dealer traits that I’ve mentioned above have been augmented by changes in the coin market. There are new dealers specializing in areas like moderns who clearly have not been involved with coins since they were nine and who do not have a “collector gene.” These are people with non-numismatic backgrounds who look at coins like widgets and whose computer savvy or marketing expertise allows them to be active market participants. They may not be “coin dealers” in the classic sense of the word but they certainly have an important role in the future of the coin market.

The Five Year Hold

Back in the Old Days of coin collecting (say 1998...) we dealers continually preached the mantra of the Five Year Hold. What the Five Year Hold said was that in order for your coin purchases to have a chance to mature financially (a euphemism, of course, for making a little dough...) you needed to hold your coins at least five years. But in the Age of the Internet, this maxim seems to have gone the way of the numismatic fixed price list.Revisiting this maxim in 2008, perhaps our sage advice wasn’t so anachronistic after all. I personally believe that many collectors have been fed unrealistic expectations by auction companies and large retailers and that they honestly believe that a coin they purchase in 2008 can—and should—be flipped in 2009 for a profit.

It’s hard to argue with the auction companies when they show you results like the 1805 quarter dollar selling for $402,500 in 2008 after bringing $74,750 exactly a year earlier. I mean every coin in this market is going to show a 5 ½ fold increase in a year, right?

I would contend that for every one of the incredible grand slams like the aforementioned 1805 quarter, there are other coins that show minimal appreciation after a short holding period. In fact, it is more likely that the typical coin is actually worth less after a year than its purchase price. Which is why the Five Year Hold might not be such a bad strategy to (re)consider after all.

Let’s say that you decide to put together a set of Type One Liberty Head double eagles. If you came to a specialized dealer and said that you wanted to complete your set in a year my guess is that the answer you’d get would be somewhere along the line of “well, it could be done but you’d have to cut some corners.” But I’m willing to bet that there a number of less ethical dealers who figure “hey, the guy is going to spend his money with someone so it might as well be me.” And our new collector would probably then be off to the races.

A year later Mr. Double Eagle is done and, if form holds, he’s already bored and looking for something else to do. So he’s ready to sell. Overlooking the fact that he’s probably bought more than his share of dud coins because he was in such a rush, he’s likely to learn the hard way that his collection, while no doubt very valuable, might not bring him the insta-profit that he was promised.

When you hold coins for a very short period of time, you run into at least three problems:

1. Your collection isn’t fresh. The chances are good that at least some of your coins have come directly (or indirectly) from auctions and can easily be pedigreed from these sales. Other coins may have bounced around from dealer to dealer and have a “staleness factor” that only insiders in a specialized market area are aware of. By holding your coins for at least five years, suddenly they appear a lot fresher. Most coin collectors and dealers have relatively short memories and 2009’s stale set of , say, Indian Head half eagles could well be fresh and interesting in 2014.

2. You are paying fees coming and going as a collector that you have to recapture before you can make a profit. Let’s say you are a newbie and you are exceptionally lucky to have hooked up with an honest, knowledgeable dealer who sells you very nice coins at competitive prices. You are still likely to be buying coins at 10-20% above this dealers cost. And when you go to sell your coins, you are going to be paying anywhere from 5% (unlikely) to 20%. So even in a situation where the collector is dealing with someone very fair his in/out fees are at least 15-40%. That’s a big hit to make up in a year and this is another reason why longer terms holds make sense. And that’s not even taking into consideration the fact that most collectors never find these trustworthy, honest dealers and wind-up dealing with the big budget, big mark-up guys.

3. By going in and out of an area quickly you are not allowing a full market cycle to occur. Chances are, collectors who rush into a series are doing so because of a promotion and the series in question has already begun an upward climb. Unless this is a series with a strong collector base that can maintain an upward climb without external stimuli it is likely that by the time the collector is ready to sell, the train has already left the proverbial station.

The reason that #3 has not always held true to form in recent years has been the phenomenon of the Set Registry. I can think of a number of sets that have been assembled quickly and then sold for a good profit to Registry Set collectors. But what if your set was the dumping ground for other quickly-assembled sets and there is no one else waiting in the wings to clean up after your mess?

The bottom line is that serious, high level coin collecting is more complicated than most new collectors and investors think and it is extremely important to find a trusted professional to work with you when assembling a set.

Coin Collecting Questions & Answers

I recently spoke at length to a number of people who were strongly considering becoming coin collectors. They all asked me a number of great questions. I thought I’d share one from each of them along with my answers. Q. How do I find a reputable dealer?

A. I recently moved to a new city (Portland, Oregon) and had to find all new doctors, tradespeople and stores. I made my decisions two ways. For the big decisions I relied on recommendations from trusted friends and acquaintances. For the less significant decisions I went with my gut. Choosing the right coin dealer(s) is the same.

If you’ve decided to form a highly specialized collection (Middle Date Large Cents, Three Dollar gold pieces or Civil War Tokens, as examples) find out who wrote the standard reference works and who typically handles the greatest number of choice, high quality pieces within a specific specialization. If you are working on a more general collection, ask around. Post on the PCGS and NGC message boards and determine whether Dealer X has a good reputation or not. I’d also strongly recommend sticking with PNG dealers. These individuals tend to be more established and reputable and most of the leading dealers are members of this organization.

And, finally, trust your gut. If a dealer strikes you as being a blowhard or a sleaze, don’t deal with him. Remember: your first impression about a coin dealer (or just about anyone else, for that matter...) is usually correct.

Q. Can I teach myself to grade coins based on images on websites?

A. Not a chance. Coins are three dimensional objects and until images are capable of accurately representing three dimensional objects they will never show subtleties such as luster and surface preservation. A good photograph can give a new collector a decent impression of a coin’s appearance but a clever photographer can manipulate an image through lighting or digital enhancement(s). Not to mention the fact that most new collectors do not really even know what they are looking at when they view images.

So, how does a new collector teach himself to grade? I’m not sure I can provide an answer that most collectors want to hear. I think that many collectors will NEVER be able to learn how to grade really well because grading is an aptitude. It’s no different than being able to hit a baseball or not. A limited number of people can hit a baseball well and only a few hundred people in the world can do it well enough to play professionally. Same with coin grading.

What the collector CAN teach himself is how to determine of a coin is nice or not. You may never be able to consistently figure if an MS66 is a nicer coin than an MS65 but you can be taught that certain “looks” on a coins are preferable to others. And that, I think, is what the new collector should aspire to learn.

Q. Is it important to go to coin shows?

A. It depends. I personally think that going to third-rate coins shows is a complete waste of time. But for the new collector, a good show like FUN or Summer ANA or Baltimore can be a useful experience. I think shows are more important as fact-gathering sources for new collectors than as places to buy coins. At shows you have to make quick decisions in a setting that is less than optimal. If you establish a good relationship with a dealer or two, you can be sent coins on an approval basis, view them at home, study price and population data and generally feel a lot less pressured than if you have to make a snap decision at the dealer’s table.

Q. How important is price when it comes to buying coins?

A. Everyone likes to feel that they got a fair value when they buy something. The same holds true with coins. But collectors who are totally focused on price are probably going to wind-up with a mediocre collection. I’m not making this statement just because I’m a dealer and I’m trying to “convince” you to pay a price for my coins, or anyone else’s. I can tell you, however, that to buy nice coins you have to be willing to pay a strong price. Collectors who are primarily focused on price are probably going to do this at the exclusion of quality.

So how, then, do you establish what a fair price is for a coin? For items that trade with frequency, like a common date MS65 St. Gaudens double eagle, this is very easy. You can see what examples have sold for at auction and you can check various dealer websites and see what specific coins are being listed for. With rare, thinly traded coins it is harder to determine value. Auction prices realized are certainly a good source. Asking a trusted dealer what you would have to pay for a certain coin is good idea as well.

Do you have questions about rare coin collecting that you’d like answered? If so, please feel free to email them to me at dwn@ont.com. I make no guarantees that they will get featured in future blogs but if I like your question(s) there is a good chance that they will become a topic of discussion.

July 2006 Coin Market Assessment

When’s the last time you a coin dealer told you the market was going to be slow for a while? Take a deep breath…July is going to be a slow month. I think a short-term slow-down in the market is actually much needed and will, in the long run, be good for everyone’s mental health.

Just think about it. For the last few years nearly every month the coin market has seen never-ending auctions, continual shows and intense flurries of activity. I, for one, am tired. I’m not asking for this paragraph to be accompanied by strings but I could use a break. And you know what? I’m going to take it easy for the next few weeks.

A number of factors are conspiring to make the upcoming four to six weeks a slow-down period. First of all, with the exception of the Baltimore show (July 13-16), there are no significant conventions. Secondly, there are (as amazing as it seems…) no major auctions until the middle of August. Thirdly, the slowdown in metals prices has brought some activity to a halt. And, finally, it’s the summer. People are taking vacations and enjoying the nice weather.

Now I know some dealers just never slow down and they will tell you that they’ll be as busy as ever in July. Don’t believe them because they won’t be. There are just not a lot of coins available now and even the seemingly-insatiable demand of early 2006 has slowed down.

Will this fallow period last long?

Nope. Be prepared for a very active August as the pre-ANA and ANA auctions come around and then the ANA convention takes place. I personally think this year’s ANA will be a true barn-burner and am bracing for one of the busiest shows of my professional career.

I’m told that between the auctions being conducted by Superior, ANR, Bowers and Merena and Heritage that there will be well over 10,000 lots with a value of over $50 million available for sale. Am I worried if the market can absorb them? Not really. This has now happened for the past three or four summers and every year, despite dire end-of-the-world prognostications from certain quarters, the market seems to be doing just fine, thank you.

What really worries me is how I’m going to physically handle viewing four auctions, attending God knows how many sessions, being at the coin show for four or five days for ten hours each day and, gasp, having to wear nice clothes for a week.

I’m planning on enjoying my new place of residence (Portland is phenomenally nice in the summer, FYI), working on a top-secret new book project and getting a tan so I look spiffy in those nice clothes that you’ll see me in Denver this August.