How a Coin Gets Bad Karma--And How It Can Regain Its Mojo

I recently sold an interesting coin (details to follow) and the entire process, which was reasonably quick  and painless for both myself and the buyer, got me to thinking: can a coin get bad karma and if it does what does it take for it to regain its mojo? The coin in question has to remain anonymous but it was a very rare silver piece, dated in the 1820's, which was both a condition rarity and an absolute rarity. The trouble with the coin was that a few factors had combined to give it a bad reputation within the specialist community. Was this reputation deserved? Partially; but not really because of the coin itself, more because of a number of external factors. The collector who bought the coin from me saw through its bad karma to realize that, at its new price level, it would be a great addition to his set. And I have to say, I think it was a pretty savvy move on his part.

So how exactly does a coin get bad karma?

I can think of at least five ways and I'm sure that other dealers/collectors can double the size of this list.

1. A Coin Is Perceived To Be Overgraded.

Grading is subjective but there are some big-ticket coins in third-party holders which have acquired a reputation for being overgraded. I can think of a certain 1804 dollar whose grade has inflated many times over the years. I'm not certain that the concept of "grade" applies to a seven-figure rarity like an 1804 dollar but the perception that it is more-than-fully graded has circled this coin for years and it might scare off a few potential buyers.

Why would a coin be overgraded by one of the services? It could have been part of a fresh deal that excited the graders and the final grades were on the high side. It could have been the "right" coin submitted at the "right" time and it acquired a grade during the submission process that probably would never be equaled again if it were to be re-submitted. Or perhaps it was doctored and a substance which was applied to the surfaces changed the appearance and the coin is now overgraded. There are many coins in holders which simply don't look properly graded (even though they might be) and their slab is an albatross.

If the coin in question has a value of $100 and the perceived grade is off by a point, it isn't saddled with bad karma. If the coin is worth $10,000 or $100,000 or $1,000,000 than the perception of whether or not the grade is accurate is very important. In the case of the coin I sold, the grade was probably off by just a point. But with an expensive coin, a point can equal tens or hundreds of thousands of dollars.

2. A Coin is Overexposed.

This is not something new. While doing pedigree research on branch mint gold coins, I have found specific pieces which appeared in four or five Thomas Elder sales during a five year period in the 1920's or five Stack's sales within five years during the 1970's. The problem was Tom Elder's sales weren't on-line and the PCGS auction archives doesn't list all the Stack's sales from the 1960's and 1970's as they do with today's auctions.

For a number of reasons, a coin can be overexposed and become tired. It might go unsold in three consecutive Heritage or Stacks Bowers auctions before it finds the right buyer. Or, it might bounce around between three or four major dealers and be advertised on different websites. An internet-related phenomena is when the same coin appears on five different dealer"s websites over an extended period. It's only one coin but to the new collector, it looks tired.

In the upper end of the coin market, the perception of freshness is incredibly important. For many of the top buyers, be they dealers or collectors, if a coin is not perceived as being fresh, its can become extremely hard to sell; even if the coin is accurately graded and reasonably fairly priced. For these buyers, nothing can kill a sale faster than finding out that not only are they not getting first shot but the coin recently went unsold in two consecutive Heritage auctions.

3. A Coin is Overpriced.

As a buyer of high end, rare coins I am sometimes offered pieces which are so insanely priced that they almost immediately are Bad Karma Candidates. I'm not talking a $50,000 coin which s priced at $55,000; I'm talking about a $50,000 which is priced at $100,000 or more. This sounds hard to believe but it happens more often than you think.

I'd like to think I'm a pretty savvy buyer and the owner of a great coin is certainly entitled to take an epic shot at me when he is pricing it. I try not to take this personally and I try not to hold it against the coin if it mysteriously is offered to me again later at a show for a number which is more in line with what I'm thinking.

Collectors tend to be more emotional and if a $50,000 coin which is priced to them at $100,000 might no longer be worth $50,000 if it is reoffered under different conditions.

4. The Coin Has an Evil Owner.

As a dealer, I find myself buying coins from people who I don't really care for. They may be Red Sox fans or they might have political views that don't mesh with me.  But collectors are able to be a little more discriminatory.

Funny story. The upper-end Dahlonega gold market is small and when a new player enters the market, the other big fish tend to approach the new player with suspicion. Around 20+ years ago, a new Dahlonega collector burst on the scene and he was, to put it kindly, lavish with his spending and harsh with his criticism of other people's coins. After he had pissed off one of my other Dahlonega clients for the third or fourth time, I got a call which basically told me to "never, ever offer me a coin again which Collector X has owned, even if it's a great deal."

Today, in this internet-driven world of numismatics, I think this is still the case. Don't you have a nemesis who you dislike and whose coins you don't want despoiling your collection?

5. Bad Pedigree

I've written a number of articles about coins with good pedigrees. But there are coins with bad pedigrees.

I'm not going to slam any specific collections here; that's not a cool thing to do. In my many years of specializing in branch mint gold, I've come across collections which had bad reputations. They may have been filled with overgraded coins or they might have had a number of recolored/doctored pieces. Perhaps they were assembled by a dealer with a bad reputation and the perception, deserved or not, was that the collection became a burial ground for some unfortunate individual.

So, there you have some of the ways a coin can acquire bad karma. How can a good coin shed this bad energy and get back its mojo?

1. Time Heals Most Wounds

Most dealers and some collectors have great memories. But its funny how some coins which were perceived as being overgraded ten years suddenly don't look so bad today. Stories about a "bad" coin can be forgotten or conveniently lost/overlooked and the Bad Karma 1847-D quarter eagle of the late 1990's becomes a decent coin in the market environment of 2013. Trust me, it happens more than you think...

2. Coins Are De-Pedigreed and Re-Holdered.

You take a coin with a bad pedigree in a scratchy holder and make a few changes...send it to the grading service of your choice, remove the pedigree and put it in a spiffy new pronged holder. Voilà, new coin. Well, maybe not a "new" coin but one whose bad karma might suddenly go away.

3. The Right Owner Buys the Coin.

I saw plenty of sketchy coins in the Bass sales but once you slapped that Bass pedigree on the coin and put it into a PCGS holder, I didn't mind that Bass bought the coin from a dealer I know was a sleaze ball or that it was in six Stack's sales between 1968 and 1973.

4. Downgrade the Coin. 

You see a coin in an MS67 holder that pretty amazing but your perception is that its just an MS66 at best. If you run the numbers and it makes financial sense, why not send it to PCGS or NGC and downgrade it a point? Sounds crazy, I know, but it is a trend which is rapidly gaining traction amongst smart dealers and collectors.

5. Keep the Coin Off the Market For a Generation.

Every collector makes mistakes. But as I said in #1 above, time heals most wounds. I guarantee you that Bass, Norweb and Eliasberg made plenty of mistakes but they overcame them by holding the coins they bought for many years.

Do you think a coin can get bad karma? If you do, how can it get back its mojo? Add your comments below or contact me by email at dwn@ont.com.

The San Francisco Surprise

Around four or five months ago, I got wind of a soon-to-be-conducted rare gold coin auction in San Francisco that sounded interesting, to say the least. I heard that it contained long date runs of Liberty Head gold and it featured such rarities as an 1854-S quarter eagle and an 1856-O double eagle. I live for "secret deals" like this. I'd fly to Fog City, spend in the high six figures, make a ton of money on my new purchases and have fun in the process. It was going to be SO easy... Except for one big thing. There are no "secret auction deals" anymore. The internet has made all information so accessible that deals like this tend to attract just enough of the big players in a specialized field like rare gold that they are extremely competitive. No, the San Francisco Surprise was going to be a bloodbath.

There were a number of factors that made this auction unusual. For one, it was being conducted by a stamp company (Schuyler Rumsey) and it would be interesting to see how they handled their foray into a new field.

So how did the sale do? And what does this sale tell me about the market and the rare coin auction market? The answers are interesting; far more so, in my opinion, than merely going over some auction highlights.

I thought prices for the sale ranged from sort of weak (for the very common pieces and the generics which probably would have been better sold outside of the auction venue) to exceptionally strong (for the very rare date $10 Libs). The few six figure coins in the sale were a touch on the weak side (they probably would have brought 10% more in a Heritage auction) while coins that appeared to have potential for upgrading or "improving" were strong to exceptional.

Did the heirs to this collection make a mistake choosing a stamp company and not going with an experienced coin firm like Heritage or Stacks Bowers? Typically I would have said a resounding "yes" but I thought Schuyler Rumsey did an outstanding job in nearly all respects. Their catalog was a bit amateurish but in the end this made no difference. Its hard to say for certain but I think many of the coins in this sale actually did better in this little, obscure auction than they would have at a major auction. Heritage may have 400,000+ registered members in their community and unparalleled technology but Rumsey reminded me of a few important facts about the auction business in general.

First, as I said above, if you get the right five to ten dealers in the room (or on the phone), the number of registered bidders or the number of hits on your website mean nothing. At least 50% of the value of the sale went to these five or ten dealers. The best way to make money in this sale would have been to lock these guys in their hotel rooms.

Secondly, Rumsey's technology was far, far better than I would have expected. It was easy to bid on their website and, to be honest, it seemed to be faster and every bit as efficient as Heritage's. It might not have had all the bells and whistles that Heritage's system has but let's not forget that Rumsey is located in San Francisco and with Silicon Valley technology available to the firm they clearly have figured out how to effectively run an IT system.

Thirdly, in the words of Mr. Costner, if you build it, they will come. The sale contained some really rare coins (issues like 1863-1865 half eagles, 1861-D gold dollars and half eagles, Civil War date eagles plus an 1873 and 1876 eagle). Avid collectors know how rare these coins are and either they or their advisers found them. Many of these rarities sold to phone bidders and, in the case of at least a few bidders, they were sold sight unseen.

Which leads me to the next point. Rumsey was smart enough to know that they weren't coin experts. So they got some good advice. Smart move: they sent most of the coins to PCGS so this gave bidders confidence. Smarter move: they advertised the sale in Coin World and gave out catalogs at the Long Beach show. Smartest move: they got at least one bidder to look at all the coins before the sale and give them bids on nearly all the lots. I feared that $10,000 coins would open at $2,000 and we'd sit through interminable slogs waiting for them to hit their true value. This didn't happen. Three weeks ago I attended a coin auction put on by a firm that has 30+ years of experience and it was so maddeningly slow that I left early in fear that I was going to have an anxiety attack. The Rumsey sale was smoothly run and almost hitch-free.

Another point: the fight against coin doctoring must not be going all that well because I saw people paying pretty confident prices for coins that needed "help." As an example, there was a cleaned 1861-D half eagle (Lot 661) that seemed to me to not only be a "no grade" but to be one that would have to be extensively resurfaced to ever get in a holder. It had the detail of an AU55 but I thought it was a risky purchase at much more than $20,000. It sold for $40,250. The person who bought this coin--and he is a smart, veteran dealer--obviously thinks this coin can be fixed, it can wind up in an AU55 or AU58 holder and it can be sold for more than $50,000. Caveat emptor....

Yet another point: this was a fresh deal and the market is STARVED for fresh coins. Note that I didn't say it was a nice fresh deal. I thought around 10% of the coins were really nice and another 20-30% were kind of nice. But many of the coins were downright ratty. These didn't seem to matter to buyers. Nor did the fact that many of the not-very-nice coins were hard to sell as is and would become even harder to sell when they were scrubbed (or re-scrubbed) and upgraded.

A few highlights and my comments:

Gold Dollars: The 1855-D in PCGS VF35 sold for $12,650. It was a decent coin but nothing great. I guess this means that "basal value" for any example of this date in a holder is now in the low five figures. The nice AU53 1861-D gold dollar sold for $51,750 to a phone bidder who, I'm told, never even saw the coin. It's an AU55 and you paid an awful lot for it...

Quarter Eagles: The 1842 in PCGS 45 was estimated at $750-1000. It sold for $5,175. If only it was even remotely attractive. The very nice 1848 CAL in PCGS 55 sold for $63,250. I liked the 1849-C in PCGS 55 (I graded it a solid 58) but someone liked it better and it brought a solid $12,650.

Half Eagles: The only early half eagle I liked was the 1814/3 in AU58 but I was not willing to grade it MS62 like the successful bidder did at $25,300. The C+D half eagles were decent and I bought the coins I liked the best; sometimes at considerably less than my maximum bid. The Civil War coins were pretty schlocky but they brought strong prices anyway; the 1862 in AU55 was bid up to $12,650.

Eagles: Uggghhh...did I get blown away. I thought there were some pretty nice coins in this part of the sale. So did everyone else. The great AU55 1852-O? It sold for $18,400 (!) The undergraded 1865-S Normal Date in EF45? (I thought it was an AU53). It brought $24,150. The lovely EF45 1870-CC that I graded AU53? How about $97,750? Many, many price records were set.

Double Eagles: It was back to reality as prices for this denomination were strong but not insane like the Eagles. The nice 1856-O in EF45 sold for $276,000 which seemed like the "right" number. The 1861-S Paquet in VF35 sold for $51,750 while the 1866-S No Motto in AU55 went very strong at $83,275. There were some very pleasing CC double eagles in the sale and they all brought strong prices.