Smart Collecting 101: Is It Ever Right to Buy the Wrong Coin?

In the first installment of Smart Collecting 101 I discussed the "coin churn" and how to avoid it. One reader made a great suggestion for the second topic and I'm going to discuss it at length here. The topic involves buying the "wrong" coin and if there is ever a right time to buy a coin that you clearly know is not optimal for your collection. The brief answer is yes. It depends on what sort of coins that you collect and what your ultimate goals as a coin collector are. Let's look at a few scenarios.

If you are a die variety collector there will probably be a number of instances that you'll be offered a coin that is a major rarity but which is either ugly or damaged or harshly cleaned or maybe even a combination of all three. But you may still have to buy the coin. Let's say you collect die varieties of early quarter eagles. There are a few varieties that are exceedingly rare and might literally be available once per decade; even once in a generation. In this case, if you aspire to have a truly complete collection, you'll buy whatever becomes available for the extreme rarities; even if the coin is damaged. And you'll probably be thrilled just to have the chance.

Let's say that you are a date collector and you are focusing on a series with major rarities in it. If the series that you are pursuing has some incredibly rare issues (say Fat Head half eagles) it certainly wouldn't be "wrong" to purchase a decent looking but cleaned example of a coin that you know might not be available again for years or which may exist in decent condition but which might be ungodly expensive if ever offered. My feeling here is that if you are someone who likes high grade coins you should avoid specializing in a series that has certain issues that almost never come in high grades.

This leads me to another scenario. Let's say you are a person who hates flatly struck coins. You have waited many years to fill a hole in your set and the date in question finally becomes available. The only problem with the coin, and let's say it's fairly decent in terms of overall quality, is that it is flat as a pancake at the centers. What should you do?

I'd suggest that you research the series and learn what percentage of the issue in question comes with this sort of strike. If every known example is weakly struck, then you just need to buy it. If some examples do exist with decent strikes, I'd say that you pass and wait for a sharper example.

There are some issues that are just so rare or so popular that I will compromise my standards and purchase problem coins now and then. As an example, if I saw a decent looking but cleaned 1870-CC eagle for sale I think I'd buy it; as long as it were priced fairly. It's rare, its in demand and its a cool first-year-of-issue. Plus I think its undervalued in comparison to other high profile Carson City issues. But I wouldn't buy most of the other CC eagles with problems. The reasons for this are simple: they would be hard to sell, they aren't in great demand and nice examples are available with enough frequency that the wrong coin makes no sense. I would take this even further with scarce but not overly rare issues. I'd be patient and wait for the exact coin I wanted.

My high degree of standards would also slacken on great rarities (notice I didn't say "expensive coins." I said "great rarities.") I would have no interest in a damaged ex-jewelry Stella but I would consider an 1864-S half eagle or an 1875 eagle if it were cleaned, very well worn or heavily abraded. In fact, these two issues are rare AND undervalued so I would probably not only buy one "wrong" example, I'd buy as many as I could find.

In the case of truly rare coins like the 1841 quarter eagle or the 1854-S quarter eagle, appearance is almost not an issue. Take the case of the 1854-S. There are around a dozen known with three of these actually being "nice." But in this case, "nice" means EF or AU. The others range from very heavily worn (the discovery coin, ex Eliasberg, is a Good 4) to "not as worn but very messed up from scratches or other non-mint damage." You don't get to be fussy with an 1854-S. You see one, you don't hate and you can afford buy it.

Let's say you are one of those collectors who doesn't really have a super narrow focus and your strategy is "best available coin." You don't aspire to finish any series although you might have a preference for San Francisco half eagles or Philadelphia eagles. In such an instance there is really no reason to buy coins that are not right. If a specific issue is too expensive, just pretend it doesn't exist; you aren't completing a set of Liberty Head quarter eagles so don't sweat it if an ugly but rare 1842 Phildelphia becomes available. Sure, it's rare but another will come along and wouldn't you rather pay $8,000 for a really nice example than $3,000 for one that looks like it was gnawed on by numismatic rats?

The "best available" collector may just want to focus on branch mint issues that grade MS60 and above. This might eliminate a host of issues that do not exit in Uncircuated. It might take other issues that are exceedingly rare in Uncircuated and make "compromise coins" very important. Let say there is an issue like the 1859-S half eagle of which just two or three are known In Uncirculated. If the one nice Uncirculated example is sold (which it was, last year, by DWN) this leaves one or two marginal MS60 to MS61 coins in NGC holders that are the best out there. They may not be "new" in the strictest sense but are a good degree better than the coins that exist in AU55 or even AU 58 grades.

In series like the gold coinage from Charlotte, Dahlenega and New Orleans, there are very, very few coins that are rare enough or ones that come ugly enough that a major compromise must be made. The 1849-C Open Wreath dollar is extremely rare with just five known and I would be happy to own one of the two lower grade pieces at the right price. There is really no Dahlonega issue that is so rare that buying the wrong coin might be right although I'd lower my standards on the 1861-D dollar, the 1854-D three dollar and the 1861-D half eagle given their great demand. In the New Orleans eagle series, I would be willing to buy "wrong" examples of the 1841-O and 1883-O because they are relatively inexpensive and because even the "right" coins have eye appeal related problems. Two others that would cause me to compromise would be the 1854-O and 1856-O double eagles. Sure, I'd want my set to contain lovely Choice AU examples and if you have the $1,000,000 to $1,500,000 it will cost to purchase Condition Census or Finest Knowns of this pair than I'd say go for it. If you have budget constraints a lower grade coin or an example that is genuine but cleaned might make sense. But not for the more common 1857-O and 1858-O. Catch my drift?

So, in summary, I'd say that buying the right or the wrong coin is not necessarily set in stone but is, rather, dictated by the collectors needs and circumstances. Just remember that if you buy an expensive problem coin for your set at some point down the road you'll need to convince another collector that he, too, can't wait for the right coin and that he needs to pull the trigger on this "coin with an asterisk."

"Fundamental" vs. "Grade" Rarity

When discussing “rarity” it is important to realize that there are two different types of rarity. These are “fundamental rarity” and “grade rarity.” Fundamental rarity refers to the overall rarity of an issue. A coin like a 1796 No Stars quarter eagle is fundamentally rare in any grade. The value of such a coin is due primarily to its rarity and not its grade. There is a high level of demand for this issue, even in very low grades. If you have a 1796 No Stars quarter eagle that looks like it was run over by a train, someone is still going to buy it.

A coin that is a grade rarity is one that is considered rare solely because of its high grade. A classic example of this is a 1920 Saint Gaudens double eagle. This is a common issue in the lower Uncirculated grades and it is only moderately scarce and desirable in MS63 to MS64. But it is extremely rare in MS65 and there is a dramatic jump in price between MS64 and MS65.

From my personal viewpoint, I like coins that are fundamental rarities. As someone who has a significant amount of money invested in coins (i.e., my inventory) I feel a lot better buying a coin that is considered desirable by virtue of its rarity in any grade than one that is desirable ONLY because of its high grade.

Some coins are “hybrids” which can be considered both fundamental rarities and condition rarities. As an example, a Proof Barber quarter is a relatively scarce coin with most issues having mintages figures below 1,000. Even an Impaired Proof has a degree of collector value. But at what point in the grading continuum does a Proof Barber Quarter morph from a fundamental rarity to a condition rarity? I’m not certain that I know the answer but I do know that once Proofs of this design are graded PR67 or higher, they become less interesting to me.

Another factor to consider is this. What if third-party grading ended tomorrow and slabs no longer had any relevance? In this scenario, a coin like an 1854-D Three Dollar gold piece would still be considered a desirable numismatic item with many potential buyers. But would a PR68 Barber quarter be considered four or five times “better” than a pretty, lightly hairlined piece that had previously been in a PR64 slab? I’m not sure I know the answer but…

These are interesting questions that the collector needs to ponder as he decides what his next purchase will be.