ValueQuest 2009

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I have the feeling that the Numismatic Buzzword for 2009 is going to be “value.” If you are like most collectors, your purchases in the coming year(s) are not going to be as extensive as they were in the past. If you are buying fewer coins, you’ll want to stretch your coin purchasing dollars and look for pieces that offer the biggest bang for the buck. I have a few suggestions, which are mainly conceptual in nature, to guide you along the Value Trail. Regardless of series, date or mint, coins that have a nice, original appearance are very rare. My definition of “original” is a coin that appears to not have been cleaned, dipped, processed or otherwise enhanced in recent generations. In many series, especially ones like early gold and southern branch mint gold, truly original coins probably represent less than 5% of the available population. If you don’t believe me, take a look sometime at a large auction that is held in conjunction with a major convention. Assuming that you know what you are looking for, my guess is that you’ll see coin after coin that is too bright or bleached out or bedecked with “unusual” coloration. In some sales there may be thirty or forty early gold coins and only a small handful that fit my criteria of originality.

It makes sense to me that if you are going to buy fewer coins in 2009 (or, who knows, maybe you won’t buy fewer coins, just less expensive ones...) you should be buying prettier, more aesthetically appealing ones. And one of the things that I am continually amazed about in the rare date gold market is that, when they are available, choice, original pieces tend to only bring a small percentage (10-20% at most) over the typical “schlock” that is usually offered.

Another important point to consider when purchasing coins with a newfound appreciation for value is current market price versus prices in 2002-2003. I use 2003 as the point in time that prices in many gold series began to rise significantly. As an example, many early gold coins that were worth $6,000-8,000 in 2002-2003 had been at that level for quite a few years. Today, these same coins may be worth $10,000-12,000 or even more in some cases.

If you own stocks, you are probably well aware of the fact that the drops in the market since early September have basically eroded all stock profits achieved in the last five years. While the coin market has, so far, held its value far better than I would have expected, it is certainly a possibility that today’s $10,000 coin could certainly drop to $6,000 in a fairly short period of time. By studying the past history of specific subsections of the market, the value- conscious collector should have a clearer idea of potential downside.

There are actually a number of rare date gold coins that are worth the same today as they were in 2002-2003. Examples include very high grade Charlotte and Dahlonega issues (in this case MS63 and above), many San Francisco issues from the 1850’s, 1860’s and 1870’s and even a number of New Orleans gold coins. The reasons for this range from the market being damaged by too many overgraded coins in holders (in the case of Charlotte and Dahlonega pieces) to collector indifference (in the case of the San Francisco coinage) to poor reporting of prices by Trends and CDN (in the case of New Orleans issues).

Just because a coin was worth $5,000 in 2003 and it is worth the same today does not mean that it offers the “best” value to a buyer in 2009. But, it is interesting to ponder if coins such as this might have less downside than areas of the market that have shot up considerably.

Which brings us to the third and final point to consider in our Valuequest 2009. Liquidity is likely to be a huge factor in the coin market in the coming year(s). This is probably no time to be “cute” when it comes to your coin purchases. My guess is that coins that had limited appeal and liquidity issues in the good market of 2003-2008 might have virtually no appeal and liquidity in the potentially-not-so-good market of 2009 and beyond. In other words, key dates may drop in price somewhat but they are still likely to have a lot of collector demand. And to use an analogy from the non-gold coin market, series such as Three Cent Nickels, Shield Nickels and Liberty Nickels have and will probably always be also-rans because they are just not especially interesting in the opinion of most collectors.

So, in summary, I believe that three of the key elements that will drive the market in 2009 are originality, current price levels versus pre-bull market prices and liquidity/popularity. These were obviously key elements in years past but with the market euphoria of the past not likely to be seen for awhile, I think they will be more important than ever.

Baltimore Show Report

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I went to this the November 2008 Baltimore show with limited expectations. Having spoken with a number of dealers whose opinions I respect, I knew the buzz wasn’t exactly encouraging. I would say that my overall impression of the show was that it was a little better than I expected but had I gone with normal expectations I would have returned disappointed. You can’t fault Whitman for anything that went wrong as the show was very well run (as usual). But collector attendance was unquestionably lower than what I would have expected for the last major show of the year and many familiar faces were either absent or were speed-walking through the aisles trying not to be tempted by the coins in the cases.

What was most noticeable at the show was dealer uncertainty and a clear dichotomy in market savvy. While most dealers did want to purchase coins, they were extremely cautious with their purchases. If a coin was fairly priced, something out of the ordinary or appeared on a valid want list, it probably sold. If it was priced at summer levels, not especially attractive or rare and not terribly desirable, it might have been used as a Numismatic Frisbee.

I mentioned a “dichotomy” among dealers. What exactly does this mean? There are a number of dealers (currently around 20-30%) who understand that the economy is lousy and that coins are harder to sell and have adjusted their prices accordingly. But there are still many dealers who appear to be in denial and are either not willing to sell old inventory at lower prices (and take losses) or are pricing new coins based on what a comparable piece might have brought at auction earlier this year. These dealers will either learn the hard, cold realities of a new market or they will be supersizing your value meal by the spring.

How much is the market down since the heady days of late spring 2008? I’d say in many cases between 20% and 30% and in some cases a bit more. But not all coins are down. In fact, I think there are areas of the market that are just fine. As an example, I would be happy to purchase as many nice EF40 to AU50 No Motto New Orleans half eagles and eagles as I could find at levels comparable to what I was paying four or five months ago; as long as the coins are choice, attractive and dates that I consider to be desirable.

Clearly, the real test of the market is going to be the 2009 FUN show. It looks like a potential perfect storm where there are going to be a bazillion coins for sale at the various auctions, numerous cash flow issues with dealers, a clearly Recessionary economy, a new Presidential administration and a clear schism between those dealers who “get it” and those that do not.

My November Baltimore show was, as I mentioned above, not really all that bad. I was able to purchase some really exceptional coins, all of which are already posted on my website (www.raregoldcoins.com). My wholesale sales were lower than usual for a Baltimore show but I did sell three mid-five figure coins and have strong interest from dealers in two other relatively expensive pieces. I should also point out that I was extremely selective with which dealers I showed coins to as there are certain firms whose checks seem potentially bouncy to me and the last thing I want to do over the Thanksgiving week is explain to my banker why so-and-so’s check was returned for insufficient funds.

As I was flying back from the show, I read the New York Times. It’s probably a real sign of the times that we live in that instead of turning right to the sports section, I read the business section first. One story, in particular, made my neck hair stand-up: a report that the stock market is experiencing its worst year since 1931. Most blue chip stocks are down 40% and many have lost 60%, 70% or even 80% in value. This really makes me believe that collectors who have a little discretionary cash right now might do a whole lot worse than considering buying a few nifty coins. My guess is that the really neat stuff is going to remain hard to find and it won’t be a whole lot cheaper than it was a few months ago but the level of competition among buyers has certain dropped, creating an excellent opportunity.

Hopefully you have had a chance to check out all the new features of my improved new website. I would greatly appreciate your feedback and am always looking for ways to make your web experience with DWN more pleasant and user-friendly.

Have an excellent Thanksgiving holiday!

The New PCGS "Genuine" Holder and my Feelings on Damaged Coins

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PCGS recently announced that they plan to begin encapsulating coins that would have formerly been “body bagged” in the past for reasons such as damage, cleaning, and artificial toning. How does this affect the day-to-day operations of my firm and inventory and what are my personal feelings about such coins? The new PCGS “genuine” holders will have zero impact on DWN. My orientation has always been towards choice, problem-free coins and it is highly unlikely that I will be selling coins in “genuine” holders or even recommending them to my clients. If any of my submissions to PCGS wind-up in such holders (and hopefully this will not occur very often!) such coins will either be consigned to auctions, wholesaled to other dealers or, in the case where I think PCGS was wrong, resubmitted.

How do I feel about PCGS deciding to offer this service to their customers? I am assuming they made this decision because of considerable feedback from collectors (and dealers) who felt that a genuine-only holder was important, especially given the success of such a product at NGC. My feelings about the holders are mixed. I feel that they slightly dilute the PCGS brand in terms of non-problem coins but I think they offer collectors a degree of safety regarding the authenticity of rare issues.

Will the PCGS genuine holders have an impact on the market? I believe that they will. Some of this impact will be good and some, I think, will be not so good.

The positive impact that the genuine holders will make is that they will help to quantify value on problem coins. Problem coins are exceedingly hard to ascribe value to and by having slabbed problem coins trade more regularly, collectors will get a better idea of what they are worth. As an example, if three 1795 half dollars in “genuine only” holders trade at auction for $3,500, $3,850 and $3,350 a collector can get a pretty good idea of the value range of a similar coin. The bad news here is that no-grade coins are not as readily quantifiable as problem-free coins. If a coin is no-graded because of “scratches” how do you value it versus the same coin that is no-graded because of a harsh cleaning?

The negative impact that the genuine holders will have on the market is that they will encourage collectors to think like bargain shoppers. I would look at a damaged 1795 half dollar as the “Wal-Mart” version of this issue. In other words, a collector will be attracted to such a coin because it is a cheap version of a non-damaged 1795. As I will explain a bit further into this blog, I am a big advocate of original coins and I think collectors are doing themselves a disservice if they buy a $3,850 scratched 1795 bust half dollar because it seems “cheap” in comparison to the same coin without scratches.

One unintended consequence of the genuine holder is that it will spawn a new class of “crackout” dealer: the person who sees a lightly scratched or mildly cleaned coin in a genuine holder and feels that it is actually no worse than a regular quality piece in a PCGS (or NGC) holder. I already know dealers who have had some big hits cracking coins out of NCS “cleaned” or “damaged” holders and getting them into regular NGC (or PCGS) holders. I have no doubt that this will happen with the PCGS genuine holders.

As I mentioned above, I do not personally like damaged coins and I try to stay away from them unless it is an issue that is so incredibly rare that I basically have no other choice. An example of this might be an extremely rare Colonial coin variety of which there are just three known. Am I going to pass on an example because it is on a pitted planchet or it has scratches or because it’s been harshly cleaned? Of course not. But for every instance like this, I can think of a dozen reasons why I would pass on the aforementioned 1795 half dollar with scratches at $3,850.

So what are some of the reasons that I dislike damaged coins? First and foremost, they tend to be ugly. Once I see a big scratch on a coin, I see it magnified every time I view it. Secondly, coins like this are hard to sell. If you don’t believe me, assemble a collection of PCGS (or NGC) genuine slab coins and take them to a coin show. My guess is that they aren’t going to generate much interest. Thirdly, they are the antithesis of what collecting is about, at least to me. I buy specific coins because they are rare, attractive and high quality; not because they are unattractive but a good deal relative to undamaged coins.

To me, the bottom line about collecting is this: if you are pursuing a series that is beyond your budget and you have to cut corners to participate than its time for a reality check. Look, there’s nothing wrong with owning up to the fact that you’ll never be able to afford a nice 1794 dollar. But I would contend that the $75,000++ it will take to purchase a problem-riddled example of one could be much, much better spent on choice, original coins; either within the Bust Dollar series or in another series where the key issues are within your budgetary restrictions.

I touched on one thing earlier in this blog that I do think is important about the PCGS genuine slab. The no-grade market right now is sort of like the Moroccan Bazaar of numismatics. A coin like a cleaned 1916-D dime with VF detail might or might not be genuine. The PCGS genuine holder will, at the very least, separate the real examples from the plentiful fakes and this is good for the collector (or dealer) who is unable to distinguish between the two.

The Liberty Cap Collection of Early U. S. Coins

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Douglas Winter Numismatics is proud to announce that we have been chosen to sell yet another high quality collection of United States coins. This assemblage, formed by an astute specialist in Texas, is known as the Liberty Cap Collection of early United States coins. It features exactly twenty different coins (plus one early American medal) ranging in value from a few hundred dollars to over $50,000. The collection is being imaged and cataloged by DWN and is expected to be posted on the www.raregoldcoins.com website around November 18, 2008. The collection is known as the Liberty Cap Collection because of the fact that a number of the coins have designs that feature a prominent Liberty Cap. Examples of coins in this collection with a prominent Liberty Cap design include a rare 1783 Libertas Americana medal in Copper (Betts-615) graded MS62 by NGC, an 1836 Pattern Gold Dollar (Judd-67) graded PR66 Ultra Cameo and an extensive date run of branch mint Classic Head quarter eagles and half eagles.

There are many highlights in this collection but I’d like to focus on three that I think are especially worthy of attention. Please note that full descriptions and images of each will be available on my website within a few days.

1838-C Half Eagle, Graded MS60 by NGC. The 1838-C is the most historically significant half eagle from the Charlotte mint. It is the only Classic Head design for this denomination and it is the very first half eagle produced in Charlotte. It is not really a rarity from the standpoint of total known but it is very rare in the higher AU grades and excessively rare in Uncirculated. Only two or three are known in Uncirculated. The finest is the superb PCGS/NGC MS63 example formerly in the Bass collection and now owned by the Pogue family. The second finest known was the NGC MS62 coin formerly owned by Paul Dingler but this coin was improperly cleaned and is no longer in a Mint State holder. This leaves two 1838-C half eagles in Uncirculated holders: an NGC MS61 that I have never seen in person and the NGC MS60 in the Liberty Cap collection.

In addition to this impressive rarity, the collection also contains a choice, original NGC MS62 example of the rare but slightly less well-known one-year type: the 1839-C half eagle.

1824/1 Quarter Eagle, Graded MS62 by PCGS. The Capped Head Left quarter eagle type was made from just 1821 to 1827. Only five single issues are known and each is very scarce. The 1824/1 is among the rarest of these with an estimated 60-70 known from the original mintage of 2,600. In fact, PCGS has only recorded twenty-one in all grades including a single example in MS61 and just three better. The finest known business strike is a single MS64 at PCGS and it is unlikely that more than ten or so exist in the various Uncirculated grades. The coin in this collection is probably within the tail end of the Condition Census and it is one of the best that I have seen with excellent color, surfaces and luster.

I have long been an advocate of the early quarter eagles as I think they represent exceptional value in the arena of early United States gold coinage. The owner of the Liberty Cap collection agreed with me and purchased some exceptional pieces in his years of collecting. Also included in the collection (and available for sale) are an 1831 in NGC MS60, an 1832 in NGC AU58 and a choice NGC AU58 1833.

There aren’t many silver coins in this collection (just one that is being sold at the present time) but it’s a doozy: a lovely 1836 Gobrecht Dollar in PCGS PR63.

1836 Gobrecht Dollar Original, Graded PR63 by PCGS. The lovely and enigmatic Gobrecht dollar has been a favorite with collectors for over a century and with good reason. The design is among the most attractive ever created on a United States coin (especially the famous starless obverse of 1836) and the limited number of coins struck has always ensured a strong demand.

After many years of speculation, research has shown just which Gobrecht dollars were made as originals in 1836 and which were restruck. In my opinion, this has made the 400 Originals produced in late 1836 the most desirable of the Gobrecht dollars.

These Originals are easily detectable by the alignment of the dies (the head of Liberty is aligned opposite the O in DOLLAR) and the lack of a die scratch above the top wing on the reverse.

In my experience, Proof 1836 Gobrecht Dollars generally come one of two ways: either dipped-out and Impaired or well-preserved but with funky and/or unappealing coloration. The coin in the Liberty Cap Collection is remarkable in that it is exactly how you’d want a PR63 Gobrecht Dollar to look: fully reflective, attractively (and originally) toned and free of significant numismatic or non-numismatic impairments. The collector who assembled the Liberty Cap collection was extremely picky and particular when it came to acquiring a Gobrecht Dollar and his patience paid off when it came to this lovely piece.

If you’d like more information on the coins in the Liberty Cap Collection, please feel free to call me before the collection is posted on my website around November 18, 2008. I can be reached at (214) 675-9897.