How NOT to Assemble a Great Collection

     While looking through thousands and thousands of coins recently in the 2013 Heritage FUN sale, I took a brief pause and read the preface to the catalog, where collectors are introduced and given the opportunity to write briefly about their collections. Some of these collectors, like John Adams, are incredibly sophisticated and operate within narrow specializations in which they are probably more knowledgeable than all but a tiny handful of dealers. Other collectors are clearly products of the Internet era of coin collecting and they make mistake after mistake. This got me to thinking...how does the mindset of a confirmed I Can Do This By Myself  collector work and why, in my opinion, does it often spell disaster?      In the spirit of these thoughts, let's take a look at how NOT to build a great--or even a good to very good--collection of coins. The spirit of this article may be snarky but I think there a lot of good points that are raised.

     1.  Choose a Complex Series.

     If you are going to collect a series like American Silver Eagles, you can be an I Can Do This Myself type of collector who lives on the plains of Montana, never goes to a coin show and seldom even visits a local brick and mortar coin store. And I wouldn't limit this simplicity factor to modern coins. I think you can build a reasonably complex set like Red and Brown Two Cent Pieces or PR64 to PR65 Barber Dimes going it alone.

     There are series that are complex either because of they way that they were produced (many Colonials as an example) or because they can be "messsed with" or misrepresented so easily (red copper coins or 20th century Proof gold as just two examples). These are not series that lend themselves to rugged individualism and I'm not certain that I've ever seen or heard of a savant who learned the ins and outs of a really complex series totally on his own.

     Despite this, many beginning collectors outsmart themselves and choose a series that is far more complex than they realize. They don't know that the preferred look for Southern gold coins is dark and dirty; not bright and grainy. They never learn that there are different levels of "redness" on Indian Cents and Lincoln Cents and that a red MS65 example of a certain date can be worth anywhere from $2,500 to $7,500.

     So what exactly am I saying here? Do I mean that all beginning collectors should start with PR69 American Silver Eagles and gradually work their way towards Dahlonega half eagles? Absolutely not. What I'm suggesting is that if you do choose a series that is complicated (and I can make the case that virtually all pre-1964 American coins have some degree of mystery that can not be unlocked in a few weeks) you need a mentor and/or a good dealer to work with.

     Or better yet, outsmart yourself and pick a series you don't really understand. You'll be on your way to NOT assembling a great set...

     2.  Go it Alone; Don't Have an Expert Dealer Working With You.

     Some collectors look at dealers as a necessary evil. They don't like dealers, don't trust dealers and work with them because they have to. (I feel the same way about lawyers but the last time I was involved in a legal issue, I was happy to hire a great lawyer and not read "Law for Dummies" and represent myself). This attitude is unfortunate as there are many good dealers.

     I'm a student of coin collectors and the coin market as well as coins themselves and in the modern era of numismatics (let's call this 1945 and onwards) there have been many great collectors but few "mavericks" who have bypassed the typical collector/dealer relationship. Some collectors like John Pittman were able to buy great coins at auction without a dealer's guidannce but even Pittman had a few dealers with who he had a good working relationship. One wonders how Pittman would view the current generation of sight-unseen Internet buyers, especially those who buy sophisticated, expensive coins without a trained set of eyes working with them.

     (If your answer to this is "much of what Pittman bought was sight unseen through mail bids at auctions he never attended" I would agree with this to an extent. Big difference: today, a slight variable in a coin's appearance can equate to tens of thousands of dollars--which was not the case in the 1940's or 1950's. Also, many of the coins sold today have been doctored while during Pittman's heyday, original coins were, more often than not, the norm in the market).

    Well-connected, educated dealers are of little value to collectors who are NOT assembling a great collection.

     3.  Buy Only Online Based On Images

     I've made this point a dozen times in other articles but I think it is tremendously important and it bears repeating. Again. Collections that are built by collectors who buy coins through auction based solely on images are destined to be full of problem coins. Auction sales are sight-unseen and most of the images that I see online are not sufficient to make important decisions, especially on high grade coins. (NOTE: I feel differently about circulated coins as it seems possible to get a clear enough image of an EF or AU piece that I would personally feel OK bidding on it although not necessarily aggressively).

     Buying a coin off a dealer's website is different as you have a return privilege.

     If you do buy sight-unseen at auction, try to at least establish a rapport with a friendly, knowledgable person at the firm and ask his opinion on the coin(s) that interest you.

     Or just buy based on the images since you do NOT want to assemble a great collection...

    4.  Don't Learn What Original Surfaces Look Like.

     If no one ever takes the time to teach you what an original coin looks like, you are not going to have any reference point in determining originality. I was lucky enough to learn about originality back when there were still a decent number of non-processed coins in the marketplace. This is not the case today. To learn this today requires a real effort and real connections in the market.

     I had an interesting conversation about originality the other day with a collector of Proof gold. He told me that when he was  less experienced, he returned a few high grade Proofs because they were "dirty." He was so used to seeing bright, shiny Proof gold that when he finally had a chance to add a few totally original coins he returned them to the dealer who sent them. But this collector was smart enough to ask his mentor why the coins were tarnished and what made them desirable. Then he learned: the "dirty" coins had a nagtural haze and had yet to be dipped. These were the "good" coins he needed to be buying.

     As I looked through the Heritage 2013 sale, I saw gold coin after gold coin that had been stripped including at least two high six-figure collections that didn't contain more than a handful of coins that were original. The owners of these coins never were able to determine what constituted an "original" (or even a semi-original) coin and never had the foresight to ask a knowledgable expert.

     Keep buying bright and shiny coins--they are the cornerstone to NOT assembling a great set!

     5.  Race Through Your Collection.

     I just sold a very significant gold dollar to a collector who has been working on his set for close to two decades. As we concluded the transaction, I commended him for his patience and got to thinking about how the old-school method of slowly assembling a collection has changed along with the way that collectors build sets and acquire individual coins.

     A few days later, as I viewed the Heritage FUN sale, I noticed that a few of the major collections had been assembled in two to five years. And these were not sets that ordinarily could be assembled quickly. Clearly, shortcuts were taken...and they showed.

     Great collections are the result of opportunity. Let me give you an example. A month ago, I began selling a superb collection of gold dollars. I gave first shot to a dedicated, persistent collector who I knew was not only going to buy a number of coins, he was going to appreciate them and (hopefully) sell them back to me a number of years down the road. Here's a collector who was probably expecting to buy two or three coins for his set this year and suddenly he was given the opporunity to buy no less than eight coins that he needed and knew he was unlikely to find again in many years of searching.  Was his purchase of eight coins at one time an example of "racing" through his set? Clearly not; it was, instead, a moment of great opportunity.

     This is an example of "positive opportunity." There are examples of negative opportunity where collectors bury themselves in a mound of problem coins in a short period of time. And there are clearly scenarios where well-meaning collectors have chosen the wrong dealer(s) and proceeded to be bombarded with crappy coins.

      Try to assemble your collection as quickly as possible; that's how NOT to assemble a set!

     6.  Overpay for Mediocre Coins and Underbid for Nice Coins.

     In the aforemtioned Heritage FUN sale, it was interesting to note on coins which pedigrees were given, what the (ex)owner paid for them. It served to reinforce an old belief of mine: misguided collectors tend to pay too much for mediocre coins and they never get to buy really nice coins as they a) either lacks the dealer connections to be offered them or b) won't "pay up" for high end pieces.

     I also note a tendency for this kind of collector to "overbuy" the common dates in a set and "underbuy" the rarities. An example: if you collect New Orleans quarter eagles, the coins you should be stretching on (i.e., buying the absolute best possibe pieces you can afford) are the keys such as the 1845-O and the dates with multiple levels of demand such  as the 1839-O. The dates that you shouldn't overbuy (i.e., buying a common date in an uncommon grade) are the 1843-O Small Date and the 1854-O).

     How can you "overpay" for most of your coins? If you are exclusively an auction buyer, I think that's easy: you can misinterpret the auction prices realized data that firms such as Heritage provide.

     Let's say you are looking at prices for a certain Type One double eagle in AU58 and the last three results are $4,500, $4,650 and $7,750. Another example comes up for sale and you figure "hey, the last coin sold for $7,750, I'm fine paying $6,250 for it." If you do not really analyze the $7,750 sale you might not know that the coin was a) in an old holder and undergraded or b) was from a shipwreck and it brought a strong premium as such. Suddenly, your bid 0f $6,250 is way too high, given that the two pertinent results are actually $4.500 and $4,650.

     Nobody actually makes that mistake, right? Uh, think again. They do. And mistakes such as this are ways that you DON'T build a great collection.

     7.  Sell Your Collection As Soon As You Finish It.

     In this New World of Coin Collecting another collector trait that seems suddenly accepted is to sell your collection literally as soon as it is done. In the red hot market of 2006-2008, you could get away with this and sometimes even have a nice score. But in the current market, I don't think the collector is doing himself a service by blowing out his collection.

     Today's market is all about "fresh coins" and it's easy for a knowledgeable collector with a computer to figure out that the coins you just consigned to auction were all bought out of other auctions in the last two or three years. This will hurt the potential resale of your coins, even if they are above-average coins.

     We were blessed with the longest bull market in numismatic history in the 2000's and collectors who were too new to remember the bear markets of 1980's and 1990's are sometimes not entirely realistic with their financial expectations regarding coins. Generally, it takes a full cycle--or two--for coins to realize their full potential.

     Buy coins quickly and sell coins quickly....exactly how NOT to assemble a great collection.

     To me, the ideal collector uses the concepts of collecting that were in vogue in 1913 and marries them with the technology that is in place in 2013. This is how you assemble a great collection.

How To Become A Coin Kingpin

Deciding what to collect can often be a case of deciding what not to collect. This zen-like statement actually makes a lot of sense once you get over the initial "huh?" Let me explain. Anyone with a more-than-casual interest in coins wants to be a force within the series he collects. By this, I mean he wants to be known as "the CC half eagle guy," or "the face of the Ten Indian market." So how do you get to be "the man" or, better yet, "the kingpin" of the area that you have chosen to specialize in? I think the answers aren't necessarily as intuitive as you might think they are.

1. Suss Out the Competition: Let's say that you've decided to collect Carson City eagles in very high grade. You research the market and determine that these coins are very rare and even though they are expensive they seem within your budget. You still need to find out who your competition is and how far along they are.

Let's say that your major competition in this series is a Texas billionaire with a virtually insatiable demand for the finest known. And he still needs many coins in the set. In this case, you have a problem unless you, yourself, are a billionaire and you are content with knowing that every coin you purchase is probably going to break a record for the date/series. This is discouraging.

But let's say that your major competition--said Texas billionaire--is virtually complete with this particular series and he has shown that he isn't likely to upgrade his Carson City eagles unless they are very, very special coins. In this case, you might not be as discouraged.

Or, you can be creative and look at it this way...

2. Be Adaptable: Just because the series you want to collect has a roadblock like a super-wealthy collector at the top end of the market, this doesn't have to stop you. Instead of buying the finest known Dahlonega half eagles or Charlotte gold dollars, what about a "gem slider" set of choice, original AU58 coins? Or what about putting together a set that features pedigreed coins? Or a set with nicely matched colors? Or a "sharp strike set" in which every coin represents as sharp a strike as possible for a specific issue? The options can be nearly limitless.

3. Timing is Everything: I'm not a huge fan of Gem Saint Gaudens double eagles as I don't think that they necessarily offer the same degree of value as much rarer 19th century gold issues do. But they are currently a comparably good value because of a unique set of circumstances. As recently as five years ago, there were a number of wealthy collectors in this arena and many of them needed the same six or seven rare coins in order to finish their set. When any of these coins came up for sale, it was going to be a Clash of the Titans and a bidding war was certain to erupt.

But just like magic, nearly all of these collectors went poof at the same time. Some lost interest, some completed their set, and some were hurt by the Financial Meltdown of 2008 and had to sell their coins. What this means, a few years later, is that there is now an excellent opportunity for a new collector to become a Kingpin of Saints.

Let me give you two examples. In the Saint series, the 1921 is recognized as one of the ultimate condition rarities. In November 2005, a beautiful PCGS MS66 example sold at auction for $1,092,500. The same coin sold for $747,500 in January 2012. In September 2007, a PCGS MS65 example of this same date sold at auction for $1,012,000. In August 2012, another PCGS MS65 sold for $587,500. Why did these coins--both were very rare and all were very nice--sell for such discounts? Because the top of the Saint Gaudens double eagle market lacked the multiple buyers that it had in 2005 and in 2007. But if you add two or three big players into the mix, I can just about guarantee you that the next nice quality PCGS MS65 or MS66 1921 double eagle that is offered will sell at levels close to--if not at--previous market highs. It has happened before and it is inevitable that it will happen again.

4. It's All About the Relationships. Unless you are willing to devote almost all of your free time to studying about coins and pursuing what you need, you are going to have to establish a relationship with a dealer (or two) who is a well-connected specialist within your intended field of Kingpin-dom.

Let me give you a pertinent example. I recently handled an extremely rare No Motto New Orleans half eagle. This is a coin that I could have sold to a number of collectors. But I chose to sell it to a collector who has nurtured a close relationship with me over the years. He's a terrific guy; sophisticated, well-read on the subject of New Orleans gold, and always ready to buy an important coin that will improve his collection. Because he has been such a pleasure to deal with over the years he was able to purchase a coin which gave him a complete set of New Orleans half eagles in Uncirculated; quite possibly the first such set ever completed.

There's something else about our relationship, though, that transcends coins. A few years ago, someone very close to me was sick and needed immediate care. I called this collector for a reference and within a few minutes I was able to make an appointment with a specialist who was very difficult to see due to his busy schedule. Like I said, it's all about relationships...

5. What's Old is New Again. If you want to be the Kingpin of your series or collecting area(s) you can focus on coins that are traditionally obscure and lack collector interest as a result. Or you can focus on coins that have traditionally been popular but for some reason are currently out of favor. (And, yes, this point is fairly closely related to point #3, above).

For many years, Charlotte gold was as popular as Dahlonega gold and it was certainly far more popular than New Orleans. But Charlotte gold has become the least popular of the three southern branch mints. Lower prices and availability of some great coins in the past five to ten years have meant that at least one or two collectors could have put together fantastic, world-class set; and at comparably reasonable prices as well.

My point here is this: just like with the Gem rare date Saints that I discussed above, Charlotte gold is a proven area of the market with a good reference book and a long collecting history. Values peaked for these coins around 1999-2000 and, in some cases, Condition Census coins are selling for less than they were nearly a decade and a half ago. These seem to be a surer bet than something like high grade With Motto San Francisco eagles from the 1880's and 1890's that have never really been popular and possibly never will be.

What are some areas of the numismatic market in which it is still possible to be a kingpin? A few of my suggestions are as follows:

1. Gold Dollars: There are two or three collectors competing for finest known coins at the very top end of the market but this series offers a lot of opportunity for the kingpin-in-training.

2. Better Date San Francisco Gold Coins, 1854-1878: There are pockets of strength in this market but there is no one collector who I'd consider The Man when it comes to very high end SF gold.

3. Type Two Liberty Head Double Eagles: This is an area of the market that remains pretty calm after being in the spotlight for much of the 1990's and early 2000's. When really special coins become available (which is not all that often) they seem to bring considerably less than I think the are ultimately worth.

4. Indian Head Half Eagles: This is a series that tends to have periodic flares in popularity but then it grows dim for years. There is currently some rumbling in the higher end but The King of Five Indians seems to still be waiting to claim his crown.

Do you need help to become a Coin Kingpin? If so, please contact Doug Winter by email at dwn@ont.com.

The Numismatic Versus: Comparing Coin Collecting Methods

Cats versus dogs. Coke versus Pepsi. Good versus evil. You get my point: two camps competing for your heart, your affection or your soul. Its not that far-fetched to stretch this analogy out to some of the basic issues in coin collecting. No, its not the Satanic Verses; its the Numismatic Versus. OK, to be a bit more serious: there are basic issues in numismatics that split collectors down the middle. There is no real right or wrong when it comes to collecting and I am a big advocate of doing what "feels right" for the collector. That said, I think my 30+ years of experience as a dealer qualify me to render an opinion on some of these issues and that's what I'd like to do here.

1. Specialist Collecting versus Type Collecting

I have many customers who are specialists and many who are focused more in a "generalist" fashion. I respect both camps.

A specialist picks a small area of collecting and focuses on this. Dahlonega quarter eagles. New Orleans half eagles. First year and last year of issue coins. All of these are great choices for the specialist.

What I like about specialist collecting is that by having a more narrow focus, the collector can become knowledgeable more easily. As I have written before, if your collecting focus revolves around 25 half eagles from one mint, you are far more likely to learn this series as well as the typical dealer than if you are trying to learn about all the half eagles produced during the 19th century.

But there is something to be said for a more general approach. I love the concept of collecting by type. I love the fact that a type collector buys something different every time he pulls the trigger.

2. Condition Rarity versus Absolute Rarity

A coin that is a "condition rarity" is one whose primary value is based around its grade. An example of this would be an 1887-S eagle in MS65. Such a coin is extremely rare and it would sell for five-figures if available. But the same date in MS60 is extremely common and it sells for essentially no date premium.

A coin that is an "absolute rarity" is one that is rare in all grades and is desirable whether it is quite worn or superb. An example of this would be an 1862-S eagle. This is a low mintage issue with a very low survival rate to its Civil War date of issuance. This coin is desirable if it grades Very Fine or if it grades Uncirculated.

What a collector should always ask himself is "would the coin that I am buying have value if third party grading were to suddenly end?" A coin like an 1887-S eagle in MS65 might not carry a great premium if third-party grading ceased to exist. A coin like an 1862-S eagle in EF45 would still be considered desirable no matter what dictates the future of grading.

The best coins are the ones that combine absolute and grade rarity. If a coin like an 1862-S eagle in Mint State were to be discovered in Europe (I have never seen one close to Uncirculated) it would be very desirable as it combined both types of rarity in one neat package.

3. Business Strikes versus Proofs

Business strikes are coins that were made for circulation. Proofs are coins that were specially made for collectors and VIP's. The coin weenie in me likes business strikes more than Proofs because of the fact that these were coins that were used as coins are supposed to be used.

But the coin snob in me likes Proofs as well. There is no getting around the fact that a Gem Proof Liberty Head double eagle is incredibly impressive. And you have to like the Proof issues that were struck in such tiny quantities during the 1860's, 1870's and 1880's.

I tend to be a more selective buyer when it comes to proofs than business strikes. I vastly favor very rare Proofs (example: an 1878 gold dollar) than a not-so-rare Proof in a mega-grade (example: a 1904 quarter eagle in PR67 Cameo).

Can a collector buy business strikes and Proofs simultaneously? I don't see why not. In certain series, like Type Three Liberty Head double eagles, there are Proof-only issues that are collected side-by-side with business strikes. Like owning a dog and a cat at the same time, I say "yes!" to the collector who buys interesting Proofs and business strikes together.

4. Gold versus Silver versus Copper

You are reading this article on a website whose URL is raregoldcoins.com so you don't have to be a rocket scientist to figure which of these three coinage metals I favor.

But let me at least explain why I do.

Gold is a precious metal with strong demand around the world. Egyptian Pharaohs were buried with spectacular gold ornaments. The last time I checked, there were no silver or copper trinkets in the pyramids.

Try to explain to a wealthy Chinese collector why he should spend $100,000 on an Indian Cent. Not easy, right? But don't you think this same individual would more likely "get" the concept of an Uncirculated 1871-CC double eagle at $75,000?

Copper coins are great and I personally collect Liberty Seated silver coins and love them. However, as far as being a dealer goes, I'm pro-gold and more so now than ever.

5. 19th Century versus 20th Century

When I began specializing in United States gold coinage back in the early 1980's, I decided to focus on 19th century coins because they were more affordable and because they seemed like better value. Three decades later I still believe this.

Now don't get me wrong. I think 20th century coins are great. I think St. Gaudens double eagles and Indian Head eagles are the most beautiful regular issue coins that the U.S. Mint ever produced. And the incuse designs of the Indian quarter eagle and half eagle series really appeal to me. But 20th century gold tends to be the ultimate in condition rarity and, as I discussed in #2 above, I have always been more of an absolute rarity kinda guy.

I look at 20th century gold as the Contemporary Art of the numismatic world. Its fairly regularly available, its pretty macho to collect, the market is fluid due to collectors coming and going rapidly and the value levels don't always make sense.

I personally like 19th century gold better as I view it as a more cerebral area to collect. It's clearly not as pretty (there is no doubt that Gobrecht and Longacre couldn't hold a candle to St. Gaudens as far as artistic talent is concerned) and it more monotonous as it goes on and on (and on). But if you have a budget of, say, $5,000 to $10,000 per coin, you can be a big player in 19th century gold while still being pretty much a nobody in the 20th century arena.

What are your takes on the Numismatic Versus that I compared and contrasted above? Email me at dwn@ont.com and let me know what you think.