By David L. Ganz
“Not every purchase of coins is an investment; not every acquisition of a collection constitutes an investment; not every collection or investment in coins constitutes a rarity.” So for years has said Harvey G. Stack, a prominent coin dealer and co-founder of Stack’s-Bowers Galleries.
A dealer for more than 60 years and as a licensed auctioneer and an industry leader who has made a living buying and selling great numismatic rarities as well as regular numismatic items during much of that time, Harvey Stack has sold just about every American coin rarity – and that was in a single collection that was formed at the request of Louis Eliasberg. Mr. Eliasberg was the first person to succeed in assembling every coin date and type listed in A Guidebook of United States Coins, by R. S. Yeoman (commonly known as the “Red Book.”) The Red Book methodically lists coins by date, mintmark, and type.
Just what constitutes a rare coin has been the subject of considerable discussion. And while there is no general agreement on what constitutes a rare coin, it is possible to list some specific coin rarities that are uniformly agreed to be rare. In addition, there are other coins that are collectible as investments that are widely acquired with that in mind.
For example, an 1804 silver dollar, of which there are fewer than two-dozen pieces known, is uniformly agreed to be a rare coin. By the same token, another coin, the 1881-S Morgan silver dollar, is not scarce in the sense that it is available but not prohibitively rare though unavailable to most collectors. Depending on condition, the 1881-S Morgan dollar is valued at between approximately $19 and $4,000, in grades between Very Good (VG-4) and Mint State (MS-68). One reason: The Mint made 12 million of them.
It is possible that a coin graded better than MS-68 on the widely used Sheldon 1-70 grading scale could be valued even higher, yet the typical coin in uncirculated, MS-63 condition is valued at about $20 to $30.
A numeric grading system is generally believed to be more accurate than a verbal description of the grade. The coins are generally described on a 1 (worst) to 70 (best) scale. The best coin possible may not exist except theoretically. The grading is usually done by visual comparison to a standard photo reference set or the actual coins that have been previously graded and maintained as a reference. Some grading sets are maintained by set by such grading services as the Numismatic Guaranty Corporation (NGC) and the Professional Coin Grading Service (PCGS).
Most collectors would consider the MS-63 a rare coin because the face value is $1, the silver bullion value is about $14, and the remainder of the selling price or, for that matter, the buying price is the “numismatic value,” which constitutes the “rarity” element.
There are numerous ways to determine whether a coin is truly rare. One way is to use COINage magazine and its pricing guide as a method of segregating coin rarities from those coins that are simply marketing hype or not necessarily a “rarity.”
Generally speaking, most gold and silver coins that have a value in excess of face value based on precious metal content may be deemed to have a “rare coin” component. This may be a small amount or a large amount which, again, will depend on condition and scarcity of a coin as well as its collectability.
A coin or medal may be rare but not desirable because of surface marks. However, one of the worst condition coins that has ever sold at public auction was a 1794 large cent that was in Poor-1 condition. It was difficult to make out the design on the coin, the lettering, or very much more than a general impression of what it once had been.
What made this coin so special and so valuable was that there were no coins of this particular type known to exist apart from the specimen offered at auction. The price realized was over $50,000. This shows that even a lowly copper cent can have a substantial numismatic value.
These coins, because of their rarity, are typically acquired at public auction sale, but this is not always the case. In the early 1960s, the Coin and Currency Institute, New York, was offered from a homeless person in an over-the-counter transaction the right to purchase an 1894-S dime that was in Very Good-8 condition. The condition sounds better than the coin’s actual appearance. His coin was worn, used, and abused during its circulation life; but it turns out that the mintage on this particular coin totaled just 24 pieces. The coin was acquired for $2.40, which later sold at public auction for more than $10,000.
The coin’s value at the time of acquisition, over the counter, was given a nominal value of $2.40 together with several other coins, none of which were valued at more than $10; the gross amount paid for the coins was about $50 (paid for by check). The dealer who acquired the coin had a problem: If he had made an offer of $2,000 or $5,000 for the coin, it would surely have been considered fair and reasonable. Yet the coin was a known rarity, well-researched and published as to source, condition, and, ultimately, determinative of its price in the marketplace. The alternative would have meant that the seller would have most likely rejected the $2,000 offer as inadequate and, as a result, the seller was asked what price he wanted for the coin, which turned out to be the selling point, even though it was modest in amount.
So here is another example of a coin of modest grade, a true diamond in the rough, which results in a true bargain for the buyer even though the seller was happy with the gross proceeds of the sale.
Coins are typically offered at auction as part of a collection and are acquired individually as such. Their value is sometimes enhanced by being part of that collection. There are a number of coin portfolios that are devices used to measure the value of a group of coins. It can be as simple as a set of Roosevelt dimes minted from 1946 to 1964, all in 90% silver. That set is capable of almost endless repetition in uncirculated condition, and it was, thus, not at all surprising that at a Stack’s sale in the 1980s, auctioneer Benjamin Stack, Harvey’s cousin and partner, found himself offering as a single lot a set of Roosevelt dimes with a bid opening of about $170. The auctioneer anticipated that the coin set would sell for anywhere from the opening bid to $220, because they were a common item available in the retail store owned by Stack’s, as well as from many other dealers, all of whom were plugged into the marketplace.
The bidding started at $170 and in $10 increments increased quickly to $250 (over the maximum expected yield). Benjamin Stack stopped the sale at $260 and said that it was clear that “auction fever” had taken over and that the bidders were just acting silly. He was willing to offer to as many individual bidders who would like it comparable sets at $220 apiece.
Indeed, the coin sets in question were sets containing significant numismatic value but were not rare. (As the price of silver rose, so eventually, did the Roosevelt dime set consisting of just under 50 coins whose total value was equal to approximately $163 in 1980.) The resultant sum became a rare coin, as silver topped $48 an ounce in the free market and, as a result, the Roosevelt dime set became collectible in its own right (though it never did include copper-nickel versions of the same coin).
The measurement of rare coins can be individually, as part of a set, a transaction including the whole set, or a market basket which constitutes a group of coins that when compiled and offered for analysis on the basis of generic fungibility can be similar to the Dow Jones Industrial Average as a method of examining the value of a selected group of coins or an entire marketplace.
One group of coins and also other commodities was used from 1978 to 1990 by Salomon Brothers, at one time an investment banking firm that subsequently became part of Citigroup and several other names, each of which measured not rare coins as much as the comparison of rare coins with other tangible assets. Salomon used stamps, coins, foreign exchange, gold, silver, platinum, Dow Jones, bonds, and other well-known measuring devices for tangible assets.
Each year, in the late Spring, Robert S. Salomon provided introductory material as to how tangible assets should be included in every investor’s portfolio and that it should include some portion of the tangible assets in the valuation. Until the mid-1970s, this had very little to do with coins except for the footnote that listed the combined value of a market basket that included rare coins that for the first time measured how the coins could be valued within the portfolio. Salomon’s notes and the list that accompanied them went only to a select customer list, but it was widely reported in the financial press and in numismatic periodicals. It subsequently became an important tool for those who sought information from a reliable, unbiased source on the rare coin market.
Neil S. Berman and Hans M. F. Schulman published the contents of the market basket and, thus, identified the specific dates that appeared on coins and how their value changed from year to year. The Federal Trade Commission later stepped in because of advertising abuses that included claims that all coins were rare coins. In failing to segregate the coins from genuine rarities, it is my contention that the Federal Trade Commission deprived the coin industry of a valuable tool that could be used to monitor the precise state of the market at any given time.
For the period between 1990 and 2015, I maintained in my office a chart based on the Salomon numbers calculated by Dennis Baker, once long-time editor of The Coin Dealer Newsletter and later a private newsletter editor and coin market analyst. I used this to calculate value on a continuing basis. Health concerns ended the project. When I was continuing the market basket analysis, I did it using the date and mintmark coins provided by Schulman and Berman and was apparently quite accurate despite obvious flaws. For example, there are no gold coins included in any of the dates and mintmarks; also, some of the choices proved to be poor ones in that they had virtually no movement at all over the past 15 years. On balance, however, the market basket was a good choice method in the absence of considering every coin in the universe; which would have overloaded either the source of the material or the cataloger. The use of the Dow Jones Industrial Average as a means of measuring the day-to-day comings and goings of the stock market is similar, and the accuracy is predicated on the same principles.
It is probably flawed to have only one commemorative coin included in the portfolio and likewise the absence of bullion coins is probably a flaw, but the guide was used for more than five years without complaint. Any substitute for a bullion one-ounce coin, the bullion substitute for other similar product would only have left the prices and ratios lower in result, because gold went through an outstanding period of growth between 1978 and 2018, and any attempt to change the listing of the market basket would acknowledge an invalidity to the message.
The market basket items included an extremely fine 1794 one-cent piece; it also included a 1916 Standing Liberty quarter, an early-date Walking Liberty half dollar, and a number of other coins that meant the substitutability of the market basket and its viability as a valuation approach. It carefully distinguished between an 1884-S Morgan and an 1881-S, which is worth substantially less.
For example, a two-cent piece is included in the overall listing; whether an 1872 or 1873 proof two-cent coin is chosen, it is of little consequence for purposes of valuation as it behaves in the same manner. In the same way, there is no difference between a 1900 Indian Head cent and any of the others produced between 1901 and 1909. In looking at some of the charts that accompany and also the result that appears in the long run, 1978 through 2018, it becomes clear that so long as the coin has some numismatic value, it also has a numismatic value that is capable of being measured and accurately compared with an appropriate measuring device that is accurate and thorough in its interpretation of the worth of your rare coin portfolio.
The coins in the Salomon Brothers market basket omit all gold coins. The theory behind that was explained by Harvey Stack, who supplied the pricing during the 12 years that the survey existed, by stating the Salomon belief that gold coins would merely reflect the bullion price without regard to collectability.
No comparable chart has been constructed that depicts a market basket of a dozen or two-dozen gold coins, but a review of the rare gold coin market from 1978 until 2018 shows that nearly all gold coins performed well and at rates in excess of copper, nickel, and silver coins.
The coins included in the Salomon market basket portfolio included an Extremely Fine 1794 half cent, an 1873 two-cent piece, an 1886 Liberty Head nickel, an 1862 three-cent piece, an 1863 half dime, an 1862 Liberty Head dime, an 1807 Liberty Head dime, and a 20-cent piece of any year and mintmark other than 1876-CC (the 1876-CC 20-cent piece is worth thousands of dollars and a scarce piece). Also included are the quarters and half dollars mentioned before and the 1795 Flowing Hair silver dollar together with a single commemorative coin (Hawaii, 1928).
In 1978, Stack’s sold the Harold Bareford collection of gold coins. Mr. Bareford acquired his coins for just about $13. None was a name coin or the best of condition, but the result was a solid collection that brought more than $1.2 million. His other collection, including an 1804 silver dollar, was sold a few years later by the family.
I have privately charted the price of gold bullion, silver bullion and platinum bullion covering the period from 1978 to the present. A secondary chart that I compiled for my private use measures the value of gold bullion and refers it to the market basket covering the same period. What will be found is not at all surprising to longtime observers of the coin industry: the gold bullion beats out the silver and copper coin portfolio every time.
I tried a number of years ago to measure the performance that might be expected from a portfolio in gold coins and found that it was simply too difficult to initially maintain in a non-computer age. One of the problems is that it habitually looked at the gold coinage and had difficulty in finding a way to separately list the type of gold coin over such a long period of time.
From 1837 until 1932, gold coins were made by the United States Mint; between 1850 and 1933 there are subsets of gold coins that would be required even though the coins are not different in design but are distinctive in terms of quantities minted. The same problem occurs with quarter eagles, half eagles, three-dollar gold pieces, and eagles.
Rare coins, singly and as a market basket, show a good return on investment; and even when compared with gold bullion, as well as gold coins, the numbers don’t lie – every purchase of rare coins as part of a collection indeed proves out to be a worthwhile investment.
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