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U.S. Rare Coin Market Update - BiMonthly

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U.S. Rare Coin

( Late July, 2001)

There are several pitfalls in investing and collecting U.S. rare coins for the novice, but next to coin grading, none can be as confusing as coin pricing.  We would all like to think we could just go to the current Red Book, Coin World "Trends", Coin Dealer Newsletter (CDN), (formerly Coin Universe) or NumisMedia on the web, and we would be well-armed to strike a fair deal on virtually any given numismatic piece.  However, and unfortunately so, it isn't that easy.  Although trite and an oversimplification, the correct price for any U.S. rare coin is that which solidifies a transaction between a willing buyer and a willing seller.  The level of knowledge of the merits and flaws of a particular numismatic coin on either side of a transaction can and will be vastly different as to total skill level and perspective; however, the price at which that rarity changes hands will become a data point in history.  Whether way off the mean or average price for that conglomeration of numismatic elements called series, mintmark, grade, and aesthetic appeal that has been  recorded over the last several weeks and months of trading, a singular transaction, especially the most recent, will add to the witches' brew that determines listed or published price.  And since we are not privy to all of the transactions taking place (and neither are the pricing guides), we have to rely to some greater or lesser extent on this published data, "garbage-in/garbage-out" or not.  Keep in mind that these guides are just that, another tool in your quiver for successful rare coin collecting and investing.  They are only as valuable or useless as the accuracy of the date being collected, the methods and consistency of collection, and the methods and consistency of compilation.

But light of lights, we must recognize from the outset that we are searching for the Holy Grail!  From the very start of our quest, our approach and assumptions are flawed.  We are attempting to find a standardized or singular price for a non-standardized or unique asset.  In this case, a slabbed U.S. rare coin.  For a former financial advisor with some twenty years experience (and possibly waning patience), nothing would simplify my endeavors in this tangible asset arena more than standardization.  But no two coins are alike, regardless of the press coming from the professional grading services such as PCGS and NGC extolling the absolute virtues and infallibility of third-party grading and encapsulation.  Third-party professional grading has not turned rare coin collecting into a hobby or business of buying and selling commodity-like assets.  While two coins may be Mint State 65, gem, or investment grade, there are many variables that will affect their market pricing. They will have differing fullness of strike, locations/number/types of marks, original luster, light/dark/perimeter/localized toning, and overall eye appeal.  

Not to mention the presence or absence of a buyer who just has to possess this particular coin at this very instant.  The U.S. rare coin market is not a totally liquid market due to this lack of commonality between competing coins of the same identical genre.  Let me repeat, "numismatic coins are not commodities" (sorry PCGS), and cannot be traded as such.  While a particular prospect may have searched for years for a specific coin, he or she may pass on the example you present for a multitude of reasons.  The numismatic elements deemed most essential to this buyer are very personal in nature, and one man's "monster" coin can be another's "slider".  And as the total cost of a coin rises, the market liquidity decreases.  Just as there are fewer homebuyers in the $500,000 category, there are fewer coin buyers in the $10,000+ per coin category.  If you have doubts about the prospects for rare coins in the uncertain economic times ahead (and, I have to admit, I have my moments also due to absolute liquidity issues), then keep your individual purchases belong this magic $10k number.  Some would even say keep it below $5,000 per coin, but I think you will pass up some superb bargains in Trade Dollars and $3 Gold if you set your threshold this low.  And in any discussion of liquidity constraints in the intermediate term, one must be prepared to visualize the long-term 5 to 10 year "buy and hold" stratagem.  

So where does this variable soup of pricing variables leave us?  To doing a lot of legwork before committing to any seller's offer.  I will review some of the most readily available sources of U.S. rare coin prices, and try to point out the strengths and weaknesses of each.  No published guide is perfect, or 100% accurate.  The operative term here is, "guide".  Most pricing services rely on market participants to play straight and make accurate reports of sales transaction details, and not hedge or distort their data to gain advantage in an upcoming transaction.  In some cases, it could truly be "garbage in, garbage out", so a purchaser has to obtain a comfort level for the price that he or she is paying for any numismatic piece after requisite research.  And that means comparing prices for identical type/series, date, mintmark, and grade if a visual comparison can be made with some degree of accuracy, say through the use of high-resolution digital images.  Once again, not perfect, but better than no comparisons at all.  This in itself is an "approximate" approach that is not as preferable as physically viewing the competition, since digital imaging does not provide an animated sequence of images as a coin is rotated in one's hand under incandescent light to observe luster, marks, blemishes, and strike.  But we are attempting to develop a "comfort level" or "reasonable man's assumptions" for what a reasonable price is based on the current competing choices in the marketplace.

Of course, we are all familiar with the difference between "wholesale" or dealer-to-dealer pricing and "retail" or dealer-to-customer pricing.  For sure, we know that the former, "wholesale", at a maximum, is all we can hope to be offered for a coin when we attempt to resell to the original dealer or one of his/her brethren.  And we also know that retail is that wildly marked up price that we must pay to become the proud owners of coinage.  Since I am running out of page space and time to make my bi-monthly deadline, I will turn this month's WCM Ezine into a Saturday Serial and continue this complicated topic next month, in August.  I had wanted to interview one or two top-rated high-volume /high-value coin buyers on this topic, but was unable to obtain a time slot on their busy summer schedules.  So I will do so in the interim for an interim piece within the next several weeks and I think you will be pleased with the results.   And, oh by the way, are any of you out there tired of receiving "ezines" that are nothing more than inventory listings of rare coins for sale.  Complain to the dealers involved, because ezines are supposed to be informative numismatic enlightenments, and not just an avenue for selling you something.  B&M and other offenders, shame on you for bastardizing the "new era" English language.







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