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BULL MARKET or JUST MORE BULL?
(December, 1999)

When is a bull market not a healthy bull market by historical standards?  When the majority of issues or coins are not fully participating.  This is somewhat of the situation we have in the U.S. rare coin market today.   Taking a page from the New York Stock Exchange where only 34% of all issues or stocks are above their 200-day moving averages, the U.S. rare coin market would be deemed to have had “bad breath” in 1999 also.   By this expression, one means that the number of coins gaining for the year-to-date is less than the number losing ground.  However, the average collector or investor would not get this impression from the verbiage some rare coin dealers use to describe today’s market:  “red hot”, “sizzling”, or as a “strong bull market”.   The F.T.C. should have a problem with this degree of hype were they not asleep at the switch, and so would the S.E.C. if rare coins were regulated assets.  I do feel that eventually U.S. rare coins will come under Federal regulation, especially if the kind of broad bull market I see developing in the not-too-distance future brings in many current equity market participants.  These new players, with stock liquidation proceeds bulging from their pockets,  may be dismayed at what passes for honesty and full disclosure at times in the trading of rare coins.  This is why it is of the utmost importance for a novice or even experienced rare coin collector or investor to build a relationship with intermediaries who have the highest ethical standards.  As I know firsthand from my dealings with one of the best-known rare coin dealers in the U.S., mistakes or misrepresentations can be very costly indeed.  I no longer do business with this particular dealer who has, in my opinion, become more interested in promotion and sales than maintaining the highest quality standards.

Using dealer bid prices from the Coin Dealer Newsletter or greysheet for sight-seen Mint State 65 graded coins, one can track specific coin prices for the most recent 2.8-year period.  The table below is a summary of some of the data for the individual coins that comprise the Twelve Piece U.S. Gold Set, and it should be emphasized that the prices shown are for the most common date of each type.  This observation is key in understanding the divergence in performances between key and semi-key date material versus common date material, particularly so far in 1999:

Coin Description 1997 Performance 1998 Performance 1999 11/26/99 Performance   3-Year Cumulative
           
$1 Type I -7.1%   1.6% -10.2%   -15.2%
$1 Type II 9.6% 37.5% -14.5%   28.8%
$1 Type III -7.7% -1.1% -8.7%   -16.7%
$3 Princess 0.0%   7.8% -14.4%   -7.8%
Four Piece Set 5.6% 28.0% -14.1%   16.1%
$2 1/2 Liberty -4.2% -4.3% -18.8%   -25.6%
$2 1/2 Indian -5.4% -15.2% -19.2%   -35.1%
$5 Liberty w/ 5.0% -9.5% -34.2%   -37.5%
$5 Indian 6.2% -4.2% -15.1%   -13.7%
$10 Liberty w/ 0.0% -3.5% -28.5%   -31.0%
$10 Indian 1.2% -8.3% -31.5%   -36.4%
$20 Liberty Till -3.3% -1.4% -30.1%   -33.3%
$20 St. Gaudens -11.7% 13.2% -13.6%   -13.6%
Eight Piece Set 1.5% -5.5% -23.0%   -26.2%
Twelve Piece 4.1% 15.7% -16.8%   0.3%

So for the most common date material, i.e., that particular gold type coin with the highest combined PCGS and NGC population counts in MS65, this has not been a particularly good year.   It is said that these U.S. Generic Gold coins trade in sympathy with the price of gold, and although I don’t know how statistically significant this correlation actually is, the tracking with bullion’s turbulent year is depicted on the downside with gold’s pre-September 22nd demise.   To date, this category has not been granted any benefits from gold’s rise from $255 to today $292 per ounce, but I think a bullion price above, say $325, will turn the tide here also.  That price should also put some serious hurts on the likes of financial paper manipulators such as Goldman Sachs.  The Performance History page on this website is in need of updating to reflect this recent pullback, I know, but a rise after a prolonged bear market is normally followed by a similar retracement in what is known as a double-bottom or “W” formation.  I think we are very close to having a strong rally in even these most common of gold coins due to a renewed surge in demand from additional participants more than any immediate reduction in supply (coins purchased and taken out of the market for an extended period of time by long-term players).  So don’t leave your investing experiences learned from trading stocks behind when you delve into the numismatic marketplace.  If true value can be established even from a semi-rare standpoint, BUY ON THE DIPS!

However, I want to remind everyone that I never recommend buying the most common date of any U.S. coin, gold or silver.  Scarcity or rarity should always be a key tenet to any pursuit of collecting or investing in numismatics, or I suggest one should just concentrate on bullion coins and don’t call it collecting.

Furthermore, regarding the performances shown above, I think there is a surplus of Generic Gold coins, these readily available types and dates, in dealer inventories, stockpiled perhaps in anticipation of more Y2K interest on behalf of the general public than has materialized to date.  The discovery of thousands of 1908 Without Motto Saint Gaudens $20 in Mint States 65, 66, 67, and 68 is a prime example of how a hoard can have a devastating effect on price regardless of the marketing dollars spent to promote the issue; personally, I have heard rumor that these coins weren’t even held in a Wells Fargo bank vault.  Similarly, when the dust finally settles on the $20 Liberty Type II’s (not shown) that are associated with the shipwreck Brother Jonathan, this San Francisco mint issue will eventually experience price erosion versus any premium for pedigree; this would occur even though $20 Liberty Type II’s have shown an 8.1% cumulative gain over this 2.8 year period as a type that is much more rare than the 1904 Type III $20 Liberty shown above, with only a handful of coins in MS65 condition across all years of mintage to begin with.

Another outstanding exception, of course, is the $1 Type II, a 3-year only issue, that is very rare in MS65, hence the current dealer-to-dealer price of $47,000 or retail (Coin World Trends) price of $60,000, and the best cumulative performance of any gold type coin shown.  For all intents and purposes, the $1 Gold, Type II is neither a common date coin nor is it considered generic gold due to the mere fact that only 73 examples have been graded by both PCGS and NGC in Mint State 65 condition.  Basically, a true type rarity, and one of my favorite U.S. rare coins in MS63 and MS64 condition, which also does not necessitate taking out a second mortgage to own.

As with any editor in this light speed of the internet, I must meet a deadline today, so I will add one or two more juicy bits of analytical data to the mix before transmitting.  I want to give readers an analysis of Morgan Dollars, but the level of detail I have in my database suggests that the next Market Update contain this info.  In closing, here is some additional food for thought:

SEATED LIBERTY HALF Dollars (1839-1866) Mint State 65 1997 Gain/(Loss) 1998 Gain/(Loss) 1999 (11/26/99) Gain/(Loss)   Cumulative Gain/(Loss)
NO MOTTO (1839-1866) -7.3% 17.9% 1.0%   10.4%
W/ ARROWS (1873-1874) -7.7% 3.3% 2.4%   -2.4%
WITH MOTTO (1866-1891 0.0% 12.9% 4.3%   17.8%

Remember, the above is the most common date of each series. 

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May's Market Update