BULL MARKET IN U.s.
Rare CoinS? .....
( November, 2001)
financial markets have decimated the retirement plans of millions
of Americans, the investing pendulum has not swung sufficiently
toward the tangible asset ledger to proclaim a new bull market in
tangibles has begun. U.S.
rare coins have been performing much better during the recent 1997
to 2001 period than the preceding major bear market period of 1989
to 1995 where they lost almost 70% of their value.
While rare coin prices ceased declining like a dot.com’s
2000/2001 income statement, the subsequent recovery in prices has
been modest on both a cumulative and annual basis.
By most measures, U.S. rare coins have advanced a mere 20%
to 30% over the last 5 years, so we have a bounce, but not a
verifiable bull market at this junction.
While we can all appreciate positive returns over any given
period after the stock market debacle most have experienced since
March, 2000, we need
rare coins to recoup dealers’ margins in a 1 to 2 year period,
not over a 5 year period. So
the rare coin purchaser of 1996 is still looking to just break
even in many cases were he or she to resell in today’s market.
No bull market there.
there is a lot of bull is in the rare coin industry itself.
dealers after the September 11th terrorist attacks
provide statements that business was dead immediately afterward,
but it has gone back to normal or better thereafter.
The very honest and forthright dealers that I have
conducted business with over the last 5 years tell me quite the
opposite. Business is
just crawling forward, except for generally inexpensive material
in the $1,000 or less category which includes most modern
super-hyped and over-priced U.S. coins.
These are the State Quarters, Franklin Halves, Kennedy
Halves, West Point Mint American Gold Eagles, Proof Silver Eagles,
and any other post-1933 American coin that was produced in the
millions and thousands and will never be rare, even in high states
of preservation. And
this includes the super high-grade modern coinage placed in MS67
to MS69 PCGS or NGC holders, then pushed onto unsuspecting
neophyte collectors as a genuine investment.
Bullion coins such as American Eagles were never intended
for circulation, so who should be surprised when one finds them in
high Mint State grades. The
impartiality of the grading services comes sorely into question
when they get involved in promoting the certification of any type,
series, date, or mintmark of U.S. coin.
Bluntly put, this industry has more whores than the Red
Light district in Amsterdam.
the opposite side of the spectrum, the semi-key and key date
classic rarities such as Bust Dimes, Quarters, and Half-Dollars
are doing quite well. Early
dollars of the 1796 and 1997 ilk are also doing well, but no one
should be surprised here either since even in Very Good condition
these artifacts are immensely collectible and almost always
popular. In this
higher priced zone, the thought emerges that fairly affluent
collectors continue to accumulate high quality material (versus
super high grade, “condition rarities”) in both good times and
toned coins, say rainbow or multi-colored Morgans, are also
selling well, but this may say more about the historically solid
demand for this large, attractive silver dollar than any change in
buyer preferences post September 11th.
One of my favorites, Deep Mirror Prooflike Morgans, are
also doing well, but their trend has been generally up in price
over the last 4 years, a reflection of solid, persistent demand.
So very attractive coins such (as lustrous, original patina
gold coins), in general, almost across all series, that are
modestly priced at no more than $3,000, are finding a home quickly
in this environment. And
I am not talking about Blast White silver coins here only, since
those that shine the brightest have likely seen the dip at some
point in their lengthy lives.
Surprisingly, some investors are buying St. Gaudens Twenty Dollar
gold coins as a bullion play, but only a Very Fine or lesser grade
/ common date coin could serve this purpose to any extent without
the buyer paying a premium over melt that would stand little
chance of ever being recouped at a future sale.
Unfortunately, the level of knowledge of newcomers to
numismatics and precious metals is not sufficient to shield them
from the hucksters out there.
And the hucksters are as legion as the biblical locust that
swarmed the farmers’ field in the days of old.
It does not speak well of the moral fiber of our society
when rare coin dealers and precious metals brokers use a terrible
tragedy to misrepresent the intrinsic value of any product.
Claiming that certain European gold coins, of which
thousands survive in Very Good to Extremely Fine condition, will
carry a numismatic value as well as provide the perfect vehicle in
which to own gold, is disingenuous at best.
There are other more accurate adjectives I could use, but
my lawyer is on vacation. If
you are interested in truly rare coins, buy them for their rarity
and not their bullion content; likewise, if you are interested in
acquiring gold and/or silver bullion, stick to American Eagles,
Canadian Maple Leafs, South African Krugerrands, bullion bars in
both gold and silver, and 90% Junk Silver Bags.
Kind of like avoiding buying a motor vehicle that is
advertised to be smooth as silk on the highway, yet be able to
climb 55 degree inclines with aplomb.
I think they are called SUV’s.
Not really good value on either terrain.
The effects from September 11th on both business and
consumer travel and on the delivery of mail and parcels could be
even more damaging to the rare coin industry, at least in the
evidenced by the recent Long Beach show in early October, many
habitual attendees did not feel comfortable boarding a jetliner to
pursue their hobby. I
think an honest evaluation of the show would be “mediocre”. Once again, the middle segment of the rare coin pricing
spectrum in the $3,000 to $10,000 zone, did poorly during the
show. To me, as an
former registered investment advisor
for some 16 years at this junction, I perceive
this “good liquidity” zone as the cornerstone for any
sustained bull market in U.S. rare coins.
This is the price region where financial market investors
have been making regular trades for their accounts for the last 20
plus years, and where investors are now comfortable about making
an individual financial (or tangible) commitment.
Not until more of these investors re-allocate 5% to 10% of
their available funds (after a begrudging realization that stocks
aren’t re-entering a new bull market any time soon) will the
overall U.S. rare coin market enjoy a traditionally inclusive bull
market. Forget about
the spectacular bounce we have had in October from a grossly
oversold condition in stocks.
As a bear, I want to thank all of those impatient and
possibly uninitiated investors out there that have bid stock
prices back up. Bear
market rallies provide superb shorting opportunities (for the
experienced investor only).
I recently mailed a coin via Registered Mail from Leesburg,
Virginia (40 miles outside of Washington, D.C., and outside
the nuclear blast zone) to New Hampshire, and after 9 calendar
days the prized parcel has not arrived.
This is disruptive to business, all business, but in
particular that of the rare coin industry that relies on the
secure and timely delivery of product to other dealers and
customers. A new
client who purchases a rare coin from me will become concerned
when his payment has cleared his bank, but his purchase has not
made it to his front stoop. Not insurmountable, since many aspects of this business are
based on mutual trust, but what if all mail goes through
irradiation centers for biological cleansing?
Could coins in plastic slabs be even minutely altered in
this process, and are the grading services on top of this one?
Hey guys, take a breather from Homeland Promotion and spend
a few moments on Homeland Preservation!
I know my thought process here is about as sunny as a
Nor’ Easter, but I think both consumers and dealers should be
aware of and address the changes to the numismatic landscape
brought about by recent and unfolding events.
question about the fear of traveling also adversely affects the
rare coin industry. National
and regional coin shows are probably the best venue for any
collector/investor to study, compare, and bid on a large selection
of “sight-seen” coins, and likewise, for dealers to make
substantial dollar sales and want list/inventory purchases in a
short period of time. Aside from the internet, they are the difference between a
good and bad year for many in the industry today, and the demise
of coin shows through reduced attendance will not positively
assist this already fragmented rare coin market.
Furthermore, the ability of dealers to take multiple or
overweight luggage full of wares onboard planes today, not to
mention the tricky question of actual searches of luggage by
security personnel, will be problematic going forward.
Dealers will search for other means of transporting coin
show or client specific inventory, and lead times for getting
material to its destination will be significantly increased.
Or if insured overnight services such as Federal Express or
USPS. Express Mail are utilized, then operating costs will
increase which will likely be passed on in coin pricing, if they
can be passed on at all. Higher
operating costs mean less capital available for inventory
purchases, which means lessened demand at the dealer or wholesale
level, and so on.
get me wrong. I still
think a genuine bull market in U.S. rare coins will eventually
lift all numismatic boats, but we just had some tragic boulders
throw in our path. If
we could just get rid of the manipulations in both the gold and
silver bullion markets, we could bulldoze the remaining obstacles
easily. When people
become uncertain, they search for stores of wealth that have
excellent liquidity. From
my own professional experience, rare coins priced over $10,000 are
not particularly liquid. Coins
priced in the $3,000 to $5,000 range are much more liquid, and are
effectively the calves that will eventually turn into bulls.
And this is the range ($5,000 to $10,000 lesser so) that is
primed for receiving old dollars and new dollars that
traditionally would have gone into stocks.
I rest my case.