US Coins

Previewing 2017: Some lessons to learn from three collectors

To open 2017, Steve Roach tackles the appeal of rare coins and why they command the hobby's attention. Below is the second segment of his extensive look at the rare coin market as it exists today and what may garner attention in the coming year:

As the stock market reaches for record heights and precious metal prices stay at relatively stable levels, one wonders where the rare coin market is headed in 2017. With all of the potential for change under a new presidential administration, many are optimistic but cautious; hesitant to make any major changes in their investment strategies and perhaps waiting for the right time to buy rare coins.

Will established collectors come out and buy rare coins in 2017? Will new collectors and investors enter the rare coin market, increasing demand?

If you’re interested in stepping up your rare coin game, or if you’re entering the rare coin marketplace for the first time, you should look at the rare coin market as it exists today and seek to understand the pitfalls and possibilities inherent in rare coin investing. Smart coin buying today requires at least an awareness of the changes that might impact the future when it comes time to sell. 

Lessons from three collectors

In addition to Pogue, a number of other top collections have come to market recently — perhaps most notably Eugene Gardner and Eric Newman. These three collections alone have released roughly $200 million in U.S. coins in the marketplace in just over three years. Pogue had only around 650 coins in his collection, with an average value well into the six figures. His coins since they were sold have reappeared rarely and have settled into the collections of long-term collectors, while the trading velocity of the Gardner and Newman coins has been faster.

Read more of Steve’s look ahead at the 2017 rare coin market:

1835 Coronet centThe appeal of investing in coins: Even though it may not feel like it all the time, there are still hundreds of thousands of people who collect coins and millions who have fond memories of coins.

1942-S Washington quarter dollarThe strategic advantages of investing in coins:This is often seen in 20th century U.S. coins. A 1942-S Washington quarter dollar has a mintage of nearly 20 million pieces and is considered a bullion coin in circulated grades.”

Two oft-repeated pieces of advice in rare coin investing is to buy the most expensive coins one can afford and to focus on the rarest coins in the finest grades. There’s a general concept across collecting categories that the highest caliber of objects is most desirable for investing, but this is not universally true.

Mei Moses Art Indices, a data-mining art market analytics tool that evaluates the strength of the art market against other asset classes has found that as an investment, masterpieces can underperform more pedestrian works. When a record price is paid for a top-level object, a buyer is less assured of being able to sell the work later for a profit. This may be seen in Pogue, as the prices paid in the sale were high — often at record levels — because of the combination of provenance, quality and rarity. But this rarity makes a “masterpiece” harder to sell at a profit and often the high prices achieved initially for “masterpieces” are from a combination of excited overbidding that may not happen again.

Pogue’s 1804 Draped Bust dollar graded Proof 68 is considered “The Finest Known Example of the King of American Coins,” and as Stack’s Bowers wrote in its description, “No other coin so singularly symbolizes the ultimate levels of rarity and desirability in American numismatics as does an 1804 dollar.”

It was estimate to sell in May 2016 for more than $10 million, and in doing so, would have set a record for a rare coin at auction. Yet, Pogue set a reserve price above the $10 million level, and when it was offered in Part IV of the Pogue Collection in New York on May 24, 2016, it failed to sell.

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After the auction concluded, Stack’s Bowers Galleries said, “A world record sum of $10,575,000 was bid from the phone for the finest known 1804 dollar, the highest price ever offered for any coin, but it did not surpass the consignor’s reserve price.” In this case, the seller decided he valued the coin more than money.

However, had it sold, for the winning buyer to make a profit the coin would have to appreciate in value and the underbidders would have to be willing to go even higher. A risky proposition indeed if purchased for a pure investment.

Few Pogue coins have returned to market, and when they do they usually sell for slight discounts at auction when compared to their original Pogue price. An 1836 Classic Head gold $5 half eagle graded PCGS Mint State 64+ sold for $22,912.50 at Pogue IV in May 2016, and then sold for $21,150 when offered a few months later at Heritage’s August 2016 American Numismatic Association auction in Anaheim, Calif.

Eric P. Newman’s coins provide a different story. Newman collected decades ago and many of his coins were purchased in the 1940s. The concept of quality was different then, well before the advent of third-party grading and before Mint State grades were clearly articulated in the fine ways they are now, where the difference between an MS-64 coin, an MS-64+ example and an MS-65 coin may mean thousands of dollars. Newman collected thousands of coins that he liked: some were exceptional and others were less so.

When Heritage sold Newman’s coins on behalf of the Newman Numismatic Education Society at a series of auctions over the past few years, the coins were all graded by NGC with special Newman labels. Many have since reemerged in the market in PCGS holders or in non-Newman labeled NGC holders, as sellers look to both increase grades and to make the coins more marketable by making the original sales price less transparent.

A dealer looking to sell a Newman coin may find collectors resistant to paying more than it sold for at the original auction. Reholdering it can minimize the effect of its past sales price.

Among highlights of Newman’s collection were his gorgeous Proof Seated Liberty silver coins with spectacular “bull’s eye” rainbow toning. His 1882 Seated Liberty quarter dollar graded Proof 68 Cameo by PCGS, with a green Certified Acceptance Corp. sticker indicating quality within the grade, sold for $21,150 at Heritage’s second sale of the Newman Collection in November 2013. It went to the Gardner Collection and the next year was offered by Heritage where it sold for $18,880. It then crossed to a PCGS holder and sold for $21,150 at a February 2016 Heritage auction. Finally, it was offered one final time at Heritage’s October 2016 New York Auction where it sold for $19,387.50.

While it changed holders, this coin’s pedigree as a Newman coin will likely not be forgotten as it has distinctive toning, and its multiple quick repeat sales at auction will be long-remembered by potential buyers.

While the Newman/Gardner Seated quarter dollar is a solid type coin with easy appeal and broad collector interest, more esoteric coins don’t fare as well when reoffered quickly.

Newman’s collection was rich in early Colonial issues from the first years of the United States. The collector’s rare 1787 New York Excelsior copper, with Indian and New York Arms designs, graded About Uncirculated 50 by PCGS with a green CAC sticker, sold for $88,125 at Heritage’s Newman V auction in November 2014, and then resold for $73,437.50 and $64,625 at Heritage’s January 2016 FUN and August 2016 ANA auctions, respectively. The market for the Newman Proof 68 quarter dollar is simply much broader than for a rare Colonial coin, and unusual coins rarely fare well when reoffered quickly at auction.

Coins from the collection of Pennsylvania collector Gene Gardner provide a third set of lessons. Gardner was a voracious collector who sold his first coin collection in 1965. When asked about the sale of his collection back then, Gardner explained that he had married in 1963 and said, “Suddenly we needed things. Unless I went cold turkey, I was never going to get away from it. So I decided to sell the coins, put everything behind me, and move on.”

Gardner would seriously reenter the rare coin marketplace in the mid-1990s and would put together a massive group of rare U.S. coins including strong holdings in early U.S. copper coins, Bust silver coins, Seated Liberty coins and Barber coins. The four main Gardner auctions by Heritage in 2014 and 2015 realized more than $50 million.

These important coin collections cross-pollinate, as a sale from one strengthens another. Gardner’s About Uncirculated 50 1802 Draped Bust half dime was one of the last acquisitions by the Pogue family. It sold for $352,500 at Heritage’s June 23, 2014, Gardner sale, but resold for $305,500 at the first Pogue sale in May 2015. As an interesting side note, that same coin had been graded Extremely Fine 45 by PCGS when offered at Heritage’s 2009 Central States Numismatic Society auction where it sold for $195,500, showing that grades, like values, are not always constant.

Sometimes stretching for a rare coin is profitable. Gardner said in an interview, when remembering his bidding on an 1876-CC Seated Liberty 20-cent piece in the Louis E. Eliasberg Sr. Collection in 1997, “The coins in Eliasberg were all raw. They were not graded. So it was dependent on your ability to grade, and frankly my ability to grade was zero — certainly compared to the people I was competing with, who were some of the real experts in the field.”

He paid $148,500 at the time, and Gardner recalled in 2014, “at the time everybody seemed to think [that] was a remarkable price. The good news is it’s worth more today.” When it sold in Heritage’s June 23, 2014, Gardner auction — now graded MS-64 by PCGS — it sold for $470,000. Nearly two decades off the market made it fresh and desirable, just as it was when offered in 1997 after being held in the Eliasberg collection for generations. 

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