Doug Winter’s Answers to this Years “Rosen Report” on the state of the Rare Coin Market
Every year, I participate in the Rosen Report in which I (along with an impressive panel of fellow dealers) answer a series of timely and interesting questions which pertain to the rare coin market. This year’s version of the report was interesting and I think that you will find my answers to be informative.
Please note that all of the questions are as asked by Maurice Rosen; the answers are the exact ones which I gave to him.
1) What is your outlook for the coin market in 2012/2013?
I think we are going to see a continuation of what we’ve seen in the last few years. The market for rare coins is extremely bifurcated right now. The solid “collector quality” coins in the $1,000-5,000 are very strong. When I get in a neat, rare, affordable coin with a good story and/or nice appearance it sells almost immediately on my website. And the market at the upper end is very strong. If ultra-rarities or important pieces become available (typically at auction), they sell for great prices. As an example, Steve Duckor’s St. Gaudens double eagles, which are in the 2012 FUN sale, will bring exceptional prices across the board. But the “middle end” of the market is soft and in danger of becoming softer. Coins that are $10,000-30,000 and not especially nice or interesting or rare are really, really hard to sell right now.
2) What areas of the market will be the strongest in 2012/2013? Why?
Nice early gold in the AU55 to MS63 range (with CAC approval) is an area that seems like it is strong right now and will continue to be strong. Really nice Dahlonega gold has quietly become very strong in the last year. Rare dates or rare varieties in avidly collected series like Large Cents, Bust Half Dollars and Type One Liberty Head double eagles will be strong. The reasons for my choosing coins like this are threefold: the coins are already popular with an avid long-term collector base; they are legitimately scarce with a manageable supply/demand ratio; they are photogenic, interesting coins with a good story to tell.
A few other areas that I expect to see strength in during the next year: Civil War era coins (150th anniversary of this conflict), low mintage/low population Liberty Head half eagles and eagles (quietly becoming a strongly collected area of the rare gold market) and “Gem slider” examples of nearly any coin from the 1793-1893 period.
3) What areas will be the weakest? Why?
As I write this (November 2011), generic gold comes to the top of the list but, with a combination of factors, this could change. There is little demand for most generic gold (with the exception of MS65 and better Saints with CAC stickers) and I don’t see this situation changing as long as the major marketers don’t sell it.
Other weak areas will include almost anything that isn’t at the very least solid for the grade. Collectors have become more sophisticated in the last few years and they want nice looking coins, no matter what the holder says.
Another area that seems really weak now is Commemorative Gold (except for Pan-Pac $50’s). In my area of specialization (rare date gold) the coins that are hardest to sell now are Charlotte issues and condition rarity Type Three double eagles (by this I mean dates that are relatively common in lower grades but scarce in higher grades).
4) A) What new collecting trends are emerging that look to make investments there worthwhile? B) Which specific issues look appealing?
The biggest “trend” I note right now in the market is that newer collectors and investors have so much more information at hand because of the Internet that they are naturally attracted to scarcer and more interesting coins than in the past. Prior to this access to information, collectors were “sold to” by dealers. Now, they tend to be better informed and more interested in things that aren’t solely grade-based. Let me give you an example. In the past, an investor would read about a coin like an Indian Head half eagle in MS65 and be fed the usual story about how it was a beautiful coin, a condition rarity, etc. Today, the same collector is likely to do his own due diligence (for better or worse!) and choose a coin like an 1864 half eagle in nice AU instead.
Given this access to information, issues that look appealing to me are ones that have good “statistics.” By this mean, I mean coins with low mintages and low populations.
One other thing the Web has done is to make photogenic coins more popular. When I put a great looking coin on my site, it sells quickly. I’m certain that the image helps.
5) Unfavorable markets bring out the most complaints. What are the common themes you hear and how do you respond to them?
I can only answer this question from the perspective of my clients and what I hear from them, specifically. The biggest complaints tend to be about the grading services and the problem coins that continue to get graded by both services. My responses tend to be along the lines of this: the grading services do make occasional mistakes but by choosing a good dealer, learning the basics of eye appeal and purchasing coins with CAC approval whenever possible, this will help to mitigate the potential problems inherent in third-party grading.
6) Many believed that new investors first buying bullion would later buy numismatics. How has that been working out?
Not very well! They’ve basically done well enough buying bullion (especially if they bought a few years ago) that they’ve just bought more bullion. Hard to argue with bullion investments, especially if you can cost average your gold at less than $1,000 per ounce.
7) What shifts in demand have you seen in light of the recession and poor economy.
A lot of the “stupid money” that you saw thrown at the coin market before the recession has vanished. In 2005, 2006 and 2007, I was selling expensive coins to both collectors and dealers who didn’t really know what they were doing and didn’t really want to take the time to figure out the basics of the coin market. These people are mostly gone. The disappearance of the non-discriminating buyer is the reason why there are many fugly $25,000-50,000 coins floating around; no bottom feeders are in the market to put them into their “portfolios.”
Most people have less money to spend on coins right now so they want more bang for their buck. I have clients who were spending $100,000 a year on coins up to September 2008. They’ve cut back to $50,000 a year or even $25,000 a year and when they do buy something, they want it to be “special.”
8) Premiums on circ. to Gem Unc. generic gold type collapsed in 2011. What is necessary for premiums to recapture higher levels, or do you doubt that happening? Please explain in detail.
Premiums are so low because there is no real market right now for these coins. If Blanchard and Swiss America decided that they were going to do promotions on MS63 Saints and MS63 Indian Head eagles, you’d see the premiums skyrocket. Heritage and other firms keep repatriating generic gold coins from Europe but there are no marketers waiting to buy (or market) them. The supply is huge right now and the demand is relatively low. Also, the cost factor is overlooked. When Saints were $1250 a coin, they were a lot easier to sell to recession-strapped buyers than now when they are $1750-2000+.
9) My annual report on NGC and PCGS: A) How have they been grading coins this past year? B) What changes/improvements would you like to see?
I thought that grading was decent but unspectacular in 2011. I still see coins in new holders that are doctored and some that seem so blatantly so that it makes me scratch my head and ask “how did they ever miss that?” But the level of consistency that I experienced, personally, in 2011, from both PCGS and NGC was pretty impressive. I think something that everyone has to remember is that you usually don’t see the coins that are undergraded or even properly graded in dealer’s inventories or in auctions. Those coins are easy to sell and they get placed with good clients. What you usually see are the overgraded coins that are “hits” for the submitters.
I was intrigued by PCGS’ Secure Plus service when it was first announced but have been pretty underwhelmed so far. It doesn’t seem to have much of a foothold in the market and some of the coins I’ve seen in Secure Plus holders are merely overgraded/doctored coins that were re-packaged by submitters to make them seem “fresh.”
10) A) Given the likelihood of greater government encroachment in our lives, what new regulations might our market face? B) How can investors today best prepare for them?
It seems likely that an Internet tax or some sort of VAT will become a reality in a few years. I’m not totally certain how that will affect the market but I can’t believe it will be a positive.
As local, state and federal governments become more and more strapped for revenue, they will seek out more and more sources. Unregulated markets like numismatics and bullion seem likely candidates.
11) Two sophisticated investors come to you for a portfolio for the long term, one investing $25,000, the other $250,000. How would you construct those portfolios?
$25,000 portfolio: I’d probably look to construct this with three or four neat pieces. I’d choose from the following sorts of coins: MS64 or MS65 Large Size Bust Dime with great color and original surfaces (getting extremely hard to find; most are either very dark or have been dipped and are bright white), No Motto Seated Quarter or Half Dollar in MS64 with attractive medium natural color and minimal rub (I seem to choose these every year but still love the value and rarity that these issues offer), No Motto Liberty Head half eagles in MS63 (these are becoming popular and still and offer good value) and nice AU58 Type One Liberty Head double eagles with a large price jump to the next highest grade range. Whenever possible, I’d choose CAC approved coins.
$250,000 portfolio: I’d look to construct this with fewer than twenty coins and maybe as few as six to ten great individual pieces. I’d choose from the following sorts of coins: accurately graded “Gem slider” 18th century silver type (most AU58 early type is way overgraded and seldom original), PR-64 to PR-65 Proof Bust Dimes (these seem to be great value at current levels), Gem No Motto Seated Quarters and Half Dollars (especially those from the 1840’s; GREAT VALUE!!), PR64 and PR65 ultra low mintage gold dollars, quarter eagles and three dollars, 1860 to 1880 (lower market premium factor than in the past and in most cases still affordable), well-pedigreed Charlotte or Dahlonega quarter eagles and half eagles in MS62 and above (in many cases priced lower than the market highs of 1999-2001), interesting high grade Condition Census half eagles and eagles from the 1840-1870 era (available, from time to time, for less than $20,000 and seemingly a great long-term hold), CAC approved early gold in the AU55 to MS63 range (worth paying a premium for).
If the right $250,000 rarity became available, I might suggest to the investor to “put all his eggs in one basket.”
The next several questions ask for your favorite Best Buy issues within certain groups. Please state specific recommendations and reasons for your choices. If you don’t particularly like a specific group, please state why.
12) What are your Best Buys among U.S. Type Coins, Mint state and proof?
Every year I select the same basic type coins and, true to form, this year I’m sticking with Mint State Bust and Seated Dimes and Quarters in MS64 to MS65. I’d look for coins that had attractive light to medium color and were as problem-free as possible. I’m less of a fan of Proof type although I love Proof Bust coins of all dates and denominations. I’d strongly suggest being very careful buying these (especially half dimes) as many coins in “Proof” holders are actually P/L business strikes.
I love silver type coins with great color. The premium for superbly toned Seated and Barber coins is far less than it is for similar colorful 20th century coins and this makes no sense.
I really like nice MS63 and MS64 Brown Large Cents from the 1820-1840 era. They seem hugely undervalued to me. Same with Red and Brown Cents from this era as well.
12) What are your Best Buys among U.S. Gold coins?
Fresh, original skinned early gold in AU55 to MS63 (it’s very liquid, very historic and very popular); properly graded southern branch mint gold in AU55 and AU58 (it’s a good value right now and choice pieces still don’t bring the premiums they deserve), No Motto Liberty Head half eagles in MS62 and MS63 (still very affordable and often priced at fractions of the MS64 levels).
Amongst the more generic issues, I like MS63 and MS64 Three Dollar gold pieces and CAC-approved high end MS64 common date Indian Head half eagles. Both of these areas could see a big rise in price if they were given a gentle push by a promoter.
13) What are your Best Buys among U.S. Silver Dollars?
I’m not really qualified to answer this.
15) What are your Best Buys among U.S. Commemoratives, silver and gold?
I like fresh, nicely toned silver commemoratives from the 1910’s and 1920’s in MS65 and MS66. I like the specific coins that are really nice but not so nice that they bring multiples of bid. I thought the pieces in the Guttag family hoard that Stack’s Bowers has been selling at auction since the 2011 Summer ANA sale were really neat, for the most part, and as fresh as you could imagine.
16) What are your Best Buys for 20th Century series coinage?
At current levels, Gem MS65 Full Head Standing Liberty quarters seem like a pretty good value to me. Same with Gem MS65 Walkers from the 1923-1934 era. I like coins that are lightly toned and as original as possible.
Although they aren’t technically 20th century coins, Barber Dimes and Barber Quarters from the 1900-1916 era seem awfully cheap right now. Nice MS65 pieces with CAC approval are under $1,000 per coin and seem to have very little downside.
17) What are your Best Buys for Generic and Modern issues?
I personally don’t think any generic issues or moderns are “best buys.” But if I had to choose one area, it would be something like MS62 $20 Libs and Saints where the premium is currently so amazingly low. One good promotion could increase the premium by 10-20% on these.
18) What are your Best Buys for any other areas of your choice?
A large percentage of the coins on the market today, regardless of series, are unattractive and unoriginal. I think a true “best buy” for collectors are coins that are pretty, wholesome and unmessed-with. In certain series, it is nearly impossible to find choice, original coins any more. Collectors who spend the time to learn what originality looks like and who don’t compromise on quality, no matter if a coin is $1,000 or $1,000,000, will be building the sort of collections that will appreciate far more than collections that have lower-end coins.
19) A) What one series strikes you as particularly undervalued? B) What are your best picks there?
I’d have to say that Liberty Head quarter eagles and half eagles probably offer the biggest bang for gold coin collector’s buck right now. In the quarter eagle series, there are still numerous dates that are very scarce to rare that can be purchased in comparatively high grades for $1,500-3,500 per coin.
20) What is your favorite put-away coin? It can be a cheap one you like in quantity or a specific high-priced issue. Please explain your choice.
There are two types of coins that I will either put away for a few years in my personal holdings or anguish a bit before I sell them. The first are No Motto Seated quarters from the 1840’s. I just can’t believe how cheap some of these are. I recently had a nice PCGS MS63 1845 in stock and priced it at $1,500. That just seems absurdly cheap to me for a coin of this scarcity.
The second is a beautifully toned, crusty and original quarter eagle or half eagle from Dahlonega in the AU grades. Even long-time specialists don’t realize how hard it has become to find non-processed examples of even the most common dates. There are some issues where there are probably fewer than ten known in AU that are still original. Despite the rarity of these coins, they can still be bought for around $5,000 each.
21) A) How successful are our industry groups promoting coin collecting to the public? B) What ideas do you have?
I’d have to say that the rare coin industry has done a pretty mediocre job of promoting coin collecting. A few observations: 1) the Mint has an enormous budget and funnels a lot of money out of the rare coin industry without putting much back; 2) we need to be doing a better job of appealing to younger people. For a brief moment back in the late 1990’s, coins became semi-hip to young people because of the State Quarter program but we weren’t able to build on this momentum and we lost nearly all of those potential collectors; 3) as an industry, we could learn a lot from the art business. Our conventions are drab, our auctions are boring and there are few good retail outlets left for collectors to come and view actual coins
One thing I’d like to see is the development of some really good coin apps for the I Pad and I Phone. I have some really good ideas about this but right now they are proprietary.
22) A) How important is rising inflation concerns for the demand side of coins? B) What’s your outlook for inflation over the next three years?
Ask an economist—I’m just a simple coin dealer!
23) For investors looking to play higher silver prices, what are your best suggestions and why?
24) Same question for investors looking to play higher gold prices.
25) What changes/improvements would you like to see for price reporting in the various Greysheets and other publications?
I’ve been pretty outspoken about my dislike for the job that the Greysheet and Trends are doing with price reporting. They are wildly inaccurate for many coins and they seem to deliberately refuse to raise (or lower) prices even after an auction trade (or two, or three) confirm that their reported levels are just plain wrong.
It’s very, very difficult to accurately price report all series of United States coins and I understand this. Both the Greysheet and Trends have had talented people working for them but I think it’s a thankless, overwhelming job.
It seems like it would be a good business for someone to create a good on-line pricing site that was based more on actual sales (at auction and through private treaty) than value estimates.
Do you have any comments about my answers to the 2012 Rosen Report questions? I would be happy to discuss any of these in further detail with you via email. Please feel free to contact me at firstname.lastname@example.org