A Weekly CoinWeek Column by Greg Reynolds
News and Analysis regarding scarce coins, coin markets, and the coin collecting community #134 …..
When I wrote about 1904 Philadelphia Mint Half Dollars two weeks ago, I pointed out that a 1904 half in Good-04 grade costs less than $18, while the finest known Duckor coin, which is PCGS graded “MS-67+” and CAC approved, was auctioned for $51,750 on Aug. 11, 2010. Such a difference in price does not only relate to 1904 halves. Since there is often a wide range in prices for U.S.coins of the same issue, important questions relate to which grades collectors should choose and why?
For different collectors, there are very different correct answers to the same questions. Nevertheless, the reality that higher grades are sometimes worth dramatically more than lower grades is certainly worth discussing. Frequently, beginners, and collectors who change directions, need to decide upon coin types and grade ranges that are best suited for them, respectively. The fact that one or two grade increments may amount to a very large difference in price should not be ignored.
As the topic of grading is complicated in all contexts, I am limiting this discussion to business strike, pre-1934 U.S. coins. The collecting and grading of modern coins is a whole different matter, which I have addressed before. (Clickable links are in blue.)
In the future, I will discuss grade ranges and corresponding values for Proof coins. Furthermore, premiums paid for prooflike coins or Specimen Strikings need to be addressed separately. Market values of Proofs, prooflike coins and Specimen Strikings are all beside the point that even one grade increment may result in a tremendous difference in price. It is beneficial to focus on business strikes while discussing the concept that higher grades are often worth much more than lower grades.
I. Accepted Standards
As the present discussion relates to differences in the values of coins of the same issue though of different grades, lessons in grading are not included. For clarity, I mention the grading terms that are employed by experts in the mainstream of the coin business and the coin collecting community in the United States. While thousands of Europeans and Asians are coming to accept U.S. standards in coin grading, it remains true that many collectors around the world continue to use other grading criteria.
In the United States, there are a few honest dealers and a small number of collectors who, in good faith, employ alternate grading criteria, sometimes their respective homemade grading systems that few others, if anyone, truly understand. More importantly, for every honest coin dealer who employs alternate grading criteria there are at least ten coin sellers who unethically, carelessly, and/or fraudulently employ alternate grading criteria. In all the years that I have been researching and writing about coins, including attendance of numerous coin shows and major auctions, plus innumerable conversations with collectors and dealers, I have found that most (though not all) of the people who employ alternate grading criteria are incompetent, extremely careless, and/or very dishonest.
Generally, U.S. coins are assigned grades that are, at a minimum, consistent with how experts at the PCGS or the NGC have or would grade the same respective coins. Yes, officials at the PCGS and the NGC have mistakenly graded thousands of coins; yet, they have graded millions in total. If experts at the PCGS or the NGC would grade a specific, individual coin MS-60 at most, it is questionable for others to represent it as grading ‘MS-65’ or as being ‘Gem Brilliant Uncirculated (BU)’!
In other contexts, I have mentioned that there are maybe thirty ‘coin doctors’ who have, on many occasions, managed to deceive experts at the PCGS or the NGC into grading coins that are not gradable or that merit much lower grades than those assigned. The abilities of a small number of coin doctors to deceive graders at the PCGS and the NGC are really beside the point in this passage, which relates to the representation of non-certified coins.
For many U.S. coins that are valued at less than $250, it is not financially efficient, from a dealer’s perspective, for these to be submitted to the PCGS or the NGC. Grading, shipping and insurance fees, in many such cases, will amount to a substantial percentage of the value of the coin, sometimes more than 100%. So, there are special concerns relating to the sale of coins that are valued at less than $250 each. Also, by tradition, most colonial coins and some circulated early U.S. copper coins are not encapsulated.
As for U.S. coins, other than generic gold coins, that cost MORE than $250 each, I am continually surprised and concerned that many of these, which are publicly offered, are not certified by the PCGS or the NGC. Indeed, advertisements in leading, respectable, coin publications sometimes list U.S. coins, valued at more than $250 each, which are not certified. I hypothesize that most of these, if submitted, would be assigned grades by the PCGS or the NGC that are lower than the grades represented by the sellers, respectively. Some such coins would probably be determined to be not gradable, because of serious problems, by experts at the PCGS or the NGC.
I wholeheartedly recommend that, when collectors seek to buy pre-1934 U.S. coins for more than $250 each, only coins certified by the PCGS or the NGC should be considered. Suppose that a coin that costs $500 and is said by the seller to grade “MS-64,” though is not certified. Further suppose that this same coin is submitted to the NGC on five occasions and to the PCGS on five occasions, after being ‘cracked out’ in between subsequent submissions. In most (though not all) such cases, neither the PCGS nor the NGC would assign a grade of MS-64 or higher to such a coin. Maybe it would be graded MS-62 or MS-63, or just MS-60. Indeed, many not certified pre-1934 U.S. coins would, if submitted, fail to receive numerical grades from the PCGS or the NGC, because of serious problems.
Yes, there are cases where a $500 ‘not certified’ coin is represented as grading “MS-64” and later is PCGS graded MS-64. These cases are exceptions, not consistent with the rule that, when not certified, pre-1934 U.S. coins (other than generic gold), are priced above $250, these are usually overgraded, in terms of widely accepted grading criteria.
I am not implying that all PCGS or NGC certified coins are desirable. I have seen PCGS and NGC certified coins that are terrible.
I am insisting that, for U.S. coins valued over $250 each, only PCGS or NGC certified coins should be considered. Of course, each collector should reject some PCGS or NGC certified coins and accept others. On average, though not always, I find CAC approved coins to be more desirable than PCGS or NGC certified coins that are not CAC approved. It is important, however, to not make generalizations and to evaluate each coin as an individual, in my view. Collectors should learn at least a little about coin grading and should often ask questions of experts.
Collectors who are buying coins that cost ‘a lot of money’ should seek the counsel of an expert before finalizing each purchase, if practical to do so. As for the amount that constitutes ‘a lot of money,’ this depends upon the assets, income, and financial responsibilities of each individual collector.
The same amount of money may be honestly regarded as ‘small’ by one collector and ‘large’ by another. Indeed, this is often true. Each collector should be careful about spending an amount that he or she personally regards as ‘large’ and consult an expert before doing so.
A collector who has $100 million, no children and no debt, could rationally spend $100,000 on a single coin without thinking much about it. A collector who has $1 million, five young children, and a hefty mortgage payment due every month, may wish to seek the advice of an expert before spending $10,000 on a coin. Many others may wish to ask questions of experts before even spending $100 on one coin.
I am very much aware that not everyone can afford to pay $250 for a coin. I am not ignoring relatively poor buyers. Collectors who cannot afford to pay as much as $250 for one coin, or who acquire many coins that cost less than $250 each, have even more of a reason to think about the issues that I am raising and to consider grading issues, for these collectors will often have to rely upon themselves to grade ‘not certified’ coins.
II. The Grading Scale
Collectors who are already familiar with the grading scale may wish to skip this section. As the scale used for coin grading is so unusual in the realm of art and collectibles, I maintain that it is necessary to publicly repeat it from time to time. Many coin collectors do not quite remember this scale, and it is not intuitively obvious.
Business strikes that grade less than 60 have wear that can be seen without magnification; these are often thought of as being ‘circulated’ though wear may come about in circumstances other than circulation in commerce. The following grades are traditionally used for “circulated” coins: Poor-01, Fair-02, Almost Good-03, Good-04, Good-06, Very Good-08, VG-10, Fine-12, F-15, and then there are four increments of Very Fine, -20, -25, -30 and -35.
There are two Extremely Fine grades, -40 and -45. Regarding some grades of -40 and above, a half-increment denoted by a plus (‘+’) sign is sometimes assigned by experts at the PCGS, the NGC or elsewhere. So an ‘EF-45+’ grade is between an EF-45 grade and an AU-50 grade. The use of plus grades by the PCGS and the NGC did not commence until the spring of 2010.
Experts at the CAC refuse to consider, or even recognize, plus grades assigned by the PCGS or the NGC. John Albanese, the founder and president of the CAC, states that “we ignore their plus grades and just consider [each already assigned] number grade.”
I am not sure whether to say that there are four AU grades or eight, as a plus may sometimes be found after any of them: AU-50, AU-53, AU-55 and AU-58. For reasons that will be further defended in the future, I maintain that ‘Extremely Fine’ is correct and the oft-used substitute ‘Extra Fine’ is wrong. A coin that grades more than Very Fine and less than AU does not have an ‘Extra’ element of fineness, it is, regarding the overall detail of the coin, extremely rather than very, fine.
Uncirculated coins are said to be ‘Mint State.’ While I have never been thrilled about the term ‘Mint State,’ in one important way it is logically superior to the term ‘uncirculated’ as a business strike that was never intended for circulation can be ‘Mint State’ even if it cannot logically be uncirculated.
As I mentioned in a recent column, most business strike Morgan Silver Dollars were never intended to circulate. Also, there numerous patterns relating to Indian Cents that are not Proofs and were never intended for circulation. Many of these are ‘Mint State,’ though not conceptually uncirculated.
Business strikes that have no wear are graded on a scale from 60 to 70. Not only are all eleven points used, plus grades from 62 to 68 are sometimes assigned by graders at the PCGS or the NGC. While I am not certain about the NGC policy on this matter, graders at the PCGS never use the plus grades of 60+, 61+ and 69+. For pre-1934 coins, the grade of 70 is not applicable.
Coins that grade MS-60 or -61 are very ‘banged up’ from contact with other coins and/or have other very noticeable issues, such as discoloration, severe U.S. Mint caused defects, substantial scratches, etc. The MS-62 grade is one of the hardest to even begin to explain.
Coins that grade MS-63 are considered to be ‘Choice Uncirculated,’ 64 grade coins are ‘Very Choice.’ Coins that grade 65 or higher are gems. A 67 grade coin is often referred to as a ‘Superb Gem,’ though this term is sometimes used to refer to MS-66 grade coins as well. Years ago, I publicly suggested that 66 grade coins be called ‘Pristine Gems’ and 68 grade coins be called ‘Phenomenal Gems,’ though these terms never became widely accepted.
Coins that grade 63 or higher, ‘Choice’ coins, will often be brilliant, glittering, and/or colorfully toned. Coins that grade EF-45 or higher, especially coins that grade MS-63 or higher, will tend to have readily apparent luster. Collectors seeking coins that are lustrous or coins that are colorful will tend to prefer higher grade coins, rather than coins that grade less than EF-40.
Natural toning usually comes about when coins are properly stored. Please see my three part series on Appreciating Naturally Toned coins. It is not practical to discuss toning at length here.
The Duckor 1904 half that I wrote about last week has wonderful green toning, along with other colors. An early 20th century silver coin that grades less than EF-40 is likely to exhibit shades of gray, though could certainly feature some green or blue hues. Circulated silver coins, however, tend to tone gray and/or brownish-russet.
III. Avoid AU-58 to MS-62 grade coins?
For U.S. coins minted from 1838 or so to 1934, I suggest that beginners and intermediate-level collectors avoid those that grade MS-60, -61 or -62. These just have too many issues, causes for concern or unsightly characteristics. For some advanced or well experienced collectors of pre-1838 U.S. coins in general or pre-1880 gold rarities, there may be compelling reasons to buy coins that grade from 60 to 62, depending upon the collecting plans of individual buyers, respectively.
Additionally, I suggest that beginning and intermediate collectors stay away from coins that are certified as grading “AU-58.” While I understand why many collectors conclude that PCGS or NGC certified AU-58 coins are great values, there is often more to the stories of those coins that are certified as grading AU-58. In theory, an AU-58 grade coin has just a touch of wear and thus is nearly ‘Mint State.’ In reality, the “AU-58” grade is much more complicated.
A coin that just has a touch of wear will often be PCGS or NGC certified as grading MS-61 or MS-62. Yes, I realize this sounds illogical. It too, though, is a topic for another discussion. Indisputably, however, it is a reality that a large percentage of the pre-1934 U.S. coins that were once fairly labeled “AU-58” or “Borderline Uncirculated” are now certified as grading MS-61 or MS-62. It is also true that, before the PCGS was founded in 1986, many of these were represented as grading MS-63 or MS-65 by incompetent or unethical dealers.
There are also many coins, especially very weakly struck coins that are not very original, for which it is debatable as to whether they should be graded AU-55+, AU-58, MS-61 or MS-62. If these are certified as grading AU-58 or higher, it is probably not a good idea for beginning or intermediate collectors to buy them. The characteristics of some of these are just too ambiguous for most collectors, or their respective expert-advisors, to be sure about them.
There are also many coins that are graded “AU-58” even though these each have the detail that would be expected on an AU-53 or AU-55 coin. Why are these graded “AU-58”?
Suppose that a collector took a MS-64 to MS-66 grade coin and carried it around in a pocket, with no other metal objects. Further suppose that it was carried around until it wore down to the point that it has the details of AU-53 to AU-55 grade coin. If it was then submitted to the PCGS or the NGC, there would be a good chance that it would be graded AU-58. After all, if it has much of the surface quality and technical characteristics of a MS-64 or even a MS-66 grade coin, it is something ‘special.’ So, it would be likely to grade “AU-58” even if it has the detail of an AU-53. So called ‘net grading’ often occurs, which leads to ‘compromise grades.’
Many such certified “AU-58” grade coins are very attractive and stand out from general AU grade coins of the same type. Moreover, a coin that has the detail of an AU-53 grade may likewise be certified as grading “AU-58” if has very attractive toning or if it scores high in the category of originality. Conversely, an AU-55 grade Morgan Dollar that is dipped bright white, in an acidic solution, may be certified as grading “AU-58” or even “MS-61”!
In general, certified “AU-58” coins should be acquired by knowledgeable collectors who understand why they are each graded “AU-58.” There are several reasons as to why a coin that has the details of AU-53 or AU-55 grade may be graded “AU-58.” In other cases, uncirculated coins with significant problems sometimes receive an “AU-58” grade as a compromise. Moreover, there are instances where an AU-58 grade coin really just has a little bit of wear. It may take a good deal of skill and knowledge to determine why a particular coin is certified as grading “AU-58.” Generally, beginners should not buy coins that are certified as grading “AU-58.”
IV. Choice Coins
Here, I sometimes use Barber coins, especially Barber Half Dollars, as examples. The same concepts apply to many other series of pre-1934 U.S. coins. Usually, circulated Capped Bust Half Dimes, Liberty Seated Dimes, Barber Dimes, Capped Bust Half Dollars, and most dates in the series of Liberty Seated Half Dollars are not particularly expensive. Mercury Dimes and Standing Liberty Quarters are relatively low priced, except for a few key dates and gem coins with special characteristics.
For classic U.S. copper, nickel and gold coins, too, there are often dramatic differences in prices due solely to grades, for coins of the same date (and Mint location) of the same type. Regarding all 19th and early 20th century series of U.S. coins, collectors may wish to consider the points that I raise in this discussion.
As for whether 63 or higher grade coins, “Choice” coins, are worth their respective premiums over coins of the same type that grade below AU-58, this notion of worth really relates to the tastes and artistic preferences of the buyer. A naturally toned, VF-30 or EF-40 grade, classic U.S. silver coin is likely to be gray. It may be brownish-russet or it may have touches of blue. It could even be a military green color. It, though, is not brilliant and/or colorful in the ways that classic silver coins that grade above 64 often turn out to be.
While a common date, Very Fine-20 grade Barber Half Dollar retails for less than $100 and an EF-40 grade Barber Half may retail for around $185, an especially attractive MS-63 or MS-64 grade Barber Half will certainly retail for well over $1000. A MS-65 grade Barber Half, which is a condition rarity for any date, may retail for more than $3000, especially if it has toned very colorfully.
An NGC graded MS-65 1915-D half, with a CAC sticker, was auctioned by Heritage in August, for $2530. Auction prices, on average, are a little less than retail prices.
A true, mid range to high end MS-66 grade coin of this type likewise would sell for more than $5000. On Sept. 7, 2012, Heritage auctioned a PCGS graded MS-65 1912-D half, with a CAC sticker, for $5581.25. This is a common date. Also, a CAC approved MS-67 grade Barber Half would retail for more than $12,000.
There is really no way to generally explain the physical characteristics of choice or gem quality coins. They have to be seen, carefully examined, and discussed with experts to be understood. Barber Half Dollars were David Akers’ favorite series of silver coins and Akers taught Dr. Steven Duckor about them. Duckor eventually assembled the all-time best set of business strike Barber Half Dollars.
Beginning collectors should not expect to immediately perceive the importance and physical characteristics of business strikes that grade MS-65 or higher. Some will appreciate these over time; other will not find them to be as exciting as I do.
It is important for collectors to not be talked into buying gem quality coins by salespeople. Collectors instead should reflect upon their own tastes and artistic preferences, while considering their own respective budgets.
In April 2005, Spectrum-B&M auctioned the Eliasberg 1845-O Liberty Seated Dime for $161,000. It is PCGS graded “MS-69.” The PCGS price guide values a Good-04 grade 1845-O dime at “$35.”
In 2004, Spectrum-B&M auctioned a PCGS graded EF-45 1845-O dime for “$1064.” My impression from the online images is that there is a good chance that this is an attractive, naturally toned 1845-O Dime. Is the Eliasberg 1845-O worth 150 times as much? To some collectors it is worth such a premium, to others it is not at all!
Regarding 19th century series in general, John Albanese and I are both surprised that more collectors do not acquire coins in the VF-30 to AU-53 grade range. Albanese points out that these “have most of the detail of uncirculated coins and cost much less.” Dr. Duckor, in contrast, really does not like to obtain coins that grade less than MS-65, as he particularly enjoys “looking at gems.”
V. A Group of Super Coins
Some collectors do not seek to complete sets and instead seek a small number of coins that are really special, because of rarity or super grades for their respective issues. In the 1990s, Jay Parrino championed the concept of a “box of twenty rarities” rather than some kind of a set.
Collectors who wish to treasure a small number of coins are more likely to spend megabucks for gems. They may also with to acquire coins that are the first or second finest known representatives of their respective issues, even if these are not gems.
I understand, and identify with, the notion of cherishing a small number of coins. A collector who has a ‘box of twenty’ may visit his safe deposit box at his bank once a month and enjoy viewing his coins. It takes less time to view twenty coins than it does to view one thousand. Even so, my impression is that most collectors like to complete or nearly complete sets of some kind.
In 2010, when I was reporting recommendations for U.S coins in the $50 to $2000 range, John Albanese focused upon “sets of EF to AU Barber Dimes, Quarters and Halves.” John adds that he would “prefer original matched sets of EF-40 to AU-53 coins, rather than sets with some AU-58 to MS-64 [grade] coins.”
Albanese is referring to sets that are complete or nearly so. Three key Barber Quarters cost more than $2000 each in EF-40 grade, though no Barber Halves do, except one die variety of interest to specialists. There is only one business strike Barber Dime, the 1895-O, that would retail for more than $1000 in EF-40 grade. Many Barber Dimes sell for less than $30 each in EF-40 grade, and for around $3 in AG-03 grade.
As for the three key date Barber Quarters, I recently wrote an article concerning prices for these in Fair-02 to VG-08 grades. (Please remember that clickable links are in blue.) For series of interest, not just Barber coins, collectors should carefully examine coins in various grades, perhaps from Poor-01 all the way to MS-67, and think about the types and grades that are desirable from a personal perspective.
For modest amounts, nearly complete sets of some series of Liberty Seated coins are viable. Many collectors may be surprised to learn that truly rare coin in Fine to Extremely Fine grades are available for less than $1000 each, sometimes for less than $250 each. Many very scarce coins in series of Liberty Seated coins may be acquired for less than $150 each. A coin is truly rare, in absolute terms, if fewer than five hundred exist, in all grades.
A coin is very scarce if fewer than one thousand exist in all grades, including the ungradable. In my opinion, acquiring very scarce coins is more fulfilling than collecting common coins, and acquisitions of very scarce coins are ‘in line’ with the culture and traditions of coin collecting. Collectors, though, should be inclined to collect coins that they really enjoy obtaining and can afford to collect. Above all, coin collecting should be fun.
©2012 Greg Reynolds