By Charles Morgan and Hubert Walker ..........
Hubert and I like to use our position as writers for Coin Week to advocate for everyday collectors. We believe that one way to grow the hobby is by focusing on areas that have traditionally been the purview of new collectors: modern coins and circulated classics. They’re easy to get into and they’re also how most collectors cut their teeth. And sure, many collectors eventually move on to other corners of the industry after they get a little experience under their belts. But one side effect of this accessibility and the collector’s shifting interests is that the marketing and selling of moderns and circulated classics tend to be problematic.
All too often, inexperienced collectors are preyed upon, sold problem coins, or left with the impression that they’re getting a fair deal, when in fact they are not. Obviously, there’s only so much that can be done to reign in the unprincipled, and at the end of the day, it’s up to the collector to educate themselves and practice due diligence. That doesn’t mean that more can’t be done to facilitate fair, open, and honest transactions.
One of the areas most in need of marketplace reform, in our opinion, is the circulated classic coin market.
Circulated classic coins provide inexperienced and budget-minded collectors instant access to the past. Part of the joy of collecting coins is the ability to travel back in time and hold in your hand a coin from a bygone era. For most collectors just starting out, Mint State examples are beyond reach, and even with Third Party Grading, the price differences within the grade and between grades can be so drastic that approaching any classic series is daunting and intimidating. Almost always, when a collector starts out, the first classic coins purchased will fall between the apparent grades of good to extra fine.
But are these coins actually gradable? Have they been handled properly throughout their time in the marketplace? We’ve grown so accustomed to the notion of net graded raw coins that the idea that we should expect circulated coins to be problem free in coin shops has become antithetical to reality. When it comes to circulated classic material in the raw, we’re not much better off now than we were before the “plastic revolution”.
The reason is cost, of course.
Professional numismatists may scoff at the notion that the hobby needs to become even more focused on plastic-holders expressing grades, but we disagree, and not for the reasons you might think.
A coin’s intrigue lies within the sum of its parts – planchet quality, the design’s eye appeal through the stages of wear, color and sharpness, and the story behind its issue. We ascribe value to coins based upon the interrelationship of the above factors combined with our desire to collect. A Third Party Grading company can provide part of the evidence relating to a coin’s quality, but essentially, the value proposition remains with us.
If more circulated material were submitted and looked over and deemed market-gradable, we’d see a resurgence in interest in classic material by collectors who would otherwise be shut out of the market. It would also start the long overdue process of weeding out problem coins. The sooner problem coins are weeded out of the mainstream numismatic marketplace, the sooner their drag on coin values and perceptions of availability will start to go away.
The reason these coins are not streaming into the likes of NGC and PCGS is because their pricing formulas are heavily skewed towards moderns. A coin minted after 1965 will cost you $16-$20 to get graded, while any coin minted before that costs $20 (Economy Tier for coins of any date valued up to $300 .... it’s $25 for the Secure service). Coins Valued over $300 cost more.
For modern material, most of what’s submitted is believed to be, on the part of the submitter, high end. The low prices are necessary to sustain and develop this market. For classic material, this pricing scheme is meant to cater to Mint State examples, where minute differences in grade can lead to large fluctuations in price. For circulated classics, the $30 price all but wipes out any margin a dealer or collector might have. The low submission rate skews population reports towards the Mint States, creating an unrealistic expectation of the state of the surviving pool of coins for virtually every classic issue. To fix this problem, the price of submitting circulated classics needs to mirror the price of moderns.
Numismatics Is Not Just for the Elite Anymore
It’s remarkable when you look through prices paid by some of the elite collectors of the 19th and 20th centuries for rare coins. The relatively low prices are masked by the raw purchasing power of an ordinary American. Yes, a Pan-Pac $50 slug sold for $100 in 1915, but $100 was a tremendous amount of money. Even as prices steadily climbed for this set in the decade or two that followed, the total number of collectors with the means to spend money on such frivolities was still relatively small.
When coin collecting became a popular middle class (and working class) pursuit in the post-war period, collectors focused on finding rarities, mostly circulated, in change. The appeal of the 1909 S VDB and the 1932-D and S quarters, even in very circulated grades, was the result of this mainstreaming. An elite collector wouldn’t concern themselves with such coins, unless, of course, no finer specimen was available.
Third Party Grading companies were founded, in part, to continue to cater to the well-heeled and carve out an even more sophisticated and lucrative (to the dealers at least) market for buying and selling rare coins.
However, the economic reality of the marketplace meant that TPGs had to evolve and find a segment of the market that was more reliable than the trickle of rare coins (many of which had already found their way into plastic). The result was the modern marketplace.
We now have a situation where there are more MS-69 Silver Eagles preserved for posterity, but the number of collectible and problem-free circulated 19th century coins is disproportionately low to the surviving populations of these coins.
Dealers Also Need to Learn Their Way around Circulated Coinage
Are a coin’s surfaces original? Has a coin been cleaned, retouched, or damaged?
These are the kinds of questions you’d expect to be asked by neophyte collectors, but the reality is, we get asked these questions from local small-shop dealers. Many of which have opened up coin shops or bullion shops without the slightest bit of training in numismatics. It’s frightening to think of the undoubtedly numerous mistakes these dealerships make when buying and selling coins to the equally unknowledgeable but eager collector.
One particularly egregious example still infuriates us. We know a local shop that bought a book of Lincoln wheat cents (1909-1958) for $700 because it contained both the fabled 1909 S VDB and a 1914 D. Unfortunately, the mint mark on the VDB had been altered, as had the date on the “1914” D. We were asked to authenticate the key dates and had to break the bad news. Instead of taking the loss (and maybe deciding to learn about coins or hire an expert to consult before buying them), the shop owner did the unthinkable and sold the book to an unwitting buyer.
How many similar things happen online? Personally, we’d never buy key date and commonly forged coins without some degree of third party certification, but we’re kidding ourselves if we think that most circulated specimens are submitted for authentication.
The fraud mentioned above had two complicit principals: the original seller (who we believe knew they were passing counterfeit goods), and the store owner, who successfully passed off his mistake to an overeager and overly trusting collector. We guarantee that collector won’t be “over” eager much longer, and certainly not very trusting. Forget building the hobby, that’s not even a good way to build a customer base.
Two Price Tiers Make Cents
On the one hand, we understand the TPG business model. A company like PCGS guarantees the grade on the insert label to be accurate. If a coin is returned for a guarantee review, PCGS is obligated to buy it back if PCGS concludes that they got it wrong. Obviously, an arrangement like that puts much of the power to arbitrate that decision in the hands of the party with the most interest in not paying, but it’s a stabilizing force on the market and one of the reasons why people make significant purchasing decisions based on what’s on a PCGS label. If a coin is worth hundreds or thousands of dollars, you’d expect the grading service to want to retain some ability to pay out claims.
Non-scarce circulated coins, for the most part, will never be worth a substantial amount of money. What collectors and dealers are really looking for in grading this material is: are the surfaces original, is the coin in any way damaged, and what’s the grade? The potential payout for the TPG is minimal, and the ease at which a skilled grader can notice these problems and affix a circulated grade P-01 through AU-58 takes less time than it does splitting hairs between MS-66, MS-66+, and MS-67.
Without having a real plan to differentiate quality circulated federal coinage and the piles and piles of junk out there that’s being foisted on unwitting collectors, the harder it will be to attract, maintain, and grow the hobby - especially at a time when there are so many other things a person can do with their discretionary income.
Unlike many complicated problems that vex the hobby, this problem has an easy and obvious fix. If Third Party Grading companies provide a discount submission service for circulating classics, where dealers AND collectors can submit coins and pay the same rate as they do now for moderns, then we’ll see a great shift in the marketplace, a culling of problem pieces, and finally a sensible remedy to a problem that has existed ever since coin collecting became a mainstream hobby - the possibility of accurate and honest grading and the authentication of all material bought and sold.
Flip of a Coin:
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