Is It Ever Wise to Take Certified Populations for Modern Coins Seriously?

By Charles Morgan and Hubert Walker  for CoinWeek  …….

It goes without saying that certain modern issues benefit tremendously from having only a few examples certified by TPGs in high MS grades. As we’ve written here and here, there are coins where a buyer can make the reasonable assumption that high-end coins are truly scarce, and the likelihood of too many new pieces entering the market at the high-end is low. On the other hand, there are also coins that the market has deemed unworthy for submission, which means that the top pop numbers may not clearly reflect scarcity – even if realized prices at auctions or in price guides point to these coins as having tremendous value.

The key for collectors of quality moderns is not to get caught up in what population numbers say but to focus instead on what you see in the wild. Where collectors get the most burned, we feel, is when they read into population reports what is not there – a thoroughly-vetted census. A totality where there is none.

Sussing out instances where the market is wrong is a critical skill to develop if you don’t want to get burned in the long run. This is especially true in instances where the vast proportion of a coin’s value is derived by the plastic holder it’s housed in. A good test case to illustrate our point is the first of the Modern commemorative coins, the 1982-D Washington 250^th Anniversary half dollar.

A $12 Coin That Regularly Sold for $500+

Nearly thirty years had passed before Congress, at the urging of Donna Pope, resumed the production of commemorative coins. The classic period, which reached its height during the Great Depression, was deeply missed by collectors, despite the fact that the series was plagued with scandal and greed. By 1982, most commemorative coins were priced well out of the budgets of many collectors. This created a pent-up demand for new coins, especially by those who thought (erroneously) that the new series would produce scarce issues on par with the classic series. The demand was so great, that the 1982-D half dollar would achieve a record mintage for a U.S. commemorative coin: over seven million coins, including proofs, which accounted for more than 2/3 of the total mintage – or more than five million more coins than the 1952 Washington Carver half dollar, the previous title holder for most common commemorative coin.

The key difference between the modern and classic commemoratives, collectors would soon discover, is that the classic coins were usually sold for only a small surcharge (often double face value, but sometimes a little more depending on the sales strategy of the distributors). Modern commemoratives would be sold at a much higher cost, with the Federal Government taking a large surcharge and either keeping it or paying it to a third party to fund whatever project the coin commemorates. The lower pricing premium for the classic series meant that some portion of those coins wound up in circulation – especially issues like the Washington Carver and Stone Mountain half dollars, which had little to no numismatic value above face for several years after issuance.

The modern commemoratives, on the other hand, tend to be so costly that it’s hard to imagine someone trying to redeem a $12 or $15 half dollar, or $40 silver dollar, for face value. This, coupled with the better handling and packaging on the part of the Mint, means that most modern commemoratives will survive in the same Mint State that the coin was in when it left the Mint, far into the future.

So how do we go from $12 a coin to $500+ dollars? In a word: Ignorance. The following three charts show MS grade dispersal for typical type coins. The first is a 1921 Morgan, the most common Morgan dollar struck; the second is the 1972-D Eisenhower dollar, which has a mintage of 92,548,511 coins, although most in the raw are below MS-65; and finally the 1982-D Washington half dollar.

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With a huge sample size, one can safely say that the typical MS 1921 Morgan is going to fall in the MS-63 to MS-64 range, with gems being scarce.

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… and the PCGS grade dispersal for the 1972-D Ike. Denver Ikes always come nice. Cherry-picked for quality, we see that the typical Mint State 1972-D in the wild is going to be MS-64 or below, with plenty of gems available but few in MS-66 and nearly no examples higher.

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… and finally, we see the grade dispersal of the submitted 1982-D Washington half dollar commemoratives. We must assume based on the value proposition, that a majority of these coins were cherry-picked for quality.

Looking at the grade dispersals of these three coins (honestly, you can pick nearly any common circulation strike coin and get the same result), it’s clear that the 1982-D Washington half dollar is different. Obviously, it was a coin struck for collectors and was better handled during its production. So why, then, would consumers, seeing a coin that’s readily available in grades MS-67 through MS-69, feel compelled to pay steep premiums? Here, we have two words: Dealer Promotion.

When digging through old auction results and TPG submission data, we discovered numerous instances where multiple PR70DCAMs (1982-S) and MS-69 (1982-D) Washington half dollars were made as the result of multi-coin submissions. One submitter scored a string of Proof 70s (PCGS cert# 656449-6566453) and made as much as a thousand dollars per coin at the height of the certified modern proof craze of the early 2000s.

So how did these perfect proofs and nearly flawless uncirculated examples get made? Was it the result of numismatic magic? Hardly. In all likelihood, most of the high grade proofs and MS coins were made by dealers with access to large quantities of these coins. Their easy access and trained eye meant that the easily discernible, high grade coins could be pulled aside for submission, while the typical, lesser grade coins would be passed over. 16% of the time they chose right and got a MS-69 coin. 55% of the time they just missed and got a MS-68 coin. MS-69 and MS-68 coins accounted for 71% of all 1982-D Washington half dollars submitted. With percentages like these, the assumption a collector should make is this: the typical 1982-D Washington half dollar is nearly perfect. As this is the case, a collector paying hundreds or thousands of dollars for a coin that is typical for the type when the coin is readily available is either an easy mark or not paying attention.

Of course, the population landscape for the ’82-D in 2002-03 was much different than it is now. With fewer coins submitted and fewer dealers specializing in certified moderns, the total number of coins available in TPG plastic was understandably low.  We could also contend that TPG standards have softened over the years. For some series, that may be the case. But we’d say it’s not the case with moderns by and large. If anything, the grading of moderns has gotten tighter in recent years. Still, this coin is so abundant that you can’t visit a coin shop without tripping over a dozen of them. Collectors caught up in high grade coinage could have done themselves a huge favor by making their own high-end coins.

The 1983-P Washington Quarter: Key to the Clad Series

So far, we’ve discussed and compared only common-type coins. Let’s take a look at 1982-83 period quarters, which, unlike the 1982-D Washington half dollar, was not sold to collectors-at-large by the Mint but instead released into circulation. These coins offer a clear contrast to the 1982-D in terms of expected quality and market behavior. We argue that, in this case, population reports – while unreliable on their face – offer sufficient insights to allow an informed collector to make a smart buying decision.

The counterpoint to the 1982-D, at least for the sake of this column, is the 1983-P Washington quarter, considered by dealers and collectors alike as the key date clad era quarter. Why the 1983-P was picked over the 1982-P or –D, or the 1983-D for that matter,  is anyone’s guess. Perhaps a greater number of rolls were saved from the other dates and mint marks. Taking a look at submissions, we see that dealer and collector behavior reflects the assumption that the ’83 is the important coin, one worthy of submission.

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The most available coin (in PCGS plastic) is also the most expensive one- the 1983-P

Now, check out completed eBay auctions for RAW and certified uncirculated 1983-P quarters in the past 90 days:

The highest prices for “RAW” 1983-Ps came in those tacky basement-slabbed SGS holders as MS-70.

What we see here is a healthy market for a popular clad era coin. MS-62, a low Mint-State grade coin sells for $20.50. A raw coin with good photography sells for $30 – $40, but taking all auctions into account, averages at around $25.88. A PCGS MS-64 coin for the everyman collector is a step up at $31.55, and a gem example graded MS-65 by PCGS commands more than double at $68.89. MS-66 coins, being scarce, have not been offered in the past three months and are not on offer at the time of this writing. Unlike the 1982-D, which comes nice and is abundant, the 1983-P Washington quarter, which is an easy sell at twice the submission price in 64, four times in 65, and more than 14 times at 66, is not being submitted en masse like the preceding commemorative.

Judging by the total number of submissions, we can assume that the vast majority of BU Washington quarters have not been graded (obviously), but that there are no great hoards of high-end coins being submitted to take advantage of a strong market. It could be that dealers and collectors are holding on to coins in hopes that the market will continue to gather strength; that we are not at the top yet. However, those dealers and collectors would also worry that they are not alone in their holdings or behavior.

The truth of the matter is that the 1982-D Washington half dollar came nice. Maybe not as consistently nice as a commemorative of recent mintage, but nice enough to pose no serious challenge to get them certified as MS-69 or PR70DCAM. The 1983-P Washington quarters are typically weakly struck from overused dies, scuffed, and by now mostly circulated. Most of the BU quarters that exist are likely in collections, dispersed around the hobby. Original rolls sell for $600 or more when they come available.

A savvy collector should take pause when looking at the populations for this coin, as these totals will increase dramatically. But they should also be able to look at the dispersal of grades and the demand for the coin in all MS grades and have a good idea where the market is and where the market is going. Simply put, nobody is clamoring for raw 1982-D Washington half dollars, but collectors place due significance on the 1983-P quarter. One coin has crashed in value since 2000, the other has held steady and is still strong (despite the fact that clad coinage isn’t in vogue as a mainstream collectible… yet).

Fellow collectors, Population Reports are critical to our understanding of how the market works. Taken without consideration of other obvious factors, however, and they can be deceiving. The smart money looks at market behavior outside of the plastic holder as indicative to the underlying strength of the value proposition of a coin’s grade. If people want the coin in its raw form, odds are people want the coin in its higher grades (especially if we aren’t talking about populations of less than 100 coins). If the raw coin is only worth melt, as in the case of the 1982-D, or seen as completely banal just one grade lower than the highly priced, top pop grade, then you have to wonder who on Earth would pay a large sum of money to take that coin off of your hands.

FLIP OF A COIN

6^th Chief Justice of the United States Salmon P. Chase, who just years before served as the Secretary of the Treasury, most famously adopting the motto IN GOD WE TRUST on the two cent piece, spoke for the Court in Hepburn v. Griswold (1870), when he said that the government did not have the power to make paper currency legal tender as this power was not granted in the U.S. Constitution. The dissent argued that the government had that power because it was waging a war and that printing money was necessary. The case was overruled one year later. Curiously, Chase oversaw the issuance of greenbacks as Treasury Secretary.

That’s one pricey 1921 Morgan: This most common date Morgan dollar typically sells for a slight premium over its intrinsic value, unless it’s a high grade specimen. That is, unless it was pulled out of the pocket of the notorious Clyde Barrow. The dollar, which was previously held in a private collection sold for $32,000 at a New Hampshire auction in September.

Coming Attractions: America’s first commemoratives? Certainly a case can be made on behalf of So-Called Dollars, which for more than one hundred years commemorated all sorts of civic accomplishments and public personalities. Hubert and I will take a look at some of the series’ most interesting pieces next in the coming weeks!