Are Auction Prices Wholesale or Retail?

Until a few years ago, the vast majority of coins that sold at auction were purchased by dealers. It was a safe bet to say that the prices realized at auctions were wholesale and collectors could assume that they would typically pay 10-20% more than what coins were selling for at auction. But this has all changed. One of the key elements to Heritage's rousing success in the coin auction business has been to make sales more collector-friendly. Today, a sizable amount of the coins that sell at auction are going directly to collectors. So, are auction prices now representative of the wholesale or retail markets? The answer is not as easy as you might think...

The answer is actually, as you might have, guessed, "answers." Nothing in the coin market is cut and dry anymore and the new auction market and the prices that coins fetch in an auction conducted in 2010 can have a broad range.

The first thing that has to be analyzed is what coin is being sold. If it's something that's extremely collector-friendly (like a rare date Type One Liberty Head double eagle) the price realized is likely to represent a retail level as it is likely to have been sold to a collector. If it's a widget or a low-end coin that sells cheaply we can assume that a bottom-feeder dealer bought it and the price it brought is clearly at the wholesale level.

The next thing that has to be gauged is the quality of the sale itself. One of the most amazing things about the Bass sales, in my opinion, was the fact that virtually all the coins were bought by dealers. If the Bass sales were to be held today (and conducted by a technologically savvy firm like Heritage) I would venture to guess that over 50% of the coins would be sold for retail as opposed to wholesale prices.

Is the coin in an auction a grading play? (In other words, is it an AU58 in an older holder that would upgrade to MS61 to MS62?) In this case it is a virtual certainty that the coin sold to a dealer. But there is an immediate asterisk that must be applied to the sales price. If the coin is worth $5,000 in AU58 and $13,000 in MS62, it is highly possible that at least two ramblin' gamblin' dealers would pay $10,000-11,000 for the coin. In such an instance, the collector needs to be careful not to assume that just because one AU58 coin sold at auction for $10,000-11,000, the next one(s) will as well.

Auction records are most useful when they occur with some degree of frequency (two or three examples per year) and when any anomalies can be discarded.

Let's say, for example, that a certain Charlotte quarter eagle in AU55 has sold at auction five times since 2007. The prices realized have been $3,500, $3,750, $2,650, $8,000 and $4,000. We can pretty much immediately boot the $8,000 auction record as we can assume that this was a severely under-graded coin with a large spread to the next highest grade(s). We can also boot the $2,650 record as this may have been for an extremely low end coin or it may have been in a "bloodbath" auction that, for a host of reasons, saw very low overall prices in specific areas of the market. This leaves us with three prices: $3,500, $3,750 and $4,000. A quick assumption can now be made that this AU55 Charlotte quarter eagle has a value in the range of $3,500 to $4,000. Another way of looking at this is that the wholesale value might be $3,500 while the retail value might be $4,000.

I have a theory that auction firms give collectors just enough information to do damage to themselves. They provide an archive of auction prices which show what coins have sold for and with a little bit of digging, the collector can determine if the coin sold on the floor, over the phone or to an Internet bidder. But unless someone really follows the market carefully, all of this "information" can do little more than serve as an easy way for the neophyte to make major mistakes. I have long said that hiring an auction representative for 5% is far and away the best value in all of numismatics. This fee (which amount to a whopping $250 on a $5,000 coin) is a small price to pay to have a specialist explain to you why a certain auction record is valid or not valid.

So 700+ words later, I'm back to my basic question: are auction prices wholesale or retail? As you can plainly see, there is no quick answer to this and I urge collectors, new or experienced, not to be lulled into a false sense of security based on what seems like unquestionable information.

The Pittman I Sale: Twelve (!) Years Later

One of the most significant auction sales held during the 1990’s was the John Jay Pittman Collection. Conducted over the course of three years and held in three different sessions in Baltimore, the sales were conducted by David Akers and featured an amazing array of United States and foreign gold, silver and copper issues. The first Pittman sale was held in October 1997. It’s hard for me to believe that the twelve year anniversary of this auction just passed as it really seems like it was just yesterday that I flew to Baltimore to examine the coins, bid on the lots and compete against most of the major collectors and dealers in the United States. It was an intense but fun four or five days in Charm City.

Dave Akers astutely concluded that it would be more interesting (and profitable) to split up the Pittman United States issues into two segments and the gold denominations that were featured in the first sale included dollars, half eagles and double eagles. Not including a group of Proof Sets that had gold coins, there were over 500 lots of gold, most of which hadn’t been offered since the 1940’s or the early 1950’s.

I remember viewing the lots and being extremely impressed with the quality. I hadn’t really known much about the Pittman collection except that I had seen his displays of early Proof coins at various coins shows in the 1970’s and 1980’s. I was expecting some very impressive Proof gold (and wasn’t disappointed). It was the business strike issues, though, that intrigued me most and which offered some of the biggest surprises in the days that lay ahead.

The first gold dollar that really caught my eye was lot 863, a superb gem 1854-S that even the notoriously conservative Dave Akers called “Gem Uncirculated” in the catalog. I graded the coin MS66 to MS67 and was amazed by the quality. It sold for $33,000 to a tall dealer from Oklahoma.

The most impressive Proof Gold Dollar was a nice example of the very rare 1854 Type Two which, according to Akers, was one of just four known and one of just two not impounded in museum collections. It brought $176,000 and I graded it a solid PR64. This was one of the coins that Pittman became famous for employing his aggressive bidding technique at the Melish sale in 1956. Legend has it that for this coin (and the Proof 1855 that followed), he went to the podium as it was being sold as raised his arm like the proverbial Statue of Liberty. His strategy proved to be lucrative as he was able to buy the coin in 1956 for just $525; a pretty decent return on investment over a forty-year hold.

My favorite early half eagle in the sale was, without a doubt, the amazing Proof 1833 which was one of just two known and the only one available to collectors. I graded it PR66+ and described it as follows in the catalog: “INCREDIBLE!!!!” It sold for $467,500. In January 2005, the same coin, graded PR67 by PCGS, sold for $977,500. I still regard this as one of the single greatest early gold coins I have ever seen. Just as an FYI, Pittman bought the coin from the Farouk sale in 1954 and paid all of $635.

There were two Proof Classic Head half eagles that weren’t far behind the 1833 on the DW cool-o-meter scale. The first was an 1835 (one of three known and one of two owned by Pittman) and an 1836 (one of three known). The 1835 sold for $308,000 while the 1836 brought $198,000. In January 2005, the 1835, graded PR67 by PCGS, sold for $690,000 while the 1836, as far as I know, has not traded at auction since the Pittman sale.

There were some amazing Liberty Head half eagles in the collection and, interestingly, nearly all of them came from the same source(s): the Farouk sale of 1954 with earlier ownership by Col. Green.

Some of the coins that I remember most include an 1840-C that is now graded MS64 (it has sold at least three or four times since the Pittman auction and is easily the finest known), a superb MS63 1840-O (I have handled it twice since Pittman and it is among the nicest New Orleans half eagles of any date), a killer MS62 1842 Large Letters and an MS64 1844-D (now in the Duke’s Creek collection and easily the finest known).

One really controversial coin in the half eagle section was Lot 981, an 1847 that was essentially perfect but which had a HUGE (and I mean huge!) copper stain on the reverse. Some people absolutely loved the coin while others couldn’t stand it. In the end the “lovers” won out as it brought an amazing $110,000.

Perhaps the number one “sleeper” coin in the half eagle section was Lot 984, an 1847-O half eagle that was graded “Extremely Fine to About Uncirculated” in the catalog. I thought the coin was a nice AU55 and felt it was the second finest I had ever seen, after the Eliasberg/Milas coin. I wound up bidding $18,000 and lost out. It brought $24,200 and was later graded MS61 by NGC where it remains the only example graded Mint State by either service.

One last coin, then we’ll end this overlong remembrance. Lot 1022 was an 1859-D half eagle that I graded MS64 to MS65. I recall speaking with the late Jack Hancock before the sale and discussing this coin. He didn’t say much about it (I knew he loved it as much as I did) and I knew he had a customer who would pretty much pay whatever it took. Jack wound-up paying $60,500 for the coin which is still in the Duke’s Creek collection and which was graded MS64 by PCGS after the auction.

The first session of the Pittman sale brought $11,820,512. I can recall thinking the coins brought “all the money” at the time but looking back at the catalog today I’m struck at how reasonable many of these irreplaceable coins were. What is most stunning, though, is to see the prices that Pittman paid in the 1940’s, 1950’s and 1960’s. If there was ever proof that really good coins held for a long time are really good investment, it was the Pittman sale!

The Byron Reed Collection Sale

In October 1996, the Western Heritage Museum and the City of Omaha decided to sell coins and manuscripts from the Byron Reed collection in order to raise funds for a renovation and expansion project to house the Reed collection. Reed, who lived from 1829 to 1891, was an unsung numismatic hero. Reed came to Nebraska in the mid-1850’s and became a successful businessman. He began collecting coins in the 1870’s and by the time of his death he had assembled one of the finest groups of United States coins ever assembled. Despite the importance of this collection it was largely forgotten until a small portion of it became available for sale a century after Reed’s death.

Spink’s of London was chosen to sell the coins and the auction was held at the old Christie’s showrooms on Park Avenue and 59th street in New York. Even though this sale seemed a bit out of the mainstream at the time, it was the sort of event that attracted all the big buyers. I can remember viewing the lots at Christie’s and thinking how out of place many of the coin dealers seemed in comparison to the well-dressed and impeccably groomed art collectors and dealers who were viewing lots from an upcoming sale.

The coins in the collection were, for the most part, fabulous. But this would not be an easy sale to buy out of. The salesroom would be full of every smart dealer in the country and the coins were, in many cases, very hard to grade. Some of the Proof silver type coins had been poorly stored and had literally turned black. And many of the Proof gold coins in the collection appeared to be lovely but were so heavily toned that they may have had heavy hairlines below the color if and when they were dipped.

I was mostly interested in the early gold coins in the collection. There was a splendid date run of Fat Head half eagles including such extremely rare coins as an 1828/7, an 1829 Small Planchet, and an 1832 12 stars.

One of the coins I really wanted to buy was Lot 113, an 1824 which I graded AU55 to AU58 (by today’s standards this coin would no doubt grade MS61 or even MS62). I had a bid of $14,000 and I stretched to $18,000 but was outbid by someone on the phone. The same pesky phone bidder outspent me on the next two lots, an 1825/1 that I graded MS61 to MS62 and an 1826 that I graded MS62. The two coins sold for $23,000 and $20,000 respectively. To make a long story short, I did finally buy one coin in the group: an 1833 Large Date that I graded MS61 to MS62 for $9,500. I remember thinking that the prices for these coins seemed insanely high. Today they seem insanely low.

Having the luxury of a decade’s reflection, I now realize that even though the prices in the Byron Reed sale seemed incredibly strong at the time, many of them are almost laughably low by today’s market values. We now forget just how awful the coin market was in 1996 and 1997. Not only did the coins bring a fraction of what they are worth today, but many of the people who spent big money in the sale had trouble selling the coins and they were later sold for losses.

The moral of the story: buy great coins in great auctions when the market is crummy and no one else wants them. Even better: let all the smart dealers buy them, let them get nervous because they can’t sell them and then buy them when they get even cheaper.