Old Coin Holders

No term gets collectors or dealers more excited than “old holders.” An old holder coin is one that has been graded approximately ten years ago (or more) by PCGS or NGC. Old PCGS holders are often easily identified by having a green label insert and are sometimes smaller in size than the current capsules. Old NGC holders tend to have a somewhat chunky configuration and a totally different internal label which lacks a barcode. Say the words “old holders” and most collectors and dealers think of upgradeable coins. Clearly, grading standards were different back in the late 1980’s and early 1990’s. Many coins were very conservatively graded in the early days of PCGS and NGC and these can often be upgraded today if resubmitted.

So it should be a slam dunk when buying old holder coins, right? I mean it’s got to be a guarantee that an MS64 in an old green label PCGS holder is today’s MS65, no? Well this isn’t always the case. In fact, I would contend at this point in time many green label holders are, in fact, potential downgrades.

Oh sure, there are still some deals out there with groups of PCGS and NGC coins graded in 1990. These invariably wind-up in auction where dealers slug it out and play games of “bidding chicken” to see who is willing to stretch the most on potential upgrades. But I would contend that many of the stray old holder coins that collectors see at shows are time bombs.

Let’s say that PCGS had graded 250,000 coins by 1991 (and I’m willing to bet the actual number is substantially higher). The graders at PCGS are only human and certainly 2% of the coins that they had examined were errors on their part. Assuming that these numbers are correct, that means that 5,000 old holder coins exist(ed) that have major problems. These coins have been recolored or expertly repaired or have rim problems. Many of them have not been removed from their old holders because experts have seen them and determined that they will not upgrade. In many cases the only buyer of such a coin will be a naïve collector who is “certain” that “just because it’s in an older holder it has to upgrade.”

Look, I like old holder coins as much as the next guy. Show me an 1839-C quarter eagle in an old PCGS AU50 holder and my hear starts racing with visions of a five or eight point upgrade. But more often than not, most of the old holder coins I see these days are mistakes that are destined to be entombed in their final slab until the game changes.

2006 Atlanta ANA Show Report

The Atlanta ANA show was among the oddest coin conventions I have been to in many years. This show was, at times, an exercise in futility yet it featured crowds that were far greater than at any show in Atlanta since the heyday(s) of the great regional conventions that were held there back in the mid-1980’s. The pre-show activity was extremely strong with most dealers reporting very strong sales. The hot gold market was a major catalyst here, with many buyers seeking pieces like MS63 to MS65 Indian Head eagles, better date Saint Gaudens double eagles, New Orleans gold and gold commemoratives to fill orders. Nearly everyone I spoke with claimed that they would have happily spent double what they were able to write checks for at the show. The competition for the few available fresh coins was brutal and the quick lesson learned by most dealers was if you saw something you liked, you bought it first and worried about the price later.

The show was extremely crowded but there seemed to be very little actual retail buying taking place. I was so busy running around the bourse floor looking for fresh coins to buy that I was not able to spend as much time being my table as I would have liked. When I was there, I found most of the people to be new collectors who were either attending their first large-size show or who were looking for items such as Dahlonega half eagles priced at under $1,000. I must give the ANA some much-deserved compliments on their pre-show publicity as the crowds really were impressive from a numbers standpoint.

The highlight of the show for me was the sale of the Duke’s Creek collection of Dahlonega gold coinage. I was pleasantly surprised at the strength of this sale. I wound up purchasing ten lots which constituted around one-third of the dollar value. Three coins (the 1855-D and the 1861-D gold dollars plus the 1854-D three dollar gold piece) broke the $100,000 mark and a number of price records were set for individual dates. I am working on a detailed analysis of the sale results which I plan to have posted on my website by the end of the week.

On Saturday morning the area around Atlanta was hit by tornados and, in case you haven’t had the pleasure of being woken up by a screaming tornado warning siren at 4AM, it’s interesting to say the least.

Going into the traditionally strong Spring season, my best guess is that the coin market will continue to display a good deal of strength. I look for the rare gold coin market to be extremely strong due to the run-up of bullion prices to $600 and over, plus the upcoming releases of at least three potential classic books on United States gold coinage within the next few months.

TFSB or the Theory of Frontloaded Set Building

In my recent April newsletter I mentioned one of my rare coin theories: EEEES or Easy Explanation Equals Easy Sales. In the spirit of wacky acronyms, here’s another one for you: TFSB or the Theory of Frontloaded Set Building. Assuming that you are collecting coins with the completion of some sort of set as a goal, you are probably building your set the wrong way. Typically, collectors are stingy when it comes to key issues and they tend to overdo more common issues.

Here’s an example of what I mean. When I have the chance to look at a complete set of coins (whether it is a date/mintmark run or a type set) the first thing I do is look at the keys. If someone has a date set of Dahlonega half eagles, I am going to be much more interested in how their 1861-D looks than their 1847-D. In nine cases out of ten I find that the 1861-D is one of the lowest grade coins in the set and generally has poor eye appeal while the more mundane 1847-D is among the nicer coins.

If I were building this set I would do the exact opposite. I would have the 1861-D be among the nicer coins in the set (perhaps even the nicest) and not worry as much about the less rare coins.

One of the reasons I find the Duke’s Creek collection of Dahlonega gold to be interesting is that it was (knowingly) assembled using the TFSB. As an example, in the gold dollar set, the two best coins are the 1855-D and the 1861-D. This makes sense since they are the two rarest. Now think about how the overall impact of the collection would have been if these same two coins were the lowest grade members of the gold dollar date run. Still an impressive set, no doubt, but not nearly as memorable as a set in which the two keys coins are also the two highest ever slabbed by a third-party grading service.

One of the negative impacts of Registry Mania is the tendency for people to get carried away about common coins in uncommon grades. In order to score more registry points, collectors will pay very high premiums for common coins, just to get some needed set value points. Rare gold coins are not really affected by this (yet) but it is possible that Registry Mania could force future collectors to make some purchases that do not adhere to the TFSB. I would caution any set collector to weigh his decisions carefully and to always save his “stretches” for the key date coins that will add panache to a set over the long term.

EEEES Theory of Coin Collecting/Investing

The EEEES theory of coin collecting/investing has proven to be remarkably successful in the past five years. And what exactly does this acronym mean? It stands for “Easy Explanation Equals Easy Sales.” Yes, I know it sounds like something from a bad marketing seminar but it makes a lot of sense if you analyze its meaning. In the past five years, we have seen an influx of new collectors into the hobby. Many of these collectors have immediately started purchasing expensive, high end coins. But unlike their counterparts from past generations of numismatists, they had very little background, other than what they read on a few websites. For them, ease of understanding was critical in the decision to buy a specific coin.

And this is exactly why coins like High Reliefs and Stellas and $50 Panama-Pacific Rounds/Octagonals have become so popular in the past five years and risen dramatically in price. In a nutshell, coins like this are easily understood by both new buyers and new sellers. Putting it another way, if a coin can be easily explained by the new breed of Internet coin dealer, it is easy to sell. Because of EBay and the success of Internet coin auctions, many purchases have become impulsive. An impulsive coin purchase is much more likely to involve a coin that requires little analysis than one that takes a page of pontificating to explain.

The EEEES theory shapes many of my purchasing decisions. I am much more likely to purchase an 1838-D half eagle than an 1849-D half eagle because the former has a great story (first-year-of-issue and one year type) while the later has nothing especially remarkable about it.

I think that the market for certain “easily explained” coins has become a bit on the frothy side. As an example, prices for coins like 1911-D quarter eagles and 1909-O half eagles are hard to justify given the relative availability of these issues in most grades. But to the new generation of collectors, these are venerated key coins in popular series. To a collector who has only just become a serious buyer, the fact that a 1909-O half eagle in MS61 or MS62 has tripled in price in the past few years is not relevant as his point of reference about coins might only go back a few months.

I expect Easily Explained coins in all series to remain in the forefront of the market as long as it stays bullish. Some of today’s avid new buyers show no inclination to become well-read, complete numismatists and will, therefore, never be able to understand subtly rare coins. For better or worse, the demand for the 1838-D half eagle will continue to grow at a much stronger rate than for the 1849-D half eagle.

How Important is Strike?

How important is strike when it comes to determining the desirability of a gold coin? In my opinion, probably not as important as it should be and for what is probably an odd reason. For certain series, strike is a critical component in determining the value of a coin. As an example, a certain date in the Mercury Dime or the Standing Liberty Quarter series might be worth $1,000 in MS65 with a normal quality strike but $20,000 with a sharp strike. There are no gold series in which strike carries a significant premium. Why?

I would have to say the answer has to deal with clever marketing. A few decades ago, some clever marketers made up Full Split Band and Full Head designations and proposed that they were worth enormous premiums. It was discovered that these coins were, in many cases, very hard to find with a sharp strike. You could look through roll upon roll of common coins like the 1945 Dime and not find one with Full Split Bands. Clearly the few examples that were well struck were worth premiums.

Why aren’t gold coins marketed with strike designations? Probably because no one has (yet…) thought of a way to make collectors pay a huge premium for a St. Gaudens double eagle with a full torch or a New Orleans quarter eagle with complete feathers on the eagle’s left leg. But if PCGS or NGC were to suddenly bless the concept of strike rarity in certain gold series, you can bet that certain issues would suddenly command huge premiums.

Why should gold coin collectors care about strike? In my opinion, poorly struck gold coins often have bad eye appeal and should be avoided. However, there are exceptions. As an example, certain branch mint issues are always weakly struck. I have never seen an 1856-D quarter eagle that was not very poorly struck and because of this I will not use strike as a consideration when determining whether of not I am going to buy an 1856-D. But an issue like the 1848-D quarter eagle is usually well struck and if I am offered a piece that has a distinctly below average strike, the chances are good that I will pass.

It is important for collectors to learn which issues are well struck and which are not. This is one reason why my books on gold coins go into careful detail on strike for every branch mint issue. If you pass on a lovely original 1849-O eagle just because it has weak stars, you are making a big mistake: every known example is very flat on the stars. But if you are offered a nice Uncirculated 1847-O quarter eagle with an extremely weak reverse, some basic knowledge of the series will show that this issue can be found with reasonably sharp detail on the reverse.

If you decide to collect U.S. gold coins (or any coins for that matter) learning how the coins are supposed to look is any extremely important consideration. Look at as many examples of what you collect as you are able to. Read all you can. The more information you have at your disposal, the more informed your buying decisions will be.

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.

Changes in the Coin Auction Market

Has any segment of numismatics changed more in the past ten years than auctions? A hypothetical collector who pulled a ten-year Rip Van Winkle and suddenly rediscovered coin auctions would note a host of differences including the following: The Internet now plays a huge role in auctions. Ten years ago, the Internet was a non-entity when it came to coin auctions. In today’s auction world, a large percentage of the lots are sold online; often times to collectors who have never seen the coins in person and are relying solely on the images.

Many auctions now play out in nearly empty rooms. Ten years it was not uncommon to see a hundred people bidding live in an auction room. Today, many big buyers never set foot in a live auction.

The numbers and dollar values of coins sold at auction have grown astronomically. Ten years ago a $10 million auction was front-page-of-Coin World-news. Today, it’s nothing. In fact, for many of the big firms a $10 million dollar sale would be a disappointment. And the physical sizes of the sales themselves have grown immensely. For certain firms, a 5000+ lot auction is routine. Ten years ago, auctions were seldom more than 2500 lots. And let’s not even mention the size of the catalogs themselves. You could use many of today’s catalogs for weight training devices…

The catalogs have become better and more sophisticated. The average auction catalog in 2006 is much slicker and glossier than it was in 1996. Most of the descriptions have gotten better and the photography has, for the most part, improved. In 2006, most coin auction catalogs compare favorably to the catalogs produced by Sotheby’s and Christie’s for their major art sales.

The players in the coin auction business in 2006 are remarkably similar to who they were in 1996. But the power structure has changed radically. Heritage has gone from an also-ran to the dominant force in the business while Superior and Bowers & Merena have become far less significant. Stack’s has kept its business model fairly consistent and has lost business as a result. The new kid on the block, ANR, has basically become what Bowers & Merena was ten years ago.

The entire numismatic auction business has become more transparent and information-driven. Heritage posts the reserves for every coin it sells and has a prices realized archive with over 1 million lots included. It is only a matter of time before other firms become more transparent and it seems likely that someone will take the Heritage archive and enlarge it to include other firms’ lots. In 1996, coin auctions were about as un-transparent as you could imagine and it was not uncommon to see consignors bidding on their own coins at auctions in an effort to drive up prices.

While the entire coin market is a very different animal today than it was a decade ago, it seems that more of these changes are noticeable in the auction arena than anywhere else. It will be very interesting to see how different the landscape looks in 2016.

Collecting New Orleans Gold Dollars

For many collectors New Orleans gold dollars are a perfect set to assemble. They are within reach of nearly any budget and with only six pieces required to assemble a complete set they do not require years and years of patience to complete. The New Orleans mint produced six different gold dollars between 1849 and 1855. Two design types are found in the series. The first five issues employ the familiar Type One design while the final (1855) one uses the popular Type Two or Indian Head design.

The keys to the series are the 1850-O and the 1855-O. The beauty of these two dates are that while both are popular and desirable, neither is so rare or expensive that they can not be obtained by the collector of average means.

The 1849-O is a favorite among collectors due to its status as a first-year-of-issue. It is common in circulated grades and a nice AU example can be obtained for under $500. Many collectors try to purchase an MS60 to MS62 piece which is typically valued in the $1000-2000 range. This date does not really get expensive until the higher MS grades and a Gem will run in the $13,000-16,000 range.

The 1850-O is the rarest date in the series and it is much undervalued in my opinion. I typically sell nice AU pieces in the $1500-2000 range and an Uncirculated piece in the MS60 to MS62 range should be available for $3000-5000. This date becomes rare in MS63 and it is very rare above this. The best pieces I have handled are a pair of MS64’s and I am not currently aware of a Gem.

The 1851-O is one of the more common dates in the series. It is very easy to find in AU grades and a nice piece can be purchased for under $500. A collector seeking a nice entry-level Uncirculated coin can purchase a solid MS62 for $1200-1400 and an MS63 will run around $2100-2300. Due to a small hoard some Gems do exist and I have sold some pieces graded MS65 in the $13,000-16,000 range.

The 1852-O is the second scarcest New Orleans gold dollar and it is the hardest Type One to find with a good strike. A high quality circulated piece can be obtained for under $1,000 while an MS60 to MS62 example will cost $1,250-2,500 depending on the quality. This date becomes scarce in MS63, rare in MS64 and extremely rare in MS65.

The 1853-O is the most common date in the series and a very nice AU is easily located at less than $500. A very presentable Uncirculated piece can be found with some searching for $600-1,200 and even an MS63 is a good value at $2,500-3,000. This date is much harder to find in MS64 and higher than typically assumed and a Gem, if available, will sell for as much as $15,000.

The 1855-O is the only Type Two gold dollar from this mint and it is an exceptionally popular issue. It has appreciated quite a bit in price in the last few years but it is still a good value. The collector searching for a nice AU example should be prepared to pay between $2,000 and $5,000 while an MS60 to MS62 will require an outlay of between $7,000 and $18,000. In any grade above MS62, the 1855-O is rare and expensive but is always an easy issue for a specialist-dealer such as myself to sell.

In my opinion, an ideal beginner’s set of New Orleans gold dollars would contain AU55 to AU58 examples of the 1850-O and the 1855-O plus MS61 to MS62 examples of the other four dates. The more advanced collector should shoot for a set with all six coins grading Uncirculated. The former set could be completed for under $10,000 while the latter could require as much as $100,000+ depending on the quality of each piece.

Market Premium Factor (MPF)

Although I can’t take credit for inventing the concept of Market Premium Factor (MPF), it is something that I have discussed before and find very interesting. The basic concept of MPF is that in a specific series of coins, certain dates trade for premiums over the common (or basal) issues. An interesting series to explore the concept of MPF is Indian Head eagles. In this series, basically any coin not dated 1926 or 1932 (the two basal issues) is considerably scarcer than a basal issue. However, until very recently most of these dates sold for little more (if any) than the two common issues. A date like the 1912 with a PCGS population of fewer than 500 in MS63 and fewer than 175 in MS64 and above did not command much of a premium over a 1932 with a population of over 10,000 in MS63 and over 5,000 in MS64 and above.

Why could dates like the 1910, 1910-D, 1911, 1912, 1914 and 1915 be purchased for virtually no premium over the common dates like the 1926 and 1932? Because until recently, the Indian Head eagle series was not seeing many collectors putting together date sets. These coins were trading primarily as type coins and this meant that no one really cared about what date they were purchasing.

The MPF for a series changes when it becomes popular. Suddenly, Indian Head eagles have become more popular. There are not necessarily a ton of new collectors putting complete sets together. But there is enough new interest in the series that even a neophyte can recognize the fact that a 1910-D eagle in MS64 is much scarcer than a 1932 in the same grade. When this occurs, the premium factor between the basal issues and the slightly scarcer issues increases. Suddenly a coin like the 1910-D eagle is now bringing 10-20% more than a 1932.

There are still a number of series that do not have fully developed MPF’s. In the St. Gaudens double eagle series, there are at least a dozen issues which sell for “type coin” prices which are considerably scarcer than the basal issues such as the 1924, 1925, 1926, 1927 and 1928.

For the savvy collector or investor a key to making a good return on your investment is to identify coins that are scarce but which do not sell for a significant premium. If and when this series becomes popular and collectors start paying attention to specific dates, you might well have some nice profits.