J&T Coins LLC Blog

Just What are Those KM Numbers?
March 02, 2010

by Dave

I had a phone call. It was one I had been expecting for several years, but in that time it has hardly happened.

The question had to do with the Coin Market Price guide section.

What are those KM numbers and what do the letters stand for, I was asked?

Ever since my firm started applying the world coin numbering system to U.S. coinage I have been expecting questions.

KM stands for Chet Krause and Cliff Mishler who invented the numbering system that is used as a shorthand by the world’s collectors. Instead of giving long descriptions, all you need do is give country, date, denomination and the KM number and any collector with the Standard Catalog of World Coins can tell you what it is.

This shorthand is necessary for making concise price lists.

This kind of numbering system never caught on with U.S. collectors because there is much less to keep track of.

However, our computer system is such that it is easier to apply numbers to all coins than to try to go on listing U.S. coins without numbers.

The change made collectors of U.S. coins who live outside the United States very happy.

For American collectors, it was hardly noticed.

As I said, I was expecting this call for a very long time.

Eagle Stampede or Last Gasp for Buyers?

The U.S. Mint had a good day of sales when the 2010 gold and silver American Eagles became available to the authorized distributors Jan. 19.

Buyers snapped up 2,440,000 silver American Eagles.

Gold American Eagle buyers took 49,000 of the one-ounce coins, only these were divided between old and new dates. The 2010 coins totaled 30,500 and the 2009 total was 18,500.

For a single day, these numbers are huge. Compared to final mintages for last year, they are tiny.

Trying to figure out where we go from here and whether we will get the proof versions back in 2010 and even the “W” mintmarked uncirculated version is basically a bet on whether you believe the Mint will be able to get ahead of the demand curve in the present 12-month period called 2010.

The Austrian Mint, no slouch in the world bullion coin market, said some weeks ago that demand for its gold coins would fall by 30 percent. A similar fall in gold American Eagles would take the 1,386,000 mintage of the 2009 gold Eagles down below a million pieces to 970,200. That would leave more than enough planchets available for any and all collector versions.

A demand decline would also allow the early return to the market of fractional gold American Eagles. In 2009 the market had to wait until December to get them.

Can demand for the silver American Eagles top the 2009 total of 29,134,000 coins?

There is little U.S. historical precedent from which to make a judgment. Look back at the mintages of the 1921 Morgans and 1922 and 1923 Peace dollars and you see mintage numbers of the same order of magnitude.

However, demand for silver dollars then was officially induced as they were replacements for the 270 million coins that were melted under the terms of the 1918 Pittman Act. The Treasury needed them to back Silver Certificates.

By 1928 the official demand ended and Peace dollar mintages were suspended until the economically unsettled years of 1934 and 1935 when President Franklin Roosevelt was trying any and every means to get the economy rolling.

Instead of a renaissance, the 1930s Peace dollar mintages were the last until an abortive 1964 attempt to revive them.

As with gold, any decline in silver Eagle demand in 2010 would hasten the return of the proof and the “W” uncirculated versions this year.

Once collectors have gotten used to the gap in their silver Eagle proof sets where the 2009 coins should be, they likely will climb back on the bandwagon and buy proofs at levels similar to or even higher than before.

Collectors who feel deprived of something often buy in greater numbers at their next opportunity. That could mean loads of silver proof Eagles in 2010.

So back to the results of Jan. 19: however you interpret the numbers, the salient fact is the Mint has generated sales of approximately $100 million in one day. That boggles my mind as I recall 1968 annual proof set sales of just $15 million.

Mintage Numbers Collapse
January 19, 2010

By Dave

Is this the year the Mint suspends the coinage of some denominations completely?

That is a question that needs to be asked in light of the collapse of production in 2009.

Overall production dropped by 65 percent last year, or 6,593,580,000 pieces from the 2008 level of 10,141,580,000.

The 3,548,000,000 total mintage from 2009 wouldn’t even be a reasonable number for cents from one facility alone in a normal year.

Collectors who grew up wondering things like why were no half dollars produced in the years 1930, 1931 and 1932, or no quarters in 1931 and 1933, now are seeing a replay of how a weak economy causes a rapid drop in the demand for coinage.

Economic statistics showed that retail sales dropped 6.5 percent last year, something not seen since the Depression.

Fewer transactions mean less demand for coins.

Throw in desperate people raiding every coin container they ever possessed just to try to keep food on the table and the combination adds up to a drastic fall in coin demand.

In 2009 the Mint tried to manage the production reductions at an even pace. Except for dimes, the Mint was remarkably able to divide what work there was evenly between the Philadelphia and Denver Mints.

The only high level of demand occurred for gold and silver coinage. Demand for those coins reflect fear of inflation and/or the unknown by buyers.

This, too, has a parallel in the high mintages of gold $10s and $20s during the Depression before President Roosevelt banned gold ownership in 1933.

The 4,463,000 mintage for the gold $10 in 1932, the record for the Saint-Gaudens Indian Head series, was caused by the same type of panicky demand for gold that we are seeing with American Eagles today.

This demand also is reflected to a lesser degree in the mintages of the 1931 and 1932 $20s.

Roosevelt after banning gold ownership to end the panic, devalued the dollar and tried to induce inflation. By this action he proved the hoarder’s fears to be justified, but persistent deflation rather than inflation dogged the economy.

Are we in a period of similar paradox where fear of inflation actually produces deflation?

We hobbyists are used to the shortages that have manifested themselves in the gold bullion American Eagle market on an off for the past 18 months, but how will we react to mandatory purchases?

It sounds strange, I know.

However a possibility exists that not all 2009-dated gold American Eagles will be sold by the time the 2010 coins go on sale to the authorized purchaser network on Jan. 19. As of Jan. 13, the Mint had 51,000 of the 2009 gold American Eagles on hand, which represents roughly a half month’s supply.

The Mint has a plan to get rid of them if buyers don’t step up to the plate between now and Jan. 19.

Force them to buy.

Any buyer who wants 2010 gold American Eagles will have to also buy 2009 coins until the supply is deleted.

For every three 2010 coins they purchase, they will also have to take one 2009 coin.

Will the market absorb these without fuss, or will this turn into another grievance against the Mint?

The date should make no difference to investors. Gold is gold, but collectors or other buyers who are focused on the new date might not care for the older coins and resent yet another unexpected turn in the secondary market for these coins.

On the other hand, perhaps the premium for the 2009 gold will fall enough on the secondary market to induce investors to take the supply, thereby achieving more bang for their investment buck.

Let’s watch and see.

One more thing, because the Mint ran out of 2009 silver American Eagles Jan. 12, possible mandatory purchases apply only to gold American Eagles.

By Dave:

Dollar Up, Dollar Down – End of Pattern?
January 14, 2010

Winston Churchill once joked that democracy is the worst form of government – until you consider the alternatives.

That statement might easily apply to the U.S. dollar. To read many online posts it is the worst of currencies. But what are the alternatives?

Anyone who owned Venezuelan bolivars got a 50 percent haircut overnight this week. Its exchange rate versus the dollar has been fixed for years. Surprise.

Argentina’s peso has been in slow decline versus the dollar even as the dollar was declining against other stronger currencies.

The British pound dropped by 20 percent against the dollar as the financial crisis unfolded and has stayed down.

Even the Chinese currency was absolutely fixed to the dollar all through 2009. For a strong country that is supposedly concerned about the mistakes of the United States, that is curious behavior.

My point isn’t that all is hunky-dory. It isn’t. Readers can point to the euro, which rose a tad against the dollar in 2009, or to the Australian and Canadian dollars which rose much more on the back of rising commodity prices.

Is the dollar weakness permanent or just a temporary illness? That diagnosis will inform market decisions all year long.

The dollar has come back before. It was under attack in the late 1960s and then again in the late 1970s. In the middle 1980s it was considered so strong that it had to be deliberately weakened to save U.S. export industries. This occurred again in the early 2000s.

Will the pendulum swing again?

By Dave:

Last 2009 Cents the Scarce Ones

January 13, 2010

The 2009 Lincoln cents just got scarcer. The mintage numbers for the fourth design, which marks the Lincoln presidency, have come in far below the totals for the first three.

Only 129.6 million of the Philadelphia Presidency coins were struck. Denver had a higher total at 198 million, but because it did not crack the 200 million mark, it will be perceived as scarcer than it perhaps really is.

In calendar year 2009 only 1.106 billion Philadelphia cents were produced. For Denver, the total was a larger 1.248 billion.

Breakdown of the other totals are:

Birth P: 284.4 million

Formative Years P: 376 million

Professional Life P 316 million

Birth D: 350.4 million

Formative Years D: 363.6 million

Professional Life D: 336 million

What do these numbers mean? Well, they might suggest that anyone who wants to get examples of all the coins should acquire them through the 2009 mint set just to be on the safe side.

It would appear from these numbers that there are not enough to go around for the banking system in normal times.

Since these are not normal times, the likelihood is all of these coins will be scarfed up by promotion houses and hobbyists who encounter them and few will be left to circulate

Sellouts and Year-End Deadlines

By Dave

December 23, 2009

Unless a large purchaser steps forward in the next few days, it would appear that sales of the 2009 Ultra High Relief Saint-Gaudens $20 gold piece will end with a whimper rather than a bang.

In the week ending Dec. 20, buyers took an additional 1,887 pieces to bring the cumulative sales total to 110,681. That’s not bad for an average week, but if there were potential buyers made anxious by the Dec. 31 sales cutoff, they are not showing it.

For comparison, look at the proof 2009 one-ounce gold Buffalo coin. Buyers took 922 of those coins during the same week to bring the cumulative total to 41,553.

Fractional gold American Eagles have sold out. The 2009 half-ounce number is 110,000 coins, the quarter-ounce total is 110,000 coins (yes, the same) and the tenth-ounce number is 270,000.

Buyers who are waiting for 2010 bullion coins can take not that the Mint expects to begin accepting orders for the 2010 silver American Eagle Jan. 19, some three week’s later than what has been customary for each new date.

However, market demand in 2009 was anything but customary. Some 27,843,000 is the current running total for sales of the popular silver coin.

It also appears that the four-coin 2009 Lincoln proof set has sold out at 201,107.

The Mint has a list of products that go off sale Dec. 31. On this list are the Jefferson and Madison Presidential dollar rolls and bags. Any interested buyers have had almost three years to get them, so nobody can claim a lack of opportunity

 By Dave

Price is in the Eye of the Buyer

December 21, 2009

Pricing is an eternal issue. Sellers want higher prices. Buyers want lower prices.

I had a call from a collector who said he had been active for over 50 years. He wanted to talk about an offer a coin dealer made to him about a silver dollar.

Without seeing a coin, there isn’t a whole lot anyone can do about figuring out an accurate price for anything, but the collector wanted to talk so I listened.

Since he was asking questions, I interjected a few words into the conversation.

I told him that nobody was obligated to buy a coin from him at a price that he wants. I said the dealer might not agree with the grade. He might not need the coin.

There are any number of reasons why someone won’t buy something.

I suggested the caller take the coin to others and see what they offer.

He said he did. They offered the same money.

I replied that then that would seem to be the market price of the coin.

The caller still was not happy. I think “disappointment” might be the best word to describe his mood.

I always feel helpless in calls like this.

The coin might be perfectly awful. It might be a jewel. I cannot tell. The price quoted to me was for a run-of-the-mill specimen.

After 50 years I wonder how it came down to this one coin.

Had the caller never sold anything before? I don’t know.

Had he promised his grandson a special present with money from the sale of the coin?

I don’t know.

The only real advice I can give is that every collector should be out there selling something from time to time to stay on top of the market and not let their sense of it rust away.

This might be a good New Year’s resolution for those who have not done this.

We Can Borrow; What’s it Mean?
December 17, 2009
By Dave

Many dealers have to borrow money to finance their inventories. It is standard business practice. It has been so to some degree for as long as I have been a collector. Some dealers over the years have made nice profits for themselves lending money to other dealers.

This is not unusual.

What brings the topic to mind this morning is that the most recent issue of Numismatic News had three full-page ads in it offering money-lending service.

What does this signify?

Does it mean the numismatic community has arrived so to speak and is becoming much more attuned to standard business practices? Are we simply catching up to the world of home equity loans, auto loans or home improvement loans?

Could it signify a growing need among hobbyists for cash? That certainly wouldn’t be good. Borrowers paying back loans might not have the money to go on buying coins at the same space as before.

Might it simply mean that Ben Bernanke’s cheap cash has finally dribbled down to the level of numismatics?

We certainly are not high on the financial food chain. It would take some time to reach our level. We hobbyists are often viewed as mild eccentrics rather than profitable financial clients.

This is a lot to ponder. It seems that by looking at it one way, it could be a negative signal for future business. By looking at it another, it might be a positive signal.

Am I on the fence on this one?

You bet I am. I will keep watching.