News and Analysis regarding scarce coins, coin markets, and the coin collecting community #15

A Weekly Column by Greg Reynolds

Today’s topic relates to the number of people who collect rare or scarce U.S. coins, and, at least once in a while, spend more than $1000 on a single coin. The number of such collectors has grown tremendously since around 1998.

At various times since Sept. or Oct. 2008, a substantial number of collectors have stopped buying, not because of lack of interest, but rather because of their own personal financial circumstances. After all, in the middle of 2008, a rather severe recession began that negatively affected almost everyone. Further evidence of my point regarding the increase in numbers and in interest of coin collectors is found in the fact that rare U.S. coins went down in value to a much lesser extent than almost all other categories of assets.

There has only been a modest amount of attrition since coin markets peaked during the first seven to eight months of 2008. (Please see my remarks about coin markets in the following articles: O’Neal’s Eagles – Part1, Part 2; Queller’s Patterns; August 2009 Market Report – Part 1, Part 2, Part 3; and my Review of the Jan. 2010 Platinum Night event.)

Why is there is a reason to put forth such points now? After all, I could, and had planned to, write more about the terrific coins that I saw at the ANA Convention in Boston. (Please click to read last week’s column.) Unfortunately, very recently, in a print publication (CW), a widely recognized commentator (QDB) has put forth a theory that most “serious” collectors are well over fifty years old and that the number of coin collectors has not been increasing. This poorly reasoned theory needs to be addressed.

I. Young Adults and Coin Conventions

Without research, it can be logically deduced that most young adult collectors do not have the time to attend many first tier coin conventions or expos. Further, because of the growth of the Internet and other advances in technology, there is less to be gained, than before, by attending major conventions, though I still recommend attending them. If a majority of the collector-buyers at major events, like the ANA and FUN Conventions, are over the age of fifty, this does NOT prove that a majority of collectors who are seriously interested in expensive U.S. coins are over the age of fifty.

It should be obvious that most collectors between the ages of seventeen and fifty just do not have the time to attend ANA or FUN Conventions, or Long Beach Expos. Surely, many young adults in their twenties, thirties and forties, are busy with their careers and/or busy running their own businesses. A lot of people work ten hours a day to further their business or occupational pursuits, especially many of those collectors who spend more than $1000 per coin. It is also true that collectors in their twenties or thirties may be focused on their respective families.

In general, it is unrealistic to expect a thirty-three year old entrepreneur to be staying up at night thinking about locating a Draped Bust, Small Eagle half dollar, completing a set of Three Cent Nickels, or assembling a type set of Proof Liberty Head gold coins. Of course, there is an occasional thirty-three year old, very affluent collector who devotes ten to twenty hours a week to studying coin related materials and to building his coin collection. Clearly, though, few thirty-something collectors will have the time to attend ANA or FUN Conventions. Therefore, QDB and also Doug Winter are correct in that collectors in the fifty to eighty year old range are more likely to engage in BOTH spending on rarities and extensive travel to coin events. It is indisputable, however, that there are many unseen coin collectors in their twenties, thirties and forties.

In an article here on CoinLink, Doug Winter states, “ever since coin collecting became popular in the United States, in the late 1850’s [to] early 1860’s, [it has] been a hobby that mainly attracts older people. Think about it: coins are expensive and people in their 20’s and 30’s have never had enough discretionary income to be making impulsive non-essential purchase. When you are 27 years old, you are thinking about buying a house and saving money for your child’s education; not deciding what series of 19th century gold coin to specialize in.”

In response to Winter, two points come to mind. My first point is consistent with Winter’s analysis. Many of the people who spend large sums on coins when they are over age fifty were interested for years or decades. They just did not earlier have the money and/or the time to devote to buying many coins that cost more than $1000 each. Secondly, in opposition to Winter, I strongly believe that there are thousands of U.S. coin collectors in their twenties and thirties who actively buy rarities.

I maintain that there are a substantial number of people in their twenties and thirties who do acquire four figure coins (and quite a few of them have purchased six figure coins). I have met or otherwise heard about quite a fair number of them. Old timers may be startled by the incomes of some young adults, particularly in major metropolitan areas.

Many relatively young adults involved in finance, banking, certain areas of international business, and technologically advanced industries, among other fields, continue to earn seven or sometimes eight figure incomes, even during the recession. Besides, someone who has an income in the low six figures, especially if he or she does not have children, can often afford to buy many coins that are valued at more than $1000 each. The suburbs of most major cities are home to a large number of relatively young adults who have incomes in the low six figures or more.

II. False Conclusions from True Data

To support his hypothesis that “the vast majority of people seriously interested in coin collecting today are on the long side of fifty years old,” QDB emphasizes the decline in: the number of physical coin stores, the number of subscriptions to one coin newspaper (CW), and the total membership in the American Numismatic Association (ANA). QDB also concludes that the total number of coin collectors has not significantly risen in a very long time. While the three sets of numbers that he cites have truly declined from peaks or not substantially increased, his conclusions are illogical.

I am here reminded of the title of an unrelated book by Ben Wattenberg, The Good News is the Bad News is Wrong. Physical coin stores, the ANA, and CW all have much less significance to collectors of rarities than these did decades ago. Innovations in the coin collecting community coupled with advances in technology have changed coin markets such that relatively new collectors seek almost all of their information via the Internet, or by way of telephone conversations with those who they meet via the Internet. Plus, most proprietors of coin stores, the management of the ANA and the contributors to CW have not focused on PCGS and NGC certified coins to the same extent that serious collectors of rarities focus upon them.

III. Old Fashioned Coin Stores

The decline in the number of physical coin stores, which are distinct from offices for mail-order sales or online Internet stores, is NOT indicative of a decline in the number of coin collectors. There are other reasons for this decline.

(1) Since the 1960s, the cost of insurance has risen, in real terms. (2) In the 1960s and 1970s, and to some extent in the 1980s, violent crime was a terrible problem, much more so than it was before 1960 or after 1990. Some of the proprietors of coin stores were killed, assaulted or just scared to the point of being emotionally scarred. The crimes of the past have discouraged dealers in later years, and in the present, from opening coin stores. (3) From the 1960s to the present, there has been a tendency for sales taxes to increase. In many circumstances, coin collectors can legally avoid sales taxes (though not necessarily legally avoid ‘use’ taxes) by receiving coins in the mail from sellers in States other than their own. (4) Coin dealers usually do not have the time to spend five or six days a week in a coin store. In the decades since the 1960s, there became more of a need for coin dealers to travel to buy coins and trade with other dealers. (5) The advent of the PCGS and the NGC resulted in lower profit margins on coins and thus some small coin stores were replaced by larger mostly ‘mail order’ coin dealerships that can feasibly operate with smaller ‘buy-sell’ spreads. (6) The last and strongest reason is that most information regarding coins being offered is disseminated over the Internet. A collector may ‘browse’ many listings of coins on the Internet in the same period of time that it would have required to drive to a local coin store, if there is one nearby, and it is unlikely that a local coin store would have an inventory that matches the inventories that could be found via the Internet in just a few minutes.

IV. Subscriptions to One Publication

It is nonsensical to argue that the decline in subscriptions to one newspaper or magazine indicates that there is a decline in the number of coin collectors. Obviously, since the late 1990s, coin related websites have blossomed and there is a tremendous amount of worthwhile information available for free on the Internet. Consider the good (though far from perfect) free price guides at PCGS.com and Numismedia.com. The Heritage Auction Archives constitute an incredible resource. The NGC and ANS websites deserve honorable mention. The PCGS and Stella Coin websites include electronic versions of quality books that may be read for free.

Coin collectors find hundreds of articles on PCGS and NGC certified coins, and related markets, that are available for free on CoinLink.com. I am not here referring only to my own columns and analytical articles. I recommend articles by Doug Winter, Laura Sperber and others.

I could understand why someone who was a dealer in the 1960s may think now that one coin (print) publication (CW) and the ANA are crucial to collectors. In the 1960s and the 1970s, this newspaper and the ANA were leading sources of information regarding rare U.S. coins. These were the mainstream information sources, along with an array of Krause publications, including Numismatic News weekly. Of course, the ANA and the print newspapers are still important as sources of information, but they no longer hold the same kind of central positions that they did in the past.

V. The PCGS and the NGC

The most revolutionary transformation in the history of coin collecting is the emergence and acceptance of the PCGS and the NGC in the mid 1980s. These are the two leading services that authenticate, grade and encapsulate coins. Previous efforts to standardize coin grading, even with encapsulation, were not entirely successful. The PCGS and the NGC rapidly became very successful.

For scarce or rare U.S. coins valued at more than $1000 each, in any grade, more than 90% of the honest and/or highly qualified dealers will sell only those that are certified by the PCGS or the NGC. Of course, some of these same dealers may sell low priced coins that are not so certified. For example, it is not cost-effective for a dealer to submit a 1914-D dime in Good-04 grade to the PCGS or the NGC.

For conditionally rare (and thus not generic), pre-1964 U.S. coins that grade 64 or higher, the threshold is less than $1000. For any such coins valued at more than $250 each, over 85% of the legitimate and/or highly qualified dealers limit their offerings of such coins to those that are certified by the PCGS or the NGC. Put differently, dealers who sell such coins that are not certified by the PCGS or the NGC are usually (though not always) suspect or are clearly engaging in practices that most experts would regard as wrongful.

Of course, there exist honest, qualified dealers who sell raw (not certified) U.S. coins for more than $1000 each or very choice uncirculated raw condition rarities for more than $250 each. Such dealer-exceptions, though, are scarce. For coins in these two categories, legitimate mainstream dealers sell coins that are certified by the PCGS or the NGC. While this point may seem obvious to most of those collectors who read my columns and articles, it would not be obvious to all those who read only the print publications and thus do not read mainstream coin material on the Internet. Someone who reads only CW and the ANA’s monthly magazine may not understand the role of the PCGS and the NGC in markets for rare U.S. coins.

From a stack of recent CW issues, I arbitrarily selected the March 1, 2010 issue. Other than in advertisements, I did not see any mention of the PCGS or the NGC until page 20. Even then, the PCGS was mentioned in the caption of an image of a coin that was not specifically mentioned, or even alluded to, in the article that this image accompanied, which did not mention any grading service. Finally, on page 24, in the second to last paragraph of Ken Potter’s article on some Lincoln Cent varieties, there is mention, in passing, of a Lincoln Cent that was certified by the PCGS. Elsewhere in this issue, there is a long article on the new Shield reverse 2010 Lincoln Cents.

Later, on p. 46, Steven Roach mentions an NGC certified coin in the second to last paragraph of his market report and a PCGS certified coin in the last paragraph. The NGC certified coin that Roach mentioned is a very famous and extremely rare, 1849-C ‘Open Wreath’ Gold Dollar, which, I suggest, should have merited a distinct, long article. On page 54, selected prices realized for an auction are presented in paragraph form; this piece looks like it came from an auction firm’s press release. There is no analysis or discussion of the rarity or importance of the coins auctioned. All the coins listed are PCGS or NGC certified, and their respective assigned grades are cited.

In the June 28th issue, other than in ads and in two or so letters to the editor, I did not notice a mention of the PCGS or the NGC until page 82 in another example of auction coverage that seemed to be a reformation of a press release from the auction company. As I am not a perfect reader, it is entirely possible that I missed a mention of the PCGS or the NGC, here or there, in one or both of these issues of CW. As best as I can tell, there is not one real discussion of a PCGS or NGC certified coin in either of these two issues of CW, which is not unusual. An absence of such discussions is typical of CW.

I maintain that collectors who spend thousands of dollars on PCGS or NGC certified coins would like to read articles that would assist them in evaluating, interpreting or at least further understanding valuable PCGS or NGC certified coins. How could one commentator conclude that the fact that CW had more subscribers in the past means that there are fewer collectors in the present? Could it be true that serious collectors of rarities were much more likely to subscribe to CW in the 1960s and 1970s than they are in the present?

As for the monthly publication of the ANA, The Numismatist, it is entertaining. Other than the columns by experts employed by the NGC (some of which are excellent), few of the articles in this publication would help readers evaluate, interpret, or further understand PCGS or NGC certified coins. Is it true that joining the ANA is very beneficial to collectors who spend large sums on rare or scarce U.S. coins and seek to learn more about grading, natural toning, coin doctoring, interpreting population reports, condition rarities, pedigrees, and auctions? Instead, it may be true that such information is more likely to be found on the Internet than in the ANA’s publications.

I am not aiming here to criticize CW or the ANA’s publications. I am asserting that it is not logical to equate changes in the number of subscribers to CW or changes in the number of ANA members to changes in the number of collectors of expensive PCGS and NGC certified coins. Moreover, it is logical to conclude that many new collectors are not subscribing to CW and not joining the ANA. Even so, I am not discouraging anyone from subscribing or joining. The ANA’s publications and CW have plenty of interesting articles and cover a wide variety of numismatic topics.

Certainly, there are many articles in both CW and The Numismatist regarding the connections between overall history and coins. I am skeptical, though, as to whether most collectors who are focused on buying rarities (or very scarce U.S. coins) are really interested in reading about history. I suggest that the ANA may be able to expand its membership if the ANA takes positions on controversial issues and offers more material that is of educational value to collectors who spend a lot of money on PCGS and NGC certified coins.

VI. The Growth of Coin Collecting

Before reading recent arguments, I did not realize that the recent growth of U.S. coin collecting is a controversial point. I am almost certain that, from 1998 or so to some point in 2008, the number of new collectors of rather expensive U.S. coins kept increasing to a substantial extent.

From 2002 to 2008, U.S. coin prices, in several categories, tripled or quadrupled. Prices for almost all scarce or rare U.S. coins went up. During this period, the number of coin collectors who signed up on the Heritage website increased from less than 50,000 to more than 250,000! Heritage auctions more than $250 million a year of just coins, mostly to collectors who bid over the Internet or to their dealer-representatives. Of course, some of the people who sign up on the Heritage website do not buy a large number of coins priced at more than $1000 each. Thousands do. Many have bought coins for more than $100,000 each. Please see my review of the Jan. 2010 Platinum Night event or many of my weekly columns over the past two months.

Generally, an 1856-O Double Eagle that was worth $30,000 in the early to mid 1990s could easily be worth more than $400,000 now. Compare the prices in the auctions of (a large part of) the Harry Bass collection in 1999 and 2000 with the prices many of the exact same coins realized during the past five years. The same coins, just a few years later, tended to realize, from two to ten times as much. Though it is not the best example as it has since been given a Specimen designation by the NGC, I recently wrote about the Bass 1853-O Eagle that sold for less than $20,000 in 1999 and for $316,250 in a Stack’s auction in Boston on Aug. 7.

In general, it is inconceivable that the same collectors decided to spend more than five times as much for the same coins. There must have been thousands of new collectors joining the coin community from 2002 to 2008.

Walter Husak’s PCGS graded AU-55 1793 Liberty Cap large cent was auctioned for $632,500 in Feb. 2008. A decade or so earlier, in Feb. 1998, the exact same coin realized $90,750 at auction, about one-seventh of its Feb. 2008 price. (Please see my article that focused on this coin.) This is not an isolated example; large cents, gold coins, many bust silver coins, and a vast array other U.S. rarities rose in value to multiples of their previous respective price levels, from 2002 to 2008. On July 31, 2008, Heritage auctioned an 1804 dime for $632,500, well over three times as much as the exact same coin (though in a different holder) realized in a Jan. 2007 Heritage auction. Furthermore, auction companies and dealers had many more customers in the 2000s than they did in the 1990s. In the early to mid 1990s, major conventions were characterized by wholesale trading and few dealers had retail customers. Dealers were speculating in regard to expected changes in market prices. By 2003, hundreds of dealers had many retail collector-clients. A rejuvenation in coin collecting occurred.

Since the mid 1990s, prices for circulated pre-1934 U.S. coins have risen as well. An 1896-S quarter in Good-04 grade was probably worth around $250 in 1998 and is worth around $1000 now. A 1908-S Indian Cent in the same grade has approximately tripled in retail price during the same time period, from $23 or so to around $69 now. Yes, there are some circulated coins that did not rise in value as much as these, and the prices of others have slid downward since the middle of 2008.

In conclusion, for almost all pre-1934 U.S. coins, and for many dating from 1934 to 1964, the number of collectors has risen dramatically since 1998. A substantial percentage of the number of serious collectors of U.S. coins are NOT over the age of fifty and circumstantial evidence demonstrates that the total number of buyers of U.S. coins valued at more than $1000 each had at least tripled from 1998 to 2008.

Related posts:

1. Coin Rarities & Related Topics: Upcoming LB Auctions, PCGS Secure Plus & NGC Metallurgic Analysis
2. Coin Rarities & Related Topics: Great Coins at the ANA Convention in Boston
3. Coin Rarities & Related Topics: The PCGS Lawsuit Against Alleged Coin Doctors
4. Coin Rarities & Related Topics: 1794 Silver Dollar, 1795 Reeded Edge Large Cent, and selected coins in the Summer FUN Auction
5. Coin Rarities & Related Topics: 1793 Half Cents, Chain Cents, Wreath Cents, 1808 Quarter Eagles — one-year type coins in general
6. Coin Rarities & Related Topics: Bowers & Merena auction, Proof 1876-CC dime, and $150 million for the CAC
7. New Weekly Column: Coin Rarities & Related Topics
8. Coin Rarities & Related Topics: Collection of Carson City Half Eagles, WPE Classic Commemoratives & Summer Coin Shows
9. Coin Rarities & Related Topics: 1794 Silver Dollar sells for $1,207,500, and More Auction News
10. Coin Rarities & Related Topics: Collections of Claude Davis and Brandon Smith, Coin Pricing and Government Regulation