Rarity Inspires

Posted on 6/1/2005

As we head into the summer months, it is always to our benefit to look at the condition of the current market. Many years ago this time of year was to the coin business—just what it sounded like—vacation time.

As we head into the summer months, it is always to our benefit to look at the condition of the current market.

Many years ago this time of year was to the coin business—just what it sounded like—vacation time. However, over the last 5 years or so, the summer meltdown has not been near as obvious. With the widespread use of cell phones and laptops, collectors and dealers can vacation and still do plenty of numismatic trading. This has been great for the coin business. So where are we today?

In the past month we have detected some softness in the bidding side of the marketing equation. However, this seems to be more of a protectionist philosophy as most dealers do not want to buy more of the same common coins already in stock. The lower bids are mostly for coins that are considered average quality where supplies are readily available. In general, where the bids have declined, it is in the lower 10% range. Of importance is the fact that this has not necessarily caused FMV to fall. While there is some backtracking in better coins, it is not as dramatic and the sellers are not really taking part in this plan. Most sellers with the better quality coins, or the real rarities, have the wherewithal to move these coins to collector customers or remain in a holding pattern for some period of time. If the discounted bidding is the bad news, then the market appears to be fairly steady because the good news is that we are finding numerous areas where the NumisMedia wholesale trading levels are moving higher and the direct results are that FMV is moving higher as well.

Morgan Dollars, especially the better dates in MS62 and higher, have moved considerably this past month. That's right, MS62s. What we are seeing in the Morgan series and some other series as well, is that the MS63 FMV prices have moved so dramatically over the last several years that the lower grades have failed to keep up the pace. Therefore, the spread between the MS63 grades to the MS62 has widened noticeably. If the market for this particular series remains active for the MS63 and higher grade, it will eventually drag the next lower grade to higher FMV levels. Furthermore, most collectors were predisposed to pass on MS62 coins because they were below the quality that would satisfy their personal tastes. Well, the farther up the ladder that the FMV moved for the MS63 and higher grades, the better some of the MS62s begins to look. What we have found is that many collectors have adjusted their attitudes slightly and are now willing to accept high-end MS62 coins.

Of course, there are certain conditions that are added to this philosophy. The spread between the FMV of the MS63 and the MS62 has to be wide enough to make the MS62 more tempting. In addition, the census as reported by the major grading services, cannot be so excessive that the MS62 coin is more accessible than sand at the beach. In other words, there still has to be somewhat of a limited supply in the marketplace depending on the overall rarity of the issue. The third and possibly most important point here is based on the supplies available; the collector has become a little more selective for this quality of coin. The end result is that collectors actually feel that they are getting a PQ coin for the MS62 grade. PQ in MS62? That's right, a premium quality coin in a 62 grade.

Premium quality coins come in all grades. These are coins that emit a near gasp from the viewer upon visual contact. "Why is this not a higher grade?" Of course, the main problem we face when reporting PQ coins is that you can't quantify it with an FMV value. If an MS62 FMVs at $100 and a 63 is $500, a PQ MS62 can be anything in between depending on agreement between the buyer and the seller. But we cannot let the PQ coin determine the value of all the normal MS62 issues. The majority of the MS62 coins would be sold (or available for sale) at a discounted price of the reported FMV and that would not be an accurate gauge of the overall market. In the majority of cases, our experience tells us that the PQ coin will bring from 10-20% over the noted grade and as much as 50%; a lot is determined by the width of the FMV spread between the noted grade and the next higher grade.

While it is not our profession to recommend which issues should be purchased for future profits, we are constantly questioned about the coins we think are poised for potential gains. What we suggest is to look at areas where the prices have risen substantially over the last couple of years. Then look at the next lowest grade where the FMV has not moved in the same fashion. This may leave you searching for too many different coins. So the next step would be to look for coins that have a lower than average number of coins graded by the major services. If you take into consideration the original mintage of these coins you should be able to eliminate many of the high mintage issues.

Another aspect to consider is the total number of coins available in a specific grade when you add the totals graded by the major certification services. Taking this number and multiplying it by the FMV of the grade and you will find the total capitalization of this particular issue. For example, if there are a total of 90 coins graded and the FMV is $87, then theoretically the cost to capture the entire census of this coin would be $7,830. This is not a large amount of money and is one of the elements that serious numismatists look at when they try to determine if they can move a market. You also have to realize that the total number of coins graded is reduced by the number of those coins simply not available to purchase. When you think about the number of collectors there are in the coin market today, census reports showing that a total of 5,000 coins in a specific grade may not be as much as you once thought, especially when you are in an area that is extremely active such as Morgan Dollars.

One area we have neglected to mention over the years is the $4 Stella Gold. These coins are about as attractive as any in numismatics. However, entry level prices here are very high for the average numismatist. In fact, we cannot imagine a coin that would not bring at least $50,000 in the market; and this would have to be a very low-grade coin. Years ago the $4 Stella was considered more of a dealer coin because of the cost to own. They were rarely traded and usually purchased at major auctions by dealers feeling particularly flush at the time. However, the times changed with the new collector trying to purchase anything and everything that had rarity and history on its side. In the last three years the 1879 Flowing Hair has increased from $74,940 to $123,130 in PR63; in PR64 the FMV has risen from $89,130 to $150,000. Further, these coins are not as easy to find as to sell. There are many collectors, with the money to spend, out there looking for these high priced rarities. And when purchased most of these coins are taken off the market and will soon be even rarer.

NumisMedia has recently been named the NGC official price guide. If you go to the NGC Web site at www.ngccoin.com you will see this important announcement.

This article is a guest article written by:
NumisMedia

The thoughts and opinions in the piece are those of their author and are not necessarily the thoughts of the Certified Collectibles Group