A Letter from Mark Salzberg
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88 posts in this topic

45 minutes ago, GoldFinger1969 said:

Agreed....the distinction is arbitrary and sometimes a matter of semantics.   Here's why I say speculation:  when you INVEST, you let time work for you.  Stocks go up over time...bonds compound interest over time.  Let the holding period increase, and it's VERY HARD to lose money buying quality even if you buy at the wrong time (i.e., right before a bear market).

With SPECULATION....you are not letting time work for you.  You may have a short-time horizon and coins (like PMs) simply fluctuate too much in the short-term.  But even if your holding period is LONG TERM, if you bought at the wrong time (during a bubble, for instance) you might never get even.  That is certainly the case with folks who bought at the 1988-90 Coin Bubble peak.  Conversely, if you bought stocks right before the 1987 Crash or 2001-02 Bear Market or even 2008-09 Financial Crisis -- you made up your losses and then some.

The actual explanation for your description is the current financial mania.  What you are describing is applicable to only a few asset classes.

US stocks are in an unprecedented mania, the same mania which was in place at the 2000 dot.com and 2007 pre-GFC peaks.  Most debt is also still in the same mania.  Some real estate remains in the same mania still inflated by artificially cheap debt and lax credit standards.

Most everything else?  It peaked years or even decades ago.  Remember Japanese stocks?  This is hardly a minor asset class.  It's huge.  Yen denominated buyers have made little if any money in 31 years and probably lost money adjusted for purchasing power.  USD buyers might have made money due to the FX rate change (about 160 to 100) but still lost purchasing power.

I summarized this in a prior post.  Most Americans don't know it because they are only aware of the primary US stock indices or the big name large caps.  They also don't want to believe it's a mania because of the implications it has on their future living standards.

US coins as measured by the PCGS 3000 peaked around 1990 and to my knowledge, most have been losing value since 2008.  I regularly hear different claims for other coinage but don't believe it's more than a minority.

I agree with you in one key aspect though.  At least if you buy financially sound companies with good cash flows and decent business prospects, you get "paid to wait" with a dividend. 

With some expensive coin in TPG holder with a high number label, it can crash and never recover, easily.  Most of these coins certainly aren't interesting enough to be bought as collectibles at anywhere near current or recent value based upon its' credentials which is why collectors will only buy it with the expectation of getting most of their money back.

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The Japanese stock market sold at stratospheric multiples (60x earnings).  No U.S. stock indices sell at those levels.

Stocks are NOT cheap but they are not a bubble in the aggregate.  The FAANGs and work-at-home stocks have discounted alot of 2022 and 2023 success in the here and now.

Stocks are not as expensive as they were in 2000.  Lots of stocks in that index and not in the index had NO EARNINGS and were being valued on eyeballs and page views.

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1 hour ago, World Colonial said:

....Most of these coins certainly aren't interesting enough to be bought as collectibles at anywhere near current or recent value based upon its' credentials which is why collectors will only buy it with the expectation of getting most of their money back.

Scary implications, but ain't that the truth.

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53 minutes ago, GoldFinger1969 said:

The Japanese stock market sold at stratospheric multiples (60x earnings).  No U.S. stock indices sell at those levels.

Stocks are NOT cheap but they are not a bubble in the aggregate.  The FAANGs and work-at-home stocks have discounted alot of 2022 and 2023 success in the here and now.

Stocks are not as expensive as they were in 2000.  Lots of stocks in that index and not in the index had NO EARNINGS and were being valued on eyeballs and page views.

Earnings is not a good measure of value and the only reason P/E has any correlation is because the "P" is the market.  It's a very poor one since it is more of an accounting number than anything tangible.  You can't spend earnings and it changes based upon arbitrary accounting standards which are liberally applied in many instances.  Many "earnings" reported in the press are just made up based upon some alternative measure.

The point I was making is that the US stock market is an outlier, on an island in deep outer space all by itself.  It's a mistake to believe the performance in practically every other stock market since 1999 or 2007 can't or won't be replicated here.  Forget about losing money, most people's finances are so marginal, there future living standards will decline just by a repeat of 2000-2011 where the return over this period was about zero.

Going by other measures such as dividend yield, price to sales, and market cap to GDP, US stocks are either near peak value or above it.

The primary difference between the US stock market and all others isn't fundamental, it's inflated psychology.  The fake economy here also exists elsewhere for the same or similar reasons with less "success" but this doesn't explain the difference.

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6 hours ago, World Colonial said:

Earnings is not a good measure of value and the only reason P/E has any correlation is because the "P" is the market.  It's a very poor one since it is more of an accounting number than anything tangible.  You can't spend earnings and it changes based upon arbitrary accounting standards which are liberally applied in many instances.  Many "earnings" reported in the press are just made up based upon some alternative measure.

Dividend yield, 40% of S&P 500 total returns since 1926, will probably outdistance bond returns so the yield on them isn't to be discounted lightly.

For a comparision of valuation metrics, click here and check out Pages 5, 10, and 21 (other valuation metrics were replaced by Covid-19 stuff this quarter; they should return eventually):

https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets/viewer

 

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On 11/16/2020 at 2:12 PM, Quintus Arrius said:

"We are only in the earliest stages of the convergence of the collecting and investing worlds, and there are still incredible opportunities for growth." (Emphasis mine.)

We're in a world of ZIRP -- Zero Interest Rate Policies -- and the effect on long-duration assets (like growth stocks that don't pay dividends) is apparent after March and C-19.

I DO believe we may see more interest in PM's and by extension coins....but I don't think we will see nor do I WANT to see what happened in 1988-90.  The $$$ today are so large that just 1 or 2 gazillionaires could disrupt the market if they went full-bore with Big $$$ and tried to accumulate their dream collection in 2 years or whatever. 

In fact, I'm sure that Bob Simpson had to impact some prices even if he was patient, just knowing that you might have a coin he definitely wanted and that $$$ were no object to a guy who fleeced ExxonMobil out of $40 billion. xD

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3 minutes ago, GoldFinger1969 said:

Dividend yield, 40% of S&P 500 total returns since 1926, will probably outdistance bond returns so the yield on them isn't to be discounted lightly.

For a comparision of valuation metrics, click here and check out Pages 5, 10, and 21 (other valuation metrics were replaced by Covid-19 stuff this quarter; they should return eventually):

https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets/viewer

 

Page 5 in this presentation uses the forward P/E.  As weak as historical earnings are as a valuation measure, this one is even worse.

The other two don't tell me whether US stocks are relatively cheap or expensive.  I agree "value" is cheap compared to "growth" but that's substantially due to the latter including so many bubble stocks and cash burn machines selling at insane valuations.

The reason current conditions don't seem insane to hardly anyone now is because it's lasted so long and we're living through it.  The behavior even in the worst prior manias is tame compared to the insanity since the late 90's.  As one example, Kindlerberg's book claims that during the South Sea Bubble (1718-1720) someone raised 5,000 GBP with an IPO titled "An undertaking of great advantage but no one to know what it is".

That's not even close to what should be worthless companies (mostly in the US) that collectively will never make a dime "worth" at least hundreds of billions if not up to several trillion right now.

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3 minutes ago, GoldFinger1969 said:

We're in a world of ZIRP -- Zero Interest Rate Policies -- and the effect on long-duration assets (like growth stocks that don't pay dividends) is apparent after March and C-19.

I DO believe we may see more interest in PM's and by extension coins....but I don't think we will see nor do I WANT to see what happened in 1988-90.  The $$$ today are so large that just 1 or 2 gazillionaires could disrupt the market if they went full-bore with Big $$$ and tried to accumulate their dream collection in 2 years or whatever. 

At some point, huge bull market in gold and silver.  If anything is going to bring bigger money in, it's that.

Edited by World Colonial
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8 minutes ago, World Colonial said:

At some point, huge bull market in gold and silver.  If anything is going to bring bigger money in, it's that.

Agreed.....the spillover to bullion substitues like generic Morgans or Saints...and then the spillover to quasi-bullion MS-65 or MS-64 coins that sell at modest premiums to bullion (15-25%) will be fascinating.

And of course....the pure numismatics that sell for multiples of the underlying metal price like ultra-rare conditions or the 1907 High Relief or rare Morgans toned or DMPLed, etc.

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33 minutes ago, World Colonial said:

At some point, huge bull market in gold and silver.  If anything is going to bring bigger money in, it's that.

Agreed.  And at year's end, with so much uncertainty in the air, ... an unresolved election, a raging pandemic, unemployment benefits running out,  an outbreak of hostilities somewhere in the world, migrants breaching the northern border of a Narco-state, climate change, 35 named storms (hurricanes in November?) massive deforestation (Brazil, Madagascar) oceans depleted of fish, melting polar ice cap/mountain glaciers, disappearing Monarch butterflies [and yellow cabs] etc...  a portent of things to come and there will be people sitting around lamenting the good old days when gold was "only $3,000 an ounce."

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1 hour ago, GoldFinger1969 said:

Agreed.....the spillover to bullion substitues like generic Morgans or Saints...and then the spillover to quasi-bullion MS-65 or MS-64 coins that sell at modest premiums to bullion (15-25%) will be fascinating.

And of course....the pure numismatics that sell for multiples of the underlying metal price like ultra-rare conditions or the 1907 High Relief or rare Morgans toned or DMPLed, etc.

Depends upon how far out anyone wants to project and what coins they have in mind.

To my knowledge, the current run up in gold has done virtually nothing for US coins prices in the aggregate and has never had much (if any) correlation with coinage from elsewhere.  Silver has run up noticeably since March but is only about 20% higher than May 2008.  Not sure either has had much impact even on generics with higher premiums either.

I don't believe this metals move is going to be that big now.  I see major asset deflation first. 

Decades from now, it's also my opinion that any run up will be more than offset by most US collectors becoming poorer or much poorer and demographic trends where a noticeably lower proportion will collect US coinage.  The collector base may or may not shrink but even if it doesn't, they mostly won't be paying current prices in "real money", much less far more.

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2 hours ago, Quintus Arrius said:

Agreed.  And at year's end, with so much uncertainty in the air, ... an unresolved election, a raging pandemic, unemployment benefits running out,  an outbreak of hostilities somewhere in the world, migrants breaching the northern border of a Narco-state, climate change, 35 named storms (hurricanes in November?) massive deforestation (Brazil, Madagascar) oceans depleted of fish, melting polar ice cap/mountain glaciers, disappearing Monarch butterflies [and yellow cabs] etc...  a portent of things to come and there will be people sitting around lamenting the good old days when gold was "only $3,000 an ounce."

"Cats and dogs...living together....MASS HYSTERIA !!!"  xD

 

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2 hours ago, Quintus Arrius said:

 a portent of things to come and there will be people sitting around lamenting the good old days when gold was "only $3,000 an ounce."

That's the thing...you have plentiful supply from Central Banks (I believe their stocks above ground dwarf annual new production from mines) but you have BILLIONS of consumers today that are middle class and above that wasn't the case in the 1970's and 2000's.  I can see gold going parabolic and hitting $10,000 in 5 or 10 or 15 years and folks congratulating themselves for "only" paying a 15% premium for an MS-65 Saint at under $12,000.xD

I think this is what MS is alluding or hoping for in that letter.

Gold went up 20-fold from 1970-1979 after decades of suppression of the price.  If it goes up only 5-10 fold, you are looking at big changes in our universe:

Prices 2-3-4-5 fold higher.....dozens of new posters here at NGC Forums and hundreds of posts each day.....coins shows talking about limiting attendance and having crowds wait to gain admittance....yeah, I can see it.  (thumbsu

Edited by GoldFinger1969
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2 hours ago, World Colonial said:

To my knowledge, the current run up in gold has done virtually nothing for US coins prices in the aggregate and has never had much (if any) correlation with coinage from elsewhere.  Silver has run up noticeably since March but is only about 20% higher than May 2008.  Not sure either has had much impact even on generics with higher premiums either.

Gold and silver rising HAS to impact the bullion and quasi-bullion coins.  MS-62 common Saints are going to track bullion 1-to-1.....and MS-65 generic Saints that sells for a 15-25% premium normally will see the price rise based on bullion PLUS an expanding premium.  Pure numismatics like a 1907 HR or an MS-66 generic are another story.

2 hours ago, World Colonial said:

I don't believe this metals move is going to be that big now.  I see major asset deflation first. 

Decades from now, it's also my opinion that any run up will be more than offset by most US collectors becoming poorer or much poorer and demographic trends where a noticeably lower proportion will collect US coinage.  The collector base may or may not shrink but even if it doesn't, they mostly won't be paying current prices in "real money", much less far more.

Gold can appreciate in real or nominal dollars during deflation.  And right now....the CB's are looking to promote inflation.  As Marty Zweig once said, "Never fight the Fed."

Demographics and our hobby has many variables.  Coins that are not tied to a PM (gold, silver) like SLQ's or Franklins or Pennies or other stuff like that....it needs collectors.  Ultimately, you could have a Baseball Card Effect if nobody wants to focus on the low-end stuff.

Higher-end coins for rarity and those tied directly or somewhat to gold/silver....they have underlying support based on metallic content, though premiums can dissipate over time.

Edited by GoldFinger1969
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7 hours ago, GoldFinger1969 said:

Gold and silver rising HAS to impact the bullion and quasi-bullion coins.  MS-62 common Saints are going to track bullion 1-to-1.....and MS-65 generic Saints that sells for a 15-25% premium normally will see the price rise based on bullion PLUS an expanding premium. 

I am aware of this.  The expanding premium is due to a temporary physical metal supply-demand imbalance.  Or, the higher volatility.

7 hours ago, GoldFinger1969 said:

Gold can appreciate in real or nominal dollars during deflation.  And right now....the CB's are looking to promote inflation.  As Marty Zweig once said, "Never fight the Fed."

Gold has never been more relatively overpriced in modern times, going back several centuries.  I'm not saying it won't become more overpriced.  I am saying that anyone who is holding a noticeable percentage of their net worth in it will have an above average risk of losing a noticeable proportion of their purchasing power, at some point I just don't know when.  It certainly isn't "cheap" even now.

Usually, an asset runs up in anticipation of the event due to psychology.  In this instance, I can see gold running up due to fear fr default (or "printing" as it did earlier).  If defaults, there are going to be many forced sellers among "metal bugs" and holders of the "paper" metal.

7 hours ago, GoldFinger1969 said:

Demographics and our hobby has many variables.  Coins that are not tied to a PM (gold, silver) like SLQ's or Franklins or Pennies or other stuff like that....it needs collectors.  Ultimately, you could have a Baseball Card Effect if nobody wants to focus on the low-end stuff.

Higher-end coins for rarity and those tied directly or somewhat to gold/silver....they have underlying support based on metallic content, though premiums can dissipate over time.

Look at the US Census Bureau forecasts.  The last one I saw goes out to 2060 though I didn't see interim detail.  Most US collectors are overwhelmingly Caucasian men.  There is no growth in this demographic (non-Hispanic white) but depending upon how anyone interprets this data, it may or will shrink. 

The groups where it will increase don't collect anywhere near to the same proportion and it isn't because of a lack of money either.  They just don't want to.  Where they do and will, they have much less affinity (if any at all) for the coins most US collectors buy now.  This doesn't mean the price level has to drop but there is no rationalizing this away.

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7 hours ago, GoldFinger1969 said:

Gold and silver rising HAS to impact the bullion and quasi-bullion coins.  MS-62 common Saints are going to track bullion 1-to-1.....and MS-65 generic Saints that sells for a 15-25% premium normally will see the price rise based on bullion PLUS an expanding premium. 

I am aware of this.  The expanding premium is due to a temporary physical metal supply-demand imbalance.  Or, the higher volatility.

7 hours ago, GoldFinger1969 said:

Gold can appreciate in real or nominal dollars during deflation.  And right now....the CB's are looking to promote inflation.  As Marty Zweig once said, "Never fight the Fed."

Gold has never been more relatively overpriced in modern times, going back several centuries.  I'm not saying it won't become more overpriced.  I am saying that anyone who is holding a noticeable percentage of their net worth in it will have an above average risk of losing a noticeable proportion of their purchasing power, at some point I just don't know when.  It certainly isn't "cheap" even now.

Usually, an asset runs up in anticipation of the event due to psychology.  In this instance, I can see gold running up due to fear fr default (or "printing" as it did earlier).  If defaults, there are going to be many forced sellers among "metal bugs" and holders of the "paper" metal.

7 hours ago, GoldFinger1969 said:

Demographics and our hobby has many variables.  Coins that are not tied to a PM (gold, silver) like SLQ's or Franklins or Pennies or other stuff like that....it needs collectors.  Ultimately, you could have a Baseball Card Effect if nobody wants to focus on the low-end stuff.

Higher-end coins for rarity and those tied directly or somewhat to gold/silver....they have underlying support based on metallic content, though premiums can dissipate over time.

Look at the US Census Bureau forecasts.  The last one I saw goes out to 2060 though I didn't see interim detail.  Most US collectors are overwhelmingly Caucasian men.  There is no growth in this demographic (non-Hispanic white) but depending upon how anyone interprets this data, it may or will shrink. 

The groups where it will increase don't collect anywhere near to the same proportion and it isn't because of a lack of money either.  They just don't want to.  Where they do and will, they have much less affinity (if any at all) for the coins most US collectors buy now.  This doesn't mean the price level has to drop but there is no rationalizing this away.

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2 hours ago, World Colonial said:

Look at the US Census Bureau forecasts.  The last one I saw goes out to 2060 though I didn't see interim detail.  Most US collectors are overwhelmingly Caucasian men.  There is no growth in this demographic (non-Hispanic white) but depending upon how anyone interprets this data, it may or will shrink.  The groups where it will increase don't collect anywhere near to the same proportion and it isn't because of a lack of money either.  They just don't want to.  Where they do and will, they have much less affinity (if any at all) for the coins most US collectors buy now.  This doesn't mean the price level has to drop but there is no rationalizing this away.

No argument....look, I'm the last person to focus on diversity nonsense and identity group politics and bring it into our little hobby.  But no doubt, if you had more "minorities" and even women it would help expand the base.  I can't recall seeing any black dealers at the local shows I have gone to and I don't recall a single one at FUN (maybe I am wrong).  Very few women, usually spouses/partners of a husband or BF. 

Lots of Asians and other immigrants, though -- that traditional affinity for gold and/or silver helping here.

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I'd be interested in hearing from Mark Salzberg himself as to what he exactly meant in that letter.  Perhaps he can post here and clarify...or someone from NGC can do so for him. (thumbsu

He's clearly a smart guy...he can't possibly be stating that he wants people to put $$$ earmarked for investments into coins and numismatics (even PM's)....and I don't think NGC or the folks ATS want to see a TORRENT of coins sent in pressurizing the TPG capacity....and/or seeing a spike in prices akin to 1988-90.

Collectibles ARE NOT and CAN NOT BE an "asset class" for investing.  Not coins....not numismatics....not paper currency...not comic books....not baseball cards....not !! 

Edited by GoldFinger1969
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On 9/25/2020 at 9:45 AM, Matt G said:

Spurred by the COVID economy, collectibles have emerged as an asset class, with certification providing the confidence, transparency and security that are necessary for a vibrant market.  Read more

 

Matt G, you posted the letter from Mark S......do you care to elaborate ?

I think Mark was right to say that the hobby has adapted and survived and even thrived during Covid-19....I think the hobby is strong and getting stronger.....I think PM's are a decent buy going forward and if you don't NEED THE $$$ that putting some $$$ into them or quasi-bullion numismatics or even pure numismatics is attractive or somewhat attractive (I'm not going to say dirt cheap xD).

But I am surprised he then took the leap to say that coins, pure numismatics, currency, and even comic books (!) and other collectibles are an asset class.  

As a financial professional with multiple certifcations, an asset class to me has specific investment characteristics including potential real long-term returns....liquidity....marketability....income or dividends or interest potential....an expanding investor base tied to growth in the real economy.

I love coins and other collectibles but they don't have any of those characteristics.

This reminds me of when NFL Commissioner Goodell said that PSLs were "good investments" at the top of the ticket bubble !! xD

 

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13 minutes ago, GoldFinger1969 said:

Collectibles ARE NOT and CAN NOT BE an "asset class" for investing.  Not coins....not numismatics....not paper currency...not comic books....not baseball cards....not !! 

[How about "resources"?  That seems to be the preferred if not favorite catch-all term used by government.]

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3 hours ago, Quintus Arrius said:

[How about "resources"?  That seems to be the preferred if not favorite catch-all term used by government.]

"Resources" in what way, QA ?

I just think you treat collectibles (including our coin hobby) like a piece of art or a rare book....enjoy it now and MAYBE you can sell it for a chunk of cash down the road.

That "chunk" though might be 50% or 75% or 100% or 200% -- or 20% -- of what you paid for it. xD  If you can live with that, go ahead and buy now.  If that's going to be a problem down the road, then don't.

Very simple set of rules. (thumbsu

 

Edited by GoldFinger1969
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1 hour ago, GoldFinger1969 said:

"Resources" in what way, QA ?

I just think you treat collectibles (including our coin hobby) like a piece of art or a rare book....enjoy it now and MAYBE you can sell it for a chunk of cash down the road.

That "chunk" though might be 50% or 75% or 100% or 200% -- or 20% -- of what you paid for it. xD  If you can live with that, go ahead and buy now.  If that's going to be a problem down the road, then don't.

Very simple set of rules. (thumbsu

 

That's pretty much what resources are.  Basically, anything of value.  You've hit the nail on the head.

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47 minutes ago, Quintus Arrius said:

That's pretty much what resources are.  Basically, anything of value.  You've hit the nail on the head.

I'd even go further:  I'd assume that whatever one buys, heads to zero (even gold or silver which I doubt would go down more than 50-75% even in a cataclysmic meltdown).  Assume you can't sell it or the price goes to zero.

If that will cause you financial distress down the road......pass. (thumbsu

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On 11/17/2020 at 3:32 PM, RWB said:

I think it was nice of Mark to write each of us personally. My letter had a nice electronic stamp on it. :)

And....this is my idea of "market cap."

Image1.jpg

I took my kid to a Dodgers game at Dodger Stadium after the Anaheim ANA show in 2016. He gets a high end fitted cap at every stadium we visit. He picked out a BROOKLYN Dodgers cap. Now THAT'S a kid with STYLE.

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I'm watching the Simpson Collection on auction over at Heritage right now......I'm seeing Barber Dimes, Quarters, and SLQ's going for TENS OF THOUSANDS of dollars with no metallic value at all backing those coins.  100% numismatic bidding. :o

This is where the future trouble will show up, if it shows up, in our hobby sector. 

 

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