Who Buys All Of Those Big Coins?
Posted by Jeff Garrett on 3/13/2014
During the recently completed FUN show and New York world coin auctions, over $100,000,000 worth of coins traded hands in one week. There were many coins selling for hundreds of thousands, if not millions of dollars. Auction records were set for many individual coins in a great number of series. In short, there were some serious buyers in action. For many, this is an amazing phenomenon to witness. The average collector you would meet at a coin club probably spends a few thousand dollars each year on their collection, many much less. The thought of paying more for a coin than their house costs would be quite absurd to most collectors. Obliviously someone is buying these coins.
For the most part these mega collectors are very private. Many prefer to bid online or through an auction representative. Understandably, most dealers who work with these types of clients are very protective of that relationship. You will rarely see an individual sitting in the auction room personally bidding for million dollar coins. This is probably very wise given the security risk of being known as a wealthy collector. There are a few high profile collectors, but this is not the norm. One thing that is certain however is that there are lots of them. A large auction might have several thousand collectors vying for top end material. Auction prices for coins with intense collector interest can sometimes sell for prices that don’t seem rational.
The most likely explanation for the above observations is the incredible increase in the net worth of America’s top income earners. The top 1% of Americans have seen their earnings increase at a much higher rate than the rest of the population. In 2013 the gap between the richest 1% and the remaining 99% was the widest it’s been since the 1920s. According to Forbes magazine, the 400 richest Americans are worth a record $2.02 trillion, roughly equivalent to the GDP of Russia. The average net worth of these 400 Americans is over $5 billion. That is staggering wealth! Many of these and the thousands of individuals with somewhat less resources have been buying tangible assets. Rare coins have been the target of many.
Rare coins offer many advantages for wealthy collectors seeking alternative investments. The hobby is relatively transparent with a great deal of information easily accessible. With moderate effort a collector can educate themselves enough to make intelligent purchases. Rare coins are also one of the most liquid collectibles with the buy/sell spread being much less than for other areas of collecting. Fine art is great, but try selling a painting you bought a few months earlier and the price might approach 50% if you are lucky. Rare coins also offer an unmatched element of portable wealth. There are very few collectibles or pieces of art worth millions that will fit in your pocket. Some collectors who fear the worst find this to be very attractive.
Traditionally, large important coin collections have been put together over many decades. Collectors such as Eliasberg, Bass, Pittman, Newman, Trompeter, Childs, and Ford spent an entire lifetime building their collections. Some had tremendous financial resources; others built great collections with more modest means. Collecting habits have changed a great deal in recent years. There have been some incredible rare coin collections formed in just the last few years. A great number of serious collectors have spent millions on their collections in a relatively short time. The world moves faster these days and numismatics is no exception. This trend even applies to great rarities such the 1913 Liberty Nickel and 1804 Silver Dollars. These types of coins used to trade hands generationally. Now a collector might purchase one of these great coins and reoffer the coin into the marketplace a few short years later.
In addition to who these collectors are, many wonder why they would spend so much money on numismatics. When one such collector was asked this question he stated that a similar investment in the fine art world would barely make a ripple. His rare coin collection is now world class and one the finest ever assembled. Who would not rather own $50 million dollars worth of rare coins instead of a balloon dog sculpture? Sort of makes sense when stated in those terms!
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