Jeff Garrett: Lessons Learned from the Rare Coin Market’s Highs and Lows

Posted on 4/23/2020

Today, the rare coin market is remarkably stable, but 40 years ago, it went from boom to bust overnight.

During the COVID‐19 crisis, the cancellation of coin shows around the country is causing me to miss one of my favorite parts of my routine. For the last 40-plus years, I have been traveling to a coin show two to three times per month, and for me, fine dining with great friends after a busy day of bourse activity will never be taken for granted again. I am sure a lot of us are now looking back fondly on activities that we didn’t give a second thought before.

The first major coin show cancelled because of COVID‐19 was the March edition of the Whitman Baltimore Convention. However, Stack’s Bowers Galleries bravely conducted a major auction that had been slated for the show. The sale was moved to its California offices and just a few hardy souls made the trip to bid in person. Most of the action was online.

That week, the stock markets had been shaken badly, and everyone was deeply concerned about how the rare coin market would respond. To the great relief of many, the sale was a big success, with many price records broken. Indeed, the market for rare coins has held firm since the start of the COVID-19 crisis.

The next major show to be cancelled was the Central States Numismatic Society convention in Schaumburg, Illinois (a Chicago suburb). The show was slated to take place this week and will be sorely missed by thousands of dealers and collectors who usually attend.

The Heritage Auction has been moved to Dallas and will take place online. The sale will be another test of rare coin prices that many market observers will be keenly watching, for despite the daily doses of bad economic news, the rare coin market has mostly been solid. Dealers around the country are reporting strong sales, especially for anything bullion related.

An 1858 Eagle graded NGC PF 64 Ultra Cameo featured in the Heritage sale.
Click images to enlarge.

Black Friday

Today, the rare coin market seems strong and highly resilient even with the major shocks to the US and global economy. That has not always been the case. Forty years ago, this week, one of the most infamous rare coin shows ever took place — the 1980 Central States Numismatic Society convention in Lincoln, Nebraska. This time in numismatic history will always be known as the week the rare coin market died.

Going into the show, the market for rare coins was hot to say the least. By Friday, the music stopped, and all of the major dealers were scrambling for a chair. Quite a few were left standing and later faced severe financial problems. The market continued its downward slide through 1982 when it bottomed out.

As can be seen from my amusing 1980 Central States Numismatic Society badge, I was in attendance that fateful week. In those days, my standard operating procedure was to accumulate coins from my local area and sell them ALL at the next major coin show. This burn and turn strategy worked well, especially during a true market crash. But many of my fellow coin buddies were not so fortunate.

The rare coin market boom of 1979 and 1980 was largely fueled by a huge spike in silver prices. Silver prices had been driven to nearly $50 per ounce in January of 1980. The Hunt brothers from Texas had been attempting to corner the market. Coin dealers around the country were making money hand over fist buying silver from the public. Shops had lines around the corner from sellers trying to cash in on the bonanza. Dealers were becoming overnight millionaires.

Rare coin prices also began to rise incredibly during this time. It was probably the fastest rise in the history of the hobby. Many dealers were plowing their newfound gains into rare coins, the one thing they understood. The Bowers and Merena sales of the Garrett collection (no relation) in 1979 and 1980 were off the charts in terms of prices realized. Again, many of the buyers were rare coin dealers, some using the magic of credit to increase their leverage.

The Hunt brothers’ efforts to corner the silver market were foiled when the federal government placed trading restrictions on silver. These restrictions crashed the prices for silver, which ended the month of March 1980 at around $14 per ounce. This huge drop sent shock waves through the rare coin market. The easy money that had fueled the stratospheric rise in rare coin prices soon dried up.

Crash and slow burn

Dealers arrived in Lincoln, Nebraska that week optimistic and ready to do business. Two rare coin dealers I interviewed for this article sheepishly admitted that they had charted private flights for the trip that week. One joked that he should have taken a Greyhound bus back home. Steve Ivy, one of the largest dealers in the country, even then, stated: “I showed up at the show with a collection I had just purchased. Everyone was begging for first shot. We needed time to figure the deal and planned to sell them later in the show. By Friday, there was zero interest.”

Kevin Lipton had split a huge roll deal of Walking Liberty Half Dollars for around $600,000. According to Lipton, “I was shocked by how few coins $600,000 had paid for. Luckily, we moved the coins before the market crashed.”

My great friend Mark Chrans was considered a “boy genius” at the time. He was only 16 years old in 1980 and was buying and selling millions of dollars’ worth of coins. He had been featured on the TV show That’s Incredible. Mark was one of the many dealers who was unsuccessful finding a chair when the music stopped. According to Mark, “I purchased a complete set of Proof Three Cent and Liberty Nickels at the start of the show. The coins were purchased from Bret Simmons with time to pay. That deal alone plunged me into financial trouble that continued for a long time.”

Interestingly, when researching this article, I checked Greysheet prices and how they responded in the following months. The Greysheet was slow to drop prices, possibly hoping the market drop in Lincoln was going to be short‐lived. It must be remembered that pricing tools of the day were far cruder than today’s market participants are used to. There were no auction record databases or pop reports.

The rare coin market continued its gradual slide until the ANA convention in 1982. The country suffered one of its worst recessions that year and interest rates were sky high. A few savvy investors recognized the value rare coins presented at that time and jumped in. Dealer and investor Hugh Sconyers showed up at the 1982 Boston ANA and spent huge sums buying great coins. By 1984, the rare coin market was in boom mode again. There have been many market peaks and crashes since then.

Demand = stability

Today, the rare coin market is much more stable. As evidenced by the current situation, prices for rare coins have remained at or near current levels. The biggest explanation for this is demand — the basis for any market. Because of the internet, there are buyers around the country who can enjoy and participate in the hobby with ease. Most major rare coin companies now have client bases that number over 100,000 with some having many times that.

The market for rare coins is also now much more driven by collector demand than in the past. Years ago, coin dealers bought the majority of coins sold in major auctions. That is no longer the case. Also, there are relatively few investors participating. Most investors are known for buying high and selling low at the wrong times. The deep collector base the hobby currently enjoys provides much more long‐term stability.

Third-party grading is also an important, if not critical, improvement from markets of the past. In 1980, grading standards were arbitrary and totally inconsistent. If the market was falling, buyers’ grading standards tighten considerably. That is one reason published prices were slow to fall at the time. NGC certification, which started in 1987, helped to standardize grading and provide liquidity for rare coins. The advent of population reports also provided transparency on rarity that was impossible before.

This isn’t to say that rare coin prices are immune to falling prices. However, the difference from 1980 is that it will not happen overnight. There are usually lessons to be learned from the past, and this look back at the 1980 Lincoln CSNS show does provide some insight. Collectors should avoid market manias and concentrate on the long term. Coin collecting can provide years of enjoyment, and if done properly, be an excellent investment.

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