Options
Silver, Gold, Platinum Eagles, Buffalo Issues, Mints Intentions, Historical and current sales data f
ericj96
Posts: 1,657
We are seeing in our life time one of the most important collecting sea changes since FDR signed the gold ban into law in 1933. The much needed end to 60 percent of the Mints product offerings and a flood of design change. This is a good time for collectors to keep the following major issues in mind.
1) The mint has killed most of its small and affordable small denomination coin series struck on gold and platinum as of 2009. We are not going to have to wonder very much about which coin will end up the key date of the series that are ending. The kings are kings and they will stay that way forever at least according to the mintage tables. Those collecting the closed modern series(classic guys like to call closed series legacy sets) will not have to face a seemingly endless financial obligation every year that fluctuates with the metals market. When people are spending their money they like some degree of certainty and that's one comforting aspect about classics that the moderns collectors have been denied over the last 22 years. This is about to change!
2) The mint clearly stated that going forward they only wish to "offer those products...that are ordered most often". If they can't sell a coin in striking runs of over 10,000 and preferably over 25,000 the Mint does not want to mess with it anymore because when the volumes drop too far they can't recover their cost and make a contribution to over head that is required of them by law. This translates to the collector - the ultra low mintage keys produced between 2004 and 2008 are a thing of the past.
3) The age of design stability is over. For almost 200 years the the US Mint had a publicly stated policy of very limited design change to discourage hoarding. Unlike most countries of the world who have thousands of designs that have been produced over thousands of years, American collectors were limited to relatively few design choices thus collecting by date and mint mark became the commonly accepted structure because there really was no other choice. The Fifty State Quarters, Life of Lincoln Cents, Westward Journey Nickels, Native American Dollars, Presidential Dollars, Fifty State Park Quarters etc. have dramatically revised the options available to the new generation of collectors picking through pocket change. Coin collecting is about enjoying some form of product differentiation be it a date, mint mark, die variety, denomination or design change. "Collecting by design, denomination or composition" is defined as "type collecting" by the Red Book. Most of the world has already gone the "type collecting" route and if the new US collectors habits are influenced by the endless streams of interesting and cheap type series we can expect a eventual impact on rare coin pricing structures.
4) Most of the time in the last 100 years if you just bought the key dates and not the sets you were in good shape. High grade key date collectors made a killing because over 60 percent of most series value is contained in the three rarest coins in the set at the time of series maturity. I have been asked many times why bother to collect by set? The answer is multifaceted. The first reason is condition rarity. The lowest mintage coin may not be the rarest in high grade. Second is survival rate. A common date may become a dark horse key date if they are not saved. The last and maybe the most important is demand curve diversification. If disposable income improves again or capital preservation considerations increase collector demand the keys are in the set and will carry the day even if the metals are flat to down. If materials spike hard and drive all the keys underwater (bullion price rises above the collector price determined by the numismatic supply/demand curve) the total set value growth will carry the day even though the key date values suffer. ALL coins face and metal value are their ultimate price floor and we will do well to keep this in mind in the next 20 years.
Commemoratives and any other set without unifying design elements:
The problem with endless streams of coins without unifying design elements is the value of the coins to a large extent is not based primarily on mintage but by design appeal. Lets look at some examples of this:
1928 Hawaiian Half..... Mintage 10,000... MS-63 Price= $3000
1935 Hudson Half...... Mintage 10,000... MS-63 Price=$1000
1939 Arkansas Half-any... Mintage 2,100... MS-63 Price=$350
1935-1939 Arkansas-PD&S.. Mintage 70,000+ MS-63 Price=$100
1996 Wheel Chair Dollar.. Mintage 14,500... MS-69 Price=$300
2001 Buffalo Dollar.. .........Mintage 227,000.. MS-69 Price=$200
2000 Leif Ericson Dollar.. Mintage 28,000... MS-69 Price=$75
This is the danger we face. When a group of coins has a significant percentage of its members with completely different designs without some clearly unifying design element the series will be collected by design type. Dates and mint marks count for very little if anything. That’s the problem with the Arkansas halves. They are a 15 coin series with rare keys but it does not matter. They are a 70,000+ total mintage type coin and the market prices them as such. You do not want a series you collect to get caught in this scenario.
Notice to a large extent total type mintage does not count as much as one would expect either. The Hawaiian and the Hudson are of the same rarity class but the Hudson is not that well liked. The buffalo dollar is common as dirt but its worth 2.5 times that of the Leif dollar that’s 8 times rarer. Even the Wheel chair dollar with its tiny 14,500 mintage is only pulling a 50% premium over a coin that’s 15 times more common. The problem with coins lacking clear and strong design unity of some sort is they are in effect stand alone coins or close to it and the pricing structure acts like it.
Lets take a look at some of the series.
*Unc Silver Eagles-Stable structures
This is the modern Morgan with a total population of over 200 million coins and its growing at an astounding rate. 30 million 2009 dated issues flew out of the Mint last year alone. Morgans are liked because they are large good looking coins that are every where so people get a few and start working on sets. Large common date populations are advertisements for the series. The Silver Eagle dollars may well end up with Morgan total populations in the next few years and their "W" mint marked key dates have mintages that look allot like that of old Carson city dollars.
*Unc Gold eagles-Stable structures
The mint marked unc Gold Eagles were a gift from the Mint. They are amazingly tight bottlenecks in huge populations. The 1999w, 2006w, 2007w and 2008w issues rule these denominational sets with an iron hand and they will perform well for many reasons not the least of which is the attention that the large market makers have taken in them. There are enough of them to take a meaningful position in but rare enough to make cornering the market an achievable task. Marketers can't hold prices higher than the market will bear without taking on heavy exit risk but they can accelerate the maturation process of a sets keys. This is what is going on right now. Interestingly the 99w issues that are the rarest of the modern gold is a little too rare to "get enough to promote" so they may not get as much help from the large market makers as the 2006-2008 issues will but in the long run it does not matter.
The 4 coin sets of mint marked gold may become popular over time. If that's the case the 1999-w struck with unfinished proof dies (all w mint marked gold are struck with unfinished proof dies but some are called burnished) will likely be the one that's hardest to find.
*Modern Commems:
I was asked about the potential of the commemorative dollars and the best answer I can think of is look to the value of the Hudson in MS-63 which is the center of its grading bell line curve. A 70 year old commem key date with a 10,000 mintage is worth $1000 in todays dollars. I doubt any of the MS-69 1996 Olympic Dollars with roughly 15,000 mintage will do any better at full maturity unless a promoter is able to corner the market and produce a short term spike. If you see the four 1996 MS Olympic dollars roll past $900 each it may be time to collect something else.
*First Spouses
The set has a structure very much like new and old commems and its long term pricing structure may reflect this........ Translates the lower mintage coins may not be more valuable than the more common and attractive issues. Many collectors including myself think the classic gold "Liberty" 4 coin subset is very attractive and they may be the hardest to come by in the out years. This is especially true of the issues blessed with sub 4,200 mintages. When a great coin comes to this set it will be a overlooked issue just like the 1936 proof Walker half did not sell in the midst of the 1936 commem mania most of whose members came to nothing relatively speaking. The speculators have given up on this series and that's precisely why 2010 is likely to be a important year.
*Buffalo Gold and Silver:
The big question for these coins is will the Mint make any more fractionals? If the answer is yes then the coins design and denomination based rarity will be compromised. Then the question becomes will the 2008 proof and W issues be able to hold onto key date status and trade type rarity for series key date relative rarity? Hopefully the Mint will refrain from any more fractional buffs and they can go on to greatness in peace.
*Changing Reverse Platinum Eagles
Blending a stable obverse with a changing reverse is forcing series price behavior on a type set and this is a good thing. The next generation of collector may not be as hot on dates and mint marks as we are and taking that prospect out of the equation gives me a higher degree of security when I am spending my money. These coins are the high end expression of the popular changing reverse structure seen in pocket change today but the have the added advantage of being rare.
The changing reverse proof and mint state plats already represent the majority of the lowest mintage design and denomination based type coins offered for sale to the public with mintages under 6,000 since 1915. Long term collectors like good designs, clearly unifying design elements, and rarity. The good looks are there and still to come. The mints sales and marketing director said that plats are the series over which they have total thematic and design freedom and they consider it their premier offering.
*General Guidelines:
If I could hand a new collector a grocery list of what to look for it would be the following:
1) Favor series with a major unifying design aspect that is hard to get past.
2) Each coin should be differentiated not just on mint marks and dates because the rest of the world is going type and we may too at some point. Its insurance.
3) Buy coins with mintages less than 7000 coins because if you graph price vs population of design based type coins over the last 100 years the point at which they have a tendency to take off is about 6,500 coins. Anything less that that is pay dirt for the patient.
4) Buy coins with higher mintages only if the total population of the set is massive.
5) Series that have constant designs on the front and back can excel going forward provided the total populations of the series is massive and the keys possess such low mintages that they are profound bottle necks.
These topics are so broad we cant do the topic justice in this format. As a result a 45,000 word book with about 50 tables and 50 graphs has been developed by KP. This is the link to it.
Modern Commemorative Coins, Invest Today & Profit Tomorrow
Starting August 2nd it looks like we are going to run a series of articles on moderns in Numismatic News and they are listed in run order.
Seeing Opportunity In Our Time
Well respected collectors and numismatic commentators such as David Bowers and David Hall have publicly voiced concerns about the graying of our fine hobby and among certain series the aging of the collector base is likely a justifiable concern but there are two important bright spot on the horizon whose impact will likely be felt for the next 30 years or more and the direction they carry the market may not be obvious at first glance.
The US Mint is successfully using circulating collector series like the Fifty States Quarters, National Parks Quarters, Presidential Dollars, Native American Dollars, Westward Journey Nickels and Life of Lincoln Cents to develop a new generation of collectors. The Mint has estimated that 100 million US citizens have or do collect these changing design series in various forms. That’s staggering market exposure by almost any measure and even if the number is a little optimistic its training new collectors to expect a high level of design differentiation in their sets. Much of the world has a design and denomination rich coinage history to draw from that stretches over thousands of years. They tend to stress collecting by type as a result.
It takes time for new collecting habits to show up in the broader market just as it took about 40 years or one generation for collecting by date to fully give way to collecting by date and mint mark. Similar changes are afoot now and it’s showing up clearly in silver proof Washington quarters because they have had a little time to mature. The present market value of the 800 thousand 1999 silver proof sets is roughly equal to that of every silver proof quarter issued from 1936 to 1998 combined with an eagle on the reverse. If the new design based quarter collectors were migrating back to pick up the early date based issues they should be trading at an all time high indexed to inflation but nothing could be further from the truth. Even America with its short coinage history and intentionally design static series has walked this road before. Oregon Trail, Arkansas, Texas and Washington Halves enjoy about the same number of series members as the $2.5 gold Indians do but their extremely low mintage key dates never developed the way they should have because they were lost in a sea of design change that we call type collecting. We don’t want series we collect by date and mintmark to become collected by type.
Another source of collector growth is the publics justifiable desire to own hard assets that are not paper promises issued by governments whose long term financial commitments are nothing short of frightening. Silver gold and platinum eagles have been flying out of the Mint at an astounding rate lately into the hands of the public and many of these individuals are buying every year. We don’t start collecting something until we have one of them. Buffalo gold buyers for example that already have part of their savings in 2007, 2008, 2009 and 2010 $50 issues are prime candidates to want at least one 2006 and 2008-w to go with them. Massive attractive populations in the hands of the public are a gift to any set because they are silent series advertisements that have the tendency to develop collector followings. Static design series that can be completed and have massive series populations will likely pull through the design tsunami successfully.
If you look over coinage history its clear that the greatest collecting opportunities tend to present themselves when a newly struck extremely low mintage type coin or a very low mintage member of a massive series with significant public exposure showed up. A couple dozen coins issued by the US Mint in the last 15 years fit this description exactly and are moving from their infancy into the rapid growth phase of their life cycle. At the time of series maturity over half of the entire series value is contained in the four rarest coins in the set. The time to pick tomorrow’s great key dates is while they are trading well below the 50 to 100 times melting commonly seen in mature series.
Yes collecting will pull through just fine and part of the fun is learning to see great coins before they have great prices to go along with them and are still low risk.
August 9th Numismatic News Article:
Real Term Growth
Even those of us that collect strictly for the fun of it have the tendency to be concerned about the price performance of our collections not only because its fun to beat the market but also many of us have a significant portion of our savings in our collections.
As we are all fully aware the value attributed to any coin we chose to buy or collect is dependent primary on two components. The first is the face or melt value of the coin that serves as its unquestioned long-term value floor and the second is its numismatic premium. Its this premium that frequently carries better date coins price to 10-100+ times its base worth by the time it matures. Over the last 15 years most major classes of classic coinage covered by the PCGS 3000 have done poorly when indexed to constant dollars or any of the precious metals they have a history of being struck on. There are a few exceptions to this but they tend to be ULTRA RARE headline coins that come to market infrequently. Why is this the case?
By and large the values we see in the price guides are a direct reflection of the disposable income of US citizens and their interest in any given series. If anything were to happen to change how the typical collector puts together sets or reduce real disposable income the current real term drift in high multiple of melt valuations could accelerate. Richard Nachbar a very respected high dollar numismatics dealer has been running one page adds in coinage magazines for several years suggesting that his clients exit high valuation numismatics and buy precious metals to replace them specifically because he is concerned about real disposable income in the United States going forward. The record over the last 10 years bare out the fact that he has been giving his clients sound advice.
Numismatic authors have correctly told us over the years that the rare issues in any series have a tendency to appreciate much faster than the common dates do until the series matures but they don’t bother to tell us that most of the time series are mature in real terms within 30-50 years after they are no long available from the government. Sky-high markups over intrinsic value for series keys and semi keys discourage new collectors from starting the series in question. It’s probably the combination of high cost, falling real disposable income and attrition that’s showing up in PCGS’s valuation composites indexed to inflation.
The flip side of this scenario is the modern eagles. Series collectors of these coins typically have about 70 percent of their sets purchase price backed by precious metal content and their very young keys and semi keys are still trading for 2-4 times melt in most cases. This combination of attractive high grade sets with high money content (yes the precious metals are a form of cash), multi million total series populations out building collector base for the sets and key dates that produce amazingly tight bottlenecks is driving their keys price behavior.
These low risk high material content series with relatively inexpensive keys whose mintages run in the 2,200-10,000 coin range are absorbing new collectors at a rapid rate and its showing up in the number of moderns being encapsulated by the grading services and key issue bid prices. Ultimately its collector base expansion in a price range they can afford or feel comfortable paying that drives numismatic premium growth. Silver gold and platinum eagles are a land of opportunity and their keys have a LONG way to go before they top out over the next 30 years. Just as wise collectors 80 years ago took an early interest in the wonderful modern coins in production from 1906 to 1936 we need open minds to see the opportunities present in our lifetime, for they are many.
Early September
The Stones Rejected By the Builders
Few series in US coinage history have been greeted with greater distain by the collecting community than the First Spouse series of $10 gold. Plagued by high initial cost, designs that don’t appeal to the typical collector and poor series cohesion the First Spouse issues have seen a continuous deterioration in their sales to the point that their mintages are becoming 100 year anomalies in gold.
It might be time to take a second look at these coins.
1. Series go through what the mint calls an inaugural sales spike when it first comes out and somewhere after the fourth issue or fourth year, sales have a tendency to bottom out. True to form this $10 gold series mintage numbers spiked the first 4 issues and then proceeded to crash in dramatic fashion.
2. Our friends at the Mint have to plan their planchet usage very closely these days due to limited supplier capacity and they are ordering and striking coins based on “anticipated demand”. The thing is the Mint has been seeing mint state sales for these coins in the 3-4 thousand range this year and proof sales in the 5-6 thousand range. It is possible that the last of the four coin Liberty short set has been short struck relative to its sales potential.
3. Type coins with beautiful or Iconic images tend to pick up collector base quickly. The Hawiian half is not $3000 because it has a 10,000 mintage. The Hudson, Old Spanish Trail and many other mint marked commemoratives populate a similar rarity class but don’t command anything like the Hawaiians price. A more recent example is the $10 gold Buffalo. The Indian and Buffalo designs are considered outstanding by many and its direct similarities to the Buffalo nickel have helped produce a four fold price jump in 2 years.
4. The forth and final liberty issue coming in September is struck on a half once gold planchet, has a $10 denomination and a beautiful Coronet Head Obverse. If you cant afford the $10,000 price tag on a Cameo Proof $10 Gold Eagle struck in the late 1800s then the Bucannons Liberty may be an affordable alternative. Don’t be shocked if this coin displays completely different behavior than the other generic First Spouse issues after sales close.
5.In a recent PCGS on line survey the Liberty subset featuring 1800s obverses with presidential images on the reverse demonstrated dramatically stronger collector interest than the series in general. The good-looking Liberty short set’s potential is largely divorced from the series it inhabits.
Collector base convergence can be an important signpost of future greatness. Large denomination late 1800s Coronet Head Cameo Proof Gold is often referred to as the “Roles Royce” of American coinage and has a staggering price tag to go with it. Some classic collectors with a limited budget will want a proof Buchanan’s Liberty, four coin Liberty short set collectors will need one as will complete set First Spouse collectors. The potential convergence of multiple collector bases on one coin is a good sign as is the Mints recent tendency to strike to anticipated demand.
If you would like a Cameo Proof $10 Coronet Head Liberty and can afford it then it might be a good idea to go buy it when it comes on sale and not play an extended waiting game with the Mint. There can be times in life when unnecessary procrastination proves costly.
Late September 2010 Numismatic News
Coinage Heirlooms, Life Boats for Family Wealth
While visiting Colonial Williamsburg recently I stopped in the silver smith’s shop while he was forming a 7 once silver cup. He explained to the tourists that in the 1700s this cup contained about 3 weeks wages in silver and the finished product sold for 4 weeks wages. A complete 12 setting silver set with plates, utensils, decanter and serving tray could easily represent 5-10 years wages! Simply put, the family’s silver ware was an enjoyable form of savings that represented a significant portion of the family’s net worth. No wonder people used to be concerned about who got aunt Beth’s silverware! It was an important form of intergenerational wealth transfer. So too is your coin collection.
Most coin collectors are upper middle class or better and are facing a serious intergenerational wealth transfer problem over the next 30 years. Lets take a look at why you might already be in the right place and how you can fine-tune your efforts in this regard.
Successful individuals are facing a pair of long-term threats to their family’s fiscal health. One is the overwhelming un-funded Federal liabilities owed pending retirees with a present value of 60-200 trillion dollars according to estimates based on Congressional Budget Office (CBO) data and a July 2010 report by the International Monetary Fund (IMF). The other is the fact that the lower 75 percent of US households have saved an average of only $15,000 in 401k, IRA and Keogh plans combined and the same groups total financial assets only average $35,000 according to the Employee Benefit Research Institute (EBRI).
While EBRI numbers are in constant flux due to changing market prices they still give us a good general feel for the magnitudes of national wealth and how it is distributed.
Percentile..... Retirement Plans... Total Financial Assets....Total Net Worth
Top 10%...... $5.3 Trillion.......... $19 Trillion.................$50 Trillion
75-90 %...... $2.1 Trillion.......... $4 Trillion..................$12 Trillion
50-75%....... $1.1 Trillion.......... $2 Trillion..................$10 Trillion
Lower 50%... $.3 Trillion........... $.7 Trillion.................$4 Trillion
Two thirds of US household net worth is concentrated in the eleven million families that represent the top 10 % of US wealth holders. Allowing the Bush inheritance tax cuts to expire at some point and not indexing the tax free inheritance limit to inflation would allow most of the 50 trillion dollar net worth of the upper 10 percent to get hit with the 55 percent inheritance tax assuming it’s not given to charity. Absorbing 20 trillion dollars in the first cycle of Federal death taxes over the next 30 years should be easily achievable given that almost all heads of house holds in the top 10 percentile are over 45 years old.
The 17 million upper middle class families that inhabit the top 10-25 % of US households have an average net worth of about $700,000 and tend to make between $75,000 and $150,000 a year. Today’s $700,000 net worth will be a $2,100,000 estate in 25 years using Alan Greenspan’s recent base line inflation predictions and the tax free inheritance exemption isn’t necessarily indexed to inflation. The CBO is already planning on various forms of bracket creep in its estimates. We are lucky to see 70 cents on the dollar from the time we make it to the time it ends up in our checking account. If that dollar is saved then it is stacked on the top end of our net worth and it’s likely to get hit for another 55 cents on the dollar through inheritance taxes. Total marginal tax rates on upper middle class and wealthy families could easily hit 70 percent from the time a dollar is earned by a head of household to the time it is given to a younger family member if it is not handled correctly.
We all hope that the US Government will not need to impose such harsh tax burdens on the productive but unfortunately that’s not what’s waiting for us. The July 2010 IMF report stated that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to 14 percent of US GDP” in order to avoid having our debt to GDP ratio expand uncontrollably. That’s a staggering figure because the Federal government is currently absorbing 15% of GDP in all tax forms so an almost immediate doubling of ALL federal taxes that goes on indefinitely is what is being prescribed. Either that or an immediate and permanent 50 percent drop in all Federal spending. Every year we put off this adjustment the larger the distortions and the more painful the necessary corrections will be.
The key to successfully navigating this situation is to focus on the continuity of family wealth not personal net worth.
The first step every household should take is develop a reasonable current net worth estimate and then index that to some rational annual inflation rate between now and the head(s) of household average life expectancy. There is no real reason to expect an unindexed to inflation tax-free estate allowable beyond one million dollars per parent given the governments disastrous long-term commitments. This gives us some idea of how much of our family’s net worth is vulnerable if any and how long we have to work with. The second task in a well thought out wealth management strategy is to consistently “scuff off” the upper portion of the household’s net worth into highly liquid invisible assets that do not create taxable events for an extremely long time, have long appreciation cycles and can be given to younger family members under uniform gift acts.
Family Heirlooms- How To Pick Them
Dr. Laurence Kotlikoff near the end of his very well written book “Generational Storm” that brings home in great detail our Federal Government’s massive fiscal problems suggested that his readers “build an alternative portfolio”. One of the best ways to do this is though the use of serious highly liquid family heirlooms. But which ones should we consider and what useful rules of thumb should we apply?
Strangely enough the US Treasury has unintentionally given us some first class pointers
on its public affairs website regarding what we should be interested in. They state:
"Precious metals, precious stones, and jewels constitute easily transportable, highly concentrated forms of wealth. They serve as international mediums of exchange that can be converted into cash anywhere in the world. In addition, precious metals, especially gold, silver, and platinum, have a ready, actively traded market, and can be melted and poured into various forms, thereby obliterating refinery marks and leaving them virtually untraceable."
Proposed Rule, 31 CFR Part 103, RIN 1506-AA28, Page 5
Occasionally collectors on the PCGS message board will make the comment that high dollar collections can end up at the pawn shop and that the best thing to do in regard to your collection is sell it for cash or gold and jointly gift it to the grand kids at $25,000 a year under the uniform gift acts. Another frequently suggested option is write a check to responsible young family members, have them cash it and progressively buy family coins from the parent or grandparent’s collection every year. Put their name on the lock box and keep the keys at home. No real cash changed hands and the family collection remains. Exactly how you accomplish this is based on many variables and you may need to talk to your tax specialist but the point is “scuff” the net worth off your books and build “cost basis” on theirs and do it every year.
Family heirlooms that are being used as intergenerational wealth transfer mechanisms need to have durable long-term value. Unfortunately sky-high collector premiums over intrinsic value are based on very thin markets that are directly dependent on the currently existing structural preferences of collector’s sets and the disposable income of US citizens. If anything were to happen to either one over the younger family member’s lifetime the heirlooms’ importance as a long-term family asset is compromised. This is why many prefer to stay completely way from numismatics when managing family wealth but this is likely an error. Just as the silver ware example in the opening was an improved form of the base material so too rare coins are a superior form of holding material that has been regarded as money for thousands of years because they have dual supply and demand curves.
An excellent example of this type of favorable dual structure can be seen in high bullion content modern eagles with low mintages. Most attractive classic key date coinage issued in the last century have matured into the 50 to 100+ times melt value range and have become almost completely divorced from the value of the metal they are struck on. Key date modern silver, gold and platinum Eagles that are still in their infancy can be purchased for 2 to 3 times their intrinsic value in many cases. The chart below illustrates the approximate price behavior of a high intrinsic value key date as its series progresses from infancy to full maturity. Constant dollar price maturity tends to show up within 30-50 years after a series is no longer available from governmental inventory or sooner.
When the rarest coin in a large series or a coin with a rare design (type coin) can be picked up for less than 2-3 times melt you are essentially acquiring a highly liquid, low risk art form that has the potential to display white hot appreciation during the growth phase of its life cycle. By the time this process is complete its normal to see the four rarest coins in any given set to represent over 50% of the entire sets value and that’s why its good policy to stay away from coinage new or old that’s trading for more than about 1.5 times melt if its common in its set. If you are going to pay over twice melt you might as well be buying the lead coin of a young set.
For Example: Buying a 20 coin mint state series whose common dates trade just over melt that includes four cheap strong keys is a beautiful thing because 75% of the set purchase price is bullion and four strong keys as they mature have no problem driving the whole set to multiples of melt. If precious metals go hyperbolic at some point because our nations long-term financial mismanagement catches up with us intrinsic value expansion will carry the day. If its morning in America again and metals prices become soft, a good-looking popular and affordable series can display excellent long-term growth.
The main point of all this is to couple young family members youth with the long appreciation cycle that rare coinage can create without absorbing sky high collector premiums. What other potential family heirlooms can we buy that enjoys the benefit of having been struck on the materials humanity has regarded as money for most of recorded history and enjoys a relatively bullet proof value floor as a result?
A rare silver, gold or platinum Eagle collection:
Is not someone else’s liability and as such cannot be defaulted on.
Is not impacted by inflation or foreign investors willingness to hold dollars.
Can appreciate in constant dollar terms for 30-50 years as the series mature.
Can be held almost indefinitely.
Is not subject to property tax.
Offers excellent liquidity.
Normally survives bankruptcy.
Serves as an invisible form of wealth.
Minimizes the impact of means testing.
Can be exchanged in large or small increments.
Is an enjoyable form of long-term savings.
Allan Greenspan made the comment in the “Age of Turbulence” that “How governments finesse the transfer of real resources from the shrinking shares of their populations who make up their work force to a growing retirement population is likely to be the defining question of the next quarter century.” 401K, IRA, Keogh, and insurance policy shelters all have the same set of problems; they are high profile targets with huge monetary value, owned by a narrow voting block, accessible by amending currently existing tax law and the cost of enforcement is negligible. Whatever high potential, high intrinsic value family heirlooms you choose to transfer under the currently exiting laws are effectively off the table. Systematically move as much as you can off the table between now and 2017 when the CBO models indicate the real Federal bills begin to come due and our deficits are no longer discretionary but structural.
Standard Disclaimer: I enjoy sharing my views and research with my fellow collectors. While I am very careful in what I share through one of my books or the internet my data is not perfect nor is my interpretation of the data. If you take an interest and buy something that I like you can take a loss. When posting opinions here, they are my opinions, not necessarily those of ModernCoinMart's. The descriptions I am doing on their website are mainly facts as I know them to be with some comparisons but no predictions or investment advice.
1) The mint has killed most of its small and affordable small denomination coin series struck on gold and platinum as of 2009. We are not going to have to wonder very much about which coin will end up the key date of the series that are ending. The kings are kings and they will stay that way forever at least according to the mintage tables. Those collecting the closed modern series(classic guys like to call closed series legacy sets) will not have to face a seemingly endless financial obligation every year that fluctuates with the metals market. When people are spending their money they like some degree of certainty and that's one comforting aspect about classics that the moderns collectors have been denied over the last 22 years. This is about to change!
2) The mint clearly stated that going forward they only wish to "offer those products...that are ordered most often". If they can't sell a coin in striking runs of over 10,000 and preferably over 25,000 the Mint does not want to mess with it anymore because when the volumes drop too far they can't recover their cost and make a contribution to over head that is required of them by law. This translates to the collector - the ultra low mintage keys produced between 2004 and 2008 are a thing of the past.
3) The age of design stability is over. For almost 200 years the the US Mint had a publicly stated policy of very limited design change to discourage hoarding. Unlike most countries of the world who have thousands of designs that have been produced over thousands of years, American collectors were limited to relatively few design choices thus collecting by date and mint mark became the commonly accepted structure because there really was no other choice. The Fifty State Quarters, Life of Lincoln Cents, Westward Journey Nickels, Native American Dollars, Presidential Dollars, Fifty State Park Quarters etc. have dramatically revised the options available to the new generation of collectors picking through pocket change. Coin collecting is about enjoying some form of product differentiation be it a date, mint mark, die variety, denomination or design change. "Collecting by design, denomination or composition" is defined as "type collecting" by the Red Book. Most of the world has already gone the "type collecting" route and if the new US collectors habits are influenced by the endless streams of interesting and cheap type series we can expect a eventual impact on rare coin pricing structures.
4) Most of the time in the last 100 years if you just bought the key dates and not the sets you were in good shape. High grade key date collectors made a killing because over 60 percent of most series value is contained in the three rarest coins in the set at the time of series maturity. I have been asked many times why bother to collect by set? The answer is multifaceted. The first reason is condition rarity. The lowest mintage coin may not be the rarest in high grade. Second is survival rate. A common date may become a dark horse key date if they are not saved. The last and maybe the most important is demand curve diversification. If disposable income improves again or capital preservation considerations increase collector demand the keys are in the set and will carry the day even if the metals are flat to down. If materials spike hard and drive all the keys underwater (bullion price rises above the collector price determined by the numismatic supply/demand curve) the total set value growth will carry the day even though the key date values suffer. ALL coins face and metal value are their ultimate price floor and we will do well to keep this in mind in the next 20 years.
Commemoratives and any other set without unifying design elements:
The problem with endless streams of coins without unifying design elements is the value of the coins to a large extent is not based primarily on mintage but by design appeal. Lets look at some examples of this:
1928 Hawaiian Half..... Mintage 10,000... MS-63 Price= $3000
1935 Hudson Half...... Mintage 10,000... MS-63 Price=$1000
1939 Arkansas Half-any... Mintage 2,100... MS-63 Price=$350
1935-1939 Arkansas-PD&S.. Mintage 70,000+ MS-63 Price=$100
1996 Wheel Chair Dollar.. Mintage 14,500... MS-69 Price=$300
2001 Buffalo Dollar.. .........Mintage 227,000.. MS-69 Price=$200
2000 Leif Ericson Dollar.. Mintage 28,000... MS-69 Price=$75
This is the danger we face. When a group of coins has a significant percentage of its members with completely different designs without some clearly unifying design element the series will be collected by design type. Dates and mint marks count for very little if anything. That’s the problem with the Arkansas halves. They are a 15 coin series with rare keys but it does not matter. They are a 70,000+ total mintage type coin and the market prices them as such. You do not want a series you collect to get caught in this scenario.
Notice to a large extent total type mintage does not count as much as one would expect either. The Hawaiian and the Hudson are of the same rarity class but the Hudson is not that well liked. The buffalo dollar is common as dirt but its worth 2.5 times that of the Leif dollar that’s 8 times rarer. Even the Wheel chair dollar with its tiny 14,500 mintage is only pulling a 50% premium over a coin that’s 15 times more common. The problem with coins lacking clear and strong design unity of some sort is they are in effect stand alone coins or close to it and the pricing structure acts like it.
Lets take a look at some of the series.
*Unc Silver Eagles-Stable structures
This is the modern Morgan with a total population of over 200 million coins and its growing at an astounding rate. 30 million 2009 dated issues flew out of the Mint last year alone. Morgans are liked because they are large good looking coins that are every where so people get a few and start working on sets. Large common date populations are advertisements for the series. The Silver Eagle dollars may well end up with Morgan total populations in the next few years and their "W" mint marked key dates have mintages that look allot like that of old Carson city dollars.
*Unc Gold eagles-Stable structures
The mint marked unc Gold Eagles were a gift from the Mint. They are amazingly tight bottlenecks in huge populations. The 1999w, 2006w, 2007w and 2008w issues rule these denominational sets with an iron hand and they will perform well for many reasons not the least of which is the attention that the large market makers have taken in them. There are enough of them to take a meaningful position in but rare enough to make cornering the market an achievable task. Marketers can't hold prices higher than the market will bear without taking on heavy exit risk but they can accelerate the maturation process of a sets keys. This is what is going on right now. Interestingly the 99w issues that are the rarest of the modern gold is a little too rare to "get enough to promote" so they may not get as much help from the large market makers as the 2006-2008 issues will but in the long run it does not matter.
The 4 coin sets of mint marked gold may become popular over time. If that's the case the 1999-w struck with unfinished proof dies (all w mint marked gold are struck with unfinished proof dies but some are called burnished) will likely be the one that's hardest to find.
*Modern Commems:
I was asked about the potential of the commemorative dollars and the best answer I can think of is look to the value of the Hudson in MS-63 which is the center of its grading bell line curve. A 70 year old commem key date with a 10,000 mintage is worth $1000 in todays dollars. I doubt any of the MS-69 1996 Olympic Dollars with roughly 15,000 mintage will do any better at full maturity unless a promoter is able to corner the market and produce a short term spike. If you see the four 1996 MS Olympic dollars roll past $900 each it may be time to collect something else.
*First Spouses
The set has a structure very much like new and old commems and its long term pricing structure may reflect this........ Translates the lower mintage coins may not be more valuable than the more common and attractive issues. Many collectors including myself think the classic gold "Liberty" 4 coin subset is very attractive and they may be the hardest to come by in the out years. This is especially true of the issues blessed with sub 4,200 mintages. When a great coin comes to this set it will be a overlooked issue just like the 1936 proof Walker half did not sell in the midst of the 1936 commem mania most of whose members came to nothing relatively speaking. The speculators have given up on this series and that's precisely why 2010 is likely to be a important year.
*Buffalo Gold and Silver:
The big question for these coins is will the Mint make any more fractionals? If the answer is yes then the coins design and denomination based rarity will be compromised. Then the question becomes will the 2008 proof and W issues be able to hold onto key date status and trade type rarity for series key date relative rarity? Hopefully the Mint will refrain from any more fractional buffs and they can go on to greatness in peace.
*Changing Reverse Platinum Eagles
Blending a stable obverse with a changing reverse is forcing series price behavior on a type set and this is a good thing. The next generation of collector may not be as hot on dates and mint marks as we are and taking that prospect out of the equation gives me a higher degree of security when I am spending my money. These coins are the high end expression of the popular changing reverse structure seen in pocket change today but the have the added advantage of being rare.
The changing reverse proof and mint state plats already represent the majority of the lowest mintage design and denomination based type coins offered for sale to the public with mintages under 6,000 since 1915. Long term collectors like good designs, clearly unifying design elements, and rarity. The good looks are there and still to come. The mints sales and marketing director said that plats are the series over which they have total thematic and design freedom and they consider it their premier offering.
*General Guidelines:
If I could hand a new collector a grocery list of what to look for it would be the following:
1) Favor series with a major unifying design aspect that is hard to get past.
2) Each coin should be differentiated not just on mint marks and dates because the rest of the world is going type and we may too at some point. Its insurance.
3) Buy coins with mintages less than 7000 coins because if you graph price vs population of design based type coins over the last 100 years the point at which they have a tendency to take off is about 6,500 coins. Anything less that that is pay dirt for the patient.
4) Buy coins with higher mintages only if the total population of the set is massive.
5) Series that have constant designs on the front and back can excel going forward provided the total populations of the series is massive and the keys possess such low mintages that they are profound bottle necks.
These topics are so broad we cant do the topic justice in this format. As a result a 45,000 word book with about 50 tables and 50 graphs has been developed by KP. This is the link to it.
Modern Commemorative Coins, Invest Today & Profit Tomorrow
Starting August 2nd it looks like we are going to run a series of articles on moderns in Numismatic News and they are listed in run order.
Seeing Opportunity In Our Time
Well respected collectors and numismatic commentators such as David Bowers and David Hall have publicly voiced concerns about the graying of our fine hobby and among certain series the aging of the collector base is likely a justifiable concern but there are two important bright spot on the horizon whose impact will likely be felt for the next 30 years or more and the direction they carry the market may not be obvious at first glance.
The US Mint is successfully using circulating collector series like the Fifty States Quarters, National Parks Quarters, Presidential Dollars, Native American Dollars, Westward Journey Nickels and Life of Lincoln Cents to develop a new generation of collectors. The Mint has estimated that 100 million US citizens have or do collect these changing design series in various forms. That’s staggering market exposure by almost any measure and even if the number is a little optimistic its training new collectors to expect a high level of design differentiation in their sets. Much of the world has a design and denomination rich coinage history to draw from that stretches over thousands of years. They tend to stress collecting by type as a result.
It takes time for new collecting habits to show up in the broader market just as it took about 40 years or one generation for collecting by date to fully give way to collecting by date and mint mark. Similar changes are afoot now and it’s showing up clearly in silver proof Washington quarters because they have had a little time to mature. The present market value of the 800 thousand 1999 silver proof sets is roughly equal to that of every silver proof quarter issued from 1936 to 1998 combined with an eagle on the reverse. If the new design based quarter collectors were migrating back to pick up the early date based issues they should be trading at an all time high indexed to inflation but nothing could be further from the truth. Even America with its short coinage history and intentionally design static series has walked this road before. Oregon Trail, Arkansas, Texas and Washington Halves enjoy about the same number of series members as the $2.5 gold Indians do but their extremely low mintage key dates never developed the way they should have because they were lost in a sea of design change that we call type collecting. We don’t want series we collect by date and mintmark to become collected by type.
Another source of collector growth is the publics justifiable desire to own hard assets that are not paper promises issued by governments whose long term financial commitments are nothing short of frightening. Silver gold and platinum eagles have been flying out of the Mint at an astounding rate lately into the hands of the public and many of these individuals are buying every year. We don’t start collecting something until we have one of them. Buffalo gold buyers for example that already have part of their savings in 2007, 2008, 2009 and 2010 $50 issues are prime candidates to want at least one 2006 and 2008-w to go with them. Massive attractive populations in the hands of the public are a gift to any set because they are silent series advertisements that have the tendency to develop collector followings. Static design series that can be completed and have massive series populations will likely pull through the design tsunami successfully.
If you look over coinage history its clear that the greatest collecting opportunities tend to present themselves when a newly struck extremely low mintage type coin or a very low mintage member of a massive series with significant public exposure showed up. A couple dozen coins issued by the US Mint in the last 15 years fit this description exactly and are moving from their infancy into the rapid growth phase of their life cycle. At the time of series maturity over half of the entire series value is contained in the four rarest coins in the set. The time to pick tomorrow’s great key dates is while they are trading well below the 50 to 100 times melting commonly seen in mature series.
Yes collecting will pull through just fine and part of the fun is learning to see great coins before they have great prices to go along with them and are still low risk.
August 9th Numismatic News Article:
Real Term Growth
Even those of us that collect strictly for the fun of it have the tendency to be concerned about the price performance of our collections not only because its fun to beat the market but also many of us have a significant portion of our savings in our collections.
As we are all fully aware the value attributed to any coin we chose to buy or collect is dependent primary on two components. The first is the face or melt value of the coin that serves as its unquestioned long-term value floor and the second is its numismatic premium. Its this premium that frequently carries better date coins price to 10-100+ times its base worth by the time it matures. Over the last 15 years most major classes of classic coinage covered by the PCGS 3000 have done poorly when indexed to constant dollars or any of the precious metals they have a history of being struck on. There are a few exceptions to this but they tend to be ULTRA RARE headline coins that come to market infrequently. Why is this the case?
By and large the values we see in the price guides are a direct reflection of the disposable income of US citizens and their interest in any given series. If anything were to happen to change how the typical collector puts together sets or reduce real disposable income the current real term drift in high multiple of melt valuations could accelerate. Richard Nachbar a very respected high dollar numismatics dealer has been running one page adds in coinage magazines for several years suggesting that his clients exit high valuation numismatics and buy precious metals to replace them specifically because he is concerned about real disposable income in the United States going forward. The record over the last 10 years bare out the fact that he has been giving his clients sound advice.
Numismatic authors have correctly told us over the years that the rare issues in any series have a tendency to appreciate much faster than the common dates do until the series matures but they don’t bother to tell us that most of the time series are mature in real terms within 30-50 years after they are no long available from the government. Sky-high markups over intrinsic value for series keys and semi keys discourage new collectors from starting the series in question. It’s probably the combination of high cost, falling real disposable income and attrition that’s showing up in PCGS’s valuation composites indexed to inflation.
The flip side of this scenario is the modern eagles. Series collectors of these coins typically have about 70 percent of their sets purchase price backed by precious metal content and their very young keys and semi keys are still trading for 2-4 times melt in most cases. This combination of attractive high grade sets with high money content (yes the precious metals are a form of cash), multi million total series populations out building collector base for the sets and key dates that produce amazingly tight bottlenecks is driving their keys price behavior.
These low risk high material content series with relatively inexpensive keys whose mintages run in the 2,200-10,000 coin range are absorbing new collectors at a rapid rate and its showing up in the number of moderns being encapsulated by the grading services and key issue bid prices. Ultimately its collector base expansion in a price range they can afford or feel comfortable paying that drives numismatic premium growth. Silver gold and platinum eagles are a land of opportunity and their keys have a LONG way to go before they top out over the next 30 years. Just as wise collectors 80 years ago took an early interest in the wonderful modern coins in production from 1906 to 1936 we need open minds to see the opportunities present in our lifetime, for they are many.
Early September
The Stones Rejected By the Builders
Few series in US coinage history have been greeted with greater distain by the collecting community than the First Spouse series of $10 gold. Plagued by high initial cost, designs that don’t appeal to the typical collector and poor series cohesion the First Spouse issues have seen a continuous deterioration in their sales to the point that their mintages are becoming 100 year anomalies in gold.
It might be time to take a second look at these coins.
1. Series go through what the mint calls an inaugural sales spike when it first comes out and somewhere after the fourth issue or fourth year, sales have a tendency to bottom out. True to form this $10 gold series mintage numbers spiked the first 4 issues and then proceeded to crash in dramatic fashion.
2. Our friends at the Mint have to plan their planchet usage very closely these days due to limited supplier capacity and they are ordering and striking coins based on “anticipated demand”. The thing is the Mint has been seeing mint state sales for these coins in the 3-4 thousand range this year and proof sales in the 5-6 thousand range. It is possible that the last of the four coin Liberty short set has been short struck relative to its sales potential.
3. Type coins with beautiful or Iconic images tend to pick up collector base quickly. The Hawiian half is not $3000 because it has a 10,000 mintage. The Hudson, Old Spanish Trail and many other mint marked commemoratives populate a similar rarity class but don’t command anything like the Hawaiians price. A more recent example is the $10 gold Buffalo. The Indian and Buffalo designs are considered outstanding by many and its direct similarities to the Buffalo nickel have helped produce a four fold price jump in 2 years.
4. The forth and final liberty issue coming in September is struck on a half once gold planchet, has a $10 denomination and a beautiful Coronet Head Obverse. If you cant afford the $10,000 price tag on a Cameo Proof $10 Gold Eagle struck in the late 1800s then the Bucannons Liberty may be an affordable alternative. Don’t be shocked if this coin displays completely different behavior than the other generic First Spouse issues after sales close.
5.In a recent PCGS on line survey the Liberty subset featuring 1800s obverses with presidential images on the reverse demonstrated dramatically stronger collector interest than the series in general. The good-looking Liberty short set’s potential is largely divorced from the series it inhabits.
Collector base convergence can be an important signpost of future greatness. Large denomination late 1800s Coronet Head Cameo Proof Gold is often referred to as the “Roles Royce” of American coinage and has a staggering price tag to go with it. Some classic collectors with a limited budget will want a proof Buchanan’s Liberty, four coin Liberty short set collectors will need one as will complete set First Spouse collectors. The potential convergence of multiple collector bases on one coin is a good sign as is the Mints recent tendency to strike to anticipated demand.
If you would like a Cameo Proof $10 Coronet Head Liberty and can afford it then it might be a good idea to go buy it when it comes on sale and not play an extended waiting game with the Mint. There can be times in life when unnecessary procrastination proves costly.
Late September 2010 Numismatic News
Coinage Heirlooms, Life Boats for Family Wealth
While visiting Colonial Williamsburg recently I stopped in the silver smith’s shop while he was forming a 7 once silver cup. He explained to the tourists that in the 1700s this cup contained about 3 weeks wages in silver and the finished product sold for 4 weeks wages. A complete 12 setting silver set with plates, utensils, decanter and serving tray could easily represent 5-10 years wages! Simply put, the family’s silver ware was an enjoyable form of savings that represented a significant portion of the family’s net worth. No wonder people used to be concerned about who got aunt Beth’s silverware! It was an important form of intergenerational wealth transfer. So too is your coin collection.
Most coin collectors are upper middle class or better and are facing a serious intergenerational wealth transfer problem over the next 30 years. Lets take a look at why you might already be in the right place and how you can fine-tune your efforts in this regard.
Successful individuals are facing a pair of long-term threats to their family’s fiscal health. One is the overwhelming un-funded Federal liabilities owed pending retirees with a present value of 60-200 trillion dollars according to estimates based on Congressional Budget Office (CBO) data and a July 2010 report by the International Monetary Fund (IMF). The other is the fact that the lower 75 percent of US households have saved an average of only $15,000 in 401k, IRA and Keogh plans combined and the same groups total financial assets only average $35,000 according to the Employee Benefit Research Institute (EBRI).
While EBRI numbers are in constant flux due to changing market prices they still give us a good general feel for the magnitudes of national wealth and how it is distributed.
Percentile..... Retirement Plans... Total Financial Assets....Total Net Worth
Top 10%...... $5.3 Trillion.......... $19 Trillion.................$50 Trillion
75-90 %...... $2.1 Trillion.......... $4 Trillion..................$12 Trillion
50-75%....... $1.1 Trillion.......... $2 Trillion..................$10 Trillion
Lower 50%... $.3 Trillion........... $.7 Trillion.................$4 Trillion
Two thirds of US household net worth is concentrated in the eleven million families that represent the top 10 % of US wealth holders. Allowing the Bush inheritance tax cuts to expire at some point and not indexing the tax free inheritance limit to inflation would allow most of the 50 trillion dollar net worth of the upper 10 percent to get hit with the 55 percent inheritance tax assuming it’s not given to charity. Absorbing 20 trillion dollars in the first cycle of Federal death taxes over the next 30 years should be easily achievable given that almost all heads of house holds in the top 10 percentile are over 45 years old.
The 17 million upper middle class families that inhabit the top 10-25 % of US households have an average net worth of about $700,000 and tend to make between $75,000 and $150,000 a year. Today’s $700,000 net worth will be a $2,100,000 estate in 25 years using Alan Greenspan’s recent base line inflation predictions and the tax free inheritance exemption isn’t necessarily indexed to inflation. The CBO is already planning on various forms of bracket creep in its estimates. We are lucky to see 70 cents on the dollar from the time we make it to the time it ends up in our checking account. If that dollar is saved then it is stacked on the top end of our net worth and it’s likely to get hit for another 55 cents on the dollar through inheritance taxes. Total marginal tax rates on upper middle class and wealthy families could easily hit 70 percent from the time a dollar is earned by a head of household to the time it is given to a younger family member if it is not handled correctly.
We all hope that the US Government will not need to impose such harsh tax burdens on the productive but unfortunately that’s not what’s waiting for us. The July 2010 IMF report stated that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to 14 percent of US GDP” in order to avoid having our debt to GDP ratio expand uncontrollably. That’s a staggering figure because the Federal government is currently absorbing 15% of GDP in all tax forms so an almost immediate doubling of ALL federal taxes that goes on indefinitely is what is being prescribed. Either that or an immediate and permanent 50 percent drop in all Federal spending. Every year we put off this adjustment the larger the distortions and the more painful the necessary corrections will be.
The key to successfully navigating this situation is to focus on the continuity of family wealth not personal net worth.
The first step every household should take is develop a reasonable current net worth estimate and then index that to some rational annual inflation rate between now and the head(s) of household average life expectancy. There is no real reason to expect an unindexed to inflation tax-free estate allowable beyond one million dollars per parent given the governments disastrous long-term commitments. This gives us some idea of how much of our family’s net worth is vulnerable if any and how long we have to work with. The second task in a well thought out wealth management strategy is to consistently “scuff off” the upper portion of the household’s net worth into highly liquid invisible assets that do not create taxable events for an extremely long time, have long appreciation cycles and can be given to younger family members under uniform gift acts.
Family Heirlooms- How To Pick Them
Dr. Laurence Kotlikoff near the end of his very well written book “Generational Storm” that brings home in great detail our Federal Government’s massive fiscal problems suggested that his readers “build an alternative portfolio”. One of the best ways to do this is though the use of serious highly liquid family heirlooms. But which ones should we consider and what useful rules of thumb should we apply?
Strangely enough the US Treasury has unintentionally given us some first class pointers
on its public affairs website regarding what we should be interested in. They state:
"Precious metals, precious stones, and jewels constitute easily transportable, highly concentrated forms of wealth. They serve as international mediums of exchange that can be converted into cash anywhere in the world. In addition, precious metals, especially gold, silver, and platinum, have a ready, actively traded market, and can be melted and poured into various forms, thereby obliterating refinery marks and leaving them virtually untraceable."
Proposed Rule, 31 CFR Part 103, RIN 1506-AA28, Page 5
Occasionally collectors on the PCGS message board will make the comment that high dollar collections can end up at the pawn shop and that the best thing to do in regard to your collection is sell it for cash or gold and jointly gift it to the grand kids at $25,000 a year under the uniform gift acts. Another frequently suggested option is write a check to responsible young family members, have them cash it and progressively buy family coins from the parent or grandparent’s collection every year. Put their name on the lock box and keep the keys at home. No real cash changed hands and the family collection remains. Exactly how you accomplish this is based on many variables and you may need to talk to your tax specialist but the point is “scuff” the net worth off your books and build “cost basis” on theirs and do it every year.
Family heirlooms that are being used as intergenerational wealth transfer mechanisms need to have durable long-term value. Unfortunately sky-high collector premiums over intrinsic value are based on very thin markets that are directly dependent on the currently existing structural preferences of collector’s sets and the disposable income of US citizens. If anything were to happen to either one over the younger family member’s lifetime the heirlooms’ importance as a long-term family asset is compromised. This is why many prefer to stay completely way from numismatics when managing family wealth but this is likely an error. Just as the silver ware example in the opening was an improved form of the base material so too rare coins are a superior form of holding material that has been regarded as money for thousands of years because they have dual supply and demand curves.
An excellent example of this type of favorable dual structure can be seen in high bullion content modern eagles with low mintages. Most attractive classic key date coinage issued in the last century have matured into the 50 to 100+ times melt value range and have become almost completely divorced from the value of the metal they are struck on. Key date modern silver, gold and platinum Eagles that are still in their infancy can be purchased for 2 to 3 times their intrinsic value in many cases. The chart below illustrates the approximate price behavior of a high intrinsic value key date as its series progresses from infancy to full maturity. Constant dollar price maturity tends to show up within 30-50 years after a series is no longer available from governmental inventory or sooner.
When the rarest coin in a large series or a coin with a rare design (type coin) can be picked up for less than 2-3 times melt you are essentially acquiring a highly liquid, low risk art form that has the potential to display white hot appreciation during the growth phase of its life cycle. By the time this process is complete its normal to see the four rarest coins in any given set to represent over 50% of the entire sets value and that’s why its good policy to stay away from coinage new or old that’s trading for more than about 1.5 times melt if its common in its set. If you are going to pay over twice melt you might as well be buying the lead coin of a young set.
For Example: Buying a 20 coin mint state series whose common dates trade just over melt that includes four cheap strong keys is a beautiful thing because 75% of the set purchase price is bullion and four strong keys as they mature have no problem driving the whole set to multiples of melt. If precious metals go hyperbolic at some point because our nations long-term financial mismanagement catches up with us intrinsic value expansion will carry the day. If its morning in America again and metals prices become soft, a good-looking popular and affordable series can display excellent long-term growth.
The main point of all this is to couple young family members youth with the long appreciation cycle that rare coinage can create without absorbing sky high collector premiums. What other potential family heirlooms can we buy that enjoys the benefit of having been struck on the materials humanity has regarded as money for most of recorded history and enjoys a relatively bullet proof value floor as a result?
A rare silver, gold or platinum Eagle collection:
Is not someone else’s liability and as such cannot be defaulted on.
Is not impacted by inflation or foreign investors willingness to hold dollars.
Can appreciate in constant dollar terms for 30-50 years as the series mature.
Can be held almost indefinitely.
Is not subject to property tax.
Offers excellent liquidity.
Normally survives bankruptcy.
Serves as an invisible form of wealth.
Minimizes the impact of means testing.
Can be exchanged in large or small increments.
Is an enjoyable form of long-term savings.
Allan Greenspan made the comment in the “Age of Turbulence” that “How governments finesse the transfer of real resources from the shrinking shares of their populations who make up their work force to a growing retirement population is likely to be the defining question of the next quarter century.” 401K, IRA, Keogh, and insurance policy shelters all have the same set of problems; they are high profile targets with huge monetary value, owned by a narrow voting block, accessible by amending currently existing tax law and the cost of enforcement is negligible. Whatever high potential, high intrinsic value family heirlooms you choose to transfer under the currently exiting laws are effectively off the table. Systematically move as much as you can off the table between now and 2017 when the CBO models indicate the real Federal bills begin to come due and our deficits are no longer discretionary but structural.
Standard Disclaimer: I enjoy sharing my views and research with my fellow collectors. While I am very careful in what I share through one of my books or the internet my data is not perfect nor is my interpretation of the data. If you take an interest and buy something that I like you can take a loss. When posting opinions here, they are my opinions, not necessarily those of ModernCoinMart's. The descriptions I am doing on their website are mainly facts as I know them to be with some comparisons but no predictions or investment advice.
0
Comments
<< <i>Always a good read,,thx >>
I always take the time to read his things. Keep it up Eric!
Well done review.
Camelot
<< <i>Text >>
A whole new echelon of collectors are in the fray. Moderns are shrugging off the stigma of being boorish and high mintage and are giving collecting it's interesting edge. The recent introduction of the W's by the Mint will kindle a new fire that has substance in terms of both rarity (perceived) and price, that will further volley them into collector hearts. It's the only reason that I am here -- previously I was a hard-core classic'r. The prospect of buying direct from the Mint AND avoiding third party purchasing/inflation has created a new generation of buyers (sorry -- old school, non-comput'oids are being left in the DUST), that will further change the demographics of collectors. The Mint will be very wise to continue being capricious and unpredictable in its mintages -- it is uncertainty that keep our hobby fun and challenging. Household limits are the only way to fuel this fire.
I look forward to your writings as much or more than my Coin World articles (except when you are writing there also)!
Miles
one can collect coinage of precious metal coins
with a double kicker of rarity and metal increases
Not a bad way to have some of your collecting money
in. Pretty designs, low mintage and a storehouse of gold,
platinum and silver.
Camelot
I have personally followed most or all eBay and Teletrade auctions on 2006 Ws since day 1 and can honestly say, based on my research, that most of these 2006 Ws have been sold to people that are not considered to be the usual Platinum buyer. Very few of these have been hoarded in large amounts (that is not to say that there are not a few hoards out there available) which in turn makes for a very thin supply.
When most of the 2006 Ws complete the process of finding a home (like most 2004s already have), these coins are going to be extremely difficult to find. Like Eric has said a million times.... "2,500 - 2,700 coins are not a lot of coins"...
It won't take long for most of the 2006 W $25 and $50 with their 2,500 to 2,700 mintages to be gone off the market...
Never count out the "big boys" - those $100 1 oz'ers! While the mintages might be a bit higher, the demand is a bit higher as well. And, just like real estate... demand, demand and demand drives the platinum complex IMHO! Which is also a good argument why those little $10 coins are worth holding on to as well.
So, why does the 2004 Proof Plat set with a mintage of 5,000 sets sell for nearly 50%+ more than the 2006(w) MS Plat set with a mintage of just over 2,500 sets? DEMAND of course, BUT, how long can a mintage of a scant 2,500-3,750 for all 4 coins in the set be ignored? The $50 2006-w Plat with a mintage just over 2,500 sells for around $1,500. Meanwhile, the J. Robinson coin with a mintage of roughly 2x that coin now sells for nearly 3x as much (and, I am not questioning the value of the JR coin here at all)! Not to say that $50 2006-W Plat will be a $10,000 coin any time soon - but, you might want to have one on hand when you grandkids ask you down the road if you were collecting when the US Mint produced the lowest mintage type coin in around 90 years! Wondercoin
I believe that one series that is still a relatively good value is modern commemoratives, especially silver dollars.
While 2006-W burnished silver eagles (mintage ~470K) sell for around $100, 1994-D uncirculated Capitol Bicentennial dollars (mintage ~68K) can be found for $20 or less.
A 1994-P proof silver eagle (mintage ~372K) brings $175 or more. A 1996-P proof Paralympics silver dollar (mintage ~84K) fetches around $55.
The 1991-D uncirculated USO silver dollar (mintage ~125K) is about the same price as a circulated 1922 Peace dollar, a few dollars above melt.
The lowest mintage silver eagle, the 1995-W proof (mintage ~30K) sells for $4,000+. The lowest mintage modern commemorative silver dollar, the 1996-D uncirculated Paralympic (mintage ~14.5K) brings less than $350.
In terms of affordability and design variety, I prefer modern commemoratives to modern bullion coins.
My opinion only.
My Adolph A. Weinman signature
I have all the proof 50s in mint box tucked away (which no one will ever see me selling on Ebay), and I am one of the mindless, hooked collector base that will buy one (along with UNC ws) every year. I am sure that there are many more like me and many more to follow. The changing reverse (and relative rarity) is what makes a yearly following and the collector base grow. New collectors looking for a complete series are a cushion of value if platinum prices fall. They will gladly pay above melt to achieve the objective.
I have all the proof 50s in mint box tucked away (which no one will ever see me selling on Ebay), and I am one of the mindless, hooked collector base that will buy one (along with UNC ws) every year. I am sure that there are many more like me and many more to follow. The changing reverse (and relative rarity) is what makes a yearly following and the collector base grow. New collectors looking for a complete series are a cushion of value if platinum prices fall. They will gladly pay above melt to achieve the objective.
<< <i>The bias for platinum for me is rarity. Whether gold, silver, or platinum as a hedge against over liquidity.....they all trend together. But a choice to collect moderns leads me to platinum because of the changing reverses make it interesting to collect (as the general populace likes collecting state quarters)...........That is your demand driver over the other choices. >>
They are nice bullion coins no doubt and the mintages are the lowest but why are they low? It is because most people have a limited budget for coins (at least if they have a wife
1. Beautiful changing reverses with designs that are not compromised by any laws (other than the requirement that there must be an eagle on the reverse).
2. The coin represents a first to everything modern: first changing reverse (with steady obverse) in an ongoing series; first US Platinum coin ever; first coin with the obverse image at an angle (other than the 1986 Gold commem) in an ongoing series again.
3. Low mintages (as stated by greedygeek). True Modern Rarity with beautiful designs.
<< <i>I believe that one series that is still a relatively good value is modern commemoratives, especially silver dollars.
>>
OverDate,
Thanks for the thoughts on these, too. Lends perspective to a much more reasonably-priced option to platinum.
I think this could be answered in many different ways. The best answered is probably hidden in your post:
"It is because most people have a limited budget for coins..."; therefore, we have less flippers and smaller dealer supplies. It is hard for anybody (other than Mitch
Another reason, problems at the mint that combined with other factors caused lower production than expected. In 2004 the mint cut production earlier than usual. In 2006, the Ws were a newcomer in a market that was flooded with other offerings (and let's not forget that it was the last offering of the year).
edit...looking at the charts again....Im wrong about silver, it too has almost trippled...Im wrong about generalizing "always" as gold and platinum did trade around the same price mid 90s........carry on.
<< <i>Eric.. thanks for an excellent article. As I read the entire thread, I see a definite separation of interests. So many are buying coins as an investment (not known as a good practice - but there are successes). I myself buy coins as a hobby... and will probably not have a numismatic legacy of great value (although.. one can never be sure). So basically, the area of numismatics is separated in several ways.... dealers/collectors... then investors/hobbyists.... of course there is a further separation - known as flippers/speculators - which I think falls under the dealers/investor umbrella, although on the periphery. Just the insight of a humble 'collector'...
Cheers back to you RickO. I am curious about this analysis. It gets to the force that drives this hobby. I think the best hobby is one that not only do you enjoy on it's face but one that can be a good investment also. I think that is what makes it good.
<< <i>coinsponge.....platinum will always be worth more than gold and gold more than silver.....Now since 2000 platinum has trippled, Gold just about, and silver only double. Pretty much trending together with silver a laggard. So if its metal only and you are a value guy go with silver. If you want best of breed momentum go with platinum. >>
I have to admit that I am one of those who does not know much about the metal. It has been my impression that platinum is a metal that gets is main value from industrial use. I know that it is used some in jewelry but I don't see it much. If industrial demand goes down would also the price of platinum? I don't recall any coins from antiquity made of platinum. As for market value statements, I would hesitate to make claims of always or never unless you were defining some parameters.
Always is tough to live up to but the past half a century at least. Platinum was used to counterfit spanish gold coins 1865 and 1868. Scroll down on link.
http://www.swissamerica.com/brief_history.php?action=plat link
If I recall correctly, there were a few periods as recently as the mid-1990s when platinum and gold were selling for about the same price.
I too am concerned about newer technologies affecting industrial use (and indirectly the price) of platinum.
My Adolph A. Weinman signature
<< <i>coinsponge
Always is tough to live up to but the past half a century at least. Platinum was used to counterfit spanish gold coins 1865 and 1868. Scroll down on link.
http://www.swissamerica.com/brief_history.php?action=plat link >>
Wow, about 35% into the tailpipe. I wonder how the price of platinum would be affected if they eliminated it's need in auto exhaust systems?
More than You could ever want to know about Platinum & the Platinum Market!
I think moderns really are spicing up the coin market and the tendency for
people to think short term is the reason. Most people have thought short
term about moderns for two generations so have missed the fact that just
about everything has changed. It's not merely a matter of short term think-
ing leading to not saving the coins or collecting them it's also led to an over
sight of how much has changed over the decades. We no longer have just
a few coins in circulation without mintmarks. We are no longer restricted to
only debased or other base metal coinage. No longer are only the mudane
circulating issues and their proofs the only coins that are available to collect.
There are now dozens of modern series with some among the longest runs
of any US coins. Not only is there something for almost everyone but it's ac-
tually possible to collect almost any of these at almost any level or income.
While it's still mostly newer and younger collectors discovering these coins,
you can see evidence that even we old timers are looking at them. When you
think about it it's pretty remarkable that in this day and age there can be a
whole new realm of US coin collecting.
Also, these are the mint sale figures as declared by the mint as of today on their website:
Interesting! This is the third set of mintage numbers I've seen for the 2006-W uncirculated Platinum Eagles, and except for the $100, the lowest.
Is there a link to this information on the Mint's website?
My Adolph A. Weinman signature
<< <i>Also, these are the mint sale figures as declared by the mint as of today on their website:
Interesting! This is the third set of mintage numbers I've seen for the 2006-W uncirculated Platinum Eagles, and except for the $100, the lowest.
Is there a link to this information on the Mint's website? >>
Mint Mintages
at the bottom of the page.
Those numbers come from the office of Michael White. Eric called about a week ago and asked if there were any audited numbers and was informed that these numbers came from an audit completed in July. The last numbers we had seen came from a CW article in June. These are the latest confirmed numbers...
Thanks, NeoStar. These numbers are quite a bit lower than the June CW numbers, but close to the earlier numbers reported in NN.
I notice that the number of 2006-W platinum uncirculated fractionals offered on eBay appears to have declined.
My Adolph A. Weinman signature
1 oz (3168) => Mint price ~$1390 => current price ~$1900
1/2 oz (2577) => Mint price ~$690 => current price ~ $1400
1/4 oz (2676) => Mint price ~$350 => current price ~ $800
Well, just Love coins, period.
Eric, what is the "5 coin set that includes the 2007W" silver eagle? Have not heard either hide or hair of this before.....
See first message:
Link
Actually, it appears that they may be six-coin sets.
My Adolph A. Weinman signature
TTown, the last one sold on eBay for $455. That has been the only 2006W $10 NGC MS69 sold this quarter. Last quarter they averaged $639 over seven sales. The second quarter of 2007 has been the best average quarter for these coins.
If mintage numbers above are true, the 1oz Plat is a better buy than all the rest due to its smaller premium
I agree with you on that. The $100 coin seems to be catching up to the hype at a slower pace than the other denominations which makes it a bargain. Everybody knows that the $100 coins are usually very well liked...
<< <i>
<< <i>The bias for platinum for me is rarity. Whether gold, silver, or platinum as a hedge against over liquidity.....they all trend together. But a choice to collect moderns leads me to platinum because of the changing reverses make it interesting to collect (as the general populace likes collecting state quarters)...........That is your demand driver over the other choices. >>
They are nice bullion coins no doubt and the mintages are the lowest but why are they low? It is because most people have a limited budget for coins (at least if they have a wife
Yes most people have a limited buget. Thats one reason why so few bought the Pan Pacific coins or gold proofs in 1915!!
Edited to add: I find it hard to believe that the sales numbers remain static week after week.