1880-O Morgan: Can You Believe It?

BAJJERFAN

Someone paid almost $4500 with the juice at the Portland sig sale and I assume floor bidding still remains. lot 6703

Sunnywood

Bajjerfan,

Yes, I can believe it. Right now, the high bid is $3800 ($4370 with the juice). The reserve has been met, so this is a "real" bid. Floor bidding will take place later today. What this is all about, is that this is the kind of coin that keeps the crackout guys in business. This coin is graded PCGS MS64, which carries a bid of $1175 in the Sheet. However, the next grade up is bid $17,850. If someone can buy a coin in a 64 holder, and get it into a 65 holder, they score BIG TIME. So if someone sees a coin that they think might have a shot at 65, they will take a chance and pay a premium.

For example, if you thought this coin had a 50% chance of upgrading, paying $4370 for it is the equivalent of betting $3195 on a coin toss. Heads, you lose $3195; tails you win $13,480. Not a bad game to play. The trick is being able to determine with some accuracy what the probability of an upgrade really is. In this case, if the coin ends up selling for $4370, then the likelihood of the upgrade has been effectively estimated by the bidders to be (actual premium paid / upgrade potential) = (($4370 - $1175) / ($17850 - $1175)) or 19.16%

If you look through the PCGS coins being offered in the Heritage, a surprisingly high percentage are in the relatively new holders with bar codes and 8-digit cert numbers. What this tell s us is that a large percentage of certified coins have been recently resubmitted. In fact, the truth is that dealers and crackout professionals are CONSTANTLY resubmitting coins with a frequency that would probably surprise most collectors. The degree to which this game is played is really amazing. So the likelihood of an upgrade has to be weighed against the notion that many coins are already "maxed out." Therefore, upgrade candidates must be chosen carefully.

In this case, the fact that there is a huge jump in price to MS65 makes the 1880-O Morgan in MS64 a potential crackout target. In fact, Dave Bowers actually had a piece in Coin World a month or so ago, in which he talked about this very date and grade as being a good crackout candidate. Dave's article may have caught the attention of some of these bidders, who are now taking his advice. One of the points he mentioned is that a suitable candidate should be a well-struck coin. The coin currently offered as lot 6703 in Heritage is quite well struck for the issue. It is in a 7-digit blue-insert holder, and it does not appear to have any grade-limiting marks. Therefore, it is an excellent candidate for this game. Of course, that doesn't mean that it will upgrade. Many crackout gambles come back the same grade, or in some cases a point or two lower !!

Given Dave Bowers' article, the fact that the coin is a PCGS MS64, and is well struck with no problems, and not already in an 8-digit holder, it is not surprising to see the coin exceeding bid by this margin. I hope this helps to explain the otherwise incomprehensible current bid !! In fact, PCGS MS64 pops are probably overinflated due to resubmissions of this type, and therefore MS64 examples may well be harder to find than the pops would indicate ... and as a consequence, the bid/ask in the sheet may be too low to reflect the actual market.

Best,
Sunnywood

Stuart

Sunnywood: That's an extremely well written and well though out post -- right on target! Thanks for sharing this with us.

bearcave

I agree, excellent post!

BAJJERFAN

I can imagine tho that if PCGS is gonna stick their neck out on a $18K grade guarantee that the 65 ought to be pretty solid for the grade.