Outrage of the day: CW editorial on investing in coins

RYK

I received my CW yesterday and last night had time to read it. I was quite surprised by the editorial by Anthony Scirpo, president of Valley Rare Coin and Investment Co. I do not know Mr. Scirpo, for all I know he is a forum member, and if so, I would love to debate him on some of these points:

"It comes as no surprise that investors are losing faith in Wall Street. Losses over the last five years have been staggering..."

Actually, I am in the black over the last five years. Most of my losses are easily attributible to 9/11 and its aftermath. I mostly avoided the run-up and burst of the tech bubble, and I only lost money from late 2001-2002. The last two years of the stock market have been quite good and have allowed me to pull out money from investment accounts to buy coins, while still exceeding my target savings goals.

Talking about the WSJ article and the bump in the CU-3000 coin index:
"That may not interest a pure collector, but it certainly would interest the many collector-investors like me, and it is the perfect alternative to declining paper assets."

Yes, the ones that have risen by at least 33% in the last two years. Frankly, it's bullish for the stock market that people are still talking about how crummy it is.

Continuing..."It is therefore no real wonder why so many people, formerly at home with stockbrokers, are now buying coins--a serious value investment."

I would like to learn his definition of "value". And, yes, I would like to place an order for 1000 MS-63 Morgans, 500 MS-62 $20 Libs, 100 shares of the CU-3000 index fund, 10 April $10,000 calls on AU-58 Dahlonega $5's, and short 100 MS-65 shield nickels, please.

Then, my favorite part..."I'm a strong believer in education, but people coming in today's rare coin market don't have years to read all the books...If they did, they'd miss the whole impending up cycle."

That's a new on me: Buy the coin, burn the book.

I could go on and on.

I am one who believes coins have value and are an asset, but not an investment, per se. I buy coins because I like them, hope that they hold their value over time, and also hope that I am never forced to sell them. I am certainly open-minded enough to entertain that coins can be an investment for some people and have no problem with that either. Hey, I subscribe to the Rosen Numismatic Advisory (RNA). But this investment approach seems very over-the-top, self-serving, and side-steps the obvious point that if the collectors leave the market, there is no market.

tradedollarnut

A little additional info on Mr Scirpo in the form of a thread from across the street:

NGC Forum Thread

dorkkarl

i read that ngc thread & a-scripo's initial post, & TOTALLY agree w/ most of his discussion.

K S

boiler78

I see Mr. Scirpo was a one post wonder on the NGC boards and never bothered to address TDNs well thought out response.

dorkkarl

to me, tradedollarnut's response ignored a significant premise, which is bolded below:

While I'm accusing no one of anything, the PCGS grading operation falls under "the aura and shroud of potential wrongdoing."

K S

tradedollarnut

Oh, give me a break. Not one person had anything to say when NGC set up grading services inside Heritage's [ie: major shareholders as confirmed by the recent Forbes article] offices last month. Not one.

Give me facts - not suspicions and innuendo.

mrearlygold

To quote TDN """NGC is a great company. Their customer service is excellent, their grading is consistent and they are a pleasure to deal with in every facet of the business. They shine on their own, without posts having no real basis in fact attempting to diminish their competition.""""



Agree 100%

Who is this guy Scirpo?

Tom

Longacre

I thiink it takes all kinds. Some people are entirely comfortable relying on another's advice as to what to buy/invest in. Therefore, it does not bother me much if an "investor" does not read a single article about the market or coins. I agree that it is a little self serving to suggest that customers do not educate themselves as to what they are getting into. Regarding stock market losses, I really don't know what Mr. Scirpo is talking about. I have generally done pretty well over the last few years, and in fact, I have been investing more than ever in the stock market because a lot of companies are undervalued (one, that I know quite well, in particular). The thing I find most disturbing is how these dastardly comments got into CW in the first place.

dorkkarl

<< <i>Give me facts - not suspicions and innuendo. >>

ok, here are the facts.

beanbag billy owns NTCS. beanbag billy is also a coin dealer who deals exclusively in coins certified by NTCS. that represents a conflict of interest.

those are FACTS.

K S

RYK

Longacre,

We are fighting the crosscurrent of an old battle raging in this thread. But at least it is keeping it on the front page.

The scirpo editorial was in response to an editorial in response to the WSJ article.

R

Conder101

<< <i>..."I'm a strong believer in education, but people coming in today's rare coin market don't have years to read all the books...If they did, they'd miss the whole impending up cycle >>


Translated to the stock market:

I'm a strong believer in education, but people coming in today's stock market don't have time to research the companies..If they did, they'd miss the whole impending up cycle. They should just buy whatever their broker recommends.

Doesn't that sound like good advice to you. . . NOT!

cladking

This advice is not good for collectors in the short run nor the long run but that does
not preclude the possibility that it's good advice for the speculator or investor in the
short run. There is a massive world wide increase in coin collecting and interest in
coins. If the total market were to triple or quadruple in size over he next few years
then this could be good advice. Few can become expert at coins in only a few years
and there are many areas where knowledge is currently scant.

ChuckC

Scirpo's remarks about PCGS is very similar to the situation that has occured with public accounting firms (audit firms, esp the Big Four). The mission of audit firms is to audit the financial statements objectively using appropriate authoritative accounting principles and provide an opinion of the truthfullness and fairness of a public company's financial statements...i.e keep the investing public in mind, not the interests of the company. This is very difficult to do (and audit firms have been burned) because an audit firm is ALSO IN THE BUSINESS TO MAKE MONEY. Thus, when a company is in error or has stretched the definition of an accounting principle on a transaction, sometimes the accounting partner will look the other way because after all, the public company is paying the audit firm millions of dollars for that CLEAN OPINION; they wouldn't want to lose a client on a technicality. This is disturbing because after all, the investors come first and the audit firm was created to be independent in evaluating the financials. This brings me back to PCGS. Coin certification companies are very simialr to audit firms. In a sense, PCGS is an audit firm...they objectively ascertain a coin's grade using defined grading standards. Scirpo accuses PCGS of using bias when grading coins which comes as no surprise since PCGS is ALSO IN BUSINESS TO MAKE MONEY. That being said, I also think other top grading companies are or have been guilty of inflating a grade to serve their own interests despite declarations of fair, objective, and unbiased grading. I would not be surprised if at least one top grading service went out of business due to this type of fraud (look at what happened to Arthur Anderson, once considered the most innovative audit firm now out of business).

oreville

Yes, many problems and potential/perceived conflicts have been pointed out in the past couple of years by this poster.

I must state that CLCT has come a heck of a long way in cleaning up its act and the stock market is certainly rewarding CLCT for doing so.

The stock has moved back up from $2 to 20 in less than 2 years!

Sure, it is not yet perfect but I am sure that the will be resolved as well.

By the way, Scirpo missed a heck of a "investment" himself when CLCT was $2 a share (after the reverse split)!

Longacre

ChuckC--

I used to work as an auditor at one of the current Big Four accounting firms. I generally agree with what you wrote. The bigger issue was that part of the audit partner's job was to sniff around and see what other opportunities were at the company in order to sell more expensive and profitable services (such as tax planning services). Under the new Sarbanes rules, it is more difficult for audit firms to do both audit work and tax work. Getting back to the numismatic theme, in order to help to make the grading firms more impartial, they should not be allowed to own or participate in coin selling businesses. I don't want to use the "R" word (regulation) in mixed company, but I would hope that the grading firms and the numismatic market in general could police themselves.

ChuckC

<< <i>In order to help to make the grading firms more impartial, they should not be allowed to own or participate in coin selling businesses >>



I agree 100%, and TPGs should take a cue from Sarbanes (specifically sec. 201) to divest themselves of "services outside the scope of practice" of coin graders.

And boy, I hope regulation does not enter the picture, but I would not be surprised if the ANA waved their big stick at TPGs.

zzzz

Ohh Please .. PCGS is in it to make money .. Why do you think you have to send a coin in numerous times .. To Generate FEES ...


As far as having a personal stake in some of the grades given out. I had a coin Heritage, Bowers & a Senior grader for PCGS looked at. They ALL concured it should be in a slab higher grade. When walked through by a third party. DH informed the person: "Yes, it should be graded higher ... BUT .. NOT at this time."

IMHO ... We all know politics plays a big part especially when DH or a friend has the POP 1 and zero finer. The "Not at this time" I think refers to when he's gone. If a coin is deserving it should be slabed as such and not at the whim of any person ...

flaminio

<< <i>"It comes as no surprise that investors are losing faith in Wall Street. Losses over the last five years have been staggering..."

Actually, I am in the black over the last five years. >>

Me too. And if you figure the last ten years, I'm way, way ahead. Wish that I could say the same about coins, but I'm in it for the fun, not the money.

mrearlygold

Sounds like the kind of guy to stay away from


Tom

K6AZ

<< <i>Valley Rare Coin and Investment Co >>



The name says it all. I don't trust any dealer who pushes coins as an "investment".

morgannut2

I think I will reserve most judgements until I get my usually late issue of C.W. on most topics. The one fact that does stand out is that CLCT is a publicly traded firm and they have to abide by the Sherman Anti-trust Act and related laws as well as Sarbanes-Oxley. The other thing that springs to mind is, I thought that Bowers and Merena Auctions had been divested by the parent company, and that David Hall (I was told) did not own more than 14.9% of CLCT, or have any voting control of this publicly traded company. Also I am ignorant of whether either NGC or Heritage are pubic or private corporations. Obviously I would never buy any coin again which is graded by NGC and sold by Heritage, if they have offices in and owned by Heritage. Nor would I, or have I, ever bought any coin that was sold by David Hall Rare Coins, unless of course it is a independent firm from PCGS/and the holding company of PCGS. My current decisions and opinions may of course change if and when facts emerge. And by the way, I thought the subject was whether coins are an investment?

marcmoish

<< Valley Rare Coin and Investment Co >>

The name says it all. I don't trust any dealer who pushes coins as an "investment".

ditto - oblivious to rantings from such outfits ~ whatever




Marc

RYK

<< "It comes as no surprise that investors are losing faith in Wall Street. Losses over the last five years have been staggering..."

Actually, I am in the black over the last five years. >>

>>Me too. And if you figure the last ten years, I'm way, way ahead. Wish that I could say the same about coins, but I'm in it for the fun, not the money.<<

I am, as well, and I am in agreement 100% about fun over money.

dorkkarl

<< <i><< Valley Rare Coin and Investment Co >>

The name says it all. I don't trust any dealer who pushes coins as an "investment". >>

yep, totally agree. i wish this issue were publicized a lot more.

K S

BAJJERFAN

I would think that if Mr. Scirpo truly believes that DHRC is is getting favorable treatment from the PCGS grading room tht he buy a bunch of coins from DHRC and resubmit them under the grading guarantee or cracked out. If they come back consistently graded lower then he might have a gripe.

GOLDGUY

The name says it all. I don't trust any dealer who pushes coins as an "investment". >>

I understand why so many of you shy away from using the terms "investment" and "numismatics" in the same sentence. But it has been my experience that virtually all of the "collectors" we deal with also view their acquisitions as a type of investment. I further think that collectors often look to their trusted dealer(s) to guide them in making prudent decisions. More to the point, a dealer who doesn't recognize this aspect of dealing with the public is shunning a fiduciary responsibility he has to the collector/investor.

Pinnacle's niche in the numismatic industry puts us in front of many extremely wealthy individuals. But before purchasing a rare coin, I believe that every single one of them gives serious consideration as to its current value -- and its future potential. Moreover, collectors who have small living budgets probably consider the financial upside and downside with even greater care.

I'm the first to be disgusted when I see a coin dealer preaching "the sky is falling! Buy gold coins, canned peaches and firearms!" and I raise an eyebrow when I see a dealer promising "big returns" to novice collectors and investors. But to totally dismiss the "investment aspects" of trading rare coins is also naive and probably irresponsible.

RYK

Hi, Todd,

Thanks for posting. I would generally agree with what you have said. As one of the more destitute customers of Pinnacle (perhaps as a result of our relationship ), I think that any collector who buys coins, rich or poor, certainly does not want to see his hard-earned money (or trust fund money, for that matter) go down the drain. However, to approach purchasing rare coins, as an unknowledgeable buyer and with encouragement to stay that way, for the primary purpose of capital appreciation, as the author has recommended, is a recipe for disaster IMO.

But before purchasing a rare coin, I believe that every single one of them gives serious consideration as to its current value -- and its future potential.

You bet I do, but it is not the most serious consideration. Number one is, and always will be, "Do I like it?"

Robert

morgannut2

And the first thing out of a dealers mouth after the word investment is that investments generally have an implied potential for growth in assets, income or have fixed value at term (bond) with income. Coins share none of these qualities and so are an
asset hedge against a declining relative currency value and/or increasing HOBBY demand for these asset hedges. Large
amounts of money are spent rather than invested in these asset classes within and part of an investment portfolio.

MrEureka

Why does this article surprise anyone? CW will print virtually anything in their editorials, however uninformed. They want everyone to be able to speak their mind. Period.

If you disagree with Scirpo's article, send a reply to CW. They'll almost certainly print it.

morgannut2

Aren't they the ones who have articles about "sleeper coins" that might go up in value and use the mintage numbers as their entire criteria for these "hot" picks? Boy that's sure helpful with Morgans!!

coynclecter

Sarbannes Oxley is concerned with the integrity of the financial reporting of publicly traded companies. Audit companies are bound by government regulations and industry standards. Although we may not like it there are no regulatory stautes requiring the impartial grading of coins by grading companies. In fact , it doesn't even qualify as a conflict of interest. Grading the coins you sell has been the industry standard for decades.

The fact remains that these companies are only bound by their desire to maintain the trust of the market. If a principle dropped a box of AUs in the grade room and said "these are 66s". There is no law or other statute that says this can't be done. Thinking otherwise is naive at best. Integrity would be compromised and ethics would be sacrificed but little else.

Does anyone doubt that some coins were stocked prior to thier inclusion in registry sets? Did anyone know ahead of time about the "full torch" designation in time to stock up or dump the dogs?

Unless some grading company comes out as a non-profit we will still be subject to concerns about undue influences. The cold fact is that for many like the "investment" company mentioned, this is all about business and profit and we know that usually wins out over integrity and ethics.

RYK

Aren't they the ones who have articles about "sleeper coins" that might go up in value and use the mintage numbers as their entire criteria for these "hot" picks?

Yes, they did the same with late Liberty $5's a few months back...VERRRRY helpful. Not.

Andy, I do not criticize Coin World for running the editorial. It was a counterpoint to another anti-investment editorial which was a counterpoint to the WSJ article. I might write a letter to the editor, I might not. Frankly, I find it more entertaining and interesting to bat it around here and get different viewpoints.

GOLDGUY

. . . . investments generally have an implied potential for growth in assets, income or have fixed value at term (bond) with income. Coins share none of these qualities and so are an asset hedge against a declining relative currency value and/or increasing HOBBY demand for these asset hedges. Large amounts of money are spent rather than invested in these asset classes within and part of an investment portfolio.

Well said. Point taken.

K6AZ

Todd, I wasn't speaking of companies like yours who sell truly scarce material. And in all the times I have dealt with your firm, I don't recall anyone trying to push me into buying an overhyped common coin.

I'm speaking of these companies who take relatively common material, mark it up well above retail, then hype the "investment potential" of these common coins. Perfect examples of this are generic $20 Libertys and Saints.

Barry

<< <i>If you disagree with Scirpo's article, send a reply to CW. They'll almost certainly print it. >>


Not if it brings to light the shady practices of one of their advertisers.

GOLDGUY

I completely understood and respect the points you made K6AZ. But even that "common material" CAN perform well with substantial capital appreciation. We have some very happy customers right now who took our advice a couple years ago to buy MS63 $20 Liberties @ $425 and MS65 Morgans @ $65 (our then-retail price).

K6AZ

When the market is in a lull like it was then, I can perfectly see advising clients in your newsletter about coins you feel are great buys at the time, as those were. But the problem is that there are some advising people to "invest" in this common material now with today's inflated prices. There is going to be a crash in the prices of this common material, it's just a matter of time. If someone buys coins to speculate in, and they do it long enough, eventually they will lose. I remember hearing many dealers in 1989 saying what a great buy common Morgans were in 65 at $500. We all know what happened there.

coynclecter

Q]I remember hearing many dealers in 1989 saying what a great buy common Morgans were in 65 at $500. We all know what happened there. >>



I remember selling some at 500, others I kept and sold at 120. This time I'm selling out when they get to 450.

GOLDGUY

I remember hearing many dealers in 1989 saying what a great buy common Morgans were in 65 at $500. We all know what happened there.

Touché! Although I don't recall hearing "many" dealers touting MS65 Morgans @ $500 -- there were definitely a few (and no, Pinnacle wasn't one of them). I still laugh out loud whenever I recall a day in May, 1989 at the Scottsdale Show when a then-prominent dealer was standing in front of a group warning us about "how sorry we were all going to be for missing the boat since MS65 Morgans were soon going to be trading between Wall Street firms at $1,500 each!"

MrEureka

Not if it brings to light the shady practices of one of their advertisers.

Barry - Don't be so sure about that. They really will print just about anything. Just don't name names or their attorneys may nix the letter.

Barry

<< <i>Not if it brings to light the shady practices of one of their advertisers.

Barry - Don't be so sure about that. They really will print just about anything. Just don't name names or their attorneys may nix the letter. >>


Andy - I am sure of it. I speak from experience.

MrEureka

I am sure of it. I speak from experience.

Barry - Show us the letter that CW would not print. I'd be surprised if it isn't defamatory.

mrearlygold

<< <i> I am sure of it. I speak from experience.

Barry - Show us the letter that CW would not print. I'd be surprised if it isn't defamatory. >>






Darn I'd really like to say something but can't.

Arghhh.

Tom

Barry

Andy,
I no longer have a copy of it, but it was not defamatory. Basically what I said is I found CW's reporting bias towards protecting their advertisers disappointing. I used as an example the big spread they did on Ron Gillio when he was being investigated, without any evidence of wrongdoing being presented. Shortly thereafter, Ken Pines was booted from the ANA for violating their dealers' standards, yet that was not even mentioned in Coin World. Needless to say, it never made Coin World as a Letter to the Editor. I guess that had too many Mint customer service complaint letters to publish that month.

oreville

Barry: Not only is CW biased towards their advertisers, they have a direct conflict in that their parent/sister company competes with some of them in selling coin supplies and books. Talk about being hypocritical???????????

I believe Barry on this one.

michael

michael

Coppernicus

I'd like to get this thread back on track: I think investing in rare coins is foolish for almost everybody, especially the uninformed. But even for the expert, coins are not a good investment, IMHO. I only invest in liquid assets with tight bid/ask spreads. I can sell 1,000 shares of Microsoft in about 5 seconds. Suppose I want to sell an equal $ amount of my coins. Hmmmm....slow execution, wide spreads, and a fragmented market. No thanks!!

Mike

morgannut2

Coppernicus: Yes but that arguement can be made against commericial real estate too. Your better point might be

stronger against the lack of current and potentially increasing income cash flow. The liquidity arguement

really applies to speculation and that goes for stocks, bonds and all sorts of recognised true investments.

Hence, coins are a poor speculative asset class, with no cash flow/poor liquidity

Trime

This thread is most interesting not because of the editorial (commentary) in CW by Mr Scripto but because of the conflicts and paradoxes of rare coin collecting.
It is impressive that many of this board emphasise the hobby (it is a great one) vs investment in accumulating coins that frequently sell for many thousands of dollars. This cautious stance is healthy for coin value. When the tone changes to near uniform optimism on future prices the cycle top will be at hand.
On the other hand most of the threads on this forum focus on price of coins and much of the business at the grading services are intended to increase the $value of a "hobby" coin. While there are a small percentage of collectors that are indifferent to either the cost or asset value of their collections most are highly cognizant of the quoted prices and follow them with great interest.
I agree with the comments of Todd Imhoff and further argue that coin collecting would have less enthusiasts if $ appreciation were not a major ingredient in their commitment of large sums of green of their collection. The fantasy of most collectors are that their collection will significantly rise in $ value, thus justifying the expendature of assets that could be well spent elsewhere. The reason that rare coins are suspect investments have been outlined by others and include issues of cost of transaction , difficulty in pricing because of subjectivity and difficulty in many instances of comparisons to identical items , variance in grading, failure in intrinsic growth ( one coin does not become three) and limited liquidity. There are partial or potential solutions to each of these issues and they are often counterbalanced by other factors but most agree that mortgaging ones house for their collection is not ideal for most hobbyists. Yet some of us have as much money in their collections as their mortgage. It is indeed for some an expensive hobby and perhaps a high risk investment.

BAJJERFAN

<<"I can sell 1,000 shares of Microsoft in about 5 seconds. Suppose I want to sell an equal $ amount of my coins. Hmmmm....slow execution, wide spreads, and a fragmented market. No thanks!!">>

True but can you go to a show, buy a round lot of Microsoft for cash, walk to the next aisle and maybe flip it for a $1000 profit, put the cash in your pocket and walk away with no one [not even Uncle Sugar] the wiser?

Trime

ttt