Do you own a Faux Rarity™, and even the rich can succumb to the Well Managed Promotion...

Longacre

I took a read through the latest Doug Winter blog, which I am posting below. I know that some board members get their panties in a bunch when I post these blogs, but in my opinion, I think they are well written, and contain a lot of information for message board discussions. I wish more dealers wrote like this.

In the latest installment, Winter talks about Faux Rarities™. Do you agree with the coins that he listed? What others would you add? Also, for some reason, I thought the middle class were the only ones who succumbed to the infamous Well Managed Promotions. However, it seems that the rich are the recipient of this, the coin dealer's birthright.


Here is the blog:

September 11, 2008

One of the ways to determine the strength of the rare coin market is to look at the pricing of coins that I like to call “Faux Rarities.” A Faux Rarity is a coin that, despite a high valuation, is relatively common. Three examples of Faux Rarities are 1879 Flowing Hair Stellas, high grade St. Gaudens High Reliefs and Panama-Pacific Exposition Octagonal $50 gold pieces. It is my opinion that once coins like this start decreasing in price, the market is weakening.

Despite the fact that it is technically a pattern, the 1879 Flowing Hair Stella is still collected as a regular issue and this has helped to make it a far more valuable item than if it were regarded solely as a pattern.

An estimated 425 examples were produced but I believe this number is too low and does not factor in Restrikes that were produced later. There appear to be at least 400-500 examples known in grades that range from Damaged Very Fine to Superb Gem Proof. Stellas are most often seen in Proof-63 to Proof-65 and it is hard for me to consider them truly rare when they seem to be available in quantity in every major auction; not to mention in the cases of a number of dealers at major shows.

If you purchased a Gem Proof Stella back in 2000 (at the beginning of the current bull market in rare coins) you probably paid $100,000 or so. If you were a bit later to the party (say 2003 or 2004), a similar coin would have cost you around $200,000. Today, the same quality Stella (graded PR66) might cost as much as $300,000. The problem with the PR66 Stella market is that, due to gradeflation, a PR66 now has a combined PCGS/NGC population that is north of fifty coins. A second thing to consider is that most of the Stellas in today’s PR66 holders have been conserved; unlike the Gems back at the beginning of the decade that tended to be original and very attractive.

I regard the St. Gaudens High Relief in MS66 as probably the ultimate Faux Rarity. Yes, this is a beautiful coin and, yes, it is an historic issue. But it appears to me that as much as 90% of the original mintage still exists and most remaining High Reliefs tend to be very choice.

In 2000, I can remember selling MS66 High Reliefs for around $40,000-45,000. By 2004, levels had risen to $70,000. Today, a nice MS66 will cost the collector around $100,000 or possibly a bit more. Considering the fact that PCGS and NGC have a combined population of 180 High Reliefs in MS66 (plus an additional fifty-one in grades higher than this) it is pretty difficult for me to say with a straight face that this is a “rare coin.” It has been brilliantly promoted but I doubt this issue can sustain enough demand to continue to appreciate in price.

Another classic Faux Rarity is the massive 1915-S $50 Panama-Pacific Octagonal. A total of 645 examples were produced and it appears that virtually all of the original mintage still exists. When the gold commemorative series is popular, there is legitimate collector demand for this issue. But gold commemoratives have been as a dead as a doorknob for a number of years so this level of demand tends to be more artificial. This, I believe, is a characteristic of all Faux Rarities.

Despite an apparent lack of specialized collector demand for this issue, it has been well-promoted during the last few years and Octagonals sell easily at coin shows and auctions. An MS65 example is currently valued at around $125,000, which is an impressive gain over the $100,000 or so it was worth a year or two ago. Five to seven years ago, if you could find an MS65 Octagonal (it is only in the last few years that PCGS started grading MS65’s of this design with any regularity; back in the day, virtually all Gem quality examples were graded MS64) it would have set you back $50,000.

As I mentioned above, I think that these Faux Rarities represent a sort of harbinger for the overall state of the high end of the coin market. When these issues begin to free fall in price (which I think is inevitable given how much they have risen in price in five years) this could well be a sign that the market as a whole is ready to begin a correction. Will truly rare coins get dragged down along with these Faux Rarities? I’m not sure. In the past they have but it appears to me that the market has enough depth this time around that perhaps the Drag Down Effect will not be as strong this time around.

What are some of the coins you regard as Faux Rarities? I would be interested to know your opinion. Please email your list to dwn@ont.com.


Doug Winter
9/11/08
www.raregoldcoins.com
For more information on U.S. gold coins please contact me via email at dwn@ont.com.

notwilight

Smooth edge Jeffersons. --Jerry

bidask

Doug Winter, while an accomplished author on gold coins, is one of the biggest promotors around in my opinion of the coins he writes about.

Nic

I agree with what Doug says. I own a couple of faux rarities. I like them .

K

fc

i like to think that there is so many coins worth more then 100,000
that you cannot even remember them all... the coin market is due
for a correction.

interesting blog post though. even big time dealers are speaking of
"it" now days.

291fifth

Coins such as those mentioned in the article are great for inclusion in "investment" portfolios of collectors with more money than knowledge.

BECOKA

High relief Gaudens Double Eagle comes to mind.

tradedollarnut

The market is softening - the peak has passed. JMHO.

RYK

I thought that was an excellent perspective on the coin market. Well worth the read. I am 0-for-3 in the benchmark Faux Rarities department.

ArizonaJack

The only Faux Raritys I own are a few SVDB's and 16-D Mercs..........the unwashed common man raritys

BECOKA

1911-D Quarter Eagles come to mind

SmallEagle

I'm afraid my avatar is only a faux-rarity. Yes?

rhedden

1909-S VDB cent. Sorry, I like Lincolns, but these are just not rare in any sense of the word. I don't own one, but had to throw this out there.

coinkat

I think Faux Rarity is not a new concept...

The reality is that rarity is often confused with demand. Demand can be created through promotion and promoters usually like what can be bought and sold. I tend to agree that some of the coins Winter listed are overvalued and coins I would not spend that kind of money to own. I can buy real rarity for pennies on the dollar for what has been hyped. I refuse to play that game.


Edited to add:

There is a sheep factor in the hobby that adds a component that must be factored into the whole Faux Rarity concept

PrivateCoinCollector

1955 Dbl Die Lincoln. There is more than one at every coin show.

PerryHall

The 1856 flying eagle cent is a good example of a faux rarity.

MidLifeCrisis

<< <i>I am 0-for-3 in the benchmark Faux Rarities department. >>


Me too.

Doug Winter's choices are very interesting to me. They illustrate the point that, while rarity in actual numbers can be absolute and definitive, the concept of rarity is relative.

"...at least 400-500 examples known..."; "...645 examples were produced and it appears that virtually all of the original mintage still exists..."

These numbers just do not indicate true rarity to me...at least not enough to justify the high prices.

roadrunner

The only problem with DW's analysis is that those "faux" rarities always seem to perform well in bull markets, and better than "true" rarities. The make money for the owners despite their lack of true rarity fundamentals. But they have the demand side covered in spades. The coins DW listed are all specialty type coins so their absolute numbers may be high compared to say an 1874-cc dime but the demand for them is off the charts.

I literally followed Winter's theory in the 70's and 80's and only went after coins that were truly rare based on number available. The problem was that they were so hard to find that there were few to buy. With only a handfull of people looking for them, they often were outpaced by the "faux rarities" and other popular coins like 1916 and 1796 quarters.

I think Nic said it quite eloquently. They may not be rare but people love them, they look great, and can be promoted. You can't promote what's too rare and hard to find. Maybe that's why investors or speculators like those "faux" rarities.

roadrunner

veryfine

<< <i>The only problem with DW's analysis is that those "faux" rarities always seem to perform well in bull markets, and better than "true" rarities. The make money for the owners despite their lack of true rarity fundamentals. But they have the demand side covered in spades. The coins DW listed are all specialty type coins so their absolute numbers may be high compared to say an 1874-cc dime but the demand for them is off the charts.

I literally followed Winter's theory in the 70's and 80's and only went after coins that were truly rare based on number available. The problem was that they were so hard to find that there were few to buy. With only a handfull of people looking for them, they often were outpaced by the "faux rarities" and other popular coins like 1916 and 1796 quarters.

I think Nic said it quite eloquently. They may not be rare but people love them, they look great, and can be promoted. You can't promote what's too rare and hard to find. Maybe that's why investors or speculators like those "faux" rarities.

roadrunner >>


Excellent response, roadrunner.

Baley

they may be "Faux Rarity™" but the coins mentioned would make just about any collector's jaw drop and eyes pop, because they're wicked cool looking.

if they don't raise someone's eyebrows, maybe the person is a little jaded from all the beautiful true rarities they've handled.

As for the prices, who the hell knows better than the market of supply and demand. I agree they're not "rare" by definition

and those of us who own R6, 7, and 8 coins (varieties usually, and sometimes tough to distiguish from the common ones, and in none too high a grade nor too visually impressive, but yes fewer than a couple dozen known) wish that they were worth the 6 figure values mentioned (they're not)

maybe sometimes the Faux Rarity™ is a trophy coin and a real rarity is just for the specialist with a book and a magnifying glass

(or if it's a Real Rarity™ AND awesome looking and popular too, then a fat wallet and we're talking $1M+)

lasvegasteddy

<<<"Faux Rarity™" >>>

faux rarity in itself is faux

why the tm there?


was there a tm applied to "faux" which maybe incringed to begin with? as faux is about as old as dirt to be coined now as original anything

back to this thread,

i'd think this has been known for sometime...stella's to me aren't faux as many were less then 15 minted and only one exsist greater then 400 in mintage

the rest seem about right

reguardless where my mpl's sit...i'm happy with them and they have a solid core base of value

FullStrike

I think all those rainbow Morgans while not rarities are Faux Premium™ Coins.

pennyannie

faux- 1909 VDB MPL for 35k plus

Duane

Thoughtful analysis. I try to buy faux rarities when they are selling (relatively) low and sell when they are trading high - never seems to works that way, though!

D

This got linked in a thread and I read it and laughed/thought it was good for a bump considering the current market state.

I did laugh at the mention of '16-D Mercs and '16-P SLQs. I can find no less than 20 available currently. I bought one of the former yesterday due the the availability and recent decline in prices.

-D