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Doug Winter: "How Do You Price Really Special Coins?"
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You 'Upper Class' numismatist forum members should appreciate Mr. Winter's article....................
How Do You Price Really Special Coins?
By Doug Winter on February 28, 2012 9:40 PM
In the recent Schuyler Rumsey coin auction, there were a number of coins that I would define as 'really special.' After the sale was over, I thought about the prices they brought and was initially pretty stunned. Upon further reflection, I still think that these coins brought strong prices but the numbers now make a little more sense . Let’s take a look at some of these specific coins and then ask (and answer) a bigger question: how do you price a really special coin?
This was not a condition-related sale and there were only a few coins that brought a tremendous amount of money because they were high grade for the issue. Examples of such coins include the 1852-O eagle in PCGS AU55 (Lot 982) that brought $18,400 and the 1870-CC eagle in PCGS EF45 (Lot 1030) that sold for $97,750. In both cases these coins sold to savvy dealers who clearly believed that the coins would upgrade significantly. If they don’t upgrade, both coins will prove to be bad deals for their buyers.
But the coins that were of real interest to me in the sale were the still-slightly-under-the-radar rarities like the 1864-S eagle, the 1873 eagle and the 1876 eagle. These aren’t coins that condition is solely relevant. They are what I call “fundamental rarities” or coins that are rare in all grades.
In the Liberty Head eagle series, the 1864-S, 1873 and 1876 are three of the rarest collectible issues. In fact, the only eagle that is rarer is the 1875 which is, for all intents and purposes, nearly impossible to find.
The 1864-S eagle in the Rumsey sale (Lot 1017) was graded VF30 by PCGS. It was a coin that I thought was accurately graded and, in spite of a scratch on the reverse, it was evenly worn and rather handsome for the grade. This coin sold for $34,500; by far a record price for the date in this grade. I know the buyer of this coin; he is a very sophisticated collector. The under bidder was a knowledgeable dealer. Were these two individuals crazy or were they savvy?
Before we can accurately answer that question, some background information about the 1864-S is in order. And after this, we need to look at ways in which really special coins (which any 1864-S eagle is) are priced.
The 1864-S is the second rarest Liberty Head eagle after the 1875. There are probably no more than 20-25 known to exist. In my experience, the opportunity to purchase one occurs maybe once every three to five years. This is verified by the fact that only one piece (Bowers and Merena 7/06: 1640, PCGS EF45 at $50,600) had sold in the last five years. To find a piece that was comparable to Rumsey:1017 you had to go all the way back to the Richmond I: 2074 example (graded EF40 by NGC and selling for $10,350 but a coin which, as I recall, was really no better than the PCGS VF30 being offered).
Using comparable auction prices to help determine the price of a rare coin has become commonplace in the last few years. In the case of the 1864-S, this was not a good method for at least two of the following reasons:
The number of auction records for VF30 1864-S eagles is virtually non-existent. The last coin sold at auction as 'VF30' was a raw, cleaned example in July 1997 that brought $8.050. Clearly, this is of no help.
Since the Richmond I: 2074 coin was sold back in 2004, the market for this issue has totally changed. This is proven by the $50,600 that an EF45 brought just two years later. But that was six years ago and, if anything, the number of collectors who want an 1864-S eagle in any grade has at least doubled–if not tripled.
Since we can safely state that using auction comparables to price an 1864-S eagle isn’t going to work, then how about checking a published price guide like Coin World Trends? According to the most recent edition, values for the 1864-S eagle are $5,500 in VF20 and $12,500. These were probably accurate in 1992 but in 2012 they are clearly completely and utterly irrelevant in 2012 (but that’s another story…)
Before I render my verdict on whether the 1864-S in the Rumsey sale was a good deal or a bad deal, I think there are two other points to touch on.
The first is opportunity cost. If you are a deep-pocketed collector and you are participating in a challenging series with a number of really special issues included (Liberty Head eagles are a poster child for this) you always have to determine how often will you have the chance to buy an acceptable example. In the case of the 1864-S, it’s been pretty well established that its going to be once every three to five years if you are lucky. So the chance to buy a decent one represents an exceptionally important opportunity for the serious collector.
Second is the fact that any really special coin is part of what I refer to as a transaction-driven market. What I mean by this is that when you buy an 1864-S eagle in PCGS VF30 for $34,500 you have essentially created a new market. Yes, this market is considerably higher than it was the last time that one traded. But the reality of the market is that since a VF30 just traded for $34,000 in a public transaction, all the geniuses that live by comparable auction prices realized are now going to see this $34,000 trade. Even if Trends ignores this transaction and keeps their estimated value at 1992 levels, the bar has still been raised.
Let's take a less involved look at the other two really rare date eagles that I mentioned above.
The 1873 eagle in the sale (Lot 1040) was graded EF45 by PCGS. It sold for $43,125.
While not as rare as the 1864-S, the 1873 eagle is still a seriously rare issue with an estimated three dozen or so known from an original mintage of just 800. I have handled two or three in the last five years and actually had a reasonably hard time selling them as I found this to be an issue that lacked the rarity recognition that other issues in the series have.
The last EF45 to sell at auction (an NGC EF45 coin) brought $11,212 in Superior’s 9/08 auction. The last transaction of any sort was an NGC AU58 sold by Heritage in June 2010 that realized $27,600. Based on these two transaction and on my knowledge of the series, I figured that the 1873 in the Rumsey sale would bring somewhere in the $15,000-20,000 range.
Why did it sell for so much this time? I think there are a few reasons. First of all, at least two people really wanted this coin. Even though the opening bid was a very strong $24,000, these two bidders slugged it out until the final bell rang at $37,500. Strong price? Yes! Crazy price? Maybe not…
As I thought about the 1873, I had the following realization. For years, this was an absurdly undervalued date. The NGC AU58 that sold for 28 grand in 2010? Even though it wasn’t a cosmetically appealing coin, even then I knew it was really cheap. And here’s why. For years, the quartet of very rare business strike Type Three Philadelphia double eagles traded in the $5,000-10,000 range for decent EF examples. But after they suddenly got hot, prices rose to $20,000, then to $30,000, then even higher. An 1873 eagle is just as rare as any of the Big Five Philly Type Threes. Why should it sell at such a discount? Especially now that Liberty Head eagles have some strong collector support?
The 1876 eagle in the Rumsey sale (Lot 1047) was graded AU53 by PCGS and it also sold for $43,125. To me, this was a very surprising price.
I find the 1876 to be less rare than the 1873, despite a lower mintage of 687 coins. There are around forty to fifty known and I can recall having owned at least three in the last two to three years. Like the 1873, they were not an easy sell even with the fact that the mintage figure is the second lowest in the whole series after the 1875.
Heritage 10/10: 4892, graded AU53 by PCGS, was a good comparable to the Rumsey coin and it sold for $14,950. I figured the Rumsey coin might bring as much as $20,000 and it opened at just $13,000. Again, two bidders slugged it out and this time, the match lasted longer.
Good deal or bad deal? I liked the coin better than the 1873 (I thought it might upgrade to AU55 if resubmitted) but I didn’t think that the 1876 carried as much opportunity cost. In other words, I would have told a collector that if this one doesn’t work out, it’s possible that another decent coin will turn up in a year or so; maybe even less. So, on this one, I’m going to have to vote more towards the “not a bad deal but probably not a good deal” camp.
As is so often the case in my writing (and my thinking!) I’ve gotten a bit off track and still don’t feel that I’ve totally answered the original question in this blog: “how do you price really special coins?”
I’ve mentioned above that published price information is not a good indicator for really rare coins. And while sometimes helpful, auction price data has to be very subtly interpreted to be truly helpful.
Ultimately, the price of a really special coin boils down to what your gut feels that it is worth. If you are willing to pay $25,000 for a decent 1864-S eagle and you’ve been waiting four years for the chance to buy one, shouldn’t you be willing to pull the trigger at $30,000 or even $35,000?
What I find most helpful is knowing the series in question very well. As I mentioned above, the Liberty Head eagle series has become more popular in the last two or three years than at any time I can remember. So pre-2010 auction prices often have to be taken with a grain of salt. And it helps to know that certain other rare issues, like the 1883-O, have a number of recent auction trades and private sales in the $40,000-70,000 range. The 1883-O is more popular than the 1873 and the 1876 but it is of comparable rarity. If an AU50 example of this date is worth $50,000-60,000 then shouldn’t an 1876 in AU53 be worth at least half this?
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How Do You Price Really Special Coins?
By Doug Winter on February 28, 2012 9:40 PM
In the recent Schuyler Rumsey coin auction, there were a number of coins that I would define as 'really special.' After the sale was over, I thought about the prices they brought and was initially pretty stunned. Upon further reflection, I still think that these coins brought strong prices but the numbers now make a little more sense . Let’s take a look at some of these specific coins and then ask (and answer) a bigger question: how do you price a really special coin?
This was not a condition-related sale and there were only a few coins that brought a tremendous amount of money because they were high grade for the issue. Examples of such coins include the 1852-O eagle in PCGS AU55 (Lot 982) that brought $18,400 and the 1870-CC eagle in PCGS EF45 (Lot 1030) that sold for $97,750. In both cases these coins sold to savvy dealers who clearly believed that the coins would upgrade significantly. If they don’t upgrade, both coins will prove to be bad deals for their buyers.
But the coins that were of real interest to me in the sale were the still-slightly-under-the-radar rarities like the 1864-S eagle, the 1873 eagle and the 1876 eagle. These aren’t coins that condition is solely relevant. They are what I call “fundamental rarities” or coins that are rare in all grades.
In the Liberty Head eagle series, the 1864-S, 1873 and 1876 are three of the rarest collectible issues. In fact, the only eagle that is rarer is the 1875 which is, for all intents and purposes, nearly impossible to find.
The 1864-S eagle in the Rumsey sale (Lot 1017) was graded VF30 by PCGS. It was a coin that I thought was accurately graded and, in spite of a scratch on the reverse, it was evenly worn and rather handsome for the grade. This coin sold for $34,500; by far a record price for the date in this grade. I know the buyer of this coin; he is a very sophisticated collector. The under bidder was a knowledgeable dealer. Were these two individuals crazy or were they savvy?
Before we can accurately answer that question, some background information about the 1864-S is in order. And after this, we need to look at ways in which really special coins (which any 1864-S eagle is) are priced.
The 1864-S is the second rarest Liberty Head eagle after the 1875. There are probably no more than 20-25 known to exist. In my experience, the opportunity to purchase one occurs maybe once every three to five years. This is verified by the fact that only one piece (Bowers and Merena 7/06: 1640, PCGS EF45 at $50,600) had sold in the last five years. To find a piece that was comparable to Rumsey:1017 you had to go all the way back to the Richmond I: 2074 example (graded EF40 by NGC and selling for $10,350 but a coin which, as I recall, was really no better than the PCGS VF30 being offered).
Using comparable auction prices to help determine the price of a rare coin has become commonplace in the last few years. In the case of the 1864-S, this was not a good method for at least two of the following reasons:
The number of auction records for VF30 1864-S eagles is virtually non-existent. The last coin sold at auction as 'VF30' was a raw, cleaned example in July 1997 that brought $8.050. Clearly, this is of no help.
Since the Richmond I: 2074 coin was sold back in 2004, the market for this issue has totally changed. This is proven by the $50,600 that an EF45 brought just two years later. But that was six years ago and, if anything, the number of collectors who want an 1864-S eagle in any grade has at least doubled–if not tripled.
Since we can safely state that using auction comparables to price an 1864-S eagle isn’t going to work, then how about checking a published price guide like Coin World Trends? According to the most recent edition, values for the 1864-S eagle are $5,500 in VF20 and $12,500. These were probably accurate in 1992 but in 2012 they are clearly completely and utterly irrelevant in 2012 (but that’s another story…)
Before I render my verdict on whether the 1864-S in the Rumsey sale was a good deal or a bad deal, I think there are two other points to touch on.
The first is opportunity cost. If you are a deep-pocketed collector and you are participating in a challenging series with a number of really special issues included (Liberty Head eagles are a poster child for this) you always have to determine how often will you have the chance to buy an acceptable example. In the case of the 1864-S, it’s been pretty well established that its going to be once every three to five years if you are lucky. So the chance to buy a decent one represents an exceptionally important opportunity for the serious collector.
Second is the fact that any really special coin is part of what I refer to as a transaction-driven market. What I mean by this is that when you buy an 1864-S eagle in PCGS VF30 for $34,500 you have essentially created a new market. Yes, this market is considerably higher than it was the last time that one traded. But the reality of the market is that since a VF30 just traded for $34,000 in a public transaction, all the geniuses that live by comparable auction prices realized are now going to see this $34,000 trade. Even if Trends ignores this transaction and keeps their estimated value at 1992 levels, the bar has still been raised.
Let's take a less involved look at the other two really rare date eagles that I mentioned above.
The 1873 eagle in the sale (Lot 1040) was graded EF45 by PCGS. It sold for $43,125.
While not as rare as the 1864-S, the 1873 eagle is still a seriously rare issue with an estimated three dozen or so known from an original mintage of just 800. I have handled two or three in the last five years and actually had a reasonably hard time selling them as I found this to be an issue that lacked the rarity recognition that other issues in the series have.
The last EF45 to sell at auction (an NGC EF45 coin) brought $11,212 in Superior’s 9/08 auction. The last transaction of any sort was an NGC AU58 sold by Heritage in June 2010 that realized $27,600. Based on these two transaction and on my knowledge of the series, I figured that the 1873 in the Rumsey sale would bring somewhere in the $15,000-20,000 range.
Why did it sell for so much this time? I think there are a few reasons. First of all, at least two people really wanted this coin. Even though the opening bid was a very strong $24,000, these two bidders slugged it out until the final bell rang at $37,500. Strong price? Yes! Crazy price? Maybe not…
As I thought about the 1873, I had the following realization. For years, this was an absurdly undervalued date. The NGC AU58 that sold for 28 grand in 2010? Even though it wasn’t a cosmetically appealing coin, even then I knew it was really cheap. And here’s why. For years, the quartet of very rare business strike Type Three Philadelphia double eagles traded in the $5,000-10,000 range for decent EF examples. But after they suddenly got hot, prices rose to $20,000, then to $30,000, then even higher. An 1873 eagle is just as rare as any of the Big Five Philly Type Threes. Why should it sell at such a discount? Especially now that Liberty Head eagles have some strong collector support?
The 1876 eagle in the Rumsey sale (Lot 1047) was graded AU53 by PCGS and it also sold for $43,125. To me, this was a very surprising price.
I find the 1876 to be less rare than the 1873, despite a lower mintage of 687 coins. There are around forty to fifty known and I can recall having owned at least three in the last two to three years. Like the 1873, they were not an easy sell even with the fact that the mintage figure is the second lowest in the whole series after the 1875.
Heritage 10/10: 4892, graded AU53 by PCGS, was a good comparable to the Rumsey coin and it sold for $14,950. I figured the Rumsey coin might bring as much as $20,000 and it opened at just $13,000. Again, two bidders slugged it out and this time, the match lasted longer.
Good deal or bad deal? I liked the coin better than the 1873 (I thought it might upgrade to AU55 if resubmitted) but I didn’t think that the 1876 carried as much opportunity cost. In other words, I would have told a collector that if this one doesn’t work out, it’s possible that another decent coin will turn up in a year or so; maybe even less. So, on this one, I’m going to have to vote more towards the “not a bad deal but probably not a good deal” camp.
As is so often the case in my writing (and my thinking!) I’ve gotten a bit off track and still don’t feel that I’ve totally answered the original question in this blog: “how do you price really special coins?”
I’ve mentioned above that published price information is not a good indicator for really rare coins. And while sometimes helpful, auction price data has to be very subtly interpreted to be truly helpful.
Ultimately, the price of a really special coin boils down to what your gut feels that it is worth. If you are willing to pay $25,000 for a decent 1864-S eagle and you’ve been waiting four years for the chance to buy one, shouldn’t you be willing to pull the trigger at $30,000 or even $35,000?
What I find most helpful is knowing the series in question very well. As I mentioned above, the Liberty Head eagle series has become more popular in the last two or three years than at any time I can remember. So pre-2010 auction prices often have to be taken with a grain of salt. And it helps to know that certain other rare issues, like the 1883-O, have a number of recent auction trades and private sales in the $40,000-70,000 range. The 1883-O is more popular than the 1873 and the 1876 but it is of comparable rarity. If an AU50 example of this date is worth $50,000-60,000 then shouldn’t an 1876 in AU53 be worth at least half this?
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SeaEagleCoins: 11/14/54-4/5/12. Miss you Larry!
BTW, the gut feeling approach has worked for me for some time in the rare date gold arena.
"Ultimately, the price of a really special coin boils down to what your gut feels that it is worth. If you are willing to pay $25,000 for a decent 1864-S eagle and you’ve been waiting four years for the chance to buy one, shouldn’t you be willing to pull the trigger at $30,000 or even $35,000?"
You can scale the numbers up or down, and the message rings true. In fact, at lower numbers ($25, for example), it is even more true, IMO.
<< <i>The 1864-S eagle in the Rumsey sale (Lot 1017) was graded VF30 by PCGS. . . .This coin sold for $34,500; by far a record price for the date in this grade.
. . . . .
The 1873 eagle in the sale (Lot 1040) was graded EF45 by PCGS. It sold for $43,125.
. . . . .
The 1876 eagle in the Rumsey sale (Lot 1047) was graded AU53 by PCGS and it also sold for $43,125. To me, this was a very surprising price. >>
B-b-b-b-but the Greysheet says the 1864-S is worth $10,000 in VF, the 1873 is worth $7,500 in EF, and the 1876 is worth $14,000 in AU!
. . . . . . . . (Pause while these numbers are being analyzed) . . . . . .
Customer (at least once a day): "The Greysheet can't be that far off, can it?"
Me: "Yes, it can be that far off, and on really rare coins, it IS that far off."
Now DW in his fine article proves this point.
Consider this: Is a price listed on a grey piece of paper more accurate than the amount of money some person actually paid for the coin?
An authorized PCGS dealer, and a contributor to the Red Book.
But I can't help thinking that it doesn't take very many collectors to make (or break) such a thinly traded market.
<< <i>This was not a condition-related sale and there were only a few coins that brought a tremendous amount of money because they were high grade for the issue. Examples of such coins include the 1852-O eagle in PCGS AU55 (Lot 982) that brought $18,400 and the 1870-CC eagle in PCGS EF45 (Lot 1030) that sold for $97,750. In both cases these coins sold to savvy dealers who clearly believed that the coins would upgrade significantly. If they don’t upgrade, both coins will prove to be bad deals for their buyers. >>
Why are so many of these coins apparently undergraded?
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
<< <i>
<< <i>The 1864-S eagle in the Rumsey sale (Lot 1017) was graded VF30 by PCGS. . . .This coin sold for $34,500; by far a record price for the date in this grade.
. . . . .
The 1873 eagle in the sale (Lot 1040) was graded EF45 by PCGS. It sold for $43,125.
. . . . .
The 1876 eagle in the Rumsey sale (Lot 1047) was graded AU53 by PCGS and it also sold for $43,125. To me, this was a very surprising price. >>
B-b-b-b-but the Greysheet says the 1864-S is worth $10,000 in VF, the 1873 is worth $7,500 in EF, and the 1876 is worth $14,000 in AU!
. . . . . . . . (Pause while these numbers are being analyzed) . . . . . .
Customer (at least once a day): "The Greysheet can't be that far off, can it?"
Me: "Yes, it can be that far off, and on really rare coins, it IS that far off."
Consider this: Is a price listed on a grey piece of paper more accurate than the amount of money some person actually paid for the coin? >>
You could say, "but, does the greysheet have one to sell to you? because I have this one here right now."
(this is the converse of what a dealer can say if a potential seller wants greysheet for something common that generally sells for less: "then sell it to they greysheet. Here and now, it's worth this here $xx cash money."
Liberty: Parent of Science & Industry
This year, Albert Pujols was a free agent. The bidding for his services was hot and heavy. Some baseball team owners were flush with money from new TV deals or other business deals. Pujols may be the top talent of his generation, a truly special player. However at age 32, his may be headed for a productivity decline. Certainly five years into a new contract at age 37 he will be well past his peak years. Pujols got 10 years and $240 million from the Angels. By most accounts, the owner Arty Moreno overpaid. However, if he wanted to win the auction, he had to overpaid.
There are parallels to the coin market. If it is truly a special item, or a song and dance can be done to convince bidders/buyers that it is a special item, the price goes up. If potential bidders are flush with cash from other business deals, the price goes up. If the bidding gets heated, the winner most certainly will overpay. Look at it this way, say there are 100 people interested and each writes down what they think fair market value is. At auction, the winning price is what the top two numbers are, and that's without bidding frenzy premium. At auction, 98% of the other experts think the price was too high.
For a coin in dealer inventory or on consignment, it is similar. In the case of a hypothetical 100 interested parties, the smart and savvy dealer may price around the 95th percentile. Another strategy might be to shoot for the 99th percentile and then bargain down if some other 90-something expresses interest. In this game theory version, the dealer only his personal number for fair value, but his years of experience also gives him a feel for what strong buyers might pay. Holding out for the last bit can get risky, the potential buyers might see other special items priced closer to fair value (fair value is the median of those 100 estimates written down) and blow their budget on those and no longer be interested in the first. Pricing at the median of what top experts think is fair value leaves a ton of money on the table.
The other part of the equation is psychological. Folks with enough extra money to buy $25k or $35k coins tend to have big egos. If that particular date/mintmark was last on the market in 1992 or 1997, there is a huge incentive to overpay. The empty feeling of coming home with nothing is like that of the baseball team owner. Perhaps Arty Moreno overpaid, but he remembers last season when one more big bat in the lineup may have made the difference. If the choice is between overpaying and coming away with nothing, many may make the irrational choice of overpaying and knowing that they are overpaying, especially if they were just shut out.
As I have said a hundred times when the Pujols discussion comes up around here: We got about 90% of the baseball benefit of having Pujols here in St. Louis for about 40% of the money. This includes three World Series appearances and two championships. The Angels paid 60% of the money for the last 10%
At age 34
This is much like buying a high profile coin in auction, one that has been owned by a celebrated collector. Assuming the coin is all there, you generally pay all the money and then some for very little appreciation potential. (I am not sure if that is necessarily true, but I had to related my post back to coins.
I shared this on Facebook with a few of my thoughts on special coins. Basically, when something comes up that is an unusual opportunity, a rarity (either pure rarity or conditional rarity) that appears only once every several years, I advise customers/friends to be wiling to pay what it might bring the NEXT time it appears -- a year, three years, five years, etc. For the price of inflatation, you get to own the coin that much longer and essentially set the price floor for the next similar opportunity. When a once-every-ten-years medal or colonial comes up, the question pros ask isn't "what is Redbook" it's "what did the last one bring at auction." On truly special items, with some exceptions of course, the last price realization generally sets the next one.
I call this strategy "buying ahead of the market." Underbidders call it "paying too much," perhaps, but then again, they don't have the coin and you do!
Betts medals, colonial coins, US Mint medals, foreign coins found in early America, and other numismatic Americana
<< <i>Excellent discussion, as always, RT.
As I have said a hundred times when the Pujols discussion comes up around here: We got about 90% of the baseball benefit of having Pujols here in St. Louis for about 40% of the money. This includes three World Series appearances and two championships. The Angels paid 60% of the money for the last 10%
At age 34
This is much like buying a high profile coin in auction, one that has been owned by a celebrated collector. Assuming the coin is all there, you generally pay all the money and then some for very little appreciation potential. (I am not sure if that is necessarily true, but I had to related my post back to coins.
On the Pujols discussion I agree but think your percentages are off some on the St. Louis side of the equation. Also it's baseball, there is no cap, so ultimately paying more to try and win a championship isn't so bad.
Successful card BST transactions with cbcnow, brogurt, gstarling, Bravesfan 007, and rajah 424.