Coin market bust of 1989--Thoughts and memories

Ahrensdad · February 23, 2011 2:45PM

I may have the year wrong. What are your memories of this? What was the lead up?

What does a bust in the coin market look like?

CaptHenway · February 23, 2011 2:57PM

Throughout the Spring and Summer of 1989 there was much excitement over a proposed mutual fund that was going to invest in slabbed rare coins. Everybody foresaw the influx of hundreds of millions of dollars into the rare coin market. In anticipation, prices for everything rose sharply.

At the ANA convention in Pittsburgh, word came from Wall Street that the deal was off. Explanations as to why vary, but it was definite. Prices collapsed.

TD

Unknown · February 23, 2011 3:12PM

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RedTiger · February 23, 2011 3:29PM

The silver dollar encyclopedia (the big heavy one compiled by John Highfill) has a lengthy blow-by-blow account of the coin market during the boom and bust days when PCGS and NGC certified coins were still a novelty and Wall Street was planning to come in with big money.

Unknown · February 23, 2011 5:18PM

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WoodenJefferson · February 23, 2011 5:22PM

My Brother-in-laws father was living in Nashville, TN at the time, selling Life of Georgia. At least they were in tune with current events and he started buying up Walking Liberties anywhere from $250-$350 by the boat load. He had it figured out where he could double his money in 6 months (that's what the speculators that sold him the coins were saying) well the boom went boom and his $22,500 investment into the rare coin business went right into the tank.

Coins that were selling for $250 one day couldn't be pawned off for $50 bucks the next day. Those that bought early and sold while the prices were still rising made out OK, but those that held onto theirs or were in on the tail end took a real beating. If he had only bought several key dates those lost less than the common dreck.

He figured out a way on his taxes for a capitol loss that played out in his favor. The accountant didn't want to claim a loss on speculative assets that had no history if there was an audit, but he went ahead and claimed a loss and it flew. After 7 years I guess your scott free.

jsf · February 23, 2011 8:22PM

I found some info about this by doing a Google search on: Merrill Lynch coin fund.

That led me to a lengthy excerpt from Scott Travers' book, "One-Minute Coin Expert." There is some basic info there about the late-1980s/early-1990s era in the coin market.

From that and some other select reading, I was left with two words stuck in my mind, speculation and greed.

Steve27 · February 23, 2011 9:44PM

Look at the owners declared value on this MS65 Morgan for an idea as to what the coin market looked like just prior to the bust:

ricko · February 23, 2011 9:57PM

"... I was left with two words stuck in my mind, speculation and greed. "

That just about sums up the market even today.... true, sometimes it may be more intense than others, but I see it every day here on the forum. Cheers, RickO

scotty1419 · February 23, 2011 10:05PM

<< Capt,
don't you think times are different now in that with all the collapses of every thing business the public is a lot smarter and not as trusting as they once were >>

This is an interesting statement and a good example for me of why bubbles reoccur. "Oh, it can't happen to me" - "I'm smarter now" - "The market is healthier this time around".

291fifth · February 23, 2011 10:09PM

<< 

<< Capt,
don't you think times are different now in that with all the collapses of every thing business the public is a lot smarter and not as trusting as they once were >>

This is an interesting statement and a good example for me of why bubbles reoccur. "Oh, it can't happen to me" - "I'm smarter now" - "The market is healthier this time around". >>

Greed rules ... count on it.

TwoSides2aCoin · February 23, 2011 10:25PM

My youngest daughter was born, I was busted , alright. It took me another ten years before I could get back into coins.

GritsMan · February 23, 2011 11:16PM

Great stories! Thanks for sharing everyone. After reading them, I think I'm glad I was getting a divorce about then and didn't have any money to spend on coins!

joebb21 · February 24, 2011 12:33AM

<< One Wall St firm, Kidder Peabody, had actually begun buying, (at least according to the CCDN, March 17, '89 issue,) but within months, things began to look 'dicey', as fluctuations began.

The first signs of trouble came late in spring, when the steady bid increases, across the board, turned into a blend of ups & downs.

By summer it was clear the market had turned, and with a vengeance.

The reason I heard at the time, was that one 'fund' had changed their minds about buying, and Kidder-Peabody had been selling some coins back into the market. (Who knows for sure, stories flew fast & furiously.)

Common PCGS Morgans in MS65 had been selling for around $500-$600 each, but by fall of 1989, you'd be lucky to find a buyer.

By late fall of 1990, you could take your pick of PCGS MS65 common Morgans, for around $100-125 each. (They eventually fell to around $75, early in the 90's as I recall.)

My first 'real' coin deal, ("real" meaning in 5 figures, and it was one of only a very few, through the years,) ...was done in May of 1989. Heritage bought the coin, paying *well* over then-current "bid". I quadrupled my original outlay, all of which had been borrowed from family. (If I had waited even a few weeks, I doubt they would have paid half that much. By sheer luck, I had sold into nearly the peak of the market.)

I was stunned by how fast the market turned, when it became clear it wasn't coming back. You just don't see it coming. (Maybe some did, but no one I talked to back then did, not until the downturn was underway)

I had been buying & selling coins, on and off since the late 70's, but had only gotten serious in 1988, when I scraped together some money, (much of it borrowed,) and I began buying coins to send to PCGS. Since VERY few dealers were ready for the PCGS era, (with *11* grades of BU!) it was fairly easy to buy MS65's at MS64 & even MS63 money, if you knew what to look for, and were patient.

Coin shows were treasure troves of 'raw' coins in the late 1980's, and few dealers had many slabs yet. (A lot of dealers I spoke with said PCGS would never survive, LOL!)

"Monster" toning was dirt cheap, (compared to today,) and most sellers felt that the 'premium' was built-in to the grade, since you could get a 'free point' for very attractive toning. Some dealers told me they "dipped all tarnished coins" still, (but I doubt it, I think they just didn't agree with the idea of higher prices for toned coins.) By 1991 I was actually laughed-at by one dealer, when I showed him an incredible 1881-S MS64 (PCGS) with gorgeous "electric" vivid toning that I had just bought at the show. He said I was a fool for paying 'double bid'. (That was around $65)

1988 was my first genuinely successful year, where I no longer had to rely on any outside work... (ie, no more job! I was in 7th heaven, and thought I owned the world, lol.)

That all changed in 1989, and by fall I was worried every time I sent in coins.

The market often fell so fast that I thought even if I 'got the grades', the value would drop by the time I got them back, and I'd be lucky to break even. (There was no "economy" tier yet, IIRC, it was $22 per coin, I think, and the 'rattlers' came back in little black, paperboard boxes, with plastic 'sleeves'.)

By 1990 I was barely getting by, and started to sell the coins I had built as "my collection" during the heydey, to pay the bills. Coins I had planned to 'keep forever' were hawked to any dealer who would take them, and they were often 'brutal' in what they offered for them!

I remember the "Bluesheet" headlines clearly, going from Spring of 1989: "6,000 Plus Signs = Degrees of Heat in The Market", to very late Spring (or early Summer) : "Steam Roller, or Rollercoaster?", and then, by the last issue of 1990, after a year of misery, something along the lines of: "Fairly Good end in Sight for a Very Difficult Year"

Probably about half of the 'new' dealers, who came into the market in 1988-89, were gone within a few years. There were plenty of horror stories to go around, and people were leery of taking checks from anyone. >>

That was a great read! thanks for sharing!

mrearlygold · February 24, 2011 12:39AM

I had a rough enough time to have to go and work for "the giant". I also learned to specialize once and for all, left and I bet you can't guess what I specialized in

IrishMikey · February 24, 2011 1:12AM

Another thing that was going on was "leveraging" of coins. A dealer would buy a million $
deal, get everything slabbed for accurate pricing, then set them aside and borrow as much
as 50% of the original deal, using the coins as collateral. They would then use the borrowed
money to buy more coins, and so on. I remember hearing that one dealer lost nearly 10
million $ when the bubble burst.

FredWeinberg · February 24, 2011 1:21AM

The Market literally stopped on a dime,
the first morning of the Central States
Show (1980) in Cedar Rapids, Iowa.

Starting that day, and for a few months,
it was just about impossible to sell anything
rare or expensive, unless it was for at
least 50% of what the coin was worth the
day before.

Matte Proof $20 St. Gaudens, which had
brought $85,000 to $100,00 at auction
just a few months before, in the Garrett
Collection (and other prior auctions) were
unsaleable at $50,000 or so - dealers were
not confident at all in the market for
expensive coins from April till about the ANA.

Yes, there were exceptions, but anyone who
was there, in the market, (I was very very
active in the rare coin part of it) will tell you
the same - the Dance stopped at the Central
States show - wow - 31 years ago!

ColonelJessup · February 24, 2011 1:58AM

In the beginning was the word, and the word was FUNGIBILTY.

Saleability didn't hurt either. But it's easier to quote the Salomon Bros. portfolio report about a coin you can get your hands on and then sell justified by the quote from this morning ANIE's market data than tell it is to tell a long story about George Washington finding a bucket of gold coins when he cut down the cherry tree.

1988:

Norweb 1876CC 20c went for 75K+juice or so. Now PCGS MS66

Norweb 1838-O 50c for about the same price by Walton Hood. This amazing piece beats anything else I've seen by 2 pts. Some day I expect this piece to grade PR64+. I will personally double-gold-sticker it

I pay a bit less for a 1900 proof $20 which holders PR66 and sells fast at $100K.

1989:

Norweb 1876-CC 20c shows up again in Auction '89. I partner it with Eureka at a touch more than it sold for the year before.

Eureka sells me a 1907 RE $10 PCGS MS65 for $120K. It takes almost 2 months to sell it for $135K. I wonder if I tied up too much money for so little a ROI. 2 months later I buy another Rolled Edge in the same grade for $135K and sell it in 3 weeks for $150K.

6 months later Eureka sells the 20c for $125K.

You could put up bids on proof gold and pretend there was a viable two-way market. For a while there was. Coins were special, but calculably so. At least you could tell retail the caviar analogy and rave about how pretty it was. And that number on the holder was an accurate quantitative evaluation of quality.

Safra was taking MS65 Morgans at $500 for collateral.

Playahs are discussing how to hedge 1000 coin positions in MS65 Saints. None of have 1000 MS65 Saints. None of them want 1000 MS65 Saints. But if they can trade hog bellies on the COMEX....

Widgets are FUNGIBLE. TDN's turn had yet to come.

The truth is that we were like kids in a candy store.

Few of us ever imagined we'd see, let alone get a chance to buy, so many great coins in such a few years. And that made every treasure especially special. Why wasn't it some guy whom I'd been hearing about for 20 years buying the Garrett 1821 $2 1/2 PR64 instead of Eureka and me. We were GENIUSES. I'm still in awe of myself.

I also had a college-level fadeaway jumper 45 years ago. Neither gym nor bourse is a place I go to anymore with anticipation of feeling "in the zone".

Someone cue up Springsteen's "Glory Days".

I'm not discounting ego-hunger and it's specific manifestation as greed, but for me it was surely more lust than lucre. This time around I've learned some healthier ways to feed my demons, including Pride and its subtle pimp Risk.

About 2 years later, after having published a list similar to Letterman's called 10 Best Ways To Delude Yourself into Thinking You Have an Exit Strategy, I became inspired to begin work on what I believe to be the first coin dealer self-help book: "How To Be Your Own Best Customer".

And to begin considering how, rather than being a genius, I was, as are we all, at best, a multi-talented idiot-savant.

Weird scenes inside the gold mine

mrearlygold · February 24, 2011 2:02AM

<< In the beginning was the word, and the word was FUNGIBILTY.

Saleability didn't hurt either. But it's easier to quote the Salomon Bros. portfolio report about a coin you can get your hands on and then sell justified by the quote from this morning ANIE's market data than tell it is to tell a long story about George Washington finding a bucket of gold coins when he cut down the cherry tree.

1988:

Norweb 1876CC 20c went for 75K+juice or so. Now PCGS MS66

Norweb 1838-O 50c for about the same price by Walton Hood. This amazing piece beats anything else I've seen by 2 pts. Some day I expect this piece to grade PR64+. I will personally double-gold-sticker it

I pay a bit less for a 1900 proof $20 which holders PR66 and sells fast at $100K.

1989:

Norweb 1876-CC 20c shows up again in Auction '89. I partner it with Eureka at a touch more than it sold for the year before.

Eureka sells me a 1907 RE $10 PCGS MS65 for $120K. It takes almost 2 months to sell it for $135K. I wonder if I tied up too much money for so little a ROI. 2 months later I buy another Rolled Edge in the same grade for $135K and sell it in 3 weeks for $150K.

6 months later Eureka sells the 20c for $125K.

You could put up bids on proof gold and pretend there was a viable two-way market. For a while there was. Coins were special, but calculably so. At least you could tell retail the caviar analogy and rave about how pretty it was. And that number on the holder was an accurate quantitative evaluation of quality.

Safra was taking MS65 Morgans at $500 for collateral.

Playahs are discussing how to hedge 1000 coin positions in MS65 Saints. None of have 1000 MS65 Saints. None of them want 1000 MS65 Saints. But if they can trade hog bellies on the COMEX....

Widgets are FUNGIBLE. TDN's turn had yet to come.

The truth is that we were like kids in a candy store.

Few of us ever imagined we'd see, let alone get a chance to buy, so many great coins in such a few years. And that made every treasure especially special. Why wasn't it some guy whom I'd been hearing about for 20 years buying the Garrett 1821 $2 1/2 PR64 instead of Eureka and me. We were GENIUSES. I'm still in awe of myself.

I also had a college-level fadeaway jumper 45 years ago. Neither gym nor bourse is a place I go to anymore with anticipation of feeling "in the zone".

Someone cue up Springsteen's "Glory Days".

I'm not discounting ego-hunger and it's specific manifestation as greed, but for me it was surely more lust than lucre. This time around I've learned some healthier ways to feed my demons, including Pride and its subtle pimp Risk.

About 2 years later, after having submitted published a list similar to Letterman's called 10 Best Ways To Delude Yourself into Thinking You Have an Exit Strategy, I became inspired to begin work on what I believe to be the first coin dealer self-help book: "How To Be Your Own Best Customer".

And to begin considering how, rather than being a genius, I was, as are we all, at best, a multi-talented idiot-savant.

Weird scenes inside the gold mine >>

In the wink of a young girls eyes Glory Days

Ahrensdad · February 24, 2011 2:14AM

I am truly enjoying reading posts from you gentlemen that have been there and done that. Fred, I recall HRH describing the very scene of the bourse stopping on a dime in one of his Monday (or was it Friday) posts. Facinating.

CaptHenway · February 24, 2011 2:17AM

Here's my "Top of the market" story.

Years before I met my wife-to-be, her father had sold two bags of junk silver near the top of the Hunt Brothers bubble, which was good, and invested the money in nice BU commem halves, which then went down a lot.

We met in 1985 and married in 1986. Her father and I sometimes discussed coins, so I knew what he had. In the Summer of 1989 I told him that prices had recovered to where he had bought in, and that he might consider selling. He then gave me his coins to sell at the ANA convention.

On the flight down there I ended up sitting next to a dealer I knew well. He asked if I had any fresh stuff to sell, and I reached under the seat in front of me and pulled out my briefcase. I showed him the boxes, he agreed on a price, and I handed him the coins. The next day he came by our table and paid me. The next day the market crashed.

No father-in-law was ever so proud of his son-in-law!

TD

Ahrensdad · February 24, 2011 2:30AM

<< Here's my "Top of the market" story.

Years before I met my wife-to-be, her father had sold two bags of junk silver near the top of the Hunt Brothers bubble, which was good, and invested the money in nice BU commem halves, which then went down a lot.

We met in 1985 and married in 1986. Her father and I sometimes discussed coins, so I knew what he had. In the Summer of 1989 I told him that prices had recovered to where he had bought in, and that he might consider selling. He then gave me his coins to sell at the ANA convention.

On the flight down there I ended up sitting next to a dealer I knew well. He asked if I had any fresh stuff to sell, and I reached under the seat in front of me and pulled out my briefcase. I showed him the boxes, he agreed on a price, and I handed him the coins. The next day he came by our table and paid me. The next day the market crashed.

No father-in-law was ever so proud of his son-in-law!

TD >>

Nothing but net...All skill...

dragon · February 24, 2011 2:48AM

Lot's of great stories guys, most interesting reading!

I remember being at some major shows during 1989 and 1990 and I remember the ANA show in 1989 in particular. I remember walking the bourse floor and there were just tons of great coins including many top pop. and major rarities for sale. I remember one dealer had an 1894-S $5.00 gold in MS69 as well as the only (at the time) $20.00 Lib in MS67 and numerous high grade matte proof gold including amazing high grade specimens of matte $10.00 Indians and $20.00 Saints......I thought that was so cool that he let me hold some of those coins that most collectors dream about. I also remember walking by Iraj Sayah's tables and seeing case after case of high grade generic PCGS generic gold stacked so high some of the cases wouldn't completely close. And also I remember seeing a lot of dealers with cases full of generic material with very few lookers or buyers and they just had this sort of nervous look. I especially remember walking by John Highfill's tables where he had numerous cases packed full of Morgan dollars and he was literally pacing up and back behind his tables and he practically looked like he was sweating IIRC. I later overheard him talking to another big dealer and saying "how the hell can the price on this coin (better date Morgan) be down over 60% on the sheet when no coins have traded hands?" I also remember buying a super nice killer electric toned common date MS64 Morgan from Laura at Legend for about $190.00 or so, and she was apologizing to me that she was asking so much but she paid a lot for it. I sold that same coin a number of years later to Larry Shepherd for close to $900.00 and again later saw it on Anacondas website.

My one "big score" at that show was buying a 1923-D Saint in a black NGC MS64 holder and cracking it out and it went MS66 at PCGS, LOLOL. That was certainly an interesting time in the coin market.

kranky · February 24, 2011 5:27AM

A most enjoyable thread, I appreciate those who took the time to share their stories.

GritsMan · February 24, 2011 5:54AM

So everyone, after all you've been through and what you've seen, how do you compare where we are TODAY with that time right before (or after) the crash? Are there overall trends, or does it totally depend on the series you're talking about? Anything available now at prices you wouldn't have dreamed possible 4 years ago? Are some series permanently dead?

I'll bet there are a lot who would like to hear the voices of experience!

yellowkid · February 24, 2011 6:30AM

I remember the "coin mutual fund" stories. I spent a few thousand dollars on slabbed pieces then but luckily I had other collecting interests at the time that had a tighter grip on my wallet. A friend spent a lot of money with, I think, the outfit in Wolfeboro NH. He still has the coins, and he is still buried in them.

roadrunner · February 24, 2011 7:44AM

While a number of widgets and monster coins may have seen their peak in 1989, that wasn't the peak for everything. And it certainly didn't crash in a week or even a month. The market got a second wind that lasted into March/April of 1990. Up to that point you could still get some pretty good prices for MS65 or better type, gem better date seated coins, etc. I brought some with me to the March 1990 Bay State show and sold about $50K worth, just as much if not more than I could have gotten in the summer of 1989. But no doubt by April to May of 1990 things were noticeably different. Even in March 1990 MS65 common Morgans were still fetching $300 or so with MS64's at around $100. MS64 Saints were around $1000.

roadrunner

cladking · February 24, 2011 8:06AM

It was obviously a bubble to me but I got out of the few coins I had that were affected
way too early. The only stuff I kept in high grade were moderns and a few coins that
were simply irreplaceable at any price.

It was a frustrating time to collect since everyone was only concerned with high grades
in a few series but it was interesting and there were lots of bargains. The Pittsburgh ANA
was incredible for moderns and almost ethereal.

bidask · February 24, 2011 8:12AM

<< Throughout the Spring and Summer of 1989 there was much excitement over a proposed mutual fund that was going to invest in slabbed rare coins. Everybody foresaw the influx of hundreds of millions of dollars into the rare coin market. In anticipation, prices for everything rose sharply.

At the ANA convention in Pittsburgh, word came from Wall Street that the deal was off. Explanations as to why vary, but it was definite. Prices collapsed.

TD >>

I was working for Merrill Lynch at the time...it was a private equity fund, I remember reading the prospectus........I was amazed seeing that being a coin collector. Merrill was going to come out with a fund....I don't think it did.

bidask · February 24, 2011 8:15AM

Also this was the time period just before the collapse of the Savings and Loans across the country and we entered a huge bear market.

shirohniichan · February 24, 2011 2:17PM

<< Here's my "Top of the market" story.

Years before I met my wife-to-be, her father had sold two bags of junk silver near the top of the Hunt Brothers bubble, which was good, and invested the money in nice BU commem halves, which then went down a lot.

We met in 1985 and married in 1986. Her father and I sometimes discussed coins, so I knew what he had. In the Summer of 1989 I told him that prices had recovered to where he had bought in, and that he might consider selling. He then gave me his coins to sell at the ANA convention.

On the flight down there I ended up sitting next to a dealer I knew well. He asked if I had any fresh stuff to sell, and I reached under the seat in front of me and pulled out my briefcase. I showed him the boxes, he agreed on a price, and I handed him the coins. The next day he came by our table and paid me. The next day the market crashed.

No father-in-law was ever so proud of his son-in-law!

TD >>

Great story.

robkool · February 24, 2011 4:10PM

I remember going to the Buena Park Coin Show... There was a dealer that represented "The Gold Mine" from Irvine, CA. This dealer had a case staked full of gold coins & bars that were just sitting there unsold. At the same time, I picked up a roll of 20 Barber halves for $60 bucks, and finding a few keys, including a 92 s, and some other mid-grade Barber halves, as well as buffalo nickel rolls at $10 bucks each, that yielded mid-grade semi-key dates such as several 38 d, 24 d, & 23 s.

lordmarcovan · February 24, 2011 5:06PM

1989 was a very memorable year for me for a number of reasons, but few of them were numismatic.

In 1989, I was only just beginning to reawaken as a numismatist, after the 5- or 6-year hiatus that splits the divide between my childhood/youth collecting (1976-1984) and my reinvigorated interest in the hobby as an adult.

I do remember getting some telemarketer calls about certified silver dollars in that time period, but it wasn't until about 1990 or 1991 that I came back into the hobby.

bushmaster8 · February 25, 2011 12:00AM

I recall 3 things about a big show (likely either the ANA or CSNS) in MWKEE or CHGO.

1) I was going around the show trying to find someone to sell me a Barber 10c in PCGS MS64. Most dealers at that time didn't carry portable credit card processing and I was unable to locate a seller. (A very good thing, as MS64 Barber dimes were ~$1000!)

2) In my search I met a much younger Mark Feld, working David Hall's table. He had no MS64 Barbers, but produced a neat MS64 Bust dime from his shirt pocket. We both marveled at it.

3) A seminar held during the shew featured a "State of the Market" session w/speakers including QDB, HRH, and Martin Paul.

The market had turned sourer and sourer during the course of the show and Davids opening comments were along the line of, "Well, it's a real bloodbath out there..."

Also remember his insistence that, "Grading standards do not change!" , which I thought was BS then, as I do now.

At the Q&A portion, I asked HRH, "How can you say that grading standards do not change? I have a letter from you at home in which you state that some "David Hall's Numismatic Investment Group" coins (which were sold in heat sealed flips and were basically the precursors of slabs) might not grade the same at PCGS because grading standards HAD changed." ?

At the close of the meeting HRH made a beeline for me and we shook hands (I think he wanted to get a closer look at my nametag

), and somehow, in the excitement of the moment and the press of the crowd, my Size 14 shoe connected with Davids' shin. I kid you not!

I will always remember the day as the day I kicked David Hall.

Bah1513 · February 25, 2011 12:54AM

Thanks for the lessons

dragon · February 25, 2011 1:01AM

<<< At the Q&A portion, I asked HRH, "How can you say that grading standards do not change? I have a letter from you at home in which you state that some "David Hall's Numismatic Investment Group" coins (which were sold in heat sealed flips and were basically the precursors of slabs) might not grade the same at PCGS because grading standards HAD changed." ?

At the close of the meeting HRH made a beeline for me and we shook hands (I think he wanted to get a closer look at my nametag ), and somehow, in the excitement of the moment and the press of the crowd, my Size 14 shoe connected with Davids' shin. I kid you not! >>>

So you basically call David Hall a liar and then kick him in the shin??? Geeeez, LOLOLOL.

ModCrewman · February 25, 2011 1:07AM

<< So you basically call David Hall a liar and then kick him in the shin??? Geeeez, LOLOLOL. >>

No wonder he's had to grow out his hair and grow that bushy mustache and beard to post here. HRH has a great memory!

Seriously though...this thread has been an excellently entertaining and educational read for a somewhat recent entrant to the hobby. Would love to hear from some others who were there.

Coin market bust of 1989--Thoughts and memories

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