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Coin Week FAQ’s… a Q & A with Charles Morgan and Hubert Walker

Welcome to the May edition of CoinWeek FAQ’s Q & A with Charles Morgan and Hubert Walker!

Each month, we take some of the more interesting questions from the reader mailbag and answer them in our unique, analytical way.

If you have a question for us, email us at [email protected]

Q. I noticed you guys have been writing a lot about the ANA Elections. The ANA has really frustrated me lately with all the politics and turmoil and whatnot. What’s the point of the ANA if no one can agree on which direction to take? -Michael, Texas

You’ve got a point, Michael. They haven’t handled several recent issues too well. Ultimately, we feel that the real disconnect between the ANA and its membership comes from a culture at the top that doesn’t effectively leverage the ANA’s strengths: a large membership, a world class collection and numismatic library, and a 100+ year-old history of being central to the hobby. Never mind the organization’s inability to keep up with the pace of technology, which has guaranteed that collectors and numismatists utilize other resources to serve their needs.

coinweek_qaWe believe that the ANA’s magazine, The Numismatist, is one of the best mainstream publications on coins in the marketplace. We’d like to see it compete alongside Coin World and CoinAge Magazine at your local bookstore. We know that practical considerations keep that from happening. Unfortunately, judging by our conversations with people on the Board of Governors, the ANA doesn’t have a clear vision for the growth of that venerable publication outside of its normal membership channels.

As for what it does well, the ANA’s Florence Schook School of Numismatics has been the gold standard for developing numismatists for generations. ANA Governor Scott Rottinghaus shared with us the fact that he learned so much from Summer Seminars back in the eighties, that without their training he wouldn’t be a numismatic author or even a governor of the ANA. If the ANA can figure out a way to provide these education-rich resources to a wider swath of its membership, then maybe questions about the feasibility and value of the ANA will go away.

Q. Al Doyle recently wrote about a billionaire that bought a hoard of nickels. Is that a good way to make money? Lamone, Virginia

What’s a million dollars to a billionaire? For most of us, putting 1/1000th of our net worth into an idea would hardly be newsworthy. For some, a full tank of gas is about right, but anytime a rich eccentric like Dallas-based hedge fund manager Kyle Bass makes an unusual move, laymen and people in the capital-generating industries listen.

So what is he thinking? That the nickel costs more to produce than its face value? We spoke with former U.S. Mint Director Philip Diehl about the two lowest denomination coins to see how he felt about their costs and benefits. Diehl told us that eliminating the cent was long overdue, but pointed to parochial interests, like the Congressional delegation from Illinois, and private interests, such as anyone invested in the private manufacture of cent blanks, for not wanting to remove Lincoln from circulation – thus keeping the practically valueless coin in production.

The nickel, on the other hand, appears to be losing more money than it probably really is due to the cost-shifting economics of coin production. “When the Mint figures out cost per unit,” Diehl said, “you have to take the overall cost of production of a coin in any given year and then allocate the cost to each of the coins – each denomination. This allocation methodology is crucial to which coins are profitable and which coins are not. Furthermore, the methodology of accounting for cost has changed recently, which makes it more difficult for the nickel to be profitable. Also, you’ll notice that the volume of nickel production has fallen recently, meaning that each piece costs more to create. But demand for coins is cyclical.”[1]

The mint’s lower-value coins always skate a fine line between profitability and net loss. The trick is to have the higher-value coins circulate freely. The Mint’s inability to get the public to adopt the dollar coin (due to turf wars between the Treasury and Mint) has taken a toll on the cost per unit of every coin the Mint produces.

In the end, perhaps a change in alloy will put the nickel back in the black.

Whether Congress ever allows Mr. Bass to “cash in” by melting his hoard of nickels is anyone’s guess. We’d hazard that the costs of storing such an accumulation will outweigh the profits.

A million dollars in nickels takes up a lot of space!

Q. My dad left me a couple of old Morgan dollars in large square plastic holders. They were graded by a company called NCI. According to the Red Book, these Morgan dollars are really over-valued. What are they really worth? -Twing1973, from the internet

The company that slabbed your coin (well, technically, housed your coin in a custom-made Capital holder) was called The Numismatic Certification Institute. The company’s principal owners, Steve Ivy and James Halperin, are the driving forces behind Heritage Auctions. Halperin knows his coins, and for the most part, the grades NCI gave are consistent with today’s grading standards.

When you mention that the coins appear to be over-valued, we take it that you’re talking about the line on the label that reads “Owner’s Stated Value”.

In the mid-‘80s, the market price of even common date coins in certified holders was unbelievably high. This had a lot to do with non-sophisticated collectors from Wall Street trying to cash in on the coin craze. NCI used the Owner’s Stated Value as a measure of its liability to the bearer of the NCI Certificate should the coin turn out to be counterfeit, offering to pay the stated amount plus 15% per year for each year from the date the certificate was issued to the date that the coin was determined to be fraudulent.

NCI did not guarantee that the coins would hold that value in the marketplace.

Of course, the absurd coin values came crashing down as Wall Street types grew increasingly frustrated by the coin hobby.

As for what happened to NCI, that remains controversial. The FTC filed suit against the company and its owners for failing to disclose certain information to consumers about the value of the coins they certified. Halperin didn’t believe the charges were fair, but decided to settle the suit by paying 1.2 million dollars into a customer redress fund. NCI was shuttered as part of the agreement.

While many NCI-certified coins have been reholdered over the years since, many remain. These coins are certainly worth a look and can frequently be had for less than their NGC and PCGS counterparts.

If your dad gave you nice coins, they might be worth more than you think. Just don’t expect them to be worth mid-‘80s coin market money.

© 2013 Charles Morgan and Hubert Walker

[1] Phone conversation April, 2013.


Charles Morgan and Hubert Walker
Charles Morgan and Hubert Walker
Charles Morgan and Hubert Walker have been contributing authors on CoinWeek since 2012. They also wrote the monthly "Market Whimsy" column and various feature articles for The Numismatist and the book 100 Greatest Modern World Coins (2020) for Whitman Publishing.

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