Jeff Garrett: The Long and Short of Coin Collecting in Times of Uncertainty

Exercise patience and think long-term to avoid losses — and even make gains

 

By Jeff Garrett for Numismatic Guaranty Corporation (NGC) ……
 

There is no denying that we in America are currently consumed by media coverage of coronavirus. The slow drip of bad news accelerated last week when the stock market plunged due to fears of shutdowns and deep economic damage. Anyone with a retirement account is now trying to determine how to react wisely. For most of us, doing nothing is probably the best course of action. Indeed, entrepreneur and investor Mark Cuban recently stated, “When you don’t know what to do, do nothing.”

Generally, selling during or after a market crash is not a good idea. One thing for sure, however, is that I am not an economist or Wall Street trader. I can give excellent numismatic advice, but my investing advice is strictly based on personal experience. My basic view on investing has always been to think long-term and not be swayed by short-term news events. By the time most of the general population (this includes me) hears news, the highly skilled professionals have already made their moves.

Impact on the Numismatic Market

Most major news events of the last several years had little or no impact on the numismatic market. This time is definitely different for several reasons. The spread of coronavirus — and the fear associated with it — will have an impact on anyone trying to conduct business.

For example, a major numismatic coin convention was cancelled last week in Munich. Many dealers from around the world had already traveled to Germany for the show. A lot of dealers in the United States are anxiously waiting to see if the Baltimore convention takes place next week. Whitman plans to hold the show at this point, but obviously the situation could change [Editor’s Note: It has. Whitman canceled the Baltimore Show. —CoinWeek].

Stack’s Bowers has a major auction planned for next week that includes an amazing group of coins from the collection of D. Brent Pogue.

In April, Heritage Auctions will hopefully be conducting the Central States Numismatic Society (CSNS) auction in Schaumburg, Illinois [Central States is also canceled.CW]. These two sales probably contain over $50 million worth of coins. Cancelation or delay of these sales will have economic consequences for the companies, consignors and potential buyers.

The deep plunge in equity prices will undoubtedly cause a negative wealth effect for a large swath of Americans and numismatic buyers. Even though the stock market is not much lower than it was 12 months ago, many potential buyers will probably curb spending on everything in the short term. This negative sentiment will probably spill over into our hobby.

The Silver (and Gold) Lining

There are, however, some “silver” linings to these recent events.

In times of uncertainty, many investors seek tangible assets. Gold has performed strongly in the last several months, and many predict further flights of capital to this safe haven. Other precious metals could also see renewed interest. Usually, some percentage of these buyers become interested in numismatics.

One of my most important jobs as a professional numismatist is to know exactly what coins are worth at any given moment. I am asked to make purchase offers or make major purchase decisions almost daily. Financial uncertainty such as that which has occurred in the last couple of weeks makes this a more difficult task.

For now, I am cautiously optimistic. When I am offered great coins, I plan to take advantage of the opportunity. I believe the market for attractive coins with good eye appeal will continue to be solid. My personal plan is to cull my inventory and reposition my assets into great coins when they become available at favorable prices. Collectors can also take advantage of this opportunity to improve their collections for a better long-term result.

Patience is a Virtue

Nearly every great financial genius of the last century has encouraged investors to take advantage of market panics. Warren Buffett has dozens of famous quotes about buying assets when there is blood in the streets. Hopefully, the current situation will not get that bad, but the same basic advice holds — buy when others panic.

Rare coin prices for many popular issues were already at their lowest levels in years before the current “black swan” event transpired. Proof type coins, High Relief double eagles, silver dollars, commemorative coins, generic gold and a host of other issues are selling for less than they were 30 years ago. The downside for most of these issues is minimal at this point, which means it is an excellent time to assemble an attractive collection of rare coins.

Despite the uncertainty that prevails because of coronavirus, one thing is certain: This will eventually pass into history. Collectors should exercise patience when considering sales and capitalize on this opportunity if they have a chance to buy great coins. In the long term, I am optimistic about the United States, its economy and the hobby of numismatics. Thinking long-term has always been the secret to the success of most of the great investors I have known.

Jeff Garrett bio

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2 COMMENTS

  1. Well the core idea is sound – don’t panic buy and sometimes it is best to do nothing.

    But your article is as shallow and wide as Paris Hilton’s musical output.

    The Pogue auction will be cancelled due to President Trump at about 6:30 pm 3/16/2020 suggesting avoiding gatherings of more than 10. of course I guess it could be an online auction. So expect more cancellations and at least in the US as far into June or July.

    Another factor you misstate is the market is not that far off from a year ago. Maybe that was true late January 2020 but the Dow Jones index is down 3/16 is 33% less than at its peak in late 2019. All gains since mid-2016 have been lost.

    Silver has dropped to around 12 – 13 from a high of 14 – 18 a dollar. Gold has lost about $200 an ounce in about 8 days. Gold has been highly overvalued anyway so what should be a correction is turning into a collapse.

    You see commodities are falling because in a pandemic, precious metals usually aren’t useful for a vaccine nor do they do much for hedging wealth when basic goods – food, water, medical supplies carry a premium over cars, vacations and other less necessary items – including coins, art work etc. Furthermore the pandemic is costing jobs and huge drops in income right now. The effect looks to be something of a drawn-out financial panic – sort of the ones that would bankrupt wealthy families overnight in 19th century England but in this a drawn out affair and thankfully with many having a stronger government safety net so to not face abject homelessness and penury as happened 2 centuries ago.

    However, we are also getting a dose of the hoarding of silver and gold coin that has happened during the 19th century (I believe Civil War). We may want to look at that period to learn more of how things will work out,

    What this time will test is who is really a coin collector. To me today the hobby has many that are actually bullion collectors rather into coins. If you were truly into coin collecting and the appreciation equitable, prices for a 1961 nickel with a great strike and luster would command just as much or more than a Lincoln cent of the same year. But that is not the case — most of the time. This is further aggravated with modern silver coins. A 2018 or 2017 proof silver Kennedy dollar has a mintage lower than a many proof Franklin dollars and yet the value is less. Proof sets languish in value due to the craze of relying on two grading monopolies and their bullshit designations such as “first strike” to encourage the gullible to part ways with their wallet.

    So I am happy for the hobby, it will get rid of the inequitable pricing, hopefully have folks melt more their excess of Morgans and highlight other coins from the past as well as the present that deserve a good look at. And finally, I would like to see professional numismatics better welcome newcomers by fewer articles on coins far out of reach of most who have more modest means. yes some deserve the attention for their fascinating history and beauty but not as much as you think. Although not the sole reason, your magazine and others must admit you are doing it as free advertising for Stacks Bower, Heritage Auctions and other high-end dealers whose clientele likely rarely if ever searched a coin roll in their lives.

    Also I know of some coin dealers – brick and mortar – they have stopped selling their silver and gold coins, only coins of numismatic value with no precious metals or not too much – Lincoln pennies etc. Why? They have lost so much money over the past 8 days it is insane to sell their gold and silver. Oh and the US Mint seems unaware of this, they are charging $63.25 for their 2020 silver Proof set and their ASE 2020 coins have not been modified as of 3/16/2020. Most of the customer service reps are clueless about commodity process (one guy said to me on Sunday he though silver spot was between 17 – 18, one lady was completely aware of the Dow losing 335 of its value today). But they will notice when buyer curb or eliminate entirely buying from the US Mint.

    Finally, I am just a working musician with a small income. I help my mother out with her care. We were funding it through stocks as the US healthcare system does a very poor job offering benefits for home health aides for a cancer survive who cannot fully bathe, dress, toilet or prepare their own food – at most Medicare may offer 8 hours a week. So we use our stocks bought from property we had. To save our assets we sold them today for liquidity because of the failing stock market. We do NOT have the luxury or circumstances to wait as my mother needs the money for her care.

    Sorry but unless it is a Pogue collection most collections of very valuable coins (but not the record breaking ones) will cover home health aide costs for someone like my mother for maybe 2 or 3 years (say $48K per year x 3 = $144). Often far, far less, maybe one two two months depending on location ($4.8K).

    So heed the advice some of your writers have offered here before when writing such an article as this – establish a budget and do not spend more on coin than your budget allows. You will find many will NOT buy coins except for very small purchases (under $50 or less a few times a year) as money ios going for such necessities as healthcare, food and shelter. Coins cannot provide that and again as some of your writers have posted, one should not spend money on coins if one does not have the money for necessities at the time.

    PS One glimmer of hope for the HOBBY at least, the W Quarter coin hunt start in 2019 and a new one for 2020 might be the one lifeline to keep the hobby alive. But the auction houses and discussion of coins out of reach of most will seem for now cruel capitalism at its worst.

  2. To the above post, what you are describing are differences in collector preferences. What’s happening now will not make the Jefferson nickel and Lincoln cent equally preferred because this incident has nothing to do with what you wrote.

    The proof Franklin half deserves to sell for more both because collectors prefer it and because the entire supply of Kennedy’s exist in their original state.

    To the original article, my advice is to get rid of coins you don’t really like that much at current prices. There will be an opportunity to buy most of it back or something else at lower or much lower prices years from now.

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