By Charles Morgan, Scott Purvis, and Hubert Walker for CoinWeek ….
In a hobby already prone to hyperbole, the recent release of the Kennedy Gold Proof inspired a mixture of vocal opinions and raised many questions.
Some saw the hysteria and dealer-driven speculation as a blight on the hobby, calling the coin’s roll-out the straw that’ll break the camel’s back for modern coins.
Others were more measured in their criticism, mostly concerned with how the U.S. Mint re-tasked American Numismatic Association staff and transformed the bourse floor and surrounding areas into an unwieldy queue. And yes, some considered the coin launch (and its attendant publicity) good for the hobby, overall[1a].
Several dealers told CoinWeek that they felt less safe at this year’s ANA, and many convention-goers we spoke to felt uneasy about the endless line that had formed around the Donald E. Stephens Convention Center. Many felt that the hullabaloo surrounding the Kennedy Gold Proof show release distracted customers, who normally come to the show to shop for coins from hundreds of the nation’s top dealers.
But whatever the complaints may be, one thing is certain. The release of the Kennedy Gold Proof was a bonanza for some.
Setting a Price at the ANA
Predictably, the limited supply of coins at the show caused prices in the secondary market to skyrocket.
On the issue’s first day of release, many dealers at the ANA World’s Fair of Money adopted a wait-and-see approach before establishing a price for the coin, which made it even more difficult to acquire certified examples. In fact, most convention-goers found that show-graded coins were not readily available for purchase until the closing days of the show.
Other dealers decided to stay on the sidelines.
John Maben from ModernCoinMart chose not to participate. In a letter to CoinWeek, Maben stated:
“We were prepared to buy 100 or so of the gold Kennedy half dollars at a big premium from others that took the time to stand in line [sic] however … at the conclusion of the show, we bought exactly one”.
Raw coins were selling for more than double the issue price by the last day. On Saturday afternoon, one dealer was offering a Kennedy Gold Proof, in its original box, for $3,000.
“Unethical but Not Illegal”
The release of the Kennedy Gold Proof made the evening news, especially in areas where the coin physically went on sale.
Denver’s ABC7 reported it this way:
“Several people in line were being paid by casting directors and coin buyers to be there. The Mint tells us it had no idea that was happening, calling it ‘unethical but not illegal’”.
The “casting directors” and “coin buyers” mentioned in the report turned out to be representatives of well-known coin dealer Kevin Lipton, the 2012 winner of the Professional Numismatists Guild’s (PNG) Lifetime Achievement Award. His Beverly Hills, California-based firm also recruited hundreds of Denver-area homeless to buy the coins.
This created an unexpectedly surreal environment for the collectors that showed up to buy the Kennedy gold proof coin on the issue’s first day of release.
Mitch Spivack, another California-based coin dealer and a prominent collector of modern coins, happened to bring his daughters with him to Denver to purchase the coin. The unusual makeup of the line made him wonder if he was in the right place.
“It was 99% homeless people and folks thinking that they were waiting in line for a casting agency,” Spivack said. “There was virtually no one in line who was excited about buying a coin for themselves”.
According to CBS4 News in Denver, Lipton’s homeless stand-ins had their hands marked and were given $20 to wait in line.
They did so for more than 12 hours.
And, according to Spivack, those 12 hours were not without incident.
“Some of the homeless brought dogs with them. The dogs would fight each other. And some people were not well. Several people couldn’t make it to the end for health reasons,” he said.
Although the CBS report doesn’t state what the buyers were paid after delivering the coins to Lipton’s representatives, several dealers who spoke on the condition of anonymity said the firm paid each homeless person a total of $100 for their services.
We spoke with Lipton last week about the coin’s roll-out. The first question we asked concerned his use of area homeless to buy coins and the reported $100 payout. He said the number was wrong but wouldn’t specify, only saying it was more.
When asked how he recruited such large numbers of area homeless to wait in line and whether he thought he was exploiting the economically vulnerable, Lipton said, “We found people milling around. We fed them and paid them to stand in line. If it wasn’t for us, they wouldn’t have been fed or earned any money. We were thanked by hundreds of people. We helped them pay rent and put food in their stomachs”.
Lipton was not alone. Several other dealers also hired surrogate buyers but were more selective. Bob Higgins of The Argent Group, for example, reportedly paid the spouses of active-duty service members from nearby Ft. Carson $300 each. Still others enlisted the help of the general public by placing ads on Craigslist.
2014 Harry J. Foreman Dealer of the Year Lee Minshull reportedly paid his proxy buyers $400 each. Our calls to Minshull have so far gone unanswered.
For the most part, the scene in Chicago at the ANA World’s Fair of Money was more orderly but not much different.
On the eve of the coin’s release, several dealers–including Lipton, Minshull and SilverTowne’s Dave Hendrickson–secured Early Bird Access for stand-ins at the World’s Fair of Money. The fee is $150 per person, but to even be eligible a buyer must first be a member of the ANA.
This means that scores of new members were enrolled into the ANA just so dealers could acquire Early Bird Access for them.
There were also several reported incidents where Early Bird Access credentials were handed off to other buyers on the show’s second and third days. The ANA began checking buyers’ identification after they were apprised of this. We were told by officials at the ANA that they verified multiple instances of abuse of the Early Bird system and were able to track them back to specific dealers, but the officials that talked to us wouldn’t say whether the Association will levy any disciplinary action against them.
Meanwhile, the lines themselves caused headaches for convention-goers and auction houses.
On the show’s first day, representatives from both Heritage Auctions and Stack’s Bowers complained that the lines prevented customers from viewing auction lots. ANA President Walter Ostromecki, Jr. told CoinWeek that the two firms were so upset about the situation that they threatened to terminate their contracts with the ANA if something wasn’t done about it.
The problem was remedied quickly.
But access wasn’t just a problem for the major auction houses. Other organizations, such as the Numismatic Literary Guild, were unable to gain entrance to their meeting rooms due to the “holding pen” the ANA set up to keep Kennedy Gold buyers off the bourse floor until groups of 20 could be brought in to make their purchases.
Not helping matters was the Mint’s checkout system, which was erratic throughout the show. Many customers faced checkout times exceeding five to 10 minutes per transaction.
In Philadelphia, the event was calm and the process was orderly but again, shill buyers made up a sizeable percentage of those waiting in line.
Philly.com reports that armed security personnel representing coin firms accompanied some buyers to a local hotel where they were reembursed for their time. The going rate in Philadelphia, according to the website, was $300 to $600 each.
Similar scenarios played out in Washington, D.C.. Proxy buyers there reported being paid $300 to $400 each.
But it was the overnight lines and the rowdiness of the crowd in Denver on the sale’s opening day, more than anything else, that led to the suspension of physical sales of the coin there and at the two other Mint retail locations.
And that, coupled with the fear of even more pressure placed on security at the World’s Fair of Money, led to the Mint’s (and the ANA’s) decision to halt sales of the gold coin in Rosemont as well.
Many dealers at the show and ANA officials voiced relief that it was over. However, several industry figures involved with the promotion of the coins weren’t happy. Some even downplayed security concerns.
CoinWeek was unable to get anyone directly connected to comment “on the record”.
Follow the Money
A quick breakdown of who gets what should give a clearer picture of what happened and what’s going on.
The Kennedy Gold Proof coin is a ¾ ounce .999 fine gold coin. At current market levels, each coin has a bullion value of $960. This leaves the Mint $280 per coin to cover manufacturing, packaging, and marketing costs. Given these costs, the 3600 total coins sold at Denver, Philadelphia, Washington, and the ANA earned the Mint approximately $1 million gross, before expenses.
As for the dealers involved, prices for the Kennedy Gold Proof with “show-graded” or “first day” labels at the ANA were fetching upwards to $5,000 the week of the show. A week later, the average price had dropped to around $4,000 and it’s been falling ever since.
On eBay last week, NGC coins were bringing close to $3,000, while PCGS coins have been fetching just over $2,800.
We know the coin costs $1240 to purchase from the Mint and $100 to grade. And while we don’t know the actual “cost of acquisition” for each coin (reports have dealers paying stand-ins anywhere from $100 to $500-$600 to buy one; the average is likely under $400 a piece), if the current pricing for “show graded” Kennedy Gold Proofs holds true then there’s at least a $1,100 per coin margin for dealers to take in as profit. At these margins, dealers stand to make upwards of $4 million dollars on the deal.
The grading services are also highly incentivized. The fact that an immediate secondary market can be generated by show-grading coins released at major coin shows is no accident.
The contemporary modern coin market is highly dependent on third party grading, the vaunted MS- and PR-70s, and novelty labels.
If the services charged $100 per coin and graded every coin released at the ANA and the three mint retail sites, then they would’ve earned $360,000 in grading fees.
Assuming the buzz surrounding the gold Proof continues for the next month or two, modern coin dealers and collectors will keep buying Kennedy Gold Proof coins over the course of the next 30 days and submit them to the services using their First Strike or Early Release / First Release programs, which have been wildly popular since their introduction in 2005.
The certified populations of coins in First Strike / Early Release holders tend to mirror that of the general population, yet the market’s support for these programs demonstrates a level of trust in the certification services’ willingness and ability to offer a transparent and meaningful product.
After the First Strike / Early Release Window closes, the Kennedy Gold Proof (if still profitable) will receive a panoply of novelty labels–all geared towards clients wishing to differentiate their stock from that of their competitors.
And all the while, the Mint will continue to offer the coin in a handsome wooden display box for $1240. For collectors, this will probably be the lowest price a Kennedy Gold Proof will sell for during its production window.
ANA Show-Graded Coins
The reason for the long lines, the surrogate buying, and the instantaneously lucrative secondary market is obvious: manufactured scarcity.
Dealers are banking on the coin’s limited distribution in the first week to create buzz and demand. That the grading services are eager to differentiate these coins from the general release underscores that dealers who secured product could market the coins as being more valuable than Kennedy Gold Proofs purchased directly from the Mint.
This requires not only the development of limited-edition labels, but also confirmation that the coins are actually different. So to generate this difference, the grading services have created special designations.
NGC offers five labels:
- First Day – Chicago ANA
- ANA Inaugural Release (for coins sold in Chicago)
- First Day – Denver
- First Day – Philadelphia
- First Day – Washington, D.C.
PCGS created individual labels for the first six coins sold at the ANA (which were bought by Lipton and Hendrickson). The company also made a special First Strike label (Label #118) that includes “Chicago 2014”, and first day labels for each of the three retail locations. We haven’t seen those last three yet so we don’t know their exact wording, but CoinFacts calls them “First Day of Issue-Denver”, etc.
ANACS, which didn’t grade coins at the show but did accept submissions, also created a show label. It reads: “Chicago Convention Limited Edition”.
Keeping this accounting of show labels in mind (and remember, we also know how many coins were issued based on numbers provided by the United States Mint), if one takes the label designations at face value, then the numbers don’t add up.
* NGC data supplied by Max Spiegel at NGC; ANACS data supplied by Paul DeFelice at ANACS; PCGS data supplied by PCGS CoinFacts. NGC ANA data combines NGC’s ANA 1st day labels and generic ANA labels.
So, what happened?
The services had to have accepted more coins at the show than were sold there, so at least some portion of the coins in “ANA” holders were brought in by dealers from Denver, Philadelphia, and Washington.
NGC required submitters to provide an original copy of their receipt to prove that the coin was sold at the ANA. Dealers at the ANA show reported this and NGC representatives verified that every Kennedy Gold Proof that they accepted for their show label program had to come with an original receipt, which they inspected, stamped and dated. NGC says this was done to prevent submitters from gaming the system and use the same receipt for more than one coin.
NGC also says that while they did certify first day issues from the three Mint retail locations, they did not accept coins from the second and third days of the sale for special label inserts. Dealers are encouraged to submit those coins to the NGC “First Release” or “Early Release” programs. NGC’s current combined population report for coins in their two ANA show labels currently sits at 1136 coins.
ANACS also accepted coins and verifying that they were from the Chicago ANA World’s Fair of Money. ANACS isn’t a major player in the show-grading arena, but Paul DeFelice, ANACS Vice President of Client Relations and Marketing, did confirm with CoinWeek that ANACS accepted 30 coins at the show–including an order of about 14 coins offered earlier this week on the Home Shopping Network.
PCGS also accepted coins at the ANA Show, and by the numbers, received the second most Kennedy Gold Proofs of any of the grading services (behind NGC). PCGS’ population report for coins in their “Chicago August 2014” label currently sits at 947 coins.
What’s unusual is that when you add the total population of all three firms’ ANA labeled coins, the total number of coins graded exceeds (by a wide margin) the number of coins issued at the World’s Fair of Money. The total number of coins issued by the Mint was 1500. The total number of coins in “ANA” holders is 2113.
To figure out how this could be, given that NGC and ANACS both say that they required receipts, we reached out to PCGS President Don Willis, presented him the numbers and asked for help in understanding what coins PCGS had graded and how they were handled.
His response is reproduced in full below:
This is an interesting situation. Without going into too many specifics about our marketing programs we can confirm the following.
1) All JFK coins graded by PCGS in Chicago were submitted in Chicago. We believe all these coins were sold in Chicago but we can guarantee only that they were submitted in Chicago. We did not require a proof of purchase. This program was announced by PCGS weeks before the ANA. Emails were sent to both dealers and collectors and announcements were run on our website.
2) Any JFK coins that received a First Day of Issue label, regardless of the mint, had to adhere to very strict chain of custody requirements. We can guarantee that those coins were sold in those locations on that day.
3) There continue to be JFK labels available for coins submitted to our office. This includes both First Strike and non-First strike labels. Standard First Strike rules apply which are described on our website.
Our intention with the JFK coin has always been to offer a variety of programs and service to satisfy the diverse requirements and many requests of our customers and the collecting public. We believe we have done that.
What we didn’t know before we asked, and what now is quite clear, is that the three services used different standards as to what constituted an “ANA coin”.
One can get into the argument whether labels for modern coins bring extra value to collectible coins. That’s not the subject of this piece, but will be covered in depth in two weeks by CoinWeek writers Charles Morgan and Hubert Walker, who actually defend the practice. The issue is providing accurate information as to the criteria each service used to designate JFK coins as “ANA coins” so both dealers and collectors know what they are both buying and selling.
Since it is impossible to differentiate which JFK coins in PCGS “Chicago 2014” holders were actually sold at the ANA, there can be no direct “apples to apples” comparison of the Population numbers. It will be equally difficult to understand or make any comparison of the Mint Location First Day of Issue Populations since all the coins above 1,500 in the category of ANA coins (presently at 613) had to have come from the various mint locations, thus reducing to an unknown extent the number of First day issue coins.
How this information will be processed and if it has any effect on the markets and prices for these coins is unknown at this time. The facts and numbers however speak for themselves and hopefully aid collectors and dealers with both price discovery and added transparency.
“Good for Numismatics”
David Hendrickson spoke with CoinWeek’s David Lisot on the first day of the World’s Fair of Money. He said that the release of the Kennedy Gold Proof was “good for Numismatics”.
Hendrickson partnered with Lipton to buy and certify hundreds of coins.
Hendrickson submitted his batch to NGC, while Lipton’s cache was graded by PCGS. Hendrickson’s company SilverTowne sells coins nationwide online and through its television program The Coin Vault.
It was a Coin Vault customer that paid a reported $100,000 for the coin designated “First Coin Sold” by PCGS. PCGS also numbered coins two through six.
Additionally, Hendrickson’s group is said to have resold the first coins sold at Philadelphia, Denver, and Washington, D.C.. Prices as high as $75,000 have been quoted. Hendrickson said the numbers were much lower, although he didn’t say what they were. An industry insider tells us the number was likely $45,000.
ANA Governor Laura Sperber called Lipton and Hendrickson out for selling a coin that “in six months you [won’t] find even one dealer who would step out and offer to buy one for $10,000″.
We asked a group of modern dealers what they’d pay for the coin. Most demurred, saying “that’s not really my market”. Although more than one admitted that they’d pay $10,000 and hope they could sell it for $30,000 or $40,000 online, since the coin has a pedigree.
Still, the expectation of a 60% haircut on a coin that’s been in collectors’ hands for less than a month is indicative of skepticism in the marketplace about the true value of these “first sold” coins, and, to a lesser extent, coins with show-graded labels.
But there is some evidence that the labels do hold their value, especially when populations are low. Whether the “issues” regarding the “Chicago 2014” coins affect public perception remains to be seen, but the fact that the grading services have added excitement and an immediate secondary market for new U.S. Mint releases cannot be denied.
Modern Coins Overtaking Classics
The original Boy Scout merit badge featured an Ancient coin. That design eventually gave way to the Washington quarter.
When one looks at the coin market and the broader industry, one might notice that modern coins are becoming the most important segment. Not for their great rarity or even for the quality of their designs, but because they are accessible, easy to acquire, and abundant.
So if you’re a budding coin collector in 2014, odds are you own more Silver Eagles than bust halves; more modern proof sets than classic gold.
Ultimately, it comes down to dealer ethics and self-policing, and collectors educating themselves before they make a purchase.
“One can criticize the labels, if they want, but the modern market should not be defined by labels, but by the coins themselves, because, ultimately it is the coins that have captured collector interest… and that interest is growing,” says Mitch Spivack.
But it’s still the label on the holder that turns a $1240 retail coin into a $100,000 collectible.
Yet even under this scenario, that $100,000 coin required more than a clever sales pitch. It required a willing buyer. A buyer who, we hope, knew what he or she was getting into when they wrote the check.
Oh, and one more thing.
Another big event occurred at the ANA Convention. Stack’s Bowers auctioned off an 1804 dollar, the “King of American Coins“. Twenty or even 10 years ago this would’ve been the biggest story in American Numismatics.
To paraphrase the famous line: Yes Virginia, there is a modern coin market, and it’s not going away.
 Personal email correspondence from John Maben to CoinWeek. 11 August 2014.
 “Mint suspends sale of JFK gold coin at retail centers after crowd trampled in Denver morning rush: 7NEWS finds some in line paid to be there.” ABC7 News Denver, Colorado. 8 August 2014. (http://www.thedenverchannel.com/news/local-news/mint-suspends-sale-of-jfk-gold-coin-at-retail-centers-after-crowd-trampled-in-denver-morning-rush08082014)
 Telephone conversation with Mitch Spivack. 15 August 2014.
 “Dealers Pay Homeless To Stand In Line For Gold Collector’s Coin.” CBS4 News. Denver, Colorado. 5 August 2014. (http://denver.cbslocal.com/2014/08/05/dealers-pay-homeless-to-stand-in-line-for-gold-collectors-coin/)
 Telephone conversation with Mitch Spivack. 15 August 2014.
 Telephone conversation with Kevin Lipton. 13 August 2014.
 Telephone conversation with ANA Governor Mike Ellis. 13 August 2014.
 Conversation with Walter Ostromecki, Jr. 13 August 2014.
 http://www.philly.com/philly/news/Philly_mint_mobbed_by_JFK_coin_seekers.html. Web. Accessed 18 August 2014.
 https://coinweek.com/category/bullion-report/. Web. Accessed 8 August 2014.
 eBay. Web. Accessed 18 August 2014.
 http://www.hsn.com/products/2014-pr69-50th-anniversary-99-gold-kennedy-half-dollar/7592617. Web. Accessed 18 August 2014.
 Personal email correspondence from Don Willis to CoinWeek. 20 August 2014.
 https://coinweek.com/featured-news/first-coins-sell-5000-piece-gold-kennedy-coin-early-story-ana/. Web. Accessed 18 August 2014.
 https://coinweek.com/commentary/opinion/fools-gold-jfk-coin/. Web. Accessed 18 August 2014.
 Holders that hold their value, include: ANA 2013 Gold Buffalos and 2014 Baseball Hall of Fame “First Pitch” / “Baltimore”.