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The Coin Analyst: Coins are Not Investments; They are Assets and Collectibles to Be Enjoyed

by Louis Golino for CoinWeek ………

Charles Morgan and Hubert Walker, in their recent “Open Letter to Wayne Homren ,” drew attention to wildly inflated predictions of future prices of classic U.S. commemoratives by Anthony Swiatek in his major reference book on the field, which was updated last year.

I strongly agree that far too many coin dealers and other involved in selling U.S. coins make exaggerated claims about the future price potential of the items they are selling. This was, in fact, at the heart of recent lawsuits stemming from hard sale tactics by certain coin companies that resulted in multi-million dollar settlements and new FTC regulations on coin buying last year. And the conflict of interest inherent in recommending the very same type of products they sell is troubling indeed, and as Mr. Morgan explains, would not be tolerated in any other industry. In my view, the fact that it is tolerated is something that limits the coin market from reaching its full potential and from being taken as seriously as other industries.

I believe that this same phenomenon played a key role in the creation and collapse of the great coin bubble of the late 1980’s. As it happens, I was taking a break from collecting coins at the time, while pursuing academic and other interests. But I have studied that period, and I believe it offers important lessons and cautionary tales for those looking to become so-called coin investors.

gold_bubble_2What led to the hugely unrealistic run-up in market values of numismatic coins at the time, and their subsequent collapse, from which many prices for higher-end and even common-date coins have never recovered to this day, was the notion that took hold among wealthy people looking to diversify their assets that all they had to do was throw some money at nice coins, and they would make a bundle.

All kinds of coin investment funds sprouted up, and to be sure those funds play a major role in promoting coins and pushing market values higher. But by the time Wall Street got involved, and people with little or no knowledge in coins were bidding up prices for common generic silver dollars to levels they will probably never reach again, something was clearly way out of whack.

During the period, all kinds of coin investment books were published too, and while they can be useful, they also contributed to the problem in many cases by creating unrealistic expectations. People jumping into the market failed to understand you need deep knowledge of what you are buying in coins, or the solid advice of an experienced and honest dealer. And you need time, often lots of it.

And even then, there are no guarantees. Because when you get right down to it, coins are a hobby, and they are assets that sometimes appreciate and sometimes depreciate just like all other assets. What they are not is investments. An investment pays a return, a dividend, generates income, etc. apart from the underlying principal.

And, of course, the same principal applies to gold or your home. They are assets, but not investments in the traditional meaning of the word. Look at all the problems in the American economy that grew in part out of the view that one’s home is an investment, or as some have put it, a “piggy bank,” that fueled a lot of short-term consumerism high until the housing bubble collapsed.

This leads to my personal philosophy of coin collecting, which is “buy only what you really like and that which gives you pleasure to own,” and “periodically sell some of your coins,” or you will be in for a major shock when you do sell.

Needless to say, if there were not people trying to make a buck with their coins and those concerned about future values of their purchases, there would not be much of a coin market. Speculators make the world go round, and I have often argued that it only makes sense to buy coins that you think will go up in value.

But numismatic coins, with the exception of major rarities most people cannot afford, are a risky way to make money in my view. Even those with substantial experience and knowledge can far more easily lose than make money with coins apart from changes in their melt value.

Part of the problem is differences of opinion about the grades of coins that have not been professionally graded, and even then arguments about whether a coin is solid for the grade, and the tendency of coin dealers to use valuations that are vastly different from what collectors use, even after factoring in that they are in business and have expenses.

Recently I was giving some advice to a gentleman who had collected coins as a boy and then, like many people, left them aside for decades, who wanted to know how to determine their worth and sell them.

So I recommended getting a Red Book, consulting some web sites like this one, and looking for a local dealer who has been in business a long time and who is an ANA or PNG member. And I stressed that he should only expect to receive around 60% of Red Book prices, and that if he mainly has common silver coins, their melt value will be roughly what he gets from a dealer and should serve as a base value in his calculations. He also has some gold Pandas from the 1980’s, and I told him to research their values carefully before selling, as some of them are worth several times their melt value, and an unscrupulous dealer would try to take advantage of him with those by only paying melt value.

But as I discovered today at my local dealer, who has been in business for around 40 years, even a widely-traded graded coin may only bring half of the retail price most dealers are selling the coin for. I showed him a 1996 American silver eagle, the key date of the regular strike series, graded MS69 by NGC, which sells on e-Bay for about $100, and from dealers for about $120, and he offered me $55. I decided to sell the coin myself on e-Bay where even after fees I could do a lot better than $55, which is only a few dollars above what a raw coin sells for wholesale.

And this anecdote illustrates why most average people will lose, not make money on most numismatic coins, especially if they buy classic American coins that are not high grade or particularly scarce, coins which are in the doldrums anyway these days while everyone chases bullion. Unless you sell the coins retail on a venue like e-Bay, you are selling to someone who is going to wholesale your coin to another wholesaler, which will eliminate any possible profit for you.

To be sure, there are always some low mintage modern coins that do well, which can be flipped for a decent profit if sold at the right moment. And lots of extremely wealthy doctors, lawyers, etc., who can afford to spend tens of thousands or more on a really high grade and scarce coin will do well with those assets.

But millions of people who buy numismatic coins from web sites, coin shows, and advertisements in major numismatic publications will never recover what they put in. That is just the cold, hard truth, and less experienced buyers should learn it sooner, rather than later. And this is true even if they are buying graded higher-value coins like better-date silver dollars, unless they hold on to them for a very long time, and the market happens to be in the right cycle for those items when they sell, not an easy combination.

My purpose is not to discourage people from collecting or buying coins. Just be realistic about your expectations. Have fun with coins you like, buy what you can afford, but don’t tie up money you may need on short notice unless you are buying bullion, which is very liquid. Most numismatic coins are just not that liquid. It takes time and effort to dispose of them. It’s not like hitting the “sell” button when you get rid of some stocks or bonds.

Finally, if you are trying to sell your numismatic coins, don’t take the first offer. Bullion is one thing, but when it comes to collectible coins, you will get substantially different prices from different dealers. Look for one that does a lot of business in the type of coins you are selling. The differences in offers can be startling.

So enjoy the hobby of kings, just don’t think you are going to become one by being a “coin investor.”

In the meantime, until there is greater transparency of information in the numismatic world, coins will always be basically a niche market, and their appeal will remain somewhat limited. And publications like this one should continue to work to promote more openness about the inner workings of this industry to the benefit of all.
Louis Golino is a coin collector and numismatic writer, whose articles on coins have appeared in Coin WorldNumismatic News, and a number of different coin web sites. His column for CoinWeek, “The Coin Analyst,” covers U.S. and world coins and precious metals. He collects U.S. and European coins and is a member of the ANAPCGSNGC, and CAC. He has also worked for the U.S. Library of Congress and has been a syndicated columnist and news analyst on international affairs for a wide variety of newspapers and web sites.

Louis Golino
Louis Golino
Louis Golino is an award-winning numismatic journalist and writer specializing on modern U.S. and world coins. He has been writing a weekly column for CoinWeek since May 2011 called “The Coin Analyst,” which focuses primarily on modern numismatic issues and developments at major world mints. In August 2015 he received the Numismatic Literary Guild’s (NLG) award for Best Website Column for “The Coin Analyst.” He is also a contributor to Coin World, where he wrote a bimonthly feature and weekly blog, and The Numismatist, the American Numismatic Association’s (ANA) monthly publication, where he writes a monthly column on modern world coins. He is also a founding member of the Modern Coin Forum sponsored by Modern Coin Mart. He previously served as a congressional relations specialist and policy analyst at the Congressional Research Service of the Library of Congress and as a syndicated columnist and news analyst on international politics and national security for a wide variety of publications. He has been writing professionally since the early 1980s when he began writing op-ed articles and news analyses.

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  1. While there is much in the way of sage commentary in this article, I must disagree with the blanket comment that coins are not investments. ANY collectible one sticks a substantial amount of money into is an investment. Not all investments are sold for a profit, but if one puts thousands (let alone millions) of dollars into a collection of anything, it’s an investment.

    When I was actively buying coins for myself, I looked for coins I liked, but also ones I thought would appreciate in value. Some of them did, dramatically, usually AFTER I had sold them! There was an 1875 trade dollar I bought for $1242.50 in February of 1975. I sold it soon afterward to buy other, less expensive coins. That same coin sold in a Heritage Auction some 25 years later for about $120,000. It would probably bring double that or more today. While I was still in college in the 1970s, I bought an 1855-S half dollar for $2500. I was intending to keep it, but a well-known dealer heard about it and enticed me to sell it for $3300. An $800 profit was a lot of money for a poor student in those days (1973). That same coin sold over 15 years ago for $77,500. One coin I did keep from my student days was a lowly 1909 Korean silver 20 chon in gem grade. It cost me $200, and I figured the Korean economy would take off some day and the coin’s value would jump. I then moved, and left the coin in a forgotten safe for 20 years. Asked to empty the contents of my old safe (the bank was moving), I did so, and re-discovered the Korean coin from the 1970s. I put it in an auction of my company, Heritage, and watched it bring $3,250. I could go on and on.

    My point is this–know what you are doing. This goes for any collectible, actually, if it will involve a financial investment. Don’t be foolish. There was that Japanese buyer of the Van Gogh painting a few decades back who lost around $50 million on it when he sold it. That was not a smart investment, but any $85 million purchase IS an investment, wise or not.

    Identify what you like, what you think others will like down the line, and try to do it INTELLIGENTLY. Heritage’s popular quarterly magazine even sports that as its title: the INTELLIGENT collector. Like what you’re collecting, of course. Have some fun with it. LEARN from it. Actually, if you’re an intelligent collector, you’ll learn from it anyway. There aren’t any collectors of gold coins of ancient Greece and Rome who know nothing about ancient history, I promise you. I’ll bet there aren’t many of them who ended their collecting careers knowing less than, or just as much as when they started.

    I know a man who collected gem unc. and proof coins of Russia, figuring that the end of communism would mean the dawn of hugely rich Russians who would become billionaires exploiting Russia’s vast natural resources, and look for ways to invest their money. He loved his collection, but he saw it as an investment. It paid off handsomely, too. He must have gotten back over ten times what he paid for it when Heritage auctioned it off for him. He collected for pleasure, but at the same time, he invested very wisely. Collectors of coins of India and Brazil, both up and coming economies, have seen the value of their collections skyrocket, and the situation with Chinese coins is no secret any longer. There are surely ares of US coins that are undervalued even now. Don’t ask me what they are. If I knew for sure, I’d be buying them up myself.

    Just don’t fool yourself. Unless you intend on being buried with your collection or have bequeathed it to a museum, your collection IS an investment. The more fun you have with it, the more likely it is someone else will agree with you, and the more your investment in your collection will turn out to be a wise one.

    • Marc,
      Thanks for your thoughtful comment and for sharing your experiences and insight.
      I was really mainly trying to be provocative. I think we agree on many points. But someone of average means buying a coin today for $1200 is not likely in my view to see that kind of return a few decades later. Someone who bought wisely and knew what they were doing in the 1950’s to 1970’s and held on to the coins a long time had the potential for huge returns years later. That was an unusual situation because lots of great and rare coins were still reasonable in those days. Today it is very hard to even find a common classic coin that has original surfaces. And someone who bought common silver dollars in the late 1970’s and early 1980’s before the start of professional grading often ended up with overgraded coins worth the same or even less 30 years later.
      Anyway, I think a good way to look at is that most of us are both collectors and investors, or as Michael Bugeja just wrote recently in Coin World, part hobbyist and part investors, with some of us leaning more one way or the other.

  2. An excellent piece, Louis. This should be required reading for any beginning collector.

    People who want to invest in physical metals for short term profits ought to be using “paper” to trade instead of trying to buy and sell coins. I was exceptionally lucky buying my coins when I did and have not been significantly harmed by the fall in prices, but this is unlikely to be true for most people who buy coins. I definitely think people should not get sucked in by crazy advertisers who are predicting something like “Gold will go to $10,000 in the next six months!!!!!! BUY NOW BEFORE IT’S TOO LATE!”

    Of course, I think it’s worth noting there’s a distinct difference between people who are buying for investment and people who are buying for the collapse of the dollar/end of the world scenarios, who may call themselves investors but are perhaps better described as stockpilers.

  3. Great article Louis.

    Sometimes it pays to be a little bit leery of a market that has no real way to judge its health, stability, or size.

    The notion of having fun by looking at coins as a hobby and intellectual pursuit far outweigh my notions of coins as a smart way to build wealth.

  4. The article is thought provoking, but… The plain truth is that a lot of money flowed into the coin market, beginning in the 1970’s, precisely because coins came to be viewed as investments. Strip that money out of the coin market, and it would shrivel to 10-20% of its size. The term ‘collector-investor’ strikes me as something of an oxymoron. An intelligent investor will insist on quality for the grade when buying (i.e., act like a picky collector) and look for coins with growth potential. However, a real investor cannot afford to fall in love with his coins (unlike a collector)—he wants to maximize his ROI. Hence, he will buy and sell. And merely holding onto a piece for decades is no guarantee of maximizing an ROI. Sometimes, things shoot up in price, and later fall back—as an example, look at what happened to matte proof Lincoln cents during the last 6 years.

  5. Thanks for reminding me of the difference between an asset and an investment. As I understand it, an asset is a thing owned, while an investment is a commitment of assets to do work. You can “invest” in stock, but the “asset” is the stock itself.

    Also, your idea of selling a few coins every so often sounds like dollar cost averaging to me. Is that the idea?

    It’s a good one.

  6. I too have gained and lost money in individual coin sales. I fall in love with many of my coins, so consideration of their eventual sale is on my mind during purchase, but is isn’t a huge factor. I consider coins generally to be a good investment in the long run. I certainly have done better with coins in general than with stocks and they are far more enjoyable to own.

    Like so many other collectors, I don’t follow the market closely enough to know exactly when to sell for maximum profit. I do have a hoard of coins that are readily available for sale under bubble conditions. I do plan to make money with those, but they aren’t part of my “collection”.


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