Early Proof Sets - Blue Moon

Coin Rarities & Related Topics: News and Analysis regarding scarce coins, markets, and coin collecting #397

A Weekly Column by Greg Reynolds …..
 

The first part of the “Blue Moon Collection” was auctioned in Baltimore on Thursday, March 30, 2017. Many of the coins in the Blue Moon I sale were earlier sold in Stack’s auctions during the 1970s and early 1980s. The present topic is the increases in auction prices from the 1970s to the present for pre-1917, choice to gem Proof copper, nickel and silver coins, particularly for specific Proof sets from 1865 to 1916.

Whether intact from the respective ‘time of issue,’ partly assembled, or entirely assembled, most 1865 to 1916 Proof sets in mainstream auctions contain coins that PCGS has or would now grade from 63 to 66, with many grading 64 or 65, and occasional coins grading less than 63 or higher than 66. The sets in the Blue Moon I sale were very much typical in this sense.

Information and analysis are provided to help collectors plan their own respective coin budgets, given their own respective objectives and preferences. No investment advice nor any investment related conclusions are being put forth now. As it is common for interested collectors to spend substantial amounts on classic U.S. coins, even pure hobbyists who buy expensive classic U.S. coins should have some interest in the price-appreciation of coins.

A conceptual annual rate of price increase was computed in regard to each Proof set mentioned herein, though such rates should not be taken too seriously.  Prevailing market levels are not the only variables that influence auction prices. Coins do not yield returns in the sense that some traditional investments provide returns.

An annualized rate of price-appreciation or ‘return’ determined by inputting the purchase and sale prices of a coin into a standard financial equation is a conceptual construct, though is mathematically sound. A coin selling for $1,000 and then for $2,000 five years later is not the same as the same coin selling for $2,000 30 years later. It does not make sense to just say that the auction result for a coin doubled or increased by X% without incorporating time and a compounding aspect into calculations.

If two coins sell in 2017, and a prior auction price for one dates from 1972 and a prior auction result for the other dates from 1981, the price-appreciation of the two coins cannot be sensibly compared unless the difference in elapsed time is factored into the calculations. Annualized (yearly) price-appreciation or ‘rates of return’ are employed to compare price changes over time, among many coins.

Such ‘rates’ computed here have not been adjusted for auction commissions and other transaction costs. Grading fees, consulting fees, shipping costs, and insurance have not been factored in either. These costs vary considerably.

An aim is to make this analysis meaningful by limiting the scope and number of variables considered. All the coins mentioned were auctioned in one sale on one day and came from the same consignor. They were all in earlier Stack’s (New York) auctions, before the Stack’s-Bowers era.

Proof sets with gold are excluded for two reasons. The two Blue Moon Proof sets that included gold coins, dating from 1907 and 1908, were not pedigreed to auctions in the past. Moreover, few collectors seek pre-1917, gold Proof sets. Cent to silver dollar Proof sets are the kind that most collectors think about when Proof sets come to mind.

It is unlikely that rates of return come to mind when collectors think about Proof sets. They think about cool coins and enjoying the sets. Non-investing collectors, however, usually allocate coin buying budgets.

While I am very interested in rarity, pedigrees and the physical characteristics of coins, I find analyzing coin values, historical price-appreciation and market trends to be fun and worthwhile. Even those coin buyers who find such subjects to be irritating may benefit by learning. To understand coin collecting, price-appreciation and market realities are factors to take into consideration as are the interests, personality, tastes and experiences of individual collectors.

Before the 1990s, it was not unusual for people to collect late 19th century and early 20th century Proof sets ‘by year.’ Over the last quarter-century, most collectors have become more specialized and often focus on one metal or one denomination. So, pre-1917 Proof sets that were often sold as units before 1990 have usually been sold as individual coins since 1990.

Blue Moon Proofs

All the Blue Moon Proofs were submitted to PCGS and apparently all to CAC, presumably not long before the Blue Moon I Sale on March 30, 2017. A minority of these coins were CAC approved. I saw these coins, though I did not carefully inspect most of them, as I was focused on Pogue Collection coins at the time.

It is unlikely that the Blue Moon collector was an expert. This is an educational point, rather than a criticism. This discussion is not about the price-appreciation of coins that were carefully selected by experts or were selected under the guidance of experts. This discussion is about the price-appreciation of classic U.S. Proof coins that a collector with a moderate to medium amount of pertinent knowledge might very very well acquire.

The Proof sets in the Blue Moon I sale were probably typical of the pre-1917 Proof sets that were often available during the 1970s and 1980s. Several of the Proof sets were earlier in a Stack’s auction in September 1972, the “S. S. Forrest” sale, which featured a collection of “original” Proof sets from 1858 to 1915. Other Blue Moon sets were earlier sold in the Stack’s auction at the ANA Convention in New York during August 1976.

A few Blue Moon sets came from Auction ’81 and one set was in Auction ’84. It was not unusual for Stack’s to auction Proof sets from the 1858 to 1916 period in apostrophe auctions.

An apostrophe auction was held each summer from 1979 to 1990. Each apostrophe sale was a two day event that included four sessions by four different auction firms, and was held not long before a summer ANA Convention.

The Blue Moon 1865 set was earlier auctioned by Stack’s at the 1976 ANA Convention for $4,500. Before being auctioned in March 2017, the ten coins in this 1865 set were PCGS certified as “Proof-64” or -65, most of them as “Proof-64”.

The Indian cent was certified as ‘Proof-64 Brown’ and received a green sticker of approval at CAC. This cent and the PCGS certified ‘Proof-64’ Three Cent Silver each went for $998.75.The Two Cent piece in this set was certified as ‘Proof-64 Red  & Brown’ and CAC approved. It brought $3,055.

All but three of the coins in this Blue Moon I auction session were PCGS certified, including all those mentioned here. The “65” grade 1865 Three Cent Nickel went for the same price as the just mentioned Two Cent piece, $3,055. Rather than repeat the term Proof over and over again, numerical PCGS grades are now mentioned by themselves. It is incorrect to use the designation ‘MS’ to refer to a Proof coin.

The 1865 Liberty Seated half dime (realized $616.88), dime ($881.25), quarter ($2585), half dollar ($2820) and silver dollar ($6462.50) were all graded “64.” None of the silver coins in this 1865 Proof set had a CAC sticker. The extreme similarity in toning among the silver coins is circumstantial evidence that the coins have been together for an extremely long time, possibly since they left the Philadelphia Mint in 1865!

The total realization for this set in 2017 was $27,641.88. I computed a 4.57% annualized, average rate of increase for the coins in this set since this set was auctioned on August 24, 1976.

Here are the PCGS grades and prices realized for the Blue Moon 1869 Proof set: Indian Cent “66+” $4,935, Two Cent piece “66” $2,585, Three Cent Silver “65”  $1,586.25, Three Cent Nickel “65” $763.75, Shield Nickel “65” $705 , half dime “64+” $1,468.75, dime “63” $470, quarter “65” $1,527.50, half dollar “65” $2,232.50 and silver dollar “64+,” $8,225. The two copper coins were designated ‘Red & Brown’ at PCGS. The Three Cent Silver, Shield nickel and half dime were the only three of the ten 1869 coins that were approved at CAC.

The total in March 2017 for these ten coins was $24,498.75. The price realized in September 1972 for this same 1869 set was $1,900. There was a 5.96% average, yearly ‘rate of return,’ conceptually.

The 1870, 1872, 1893, 1894 and 1906 Proof sets in the Blue Moon I sale were earlier in the Stack’s sale during March 1976 of selections from the Garrett Family Coin Collection. These are omitted from this discussion, as the Garrett sale was just too phenomenal and important an event for the results to be consistent with the theme of this discussion.

“The 1976 Garrett sale was packed and exciting. It was standing-room only. People were crowded in the doorways. It was hard to buy anything, though I got a few coins. Bidding was sometimes crazy. Prices were very strong,” Richard Burdick recollects.

Because of the crazed bidding and epic nature of the events, there is a statistical problem with mixing results from Garrett sales with results from more ordinary, mainstream auctions during the same time period. The past sales cited here were major or notably important, though not epic.

The Blue Moon I sale was not epic and was overshadowed by the Pogue V sale, which was conducted by the same auction firm during the following night. It would be more meaningful to discuss Garrett coins that later were in Pogue sales than Garrett coins that later appeared in Blue Moon I sale, which few people remember.

The apostrophe auctions remain famous and were regular annual events, which included some collector consignments along with many dealer consignments. The Blue Moon 1871 Proof set was in the Stack’s session of Auction ’81. Seven of the 10 coins were PCGS-graded as “64”. The dime and the quarter received “Cameo” designations. The Three Cent Silver was graded “66+”, and the half dime just “62”. The PCGS-graded “65” Three Cent Nickel was the only one of the 10 coins to receive a sticker from CAC.

The March 2017 result, $19,293.50, leads to a calculation of an annualized rate of increase of just 1.59% a year, over the price realized in July 1981, $11,000, which could have been a strong price at the time.  Curiously, the Auction ’81 catalogue, reveals that this same 1871 Proof set was in the Stack’s “George F. Scanlon Sale, October 1973, lot 1303”. If so, it brought  $1,750 in 1973.

The annualized rate of price-appreciation for this 1871 Proof set from 1973 to 1981, 26.78%, is much greater than the yearly increase from 1981 to 2017, 1.59%. The annualized rate from October 26, 1973 to March 30, 2017 was 5.68%.

There are no stated pedigrees for the catalogue listings for Blue Moon Collection Proof sets dating from 1873 to 1887, except for the Garrett 1875 set. All the Blue Moon 1888 Proofs were PCGS-graded in the 65 to 66 range. Five of the seven coins have CAC stickers.

In March 2017, the total realized for the 1888 set was $32,723.75. The CAC approved “Proof-66” Morgan dollar amounted to more than a third of this total, and the “Proof-66+” half dollar, without a sticker, brought more than one-fourth of the total.

This 1888 set sold for $1,000 in September 1972. The annualized rate of price-appreciation was 8.16%, markedly higher than the rates for the vast majority of the other Proof coins with pedigrees in the Blue Moon I sale.

Four of the six coins in the Blue Moon 1890 set were CAC approved, a Proof-64 Liberty Head nickel, a Proof-67 dime, a Proof-67 quarter and a Proof-66 half. The total price of $22,442.50 is far more than the amount the same coins realized in 1972, $900! The rate was 7.48%.

The Blue Moon 1891 set received PCGS grades in the 64 to 65 range. The dime was PCGS certified as “Proof-66+” and it was one of four coins in this set to be CAC approved. This same set realized $7,500 in Auction ’81 and $15,580.50 this year. The annualized growth rate was 2.07%.

The Blue Moon Collection 1892, 1897, 1905 and 1910 Proof sets were all earlier in the Stack’s ANA Convention auction in August 1976. The coins in these sets were graded in the 64 to 66 range. Around half of them were CAC approved.

The Blue Moon 1892 set realized $15,040 in 2017 and $2,000 in 1976. There was a 5.09% annualized annual rate of increase.

In that same ANA sale in 1976, the 1897 Proof set also realized $2,000. In March 2017, this 1897 set brought $20,832.75, 5.94% annualized price-appreciation.

The Blue Moon 1905 set was one of the lower quality sets in this run. Of the five coins in the set, three are PCGS-graded as 64 and two as 62. Only the PCGS certified ‘Proof-64 RB’ Indian cent is CAC approved. The $3,619 price in 2017 is not that much higher than the $1,400 price in 1976. Bidders in 2017 were perhaps far more concerned about the quality of individual, early 20th century Proof coins than bidders were 40 years ago. The annualized rate of price-appreciation was 2.07%.

The Blue Moon 1914 set totaled $13,160 this year and brought $8,000 in July 1981.The coins were assigned 64 or 65 grades except for the Buffalo nickel, which is PCGS-certified as “Proof-67+” and CAC approved. This nickel garnered $6,462.50.

According to the Auction ’81 catalogue, this same 1914 set was even earlier in the Scanlon sale in 1973, in which it realized $1,350. The annualized rates of increase were 1.4% from 1981 to 2017, 5.38% from 1973 to 2017, and a whopping 25.82% from 1973 to 1981.

“Coin markets crashed in 1975 and were much better by 1977. Starting in 1978 there was a tremendous boom that lasted until April 1980, when there was a big crash,” Richard Burdick maintains.

Although market levels sharply dived before reaching low points in 1982, pre-1917 Proof coins remained popular, much more so in the 1980s and ’90s than these were in the ’70s. They were never as popular during the 2000s, when business strike copper and silver coins dating from the mid-19th century to the 1930s really surged in popularity among coin collectors. On average, the Blue Moon pre-1917 Proof coins that were acquired in the 1980s did not appreciate nearly as much per year as those that were auctioned from 1972 to 1976.

The Blue Moon 1915 set hardly appreciated at all, annually. These seem to be the only coins in the Blue Moon I sale that were pedigreed to Auction ’84. Market levels were much higher in July 1984 than they were in July 1981. These are all certified in the 65 to 66 range. The cent and the nickel have CAC stickers. This 1915 set brought $8800 in July 1984 and $10,340 in March 2017.

Blue Moon Gold Coins

Some of the ‘better date’ gold coins in the Blue Moon I sale were catalogued with mentions of appearances in Stack’s auctions during the 1970s and early ’80s. A few are mentioned here, to compare with the rates of increases in prices of the already mentioned Proof copper, nickel and silver coins.

A PCGS-graded and CAC-approved AU-55 1811 half eagle was in a major Stack’s sale in February 1979, in which it sold for $2,400. This year, it went for $10,575; the  annualized rate of increase was 3.96%. It should be noted that coin markets were markedly rising and beginning to boom in February 1979 while coin markets were sluggish and drifting downward in March 2017.

A PCGS-graded MS-61 1837 Classic Head half eagle was reported to have earlier been in Stack’s 1976 ANA sale, as lot #2951, in which it was described as being AU with “virtually full frosty luster”. It brought $425 in 1976 and $6,462.50 in March 2017, conceptually an annualized rate of price-appreciation of 6.93%.

A PCGS-graded “MS-62” 1858-C Liberty Head half eagle realized $14,100 in March 2017 and less than one tenth as much in August 1976, $1,400, 5.85% annually. Back then, the cataloguer said, “Brilliant Uncirculated and a very sharp impression. Some light bag abrasions but still a very choice specimen.”

It is hoped that no one is drawing conclusions from the few Proof sets and three gold coins mentioned here. A great deal of pricing data, an understanding of the history of coin collecting, and information about market realities is required to develop knowledge of coin prices over time. Also, there is a need to learn to distinguish wholesale prices from retail prices, and to understand why the same coin could bring different prices in different auctions even if market levels remain the same.

Adjustments for Transaction Costs

The conceptualized, annualized rates of increases in value would be lower if adjusted for transaction costs, though not dramatically lower. I hesitate to put forth adjusted returns because different collectors incur different costs, even for equivalent coins. The terms of auction consignment agreements vary and collectors often hire agents or pay consultants in regard to auction purchases.

If 20% is deducted from prices realized as a conceptual exercise, then the annualized rates of price increases put forth already would be a little lower. For example, if the consignor received 80% of the reported total price for the 1888 Proof set, $26,179 rather than $32,723.75, the conceptualized annual rate of return for him could be 7.6% rather than 8.14%.

While the final total for the Blue Moon 1897 Proof set was $20,832.75, if an amount 20% less, $16,666.20, is used as a basis, then the annualized rate from August 24, 1976 to March 30, 2017 would be 5.36% rather than 5.94% without such a 20% adjustment. Although there are other transaction costs in addition to the commission for an auction consignment, it is true that some consignors negotiate deals enabling them to receive a share of the so called ‘buyer’s fee’.

An  important point is that holding coins longer results in auction commissions and transaction costs becoming less burdensome in the context of annualized rates of increase, if all other factors are equal. Conversely, if a coin is purchased at auction and then consigned to another auction soon after it was purchased, then auction commissions might result in a negative rate of return even if the price realized is significantly higher in the later auction.

Concluding Thoughts

Risks and market realities should be taken into consideration when buying decisions are made. It is not logical for the buying decisions of most collectors to be entirely guided by emotions. It is important to think about past, present and future values of coins, if coins that the prospective buyers find to be expensive are being considered.

There needs to be more discussion of such matters, as many coin buyers do not understand market trends and the factors that influence coin prices over time. Moreover, it is not implied that the coins that have appreciated the most in the past will appreciate the most in the future. Indeed, one could intelligently argue that the opposite is true; the rare coins that did not appreciate much in the past may surpass the appreciation of others in the future. Questions regarding future price appreciation should not be simply answered; plausible scenarios must be analyzed.

©2017 Greg Reynolds

Insightful10@gmail.com
 

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