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All That Glitters: Coin Collecting

There's Money to Be Had in Coin Collecting, But You Must Choose Wisely
Edward Kiersh
From the Print Edition:
Sylvester Stallone, Mar/Apr 98

It was billed as the "Rendezvous with Destiny" sale, and as the world's preeminent coin collectors streamed into the St. Moritz Hotel in New York City last spring, euphoria reigned. No one was thinking of the pall that had settled over their world earlier this decade, the "crash" that sent the values of super-grade coins plummeting 50, 60, even 70 percent from their stratospheric levels of 1989. Instead, as the CNN cameras focused on the glittering Draped Busts and Liberty Seated coins and other fabled items from the Louis E. Eliasberg Collection, the giddy talk among dealers and investment consultants was only of anticipated record prices--the "bounce" that would spur a long-overdue turn in this bearish market.

These coin specialists had reason to rejoice when the sale's final session began with a landmark price of $308,000 for a 1795 Flowing Hair silver dollar. Soon other records toppled, and with each new high, emotions seemed to be fueling a feeding frenzy. It was still debatable whether the bulls were coming back, and if rare coins had regained their investment luster. Yet there was no mistaking the fire and smoke that characterized the bidding battle for the king of American coins, a Stickney Class I 1804 silver dollar, which finally sold for a headline-grabbing $1.815 million.

"People were spending so freely, even nontrophy coins sold at unbelievable prices," recalls Scott A. Travers, the vice president of the American Numismatic Association and a consumer advocate who's written 17 books on coin collecting. "This was an extraordinary event, and because such a competitive environment builds confidence, people just got crazy."

But aside from the dazzling flash of this record-grossing, $45 million sale, which one dealer says "spurred new widespread interest in coins, their magic and rich history," what lessons, if any, did the extravaganza hold for potential investors, or collectors? With stock prices still high, inflation checked and gold in the doldrums, was this auction a mere aberration? Or has all the risk been squeezed out of the market, and is this now the time to go bargain hunting for pieces that are selling for a fraction of their 1989 value?

Market watchdog Travers, a coin investment consultant for 22 years, who's won a great deal of enmity in this otherwise clubby world because of his "survival guides," insists that "there was no economic justification" for those landmark Eliasberg prices. "Bidders had the certainty that these were original, undoctored coins, and trophies are just not representative of the entire market."

Although he remains skeptical about a universal upsurge in prices in the late 1980s, Travers still says, "There are tremendous opportunities for newcomers in today's coin market; 1854-1855 Liberty Seated quarters with arrows in mint-state 65 [a system of coin grading based on a scale of 1 to 70] are really popular, and at $7,000 [compared with $13,500 in 1989] are very underpriced, with a potential for shooting up dramatically. The same for three-cent nickel pieces in proof 67. Rare dates were priced at $14,000 in '89, and though they're very difficult to find, this is a true connoisseur's coin--an item that can be picked up at $1,200 and could easily go through the roof one day." Budding numismatists might have to do more homework than was required during those glorious 1980s, when Wall Street brokers adopted coins as an investment vehicle and sent prices soaring. Novices may even lose some money when they first enter this market, where promotional schemes abound and various tricks are used to disguise a coin's true grading value.

While Travers says, "The coin market on the whole is very risky, a place where caveat emptor is an understatement," he also points out, "there are ways to profit today, to even make quick killings, if consumers proceed on the basis that most coins are lemons, not very high-grade. There's real caviar out there, extraordinary super-grades with great investment potential. Newcomers just have to realize that in this search, knowledge is real power."

Traditionally the "hobby of kings," a pastime reserved for gentlemen in oak-paneled salons, coin collecting hasn't always been such a playing field for profit seekers. While scoring financially now adds to the excitement of chasing rare coins, many aficionados are content to be pure hobbyists, amassing pieces that mirror history, art and other civilizations. Emotionally tied to their "specimens," and viewing these holdings as long-term projects, these purists aren't driven by profits or trends in the marketplace. To them, assembling or completing a series of rarities is the only thrill.

As many newcomers will discover, it's easy to become a collector at heart, a purist who simply wants to amass and carefully hold such lustrous gems as 1838 No Drapery quarters and 1806 mint-state half dollars with gold, blue and lilac toning. Along with their sheer beauty, as James Earl Jones rhapsodizes in a video sponsored by the American Numismatic Association and the Professional Numismatists Guild, these pieces also "have a story to tell...it's history you can hold in your hand."

Yet to take even tentative steps into this arena, enthusiasts should be prepared to spend $10,000 to $50,000, and when that much money is at stake, it's understandable why an investment mentality must also affect buying and selling decisions. For in today's market, some coins given numerical rankings by professional grading services are traded sight unseen, like commodities. The most subtle distinctions in a coin's appearance, or state of preservation, determine those ratings--variations that result in huge differences in pricing.


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