HIGH-GRADE LINCOLN CENTS ARE NOT PENNY-ANTE

in Articles,US Coins

By SCOTT A. TRAVERS

COPYRIGHT © 2001, 2003 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

Who says Lincoln cents are penny-ante?

Certainly not the bidders who attended a wild auction at the spring convention of the Central States Numismatic Society in Indianapolis.

Lincoln and Indian cents in unheard-of pristine mint condition brought unheard-of prices at the Central States Signature Sale, conducted April 5 and 6 by Heritage Numismatic Auctions of Dallas.

Cents long considered common-date, or semi-key at best, changed hands for strong four-figure prices – even five-figure prices, in some cases – as dealers and collectors battled tooth-and-nail to bring home small bronze trophies from this frenzied treasure hunt.

A fully lustrous 1919-S Lincoln cent graded Mint State-66 Red by the Professional Coin Grading Service (PCGS) sold for an astounding $19,550 (a hammer price of $17,000 plus a 15-percent buyer’s fee).

Heritage described this coin as “the single finest representative of this issue known to both NGC (the Numismatic Guaranty Corporation of America) and PCGS.” Still, it is a 1919-S, not a 1909-S. And, with a mintage of nearly 140 million, it has never been mistaken for a rarity. In fact, it has one of the highest mintages of any Lincoln cent produced before 1920.

With this and other so-called “common-date” cents in the Heritage auction, however, the crucial figure wasn’t the number produced by the Mint, but rather the number certified in very high mint condition since the start of the “grading revolution” in 1986.

In the case of the 1919-S, this is the only specimen ever graded MS-66 Red by PCGS or NGC, with none graded higher. Thus, this has a legitimate claim to being the finest-known 1919-S Lincoln cent – a true condition rarity if ever there was one.

Obviously, ‘19-S cents weren’t well struck and fully lustrous even on the day they left the Mint, so not many examples existed to begin with – and over the years, the number has been winnowed to just a precious few by the ravages of time and attrition.

A 1914-S Lincoln cent graded MS-65 Red by PCGS changed hands at the Central States auction for a remarkable $14,375 ($12,500 plus the buyer’s fee).

Yes, the ‘14-S has always been regarded as a semi-key Lincoln, given its mintage of just slightly more than 4 million. And yes, the Heritage catalog described this specimen as “fully struck” and “sparkling with originality.” But most observers would have been looking for the key-date 1914-D, not the ‘14-S, to realize a five-figure price. The S-mint, after all, is a coin that can be purchased in highly collectible very fine condition for less than $50.

Here, too, the relevant number isn’t the mintage figure – even though that’s much lower than the mintage of the 1919-S. The number that prompted the five-figure price was 21 – the number of specimens graded by PCGS as MS-65 Red. The service has certified only two ‘14-S cents in higher grades – both MS-66 Red.

A 1919 Lincoln cent graded MS-68 Red by PCGS, and a 1921 cent graded MS-67 Red by the same company, brought matching prices of $9,775 apiece. And after the auction, at least two underbidders were disappointed that their bids did not secure these coins—and offered $10,500 apiece for them.

These are exceptionally high-grade pieces, and “super-grade” coins do command big premiums. But these are not rare dates by the standards of early Lincolns. The 1919 has a mintage of more than 392 million. The 1921, at slightly more than 39 million, has less than one-tenth the mintage of the 1919, but it, too, is not rare. And MS-67, while only one grade lower, seems a lot less rarefied than MS-68.

All this pales in significance, though, upon examination of the PCGS population figures. As of this writing, the company has graded only 14 examples of the 1919 cent as MS-68 Red, with only one specimen (an MS-69 Red) graded higher. And it has graded a mere two examples of the 1921 as MS-67 Red, with just two graded higher. These low populations have apparently established these Lincoln cents as important condition rarities. From the collector’s perspective, a coin with a population of two or 14—after 15 years of submissions to PCGS—qualifies as a rarity that commands respect and a high price realized.

Other Lincoln and Indian cents sold for similarly impressive prices at the Central States auction – and in each case, the constant ingredient was very low grading-service population figures.

Here are a few more sample prices, in each case representing the hammer price plus the 15-percent buyer’s fee – along with the population figures:

· $9,775 for a 1925-D Lincoln graded MS-65 Red by PCGS. It has given this grade to just 33 examples, with only one higher (MS-66 Red).

· $8,050 for a 1917-S Lincoln graded MS-65 Red by PCGS. It has graded a mere 12 as MS-65 Red and only one as MS-66 Red.

· $4,945 for a 1932 Lincoln graded MS-67 Red by PCGS. It has graded just 14 as MS-67 Red, with 290 as MS-66 Red.

· $5,290 for an 1869 Indian graded MS-65 Red by PCGS. It has graded 22 as MS-65 Red and six higher.

· $4,313 for an 1875 Indian graded MS-65 Red by PCGS. It has graded 25 as MS-65 Red and four as MS-66 Red.

What are we to make of this bidding frenzy? Lincoln and Indian cents, after all, have been widely collected series for generations, so it’s not as if buyers suddenly discovered them in a secret sub-basement of the marketplace. Even when the coin market fell into a funk in the early 1990s, small cents remained popular and active and their prices edged upward while other series languished and suffered a spate of minus signs in price sheets.

The connection may not be apparent at first glance, but the recent price explosion in certified high-grade cents is inextricably linked to the vast popularity of the 50-state Washington quarters. The cent boom is being fueled by people who became involved with coins – or returned to the hobby after years away from it – because their interest was piqued by the statehood quarters.

It has been estimated that 120 million Americans are saving the 50-state quarters. Some are simply pulling them out of their pocket change and setting aside one example of every type. But others are collecting them in a more organized – and often more elaborate – fashion, arraying them in folders, holders, albums, maps and other kinds of packaging meant to both display and protect them.

Many of these statehood quarter enthusiasts are Baby Boomers who collected coins as youngsters but put aside the hobby when they had to focus instead on college, career, courtship, marriage and children. Now, decades later, they have leisure time again, as well as disposable income – sometimes quite a bit of it. And once they get their feet wet again with the help of the 50-state quarters, more than a few are taking the plunge in a much bigger way than they did when they were kids.

State quarters are the entry point for most new coin hobbyists today – but in years gone by, the majority got their start with Lincoln cents. It’s only natural, then, that many of the Baby Boomers now renewing their earlier links are moving on from quarters to Lincoln and Indian cents – the coins they were most familiar with, and had the greatest interest in, years before. Only now, they have the wherewithal to acquire the scarcer dates and better grades.

At first, these reborn collectors tended to settle for lower-tier uncirculated cents in grades such as MS-60 and MS-63 – possibly even higher-grade circulated pieces. But now, more and more are pursuing the best available, applying the kind of thinking that helped them amass big profits in the stock market and other investment arenas. And this, in large measure, is the source of the upward pressure we’re seeing now on pristine Lincolns and Indians.

The Central States sale shone a spotlight on the cent boom and came as a revelation to many collectors. But while it may have been the most dramatic manifestation, it was simply a reflection of a trend that is becoming increasingly apparent throughout the country.

Demand for Lincoln cents has been growing by leaps and bounds in all collectible grades – all the way down to very good and, in some cases, even good. We’ve never seen anything like it; the coins are simply flying out of dealers’ cases.

The scarcer dates and higher grades are doing especially well, though – and when coins such as those in the Central States auction are put in a sale, bidders go wild.

The Heritage sale included not only common-date and semi-key Lincoln and Indian cents in pristine mint condition but also key dates in very high grades. And they, too, realized fancy prices. But these prices seemed to represent a straight-line progression from the values the keys enjoy in lower grades.

With the semi-keys and common dates, by contrast, the price increase was often geometric. In other words, top mint-state common-date pieces didn’t just bring two or three times as much as borderline mint-state examples – they brought exponentially more.

There’s a logical explanation. Key-date coins were recognized as such at the time of their issuance, and thus were set aside in much higher numbers – from a proportional standpoint – than their common cousins. Therefore, they exist in greater quantities, relative to their mintage, in uncirculated and higher-level circulated grades.

The 1931-S is the ultimate case in point. At 866,000, it is one of only two Lincoln cents (not counting errors and unusual varieties) with a mintage below a million, second only to the 1909-S VDB, at 484,000. But the ‘31-S was recognized at once as a low-mintage coin and much of its output was saved from the very beginning. As a result, it sells for only marginally more in mint condition than in circulated grades.

Speaking of the 1909-S VDB, the sale included a specimen of this famous first-year rarity graded MS-65 Red by PCGS. It changed hands for $3,105 – a fancy figure, to be sure, but less than one-sixth as much as the 1919-S.

In the same vein, an 1877 Indian cent graded MS-64 Red-Brown by PCGS realized $5,060. This, too, is nothing to sneeze at – but the 1877, the key to the Indian series, brings four-figure prices even in nice circulated condition. Meanwhile, the 1869, which brought a higher price, is a coin with a mintage eight times as high. And the piece that achieved that sum is just a shade higher on the grading scale.

The real point of comparison, however, is the two coins’ surviving populations in higher mint condition. As I pointed out, PCGS has graded only 22 examples of the 1869 as MS-65 Red. By contrast, it has graded 89 examples of the 1877 – more than four times as many – as 64 Red Brown.

One key Lincoln did bring a key price in Indianapolis. In fact, it realized more than any other cent at the sale. The coin was a 1922 No-D Strong Reverse cent graded MS-65 Red by NGC. This so-called 1922 “Plain” cent sold for $49,450.

But the ’22 Plain is a different kind of key; it’s a mint-error coin, created when small numbers of 1922 cents were struck with worn dies at the Denver Mint, giving them the appearance of lacking the “D” mint mark. Typically, these coins have very weak detail, especially on the obverse, and a mushy, well-worn appearance. Finding one sharp enough – and with sufficient luster – to justify a grade of MS-65 Red is indeed an event worthy of note and a lofty price.

The ’22 Plain cent sold at the Central States show is exceedingly rare. In fact, it is the only one ever graded by NGC as MS-65 Red – and PCGS has never awarded that high a grade to a single example, designating only one at MS-65 Red-Brown.

Most, if not all, of the common-date Lincolns now bringing unprecedented premiums in very high grades exist in that condition in double-digit quantities or more. They are not unique, or nearly so. But the law of supply and demand is pushing their prices inexorably higher – for while there may be 50 or 100 supergrade specimens available, three or four times that number of people want them.

I do have one very important caveat: Population figures should be relied upon as reasonably accurate determinants of rarity only for Indian cents and Lincolns from 1909 through 1933. Cents produced thereafter tend to have significantly higher mintages and were set aside in far greater quantities at the time of their issuance because of the growth of interest in coin collecting starting in the early 1930s.

What’s more, these later coins have not yet been submitted to the coin-grading services to the same degree, relative to their mintages, as the earlier cents. So the odds are much higher that rolls – even bags – of uncirculated pieces might emerge from hiding someday soon and drastically skew the population reports and market values.

One of the more unusual coins in the Central States auction was a 1943 Lincoln cent struck in error on a bronze planchet meant for a Curacao coin. This piece, produced for that Latin American country at the Philadelphia Mint, was certified as Fine-12 by ANACS. Bob Korver, director of auctions for Heritage, declared it to be “the most interesting Lincoln cent in this sale.”

“Due to its close association with the fabled 1943 copper cent, we followed the bidding activity on this coin with great interest,” Korver said.

It changed hands for $7,475.

Shortly after the auction, I was privileged to handle the finest 1943 “copper” cent I’ve ever seen. This specimen, graded About Uncirculated-58 by PCGS, in my opinion surpasses the two examples certified as Mint State by other grading services because it is original, has mint luster and has never been cleaned. Indeed, the coin appears to grade MS-64 Brown.

I sold this coin recently for a sum around six figures.

In a series that is currently hot as Hades, this can truly be called a “penny” from Heaven.

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