One-Minute Coin Expert®, Sixth Edition

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one_minute_6thScott Travers takes you all the way from identifying valuable coins in your pocket change to trading coins on an electronic exchange network.

“In numismatic terminology, it’s a gem.” – Don Alpert, Los Angeles Times
“The easy and fast way to become a true coin expert.” – Robert Leuver, American Numismatic Association

One-Minute Coin Expert

® Sixth Edition, by Scott A. Travers, published by House of Collectibles, an imprint of Random House, Inc.

Excerpt from One-Minute Coin Expert®, Sixth Edition

Chapter 5
“Answers to the Most Frequently Asked Coin Questions”

By Scott A Travers, Copyright 1991, 1996, 1998, 2001, 2004, 2007
ALL RIGHTS RESERVED. HOUSE OF COLLECTIBLES, AN IMPRINT OF RANDOM HOUSE, INC.

The following is an excerpt from One-Minute Coin Expert®, Fifth Edition available at bookstores everywhere.

What’s the most valuable U.S. coin?

On July 30, 2002, two leading auction firms jointly conducted a public auction for sale of the fabled 1933 Saint-Gaudens double eagle.  Pre-sale estimates were in the $4-million to $6-million range.  The coin sold for an astounding $7,590,020. This now stands as the highest price ever paid at auction – and the highest price confirmed to have been paid publicly – for a single U.S. coin.

In August 1999, an 1804 silver dollar changed hands at a New York City auction for $4,140,000.  That figure included a hammer price of $3,600,000 plus a 15-percent buyer’s fee of $540,000.  As this book goes to press, that stands as the highest price ever paid at auction – and the highest price confirmed to have been paid publicly – for a single U.S. coin.  In fact, it is more than double the previous record of $1,815,000, which was achieved by a different specimen of the same coin in April 1997.  Both coins were sold by Bowers and Merena Galleries of Wolfeboro, New Hampshire.

The 1804 dollar is not the rarest coin ever made by Uncle Sam; in fact, a number of others have lower mintages. However, it may be the most highly publicized – and romanticized – of all U.S. coins. Just 15 specimens are known, and all of them were minted many years after 1804. Eight are so-called “original” examples struck in the mid-1830s for inclusion in presentation sets prepared by the U.S. Mint as gifts from President Andrew Jackson to rulers in the Far and Middle East – monarchs with whom the U.S. government was seeking to establish trade relations at the time. The other seven coins are restrikes minted in the late 1850s.

The piece that brought the record price on Aug. 30, 1999, was an original (or Class I) example considered to be the finest of all the known 1804 silver dollars. It came from a collection formed over several generations by the Childs family of Vermont and had been purchased in 1945 by Charles Frederick Childs for a mere $5,000. Originally, the coin had been part of a presentation set given by U.S. envoy Edmund Roberts to the Sultan of Muscat, a Middle East nation now known as Oman.

I was an eyewitness to the historic sale at the Park Lane Hotel in midtown Manhattan. In fact, I was a serious bidder for the coin: My firm represented a client who was willing to pay significantly more than the previous auction record. The bidding exceeded his limit, but I did have the satisfaction of calling out the bid that shattered the old record: My offer of $1,750,000, when augmented by the 15-percent buyer’s fee, officially put the Childs coin over the top.

A 1913 Liberty head nickel, one of five known, sold for $1,485,000 in May 1996. This specimen was from the collection of Louis E. Eliasberg, Sr., and sold at public auction by Bowers and Merena. It was purchased by well-known dealer Jay Parrino of Missouri.

I have a collection of medallions struck by The Franklin Mint They’re attractive silver pieces portraying various United States presidents. I understand that very few were struck, and I have certificates from The Franklin Mint which guarantee they’re made of sterling silver. Are these medallions valuable?

Chances are, the items you have are worth no more than “melt value”-the value of the silver they contain. Thousands of Franklin Mint issues were struck and sold for substantial premiums, but a significant resale market never materialized. Your “medallions” may be beautiful, but they’re not negotiable; you can’t spend them. And since there isn’t a strong secondary market for these pieces as collectibles, the only real value they have is their precious metal.

Remember, three factors determine the value of a coin or medallion: (1) the level of preservation, which these medallions probably have in their favor because they are undoubtedly well preserved; (2) the number struck, and many Franklin Mint items have relatively low mintages; and (3) the collector base.

Even though your medallions may do well in two of these three areas, they’re seriously hurt in the third area – the collector base. And this is extremely important. Most collectors simply aren’t interested in Franklin Mint medallions. It’s a classic case of supply dramatically outstripping demand. Thousands are available and almost no one wants them.

If each of your medallions contains an ounce of silver, then each one is worth more or less the same as an ounce of silver. Sorry, but that’s the way it is.

I visited several countries in Europe a few years ago and picked up coins everywhere I went during my travels. Are they worth anything?

Probably not. These coins are probably worth no more than their face value in the countries where you obtained them. Even if by chance you got some unusual variety, it still isn’t likely that these coins would command much of a premium. There’s simply not much of a market for modern foreign coins.

The rare coin market in the United States is an easy-entry, easy-exit field; there is little regulation governing sellers of coins. Consequently, many of the people dealing in coins in this country are freewheeling entrepreneurs who don’t have extensive backgrounds in areas of numismatics that are, quite literally, foreign. Most of these people don’t speak foreign languages and don’t really know much about foreign coins. They stick with the subject they’re comfortable with-United States coins. Similarly, the overwhelming majority of coin collectors and coin investors in this country limit their purchases to U.S. issues.

Modern foreign coins do turn up in coin shops and at coin shows-but often they’re in boxes containing common material that dealers sell by the pound for nominal sums. The foreign coins you acquired in your travels might very well be found in such a box.

My grandmother left me an old Buffalo nickel but I can ‘t see the date. Is it worth anything, and is there any way to restore the date?

That Buffalo nickel could be worth a million dollars-in sentimental value. But if you try to cash that in, you won’t get more than a nickel.

Dateless Buffalo nickels are so worn that they’re barely identifiable as to type. These coins don’t have any collector value. Chemical date restorers are available-but while these might enable you to determine the date of the coin, they won’t do a thing to enhance its collector value.

I just received a telephone call from someone I’ve never heard of, trying to sell me rare coins. “What should I do?”

Hang up the phone! Selling coins over the telephone is never a cost-effective proposition. Consequently, just about anyone who sells coins over the phone-via telemarketing-marks up their prices tremendously, in some cases several hundred percent. I’m sure there must be reputable telemarketers somewhere, but they’re few and far between.

I’ve heard chilling horror stories about the abuses perpetrated by telemarketers. However, these go far beyond the scope of this response. Suffice it to say that if you’re ever called on the phone by someone selling coins, someone you don’t know, you should hang up the phone. Don’t be polite. And never, under any circumstances, give your credit-card number over the telephone to someone that you have not called.

I talked to a coin-collector friend about selling some mint errors I found in change, but my friend said the coins I found weren’t really “errors. ” Is he right?

There are many coins that deviate from the norm. Some are off center and others exhibit doubled letters, to cite a couple. These coins were once lumped together as “mint errors.” Now certain specialists argue that these coins should be classified under “minting varieties.”

Author Alan Herbert is one of these experts. In Herbert’s view, not every unusual coin is an “error.” The coin may have been manufactured that way, perhaps because the mint was using worn dies to save money. Herbert differentiates between these intentionally different- looking coins and those that come out different by mistake. Only the latter, he argues, are really errors, but both come under the heading “minting varieties.”

An excellent listing of minting varieties can be found in The Official Price Guide to Mint Errors, 7th Edition, by Alan Herbert (House of Collectibles/Random House, Inc., 2007).

Last year, after reading a financial publication, I decided to invest $5, 000 with a very good company that sells bullion and coins. I got several $20 gold pieces. They looked pretty and I put them away for a while. Last week, I decided to show them to a local coin dealer. He looked at them and said they’re not worth anything. What should I do?

One thing you shouldn’t do is accept the opinion of your local coin dealer without checking further. Any dealer to whom you bring coins for an appraisal has a vested interest in the outcome of the discussion. If you ask a dealer to render an opinion on coins that you purchased from a competitor, you really can’t expect him to be objective. Human nature being what it is, that dealer isn’t going to say: “You got a wonderful deal. You shouldn’t buy coins from me; you should buy all your coins from my competitor.” He’s much more likely to say: “You got a terrible deal. These are horrible coins. You should return them and buy all your coins from me.”

In buying coins and in getting coins appraised, you should always seek the protection of independent third- party grading. Buy only coins that have been certified by leading independent grading services. And before having coins appraised, submit them for certification by one of these firms. These organizations will encapsulate your coins in tamper-resistant sonically sealed holders with inserts stating their grade. That way, you’ll know what your coins are worth-or what they aren’t worth.

I understand that coins are graded on a 1-through-70 scale. How can I tell the difference between a coin which grades 65 and is worth $5,000 and a similar coin which grades 64 and is worth only $1, 000?

Don’t expect to be able to tell the difference. Only trained experts can do this. But do apply a little common sense. If you have a portrait coin with a likeness of Miss Liberty, for example, look at the portrait. Her cheek is what is known as a grade-sensitive area. If you see nicks, marks, scratches, gouges, or other imperfections on that cheek, common sense should tell you that this particular coin probably won’t qualify for a grade of Mint State-65.

There’s a greater ethical burden on the coin dealer’s shoulders than on someone who is selling a uniform commodity. Suppose you go out and buy yourself a television set-a brand-name 19-inch television set. As long as it comes in a factory-sealed box and has a U.S.A. warranty, you can be reasonably certain that you’re getting what you’re paying for. But if you buy coins which haven’t been independently certified, you have no reasonable certainty as to what you’re getting. If you don’t know your coins, know your dealer. If you don’t know either, get your coins independently certified. In fact, play it safe: Always get your coins certified by NGC, PCGS, ANACS, or ICG.

I’ve heard about independent certification, and I have some coins I might want to have certified. Lots certification services are reliable, and how do I get my coins certified by them?

As this is written, four organizations which have reputations for strict, consistent grading-and whose coins enjoy great acceptance in sight-unseen trading-are the Professional Coin Grading Service (PCGS), the Numismatic Guaranty Corporation of America (NGC), ANACS, and the Independent Coin Grading Company (ICG). You can write for a list of authorized dealers, or submit coins, as follows:

Professional Coin Grading Service, P.O. Box 9458, Newport Beach, CA 92658
Numismatic Guaranty Corporation, P.O. Box 4776, Sarasota, FL 34230
ANACS, P.O. Box 200300, Austin, TX 78720-0300
Independent Coin Grading Company, 7901 East Belleview Ave., Suite 50, Englewood, CO 80111

Where can I sell some of these pocket-change rarities?

Perhaps the leading market-maker in off-metal U.S. coins is Fred Weinberg & Co., Inc., 16311 Ventura Blvd., Encino, CA 91436.  Be sure to call and confirm the arrangements before sending any coins (the number is 1-818-986-3733).

With certification of coins being so important is there any book I can buy that would explain in clear and understandable terms exactly what standards are used by these various certification organizations?

At press time, August 2004, the only independent  grading service that has issued an authoritative book defining its grading standards is PCGS. Its award-winning , 432-page profusely illustrated book, The Official Guide to Coin Grading and Counterfeit Detection, Second Edition (House of Collectibles/Random House, Inc., $19.95), will help you understand what’s involved in the grading of coins and what factors are taken into consideration when assigning numerical grades. The grading standards are authored by the book’s exceptionally-skilled text author, John W. Dannreuther. I am proud and honored to be the book’s editor and applaud PCGS and random House for this colossal effort.

I have some silver dimes, quarters, and half dollars. All of them are common-date coins, and all are well worn from having circulated. I assume they’re worth just their bullion or metal value. How can I determine what they’re worth?

The rule of thumb is that for every $1 of circulated silver U.S. coins, the value is approximately 70 to 75 percent of the price of a troy ounce of silver on that day. If you have five silver dimes and one silver half dollar-or any other combination adding up to $1-and the price of silver that day is $4 an ounce, you’d probably be able to cash in those coins for $2.80.

Of course, different equations are used for different coins. The formula given here applies only to traditional U.S. silver coins with a silver content of 90 percent. These include the dimes, quarters, and half dollars made before 1965. Kennedy half dollars minted between 1965 and 1970 also contain silver-but only 40 percent. You’ll get less money for these. Jefferson nickels made during World War 11 also contain silver, but in an altogether different composition.

I have about $500 to spend and I want to get involved in buying coins. Were should I start?

High-grade coins – those with grades of at least Mint State-65 or Proof-65 – performed very well in the market’s last big boom – and although their prices have fallen since then, they still hold great appeal. People want coins in the very highest grades they can obtain, or at least in the highest grades they can afford.

Demand in the coin market moves horizontally, not vertically. If someone is collecting a certain kind of coin – Morgan silver dollars, for example – in high Mint State grades and the prices for these coins go up dramatically, that buyer may find it difficult to purchase more Morgan dollars in those grades. But rather than lowering his sights and buying Morgan dollars in lower grades, he’ll probably turn instead to a different kind of coin that’s substantially less expensive – and then collect that series in the same high grades to which he was accustomed with Morgan dollars.

As this is written, one good starting place would be Mint State-66 or Mint State-67 Mercury dimes. Another would be Mint State-66 Walking Liberty half dollars. A third would be Franklin half dollars graded Mint State-66 or even Mint State-67. All of these coins are affordable, all of them have good potential, and all of them are quite scarce in extremely high grades.

With Mercury dimes, for example, there are certain dates for which only five or six specimens have been certified in Mint State-67. Yet some of these coins can be purchased for less than $1,000-sometimes substantially less -in Mint State-67. That’s a tremendous value; you really can’t get hurt when you buy a coin like this.

Is there any one coin that you recommend as the best to buy?

My favorite United States coin of all time is the Liberty Seated quarter. Buy the highest grade you can afford. I like both proof and business-strike examples (the coins the Mint intended people to spend) in grades 65 and above on the 1-through-70 grading scale. Different styles or “varieties” of Liberty Seated quarters were struck from 1838 through 1891.

A “type” coin is a representative example of a particular coin series, but not one of the rarest and most valuable specimens from that series. Experienced collectors and investors have found certain type coins to be the biggest winners. I extend my highest recommendation-in high grades only-to the following: Liberty Seated dimes, quarters, halves, and dollars; Barber dimes, quarters, and halves; Bust dimes, quarters, halves, and dollars; Trade dollars; and nonmodern proof gold coinage. These coins are the blue chips, not the “sleepers,” and have formed the backbone of the market for U.S. coins. But most importantly, these coins are beautiful.

What’s the lowest-risk/highest-reward way to get involved investing in gold coins?

Common-date Type 3 Liberty Head double eagles in grades of MS-60 to MS-62 are low-risk/high-reward gold coin investments as this is written in March 2007.

Type 3 “Lib” $20s are the most popular and most commonly collected coins in this long-running series. They cover its final three decades, from 1877 through 1907. For years, examples in lower mint-state grades have provided just under an ounce of gold for not much more than the price of one-ounce gold bullion coins – but with the added kicker of bonus price potential as collectibles. Not so long ago, these coins were selling for close to $1,000.

All that changed when the one-ounce American Buffalo coins hit the market. While the new coins were selling like hotcakes, the Type 3 Libs were languishing in dealers’ showcases – and their prices started to plunge. Before long, they could be had for little more than melt value. With gold at $600 an ounce, a Lib $20 in MS-60 or 61 might cost you $700.

The premiums have collapsed because people have been spending the money instead on American Buffalo coins, which they find more interesting at the moment. But the value may soon return to these Lib $20s once the novelty and strong initial demand for the Buffalo coins subside. So now might be the time to buy the Libs, while you can get them for just $700 or $750 – including pieces certified by the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation of America (NGC). For that modest sum, you can even get a coin with nice eye appeal that nearly makes the grade of MS-63.

If analysts are right and gold goes up to $800 or $900 an ounce, you’ll end up with a double-barreled winner: a coin whose value rises both as bullion and as a collectible.

How much can a dealer mark up coins sold for investment without getting in trouble with the government?

If you’re selling something that’s not an investment, you can charge whatever the market will bear. For example, if you buy a painting for $500 and sell it for $50,000, that’s not illegal in itself. But if you represent that painting as a good investment, you’ll surely have the watchdogs from the Federal Trade Commission sniffing down your neck, because the market value of that painting would have to go up spectacularly in a relatively short time to come even close to the $50,000 that your buyer was foolish enough to pay for it.

Barry J. Cutler, former director of the FTC’s Bureau of Consumer Protection, says that when he was working for the commission, dealers selling items for investment tended to invite government scrutiny when they exceeded a markup of 100 percent, but that a 50-percent or even 75-percent markup (though this can be pushing it, he says)  usually would escape the FTC’s scrutiny. This doesn’t mean that in private litigation in a civil court, a judge is going to give a dealer his or her blessings for a 75-percent markup – but based on the FTC’s apparent yardstick, a dealer charging 50 percent or even 75 percent is probably free and clear.

Dealer representations can be very important in this area. Often, a dealer will claim to be charging a commission of only 2 or 3 percent when in fact he or she is charging 50 percent–in which case that person is committing fraud. By the way, Barry Cutler is now an attorney at McCutcheon, Doyle, Brown, and Enersen in Washington, D.C.

Why do I have to pay more than the price guides for certain coins?

Coin market analyst Maurice H. Rosen of Plainview, New York, editor and publisher o the prize-winning Rosen Numismatic Advisory, several years ago came up with the term “market premium factor,” or MPF to cover such situations. When you’re purchasing coins, MPF refers to the percentage you’re sometimes required to pay above published price-guide values.

Price guides are reflective of the marketplace, but the marketplace is not necessarily reflective of price guides. If a price guide says a coin is worth $1,000, but that coin is booming in the marketplace, suddenly you might have to pay $1,400, $1,500 or $1,600 to acquire it, even though the previous week’s price guide indicated a market value of $1,000. So if you’re at a coin convention and there’s a particular coin you want, and the market for that coin is hot, just because your week-old pocket price guide says it’s worth $1,000 doesn’t mean you can write out a check for $1,000 to any dealer who has that coin and walk away with it.

If the market is hot, you need to use your intuition – your “market smarts” – in deciding what would be a fair market price for that coin. If the market is really booming, you might even have to pay upwards of $2,000 for that sought-after numismatic treasure.

*     *     *     *

MORE FREQUENTLY ASKED QUESTIONS, WITH THE EMPHASIS ON GOLD (updated Dec. 2007)

Q.   Precious metals, in particular GOLD, are showing strength.  Gold is hovering around $800 an ounce.  In the 1990’s, gold was barely over $250 an ounce. There’s talk about a return of inflation.  Investors fear a terrorist attack on U.S. soil. How does this affect the rare gold coin market?

Domestic monetary inflating and higher gold prices have long served as “economic justification” for a sustained increase in rare gold coin prices.  The current bull market in rare gold coins would be expanded and sustained in the event inflation returns or gold (now around $800 an ounce)—sees a continued impressive rise, especially above the $1,000 level.  Broad demand comes from rare gold coins being perceived as an inflationary hedge and from coin dealers plowing their profits from gold investments back into the rare coin market.  Terrorism fears are bringing investors back to “safe haven” gold coin investments—coins whose values are primarily determined by their gold content.

Q. What does the fear of a crippling terrorist attack have to do with consumers wanting to buy gold coins?

Rare coins have long been viewed as an insurance policy against calamity.  With the continued threat of terrorism looming over Americans, rare coins are being snapped up by jittery investors. Certain rare gold coins contain high precious metals content—a lot of gold. And if a spectacular event were to paralyze the economy, these coins would serve as a store of value and a facilitator of trade and barter. In a severe economic crisis, it might be easier to buy food with gold coins than with paper dollars.

Q. What makes a coin valuable?

There are 3 factors that determine a rare coin’s value:  1) Grade or condition:  The number of nicks flaws and scratches a coin has on it—or doesn’t have on it—plays a key role in a coin’s demand.  Coins are graded on a scale of one to seventy.  One represents a coin so well worn it can barely be identified; seventy represents a perfect coin.  2) Supply or rarity:  The number of coins extant or available has a major impact on a coin’s value.  A coin that is unique is rarer than a coin that has a million examples known.  3) Demand or collector base: The number of collectors that want a coin have an important impact on a coin’s value.  Even if a coin is available in a quantity of a million, it will have a high value if two million persons want that particular coin.

Q.      What’s the difference between a “bullion” coin that has an ounce of gold and a “rare” coin that has an ounce of gold?

A gold “bullion” coin that has an ounce of gold is worth what an ounce of gold is worth—about $800.  A “rare” coin that has an ounce of coin derives its value from collectors and can be worth millions of dollars.  A 1933 Saint-Gaudens twenty-dollar gold piece—that contains about an ounce of gold—sold at public auction about 5 years ago for $7.59 million. The government says that it is the only twenty dollar gold piece dated 1933 that is legal to own.

Q. So you have a new book out from Random House titled SCOTT TRAVERS’ TOP 88 COINS TO BUY & SELL. What’s your Number One winner? And what’s your Number One loser?

The Number One winner is the Type 3 Liberty head twenty dollar gold piece (or “double eagle”) in Mint State or Uncirculated condition. These coins were manufactured by the U.S. Mint from 1877-1907. They each contain about an ounce of gold, are true collector coins, but declined in value after the U.S. Mint introduced its Buffalo gold bullion coin. For a very small amount of money above the intrinsic or melt value of the gold, you can buy a large Uncirculated coin manufactured in the late 1800’s or early 1900’s. When the novelty of the Buffalo gold coins wear off, I expect these Liberty head double eagle gold coins to easily double or triple in value. The risk is minimal, as each coin is worth at least what an ounce of gold is worth. And if gold goes to $1,000 an ounce, watch out—I would anticipate even more impressive price performance.

The Number One loser is gold PLATED coins offered for sale on home-shopping television programs. These shows don’t lend themselves to selling collector coins that are truly rare. Thus, right off the bat, the coins they offer for sale are less-than-prime collectibles. This format is expensive for the sellers, who are pressured to cut corners. Last year, I worked with a nationally syndicated television program that hired two independent laboratories to test some of the platinum “layered” coins offered on those shows. According to the lab results, some of the sets of those coins contained *no* platinum at all.

Q. How does a consumer get started collecting or investing in gold coins?

A consumer has to raise his or her level of knowledge from that of swindler’s mark to that of informed amateur.  This is done by gaining familiarity with grading standards and pricing mechanisms, while slowly making purchases over time.  Book knowledge combined with practical experience will all pay off in the end in a marketplace where “caveat emptor”—let the buyer beware—is an understatement.

Q. What are “certified” coins?

Organizations have been established that independently grade or rate a coin on that one to seventy scale, where one is the lowest and seventy is the highest.  The two leading services are the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation (NGC).  These organizations assign a grade and encapsulate the coin in a sonically sealed, tamper-resistant holder.  Consumers should only buy rare coins that have been certified by a leading grading service; this is the cornerstone of consumer protection in the coin field.

Q.  How can someone who buys a gold coin be certain of getting good value?

Buy pre-packaged U.S. Mint products or coins that are certified by credible, third-party grading services, such as PCGS or NGC, and receive pricing guidance for those coins from a reliable price guide.  If you purchase coins that are accurately graded and fairly priced, you have, for all practical purposes, eliminated the risks associated with acquisition.

Q. With all this talk about buying things online—is a consumer safe buying expensive gold coins through online auction facilitators, such as eBay?  What are the risks?

Consumers should treat online coin purchases the same way they treat mail-order purchases: very carefully.  Purchase only from reputable dealers and buy only coins certified by leading third-party grading services or pre-packaged U.S. Mint products.  Online digital images of coins can be misleading and should not be relied upon.  And beware of shills that bid up the values of coins on behalf of the selling dealer.

Q.  What’s the right way to handle a coin? –and to store a coin?

A coin should be held tightly by its edge between your thumb and forefinger.  Always examine a coin over a soft surface in case you drop the coin.  Never abrasively clean your coins.  And be certain to store your coins in a dry, stable environment and away from airborne particulate matter.

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