PREMIUM QUALITY EQUALS QUALITY PREMIUMS

By SCOTT A. TRAVERS

Minding your p’s and q’s is a sign of good manners and
common sense.
Minding your PQ’s can be a sign of extremely good
judgment–and uncommon investment sense–when it comes to
rare coins.
“PQ” is shorthand for “premium quality”–and frequently,
it translates into very substantial profits for those who
pursue and obtain it in their rare-coin acquisitions.

SHOWN ABOVE: This Premium Quality, hairline-free 1886 Proof Liberty head
double eagle might well re-grade PR65DCAM or higher. It was hand-picked
and sold by Scott Travers to a collector.

In 1989, when the coin market was experiencing
unparalleled increases on a weekly–and even a daily–basis,
premium-quality (PQ) coins were selling for significantly
more than ordinary pieces. This led some market analysts to
question whether the extra cost was justified, or really
would prove worthwhile with the passage of time.
Those doubts were demolished at two recent auctions
where PQ coins took center stage. They changed hands for
prices far in excess of current market levels for ordinary
coins of the same grades–far more percentagewise, in fact,
than the price differentials at the time they were acquired,
which, in many cases, was at or about the last big market
peak in 1989.
The term “premium quality” was coined by Q. David
Bowers, one of the nation’s best known and most respected
coin dealers for more than 40 years. It describes a coin that
is better–often much better–than typical examples in the
assigned grade for the date and mint.
Some words of explanation are in order.
Coin grading is performed on a spectrum or continuum.
Not every Mint State-65 or Proof-65 coin is equal. Some coins
graded 65 on the 1-to-70 scale are high-end 65s–almost 66s.
Other 65s are low-end 65s–not much better than 64s. And many
other 65s are right in between, making them solid 65s on the
spectrum or continuum.
Some years ago, I served as an occasional grader for the
Numismatic Guaranty Corporation of America (NGC), a leading
coin certification service located in Parsippany, New Jersey.
During the time I was there, we used the letters A, B and C
internally to designate whether a given coin was high-end for
its grade, low-end or right in the middle. These designations
did not appear on the tabs that accompanied the coins when
they were encapsulated (or “slabbed”), but the company did
incorporate them in its computerized records.
A high-end or premium-quality coin was referred to by
the letter “A,” a typical coin of the given grade was labeled
“B” and a low-end coin was said to be “C.”
In the late 1980s, “A” coins–those that almost
qualified for the next-higher grade–commanded impressive
premiums.
Let’s say the going price for a typical Mint State-65
example of a certain coin was $1,000 and the Mint State-66
price was $5,000. A premium-quality Mint State-65 specimen
easily might have sold for $2,000 at the time–possibly even
$3,000. In other words, it might have brought two or three
times as much as an ordinary coin of the same grade.
There was considerable debate at the time as to whether
it was prudent to buy coins for $3,000 or $2,000 or $1,500
when those prices were sharply higher than the figures
reflected in standard price sheets–figures that corresponded
to ordinary coins of that grade.
There were persuasive advocates–and arguments–on both
sides of the issue. For my part, however, I always considered
premium-quality coins well worth the extra cost, and I always
encouraged my clients to seek out PQ coins and pay the
additional money.
Some of those clients were glad they did, for when their
PQ coins crossed the auction block in late 1998 at two sales
held–appropriately enough–by Bowers’ firm, Auction by
Bowers and Merena, they realized exceptional prices.
Among the clients consigning coins to those auctions
were Dr. Craig M. Morgan and Dr. Leonard J. Torok, two
physicians with highly discriminating tastes in rare coins
and a shared commitment to buying only the best.
Another client-consignor, who prefers not to be
identified, assembled what I called the “Time Capsule
Collection” because it consisted of high-grade certified
coins–premium-quality coins–that were encapsulated, for the
most part, in the early days of NGC and the Professional Coin
Grading Service (PCGS), when grading standards at both firms
were unusually strict.
Dr. Torok’s collection was sold at an auction in early
September, while the Morgan and Time Capsule collections both
came under the gavel at the same Bowers and Merena auction in
mid-November.
Consider these examples of the prices that were achieved
by premium-quality coins:
An 1877 Liberty Seated quarter graded MS-65 by NGC,
purchased around 1989 for a relatively modest premium over
the Bluesheet price at the time, brought $3,335–nearly four
times the 1998 Bluesheet price of $950.
A 1912 Barber quarter graded Proof-69 by NGC–a
premium-quality Proof-69, if such an animal exists–realized
almost $50,000, at a time when Proof-69 Barber quarters
generally trade for 18 or 19 thousand dollars.
An 1863 Seated Liberty dollar graded Proof-65 NGC went
for $20,700–more than twice the Bluesheet price of $9,250
for a similar coin without the premium quality.
An 1879 Trade dollar graded Proof-66 by NGC sold for
$25,300–more than three times the Bluesheet price of $7,850.
One of my favorite examples was a different Trade
dollar, an 1875-S graded Mint State-66 by NGC. We put a
reserve of about $10,000 on that coin–or the Bluesheet price
for an MS-66 coin of this type, year, mint and grade with NGC
certification. If that coin were perceived to be full MS-67,
its Bluesheet value would be about $30,000. But it ended up
realizing even more than that: an eye-popping $46,000.
A cornerstone of the books I have written, in particular
The Coin Collector’s Survival Manual™, has always been to
advise people to buy premium-quality coins–coins that on
that grading spectrum or continuum appear to be the next-
higher grade, coins which are absolutely magnificent.
In the revised third edition of The Coin Collector’s
Survival Manual™(Bonus Books Inc., $14.95), I wrote as
follows:
“If you came across a magnificent PCGS or NGC MS-65 in
the 1980s, it would have cost you 20 percent to 40 percent
over published bid levels. But in 1994, when this third
edition is being written, the premium on these coins in the
$500 to $1,000 price range is nominal–in some cases, 20 to
40 dollars. It appears that this premium cost factor
fluctuates with market conditions. Also, a number of premium-
quality coins for which you may have paid the 20-percent to
40-percent premium qualify today for a grading service
upgrade. NGC and PCGS graded very strictly during their early
months of operation.”
I then went on to quote a coin dealer who said the
following:
“MS-65 today does not mean what MS-65 meant five years
ago. And in five more years, it could mean something else
altogether. That is why wise coin buyers do not buy coins as
certified products. They buy coins as raw coins that happen
to be accompanied by certification. With a premium-quality
piece, you have a rare-coin investment. With a generic-
quality piece, you have an investment in a certified product.
Grading services have yet to prove their longevity. Rare coin
investments have decades of strong appreciation behind them.”
PQ coins possess inherent potential for enhanced price
appreciation–potential to rise in value faster and more
sharply than typical coins of their grade level simply
because they are, in and of themselves, better coins.
Beyond that, however, two other factors have been at
work in recent years to give them even greater potential.
Those factors are a perceptible softening of grading
standards and a change in market attitude toward coins that
are toned.
Grading standards today are unquestionably softer than
they were in 1989–so much so that significant numbers of
coins that were certified in 1989 at one grade would qualify
today for a grade one point higher, possibly even two points
higher.
I interviewed John Albanese, the founder of NGC, for the
third edition of The Coin Collector’s Survival Manual™, and
he told me that at the very inception of the third-party
certification services, during their first six months of
operation, grading standards at both PCGS and NGC were too
tight.
I interviewed David Hall, PCGS’s founder and president,
on a radio show I had some years ago, and he conceded that a
small percentage of coins graded 66 and above during PCGS’s
first several years might grade higher today upon
resubmission.
For the most part, the coins that were graded too
conservatively in those early days were premium-quality
coins. So PQ coins dating back to that early period are
getting a double-strength booster rocket today as the overall
marketplace gathers momentum.
Changed attitudes toward toning can be viewed as a price
deterrent to toned PQ coins today–but, on the flip side,
it’s a major plus for untoned PQ coins.
During the early years of the Grading Revolution, coins
with attractive toning were graded somewhat more loosely–and
favorably–by both services than brilliant untoned coins. Put
another way, the brilliant coins were graded more tightly.
Today, the pendulum has swung the other way and toning tends
to be viewed more as a possible problem than as a plus.
If you have (or come across) brilliant PQ coins that
were graded in 1986 and 1987 by NGC and PCGS, in particular
by NGC, you might find it extremely advantageous to remove
them from their holders and resubmit them. Coins of this type
that received grades of 65 and 66 during that period might
very well be regraded today as 67 or even 68.
Some of the coins sold by my clients in the two Bowers
auctions were looked upon by prospective buyers with changing
standards and attitudes in mind. And some of those would-be
buyers calculated in advance that the coins would be regraded
not just one but two levels higher–and they factored this
into their bidding. That anticipation does much to explain
why a coin with a Bluesheet value of $10,000 would instead
realize close to $50,000.
The moral of the story is that premium-quality coins do
pay, as long as you end up selling those coins in an upbeat
market.
In a bull market, grading standards loosen. In boom
times, people’s perceptions of coins and the grades of those
coins are not as strict as they are during bear markets or
business-as-usual markets.
In the rip-roaring bull market now under way, my
clients’ PQ coins brought two times–and in some cases three
times or more–their Bluesheet levels.
It pays to buy the best. And when it comes to PQ coins,
it’s well worth the premium to get the extra quality.