DIFFICULT COINS TO GRADE – A GRADER’S TOUGH TEN

DIFFICULT COINS TO GRADE
– A GRADER’S TOUGH TEN

By SCOTT A. TRAVERS

COPYRIGHT © 1988, 2003 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

Coin grading is a subjective process of evaluation —
but it is a consensus of subjectivity which makes it somewhat
objective.
To an outsider looking in, the grading process at
leading grading services is scientific. Graders examine
submitted coins in a circular, computerized room reminiscent
of the Starship Enterprise. A grader can view a coin under a
halogen lamp or under a stereoscope.
The desired result is a consensus grade. And, for a
grader to enter his grade into the computer in order to be a
part of that consensus, he has to carefully scrutinize every
coin that comes his way. Each and every aspect of a coin’s
grade has to be carefully considered. Strike. Luster. Toning.
Surfaces. Eye appeal.
Some coins have to be scrutinized more carefully than
others. At one grading service I worked at, it’s recognized that
coins are graded on a continuum. There are high 65s, low 65s and
right-in-the-middle 65s. At that service, an internal coding is used to
differentiate among these grades. For example, a high-65
would be referred to as MS-65A; a low-end 65 as 65C; a right-
in-the-middle 65 as 65 (or 65B). Sometimes, my 64A is another
grader’s 65C — or vice versa.
This intense scrutiny of each and every coin submitted
to that service and this service’s striving for accuracy and
consistency have made it clear to graders that at that service, all
coins submitted are treated equally. It’s just that some
coins are more equal than others.
Certain specimens are every grader’s nightmare: coins
that could be either 65C or 64A; incuse-design gold coins
that could be either 63A or 64C (with a price difference
between the two of $5,000); and coins that realized mind-
boggling prices at auction but don’t deserve grades
commensurate with those prices.
The 10 types listed here are among the most difficult
coins to grade.

(1) LINE COINS. When a grading service is popular, its
65-or-better grade (or even 64-or-better grade) is
highly coveted. But in order to maximize his profit, the coin
trader likes to pay a 64 price for a coin and send it in
for encapsulation as a 65. Most traders can’t do this, but
some inner-circle high-volume traders can — and do. Some of
these traders have the finest grading minds of our time. And
they use their minds to find and send “line coins” to be
graded.
Line coins are coins that qualify to be graded, say, MS-
64A or MS-65C. Either grade would be fair, but many traders
have paid a price commensurate with the lower grade and are
hoping to receive the higher grade from the service.
On business strikes, it usually comes down to the
quality of the surfaces; this is what determines whether a
line coin gets the next highest grade — although impaired
luster can reduce the coin’s chance for the next grade.

(2) LAW-BREAKERS. If you were to assign a technical
grade of MS-67/64 (the obverse being a 67; the reverse
being a 64) to a coin, any old-timer would tell you that the
overall grade would have to be MS-64, for conventional wisdom
used to be that a coin couldn’t be assigned an overall grade
that was higher than the lowest grade of any one side.
Wrong. The overall grade might well be MS-65. The
obverse can “carry” a coin. But if it were the other way
around — MS-64/67 — the final grade probably would be MS-
64.
An MS-65/65 coin with some weakness of strike might be
graded MS-64 — or lower — to reflect marketplace
standards. The service I worked at grades in such a way that coins
can be traded sight unseen — without offer-makers even looking at them.
And a weakly struck coin graded MS-65 could restrict the
fluidity of the system.

(3) SUPER COMMON COINS. Some unscrupulous dealers have
been attaching hefty price tags to coins which are
common but have high grades. For example, I saw one dealer
at a show with a 1964 Kennedy half dollar graded Proof-67 by
a leading rading service for which he was
asking $500! The coin is worth a mere fraction of that price.
When someone sends in a common coin worth $4 — and has
paid $20 to get it graded — that modern coin with a 67 or
68 grade is not going to be sold for $5 or even $25; often,
the asking price is going to be in the hundreds!
I resent giving these modern, common coins wonder-coin
grades — even if they are deserving of them.

(4) INCUSE-DESIGN GOLD. Coins with incuse designs are
difficult enough to grade. Gold retains its mint luster
indefinitely, and these gold coins have characteristics that
make it difficult to tell whether or not there is wear on the
high points.
But let’s say you’re looking at a $5 Indian submitted
for grading. You examine it carefully and are certain it has
no wear. In fact, it looks like a 65. You’ve seen many
dealers pay 65 money for coins identical to this one, but you
wouldn’t want it for 65 money. It grades 64A or 65C. You
think the 65 grade is probably fair. Then you think about the
economic consequences: The 64 price is $5,400; the 65 price
is $15,500!

(5) COINS WITH SENSATIONAL EYE APPEAL. If you have a
magnificent proof Barber quarter — one with a cameo
contrast between its watery fields and snow-white devices —
but the coin has a tiny hit on the obverse, can you still
grade it Proof-65? Probably. Personally, I don’t like seeing
the 65 grade assigned to such coins, but it’s the consensus
that rules.
If you have a proof Liberty Seated half dollar with
light hairlines that make it a technical 63A, can phenomenal
toning make it a 64? Yes, as long as the eye appeal isn’t
counted for more than one-quarter of a point.

(6) RARE DATES. If you come across a shimmering 1936
Walking Liberty half dollar in proof (a relatively rare
coin) and it is identical in every respect to 50 1942 Walking
Liberty halves which were just graded Proof-64, does the 64
grade apply to the 1936, too? If the ’36 is a technical 64A,
compensation for the date by one-quarter of a point is
acceptable. Thus, the Proof-65 designation is acceptable.
Compensation for rarity is satisfactory, as long as you
don’t go overboard and upgrade a technical MS-62 coin to MS-
65.

(7) SMALL COINS. Graders spend more time examining
small coins than any other kind. We have to be extremely
careful about looking for imperfections, and even have to
exercise more care in holding these coins. This is not to say
that larger coins don’t get complete consideration; it’s just
that smaller coins require closer scrutiny.
A tiny mark on a three-cent silver piece is weighted
differently from a mark of the same size on a Morgan dollar.
The three-cent silver is tiny itself, and even a tiny mark
can be a considerable detraction.

(8) AUCTION COINS. A public auction serves as an
important symbolic representation of the concept of
consensus grading. If a dozen major players all are willing
to pay the MS-65 price-guide level for a given rarity,
chances are that its marketplace grade is MS-65.
But what happens if that MS-65 looks like an MS-64A?
Personally, I would grade it MS-64, even if I knew what it
brought in the auction. But auction prices realized can and
do have an effect, even if it’s a subconscious one, on the
grader’s judgment.

(9) PROBLEM COINS. Coins with PVC on them or coins with
imperfections or coins that are bent or tampered with —
these are “no-grade” coins.
Sometimes, however, it becomes a problem to determine
whether a coin is, in fact, a no-grade, or whether it simply
should have its grade lowered to reflect the imperfection.
For example, a Morgan dollar which under normal circumstances
would grade MS-64 might be assigned the grade of MS-62 or MS-
63 because of a rather eye-catching ding on its rim.
But a Walking Liberty half dollar which normally would
grade MS-67 but has a deep gouge on the obverse — a gouge
so deep that it nearly travels through to the other side —
would be no-graded.

(10) PERSONAL COINS. Some dealers who have graded at
grading services say they know the grading standards are tight, but
they have no problems with the grades assigned — except the
grades assigned to the coins which they themselves submit
(which they, of course, are not allowed to grade).
It all comes down to the old axiom: If it’s yours, it
appears just a bit nicer than the coin which belongs to
somebody else. But the grading process at the leading services is
designed to maximize the use of idependent, arm’s-length
grading to assure fair and just grading opinions for everyone.

THE 10 MOST IMPORTANT GRADING TIPS

THE 10 MOST IMPORTANT GRADING TIPS

By SCOTT A. TRAVERS

COPYRIGHT © 1994, 2003 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

With the advent of independent third-party
certification, many coin buyers and sellers thought all their
grading worries were over.
No longer would they have to scrutinize each coin they
bought and sold to determine its level of preservation. No
longer would they need to concern themselves with grading
pointers, grading tips, grading advice–these mattered now
only to the experts at the leading certification services.
From now on, all Mint State-65 coins would be created
equal, as long as they got those grades from the Professional
Coin Grading Service (PCGS), the Numismatic Guaranty
Corporation of America (NGC) or ANACS.
In short, buyers and sellers no longer would need to
think for themselves and exercise their own common sense.
This is not entirely true.
Certification services have made–and are continuing to
make–tremendous contributions to standardizing and
stabilizing coin-grading standards. In the process, they have
dramatically reduced the risk that buyers might suffer
significant financial loss because they purchased coins that
were overgraded.
But certification services aren’t infallible. And though
they strive mightily for consistency, they–like the coins
they grade–inevitably fall short of total perfection. Some
coins graded Mint State-65 by PCGS, NGC or ANACS are indeed
better than others; some might even qualify as Mint State-66.
Others, by contrast, might get a lower grade if broken out of
their holders and resubmitted.
Over a period of time, subtle shifts in standards or in
their application can result in the existence of whole groups
of coins that are undergraded or overgraded relative to the
rest of the coins from a given grading service.
For example, in 1994, David Hall, founder and president
of PCGS, admitted on my radio program–a weekly talk show
called One-Hour Coin Expert–that during its early years,
his company was reluctant to assign the grade of Mint State-
or Proof-68. He candidly agreed that a number of the coins
graded Mint State- or Proof-67 by PCGS during that early
period might well receive a grade of 68 if submitted today.
And that could increase their current market value by many
thousands of dollars.
Just because a coin is in a holder and just because that
holder carries a grade assigned by a certification service,
there’s no reason why you–as a buyer or seller–can’t and
shouldn’t resubmit that coin to your own personal grading
service … your own common sense and your own store of
knowledge … and render an expert judgment of your own.
Knowledge is more than power; in the case of rare coins,
it also can mean enormous profit.
With that in mind, here’s my personal list of the top 10
coin-grading tips of all time:

(1) Check the high points for wear.
Even if a grading service certifies a coin as Mint
State-63, that doesn’t mean it won’t come back with a lower
grade–possibly even AU-58–if you resubmit it. A coin should
stand on its own merits; you should buy it for itself and not
for the plastic.
Look at the very highest points of the coin. If they’re
lighter in color than the rest of the coin, or if you see
friction, the coin may not be mint-state; it may be about
uncirculated.
Telltale signs of wear are indicated by the color of the
high points. On coins made of copper, the high points after
friction are dark brown. On coins made of nickel, the high-
point color after friction is dark gray. On coins made of
silver, the color is dull gray. And on coins made of gold,
the high-point color after friction is dull, dark gold.

(2) If it’s ugly, don’t buy it.
Use your common sense. Blotchy toning, obvious scratches
and spots which penetrate the surface of a coin are
unattractive. And if a coin appears unattractive to you, it
probably will appear that way to other people, too.
Therefore, you should stay away from it.
Even coins with very high grades–coins which have been
certified as 67, 68 or 69 by a major certification service–
are subject to personal taste, and you should always rely on
yours. Rare-coin grading is subjective, and so is the beauty
of coins.
Among the few characteristics which is universally
attractive is concentric circle toning. If you observe this
on a coin, you should view it as a highly positive feature.

(3) Examine grade-sensitive areas.
Some flaws are more obvious than others. On Morgan
silver dollars, for example, a scratch on Miss Liberty’s
cheek is immediately apparent because that part of the coin
is so smooth and open. By contrast, a scratch in her hair
wouldn’t be noticed as readily because it would be
camouflaged by the intricate details in that portion of the
design.
High, exposed areas such as Miss Liberty’s cheek are
said to be “grade-sensitive,” and you should be more hesitant
to purchase any coin with an imperfection there–even though
that coin may carry a grade of Mint State-65 or Proof-65 or
above from PCGS or NGC.
If you have a choice between one coin graded Mint State-
66 with a scratch on the cheek and another coin in the same
grade without that scratch on the cheek, always opt for the
latter. Everything else being equal, it’s always best to
purchase coins whose flaws are in non-grade-sensitive areas.
Grade-sensitive areas for all the major U.S. coin series
are identified and illustrated–with color grading maps–in
an excellent book by James L. Halperin called How to Grade
U.S. Coins. To underscore my enthusiasm for this book, I
wrote its introduction.

(4) Look beneath the toning.
This is probably the most important point of all. It’s
also the easiest way to determine whether a coin has
artificial toning.
Toning can cover up a multitude of imperfections–
scratches, hairlines, tooling, thumbing and chemical
alteration, to cite just a few. Many times, coins with
imperfections are artificially retoned to conceal these
flaws. By examining these coins closely under a magnifying
glass, you can detect not only the hidden imperfections but
also the artificial toning.

(5) Examine every coin under a halogen lamp or a high-
intensity pinpoint light source.
When looking beneath the toning of a coin or otherwise
searching for imperfections, it’s essential that you use the
right kind of lighting. I first pointed this out in an award-
winning article published in COINage in 1979. I later
elaborated on this in my best-selling book The Coin
Collector’s Survival ManualTM.
A halogen lamp is especially beneficial when looking at
proof coins. It will help you spot hairline scratches, which
can detract considerably from a proof coin’s overall grade. A
tensor light is adequate for mint-state business-strike
coins.
Ordinary light sources such as floodlamps or bare
filament lights–the kind commonly used in chandeliers–make
coins appear more attractive than they actually are. For that
reason, if you’re looking at coins at an auction-lot viewing
session, you should always make sure there’s a halogen lamp
or a tensor light source nearby.

(6) Resubmit upper-end coins–coins which are high-
quality for the grade–and coins graded 67 by PCGS.
You stand a reasonably good chance of getting a higher
grade if you resubmit such coins–especially if you acquired
them in 1986 and 1987, when the grading services were
extremely tough in assigning grades.
As I mentioned earlier, David Hall has publicly admitted
that a number of PCGS coins graded 67 a few years ago might
well come back today at a higher grade. The difference in
price between a 67 and its 68 counterpart can be tens of
thousands of dollars–so this could represent a $20,000 gift
for you, just for taking the trouble to crack a coin out of
its holder and resubmit it.

(7) “Read” every coin.
This is a point on which I elaborate in the The Coin
Collector’s Survival Manual™. Looking at a coin is similar to
proofreading a letter. And individuals who possess book
knowledge combined with practical experience at buying,
selling and trading coins have learned how to look
at a coin and size up its flaws rather quickly, just as
expert editors have learned how to scan a manuscript for
errors and typographical mistakes.
Often, a coin’s imperfections won’t be noticeable at a
glance, or even after somewhat closer perusal by an unskilled
observer. This may happen, for example, when a coin has one
feature so overwhelmingly attractive that it causes you to
lose sight of everything else. Let’s say you’re shown a
Saint-Gaudens double eagle with blazing golden luster; the
luster may be so intense that it causes you to overlook a
bump or a ding on the rim, which in turn might cause the coin
to be downgraded.
You should learn how to read all the key information on
every coin you handle and properly identify all the
imperfections. Don’t be dazzled by any one feature of a coin,
no matter how attractive it may be, to the point where you
miss important details in the “fine print.”

(8) Look for hairlines.
A proof coin with overwhelmingly beautiful toning can be
powerfully appealing. And, to the naked eye, its surfaces may
appear pristine and original. But even on gorgeous proofs
such as this, and even on coins in very high grades, you may
very well find hairline scratches–and the number of hairline
scratches is a very important element in determining the
grade of a proof coin.
Once again, I suggest that you consult The Coin
Collector’s Survival Manual™. The book contains excellent
photographs illustrating hairlines on a proof coin. These
photos, which noted numismatic researcher and author Kenneth
E. Bressett was kind enough to provide to me, are the best of
their kind I’ve ever seen.
Spotting hairline scratches is easier on brilliant
modern proofs–proof Mercury dimes, for example. It’s
somewhat more difficult on older coins with heavier toning–
say, Liberty Seated half dollars from the 1880s with
concentric-circle toning. On coins such as these, the toning
may cover the scratches.

(9) Beware of the rub.
Checking for wear on the high points of a coin is
relatively easy–and that’s a good thing, since wear, after
all, is the single most crucial factor in determining grade.
Detecting rub on a coin is considerably more difficult, for
rub is far more subtle. It’s also far more hazardous to the
health of that coin.
As the term suggests, a “rub” is a small area on a coin
–possibly no bigger than a thumbprint (and possibly caused
by a thumbprint)–which bears evidence of friction, showing
that the coin has been rubbed. The effect of such a rub can
be devastating. Suppose you had a gem, pristine, magnificent
coin, blazing with luster, and just one time a perspiration-
soaked thumb rubbed ever so slightly across its surface. Even
if the coin otherwise might have been graded 65, 66 or 67,
that rub could knock it all the way down to AU-58.
To identify rub, you need a good, solid tensor or
pinpoint-light source, and you have to tilt and rotate the
coin under that lighting. You then need to envision a pencil-
drawn circle fully formed. If the coin reflects light in a
fully circular pattern, it’s probably mint-state. But if it
reflects light in a generally circular pattern but the
pattern is disturbed in any way, then the coin may have a
rub. Using the same analogy, that pencil-drawn circle would
have just a couple of segments erased. The Coin Collector’s
Survival Manual™ illustrates this with excellent photographs.

(10) Remember that grading standards have changed since
the early 1980s.
A lot of people still own coins which they purchased in
the early 1980s and which were graded at that time by
reputable dealers or by the ANA Certification Service. But
many of these people tend to forget–or never even knew–that
grading standards have tightened since then and become more
consistent.
Even coins purchased from reputable dealers in 1981,
1982 and 1983 may not meet the rigorous, consistent,
impartial standards established in the late 1980s and being
observed today by NGC, PCGS and ANACS.

There you have them: my 10 top coin-grading tips. They
may not make you rich, but they’ll go a long way toward
helping you avoid losing your shirt!

GET CRACKING ON ‘CRACK-OUTS’

BY SCOTT A. TRAVERS

COPYRIGHT © 2006, 2007 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

Safecracking can be highly lucrative for skilled professional burglars. A different kind of “cracking” can be equally as profitable for knowledgeable professional numismatists who understand the finer points of grading rare coins – and unlike the kind involving safes, this one is perfectly legal.
“Crack-out” is a term of art that refers to getting certified coins upgraded by either removing them from their plastic grading-service holders and resubmitting them as uncertified or sending them in while still in their holders under a variety of grading service tiers in anticipation of upgrades.
The “crack-out game” was spawned by the Grading Revolution of the late 1980s, when encapsulation – or “slabbing” – of rare coins first became a force for dealers and collectors to reckon with. We soon discovered that by removing certain coins from their grading-service holders and resubmitting them to the same service or a competitor, we could get them recertified at a higher grade level, increasing their resale value by hundreds, even thousands of dollars. There were – and are – risks, of course, to removing a coin from its holder. It could get a lower grade the second time around, resulting in serious loss instead of gain. Or, horror of horrors, it could get body-bagged and permanently “no graded” as a result of doctoring the grading service did not notice the first time around-and that we didn’t recognize before cracking the coin out for resubmission. But those of us who have mastered the game play it extremely well, and our miscalculations are more than compensated for by upgrades.
The most obvious type of crack-out – and the one that gave the crack-out game its name – is to pry open a grading-service holder, remove the coin inside and resubmit it as a “raw” coin, as if it had never been graded in the first place. My personal experience suggests that this is the best way to maximize many potential upgrades. It isn’t without significant risks, and it also isn’t the only way to play this game.

CROSSOVERS AND REGRADES AT NGC AND PCGS

Another approach is to leave a certified coin in its holder and take advantage of one of the “crossover” or “regrade” programs offered by the major grading services. The Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation of America (NGC) both provide such programs.
NGC and PCGS offer a “crossover” service that lets you send either entity an encapsulated coin graded by another grading service. (Other grading companies offer this as well.)
NGC writes: “Coins will be removed from their holder[s] only if they can be graded at the same or higher than your specified minimum grade[s]. You may not request a higher minimum grade than is on the current holder.”
According to PCGS: “We will grade the [coin] and put [it] in a PCGS holder only if the PCGS grade meets or exceeds the other grading company’s grade (unless specifically instructed differently by you). You cannot specify a higher minimum grade. If the PCGS grade is lower than the other grading company’s grade, we will return the coin to you in the original holder. You will be charged the full grading fee even if your coin does not cross.”
NGC and PCGS also offer a “regrade” service for coins graded by each respective entity that you would like to have regraded at a higher grade, but not risk having downgraded: You may submit NGC coins in their holders to NGC and PCGS coins in their holders to PCGS.
I have heard favorable comments about the crossover and regrade programs. Submitters using these programs report success in getting coins upgraded. It’s essential to choose coins that are candidates for upgrades – meaning either undergraded or premium-quality coins within the original grade level. A coin that ranks near the top of the spectrum for Mint State-64 might well come back as MS-65.
Certain series have idiosyncracies that make them hard to grade. The Indian Head Half Eagle and Quarter Eagle fall under this heading because their incuse (or recessed) designs require an entirely different approach to grading from normal raised designs. Those of us with expertise on grading these two series have a good chance to reap a windfall by taking advantage of inconsistencies by the grading services. After all, these coins pose a major challenge for their graders, too.
Despite the satisfaction some have expressed with crossovers and regrades, both of these programs provide less potential for achieving an upgrade – especially a significant one – than removing a coin from its holder and resubmitting it “raw.” They also entail virtually no risk, and the only downside is the grading fee – typically $100 when done on a walk-through basis at a coin show – and this would be recouped many times over if even one of the “right” coins were upgraded.
In theory, the graders at PCGS and NGC are supposed to disregard the number on a holder – even make an effort not to look at it at all. However, because they can’t see a coin completely through the plastic in the holder, people tend to be gunshy about raising the grade too much – maxing it out, so to speak. Either they’re just not confident about missing a hard-to-see flaw, perhaps on the rim, or they prefer to play it safe and err on the conservative side. Either way, the temptation is great to sneak a peek at the coin’s original grade.
Dealer Steve Contursi says he is “confidently certain” that grading services sneak a peek at the original grades of coins submitted in slabs. Contursi certainly must believe that because he recently returned to PCGS 13,535 of its inserts, representing hundreds of millions of dollars’ worth of high-end coins he cracked out of slabs since 1986. Among the inserts from PCGS coins that Contursi returned were: 42 certified 1879 and 1880 $4 “Stella” pattern Gold pieces with a combined estimated value of over $5 million; 130 Round and Octagonal 1915-S Panama-Pacific International Exposition $50 Gold Commemoratives valued at over $5 million; and 168 High Relief 1907 Saint-Gaudens Double Eagles valued at over $3 million.
The returned inserts were part of a philanthropic promotion for the American Numismatic Association, and PCGS used the opportunity to improve the accuracy of its population reports in the process.

CRACKING COINS OUT OF SLABS

Most of the coins I know of that received substantial upgrades were physically cracked out of their holders before resubmission. In some cases, the same coins have been resubmitted both ways – in and out of their holders – and did much better as crack-outs than as crossovers and regrades. In one case, one of my clients had a truly magnificent 1881-S Morgan Dollar – a coin with beautiful toning – that had been graded MS-64 by NGC in 1987, when grading standards were very strict. The client didn’t want to crack it out and resubmitted it for an upgrade in the holder. It was upgraded to MS65.ÿSubsequently, I cracked it out of the “65” holder and resubmitted it again as a raw coin – and sure enough, it was then upgraded again to MS67.ÿThis helps explain why I favor playing the crack-out game the traditional way – by cracking the plastic.
Several years ago, I learned informally of a passive form of crack-out that also resulted in an upgrade. I had sent a group of coins to PCGS for reholdering because their “slabs” were damaged or scratched, and one of these coins, in a cracked holder, caught the eye of a grader who felt it was undergraded. Even though I never submitted that coin to be upgraded, it came back in a higher-grade holder.

The crack-out game has gotten tougher and it would be a serious mistake to think that you can get a coin upgraded with little or no trouble and make yourself a quick return of several thousand dollars. For one thing, coin “doctoring” is much more prevalent today, so doctored coins – those artificially enhanced to look better than they really are – turn up in coin holders more frequently than in the early days of certified grading. Then, when such coins are removed from their holders and examined more closely, the coins may be not only downgraded but no-graded.
The greatest downside of cracking out a coin today is that you might never be able to get it back into a holder. In the days before doctoring became so widespread, there was really only a one- or two-point downgrade risk. Today you may crack a coin out of a holder in hopes of getting it upgraded and end up never being able to get it graded again at all.
Jim Halperin is one of the most successful dealers in the nation at getting coins upgraded. He and Steve Ivy, his fellow co-chairman of the board at Heritage, together own 24.254% of non-voting NGC stock. (That number is current as of February 15, 2005.) This chart lists samples of Halperin’s favorite upgrade coins. Halperin says in cracking out a coin, he considers the downside as well as the upside.

Upgrade Winners

Downgrade

Target Buy

Target Upgrade

Coin

Service

Grade/Bid

Grade/Bid

Grade/Bid

1923-S $1

NGC/PCGS

MS-63 $55

MS-64 $255

MS-65 $4,500

1924-S $1

NGC/PCGS

MS-63 $450

MS-64 $1,250

MS-65 $7,200

1928-S $1

NGC/PCGS

MS-63 $455

MS-64 $1,190

MS-65 $14,250

1883-S $20

NGC/PCGS

MS-60 $645

MS-62 $1,500

MS-63 $9,500

88 CRACK-OUTS

Maurice Rosen, publisher of the Rosen Numismatic Advisory, agrees that the greatest upgrades come from actually cracking coins out of their holders – especially NGC and PCGS holders from the late 1980s, when standards were tight, resulting in many coins that were seriously undergraded by comparison to most coins graded later.
This spring, Rosen submitted a group of 88 common-date Saint-Gaudens Double Eagles to PCGS for regrading, and achieved remarkable success. More than half the coins were in PCGS holders, while the rest had been graded by NGC. All were cracked out of holders for certified coins graded in the late 1980s, so they not only were graded strictly but also weren’t subject to the same doctoring risk as coins that were graded more recently.
The coins, dated 1924 through 1928, received upgrades averaging 1.52 points. Here’s a brief summary:

Two MS-61 coins ($635) made MS-64 ($855) total increase in Bid: +$440

Two MS-62 coins ($685) made MS-63 ($740) +$110

Fourteen MS-62 coins ($685) made MS-64 ($855) +$2,380

Two MS-62 coins ($685) made MS-65 ($1,230) +$1,090

Two MS-63 coins ($740) remained MS-63 ($740) unchanged

Thirty-six MS-63 coins ($740) made MS-64 ($855) +$4,140

Twenty-six MS-63 coins ($740) made MS-65 ($1,230) +$12,740

Four MS-64 coins ($855) made MS-65 ($1,230) +$1,500

Nothing was downgraded +$22,400

HOW TO CRACK-OUT COINS FROM SLABS

When cracking a coin out of its grading-service holder, always use caution, and wear goggles to protect your eyes. Crack-out practitioners are careful to also protect their fingers. Remember, too, that you can always crack a coin out, but you cannot put it back into a holder once it has been cracked. So be absolutely certain in advance of cracking any coin out of its holder that this is what you want to do.
A heartbreaking mistake can result from cracking an older holder, when you assume the coin is undergraded, only to find that the services will no longer grade that coin because it was doctored in a manner that is recognizable today, but wasn’t back then. So you will have not only lost the advantage of the old holder premium, but you will have a coin that is now ungradable.
An NGC holder comes apart after a solid hit by a flat hammer on each edge. After no more than two twists, the holder should easily separate.
PCGS holders can be opened by using sheet metal nippers-a pliers-type tool with the cutting edge perpendicular to the handle. Cut the holder on the edge across from the coin, and the holder breaks in two. The insert ring with the coin will then slide out.
For removing coins from any type of slab, a bandsaw can be used. The coin is left sandwiched in the holder so you don’t have to handle it. Persons who use this method make a few straight cuts away from the coin. This leaves small squares of plastic on each side of the coin which lift off.
The crack-out game is no sure thing, and playing it requires a high degree of skill, savvy and guts. But while winning may be harder than it used to be, the fruits of victory can be very sweet indeed.
Remember, there’s more than one way to skin a cat or crack a coin!

PRICING: THE NEW CORNERSTONE OF CONSUMER PROTECTION

By SCOTT A. TRAVERS

COPYRIGHT © 1994, 2003 BY SCOTT A. TRAVERS ALL RIGHTS RESERVED.

In reviewing the new edition of my mass-market Dell paperback book, The Insider’s Guide to U.S. Coin Values, COINage magazine Senior Editor Ed Reiter likened its listings to a popular television game show. “Here, as on TV,” he said, “the price is right.”

The Price Is Right is more than just the name of a long-running TV game show. It’s also the name of the game in the rare coin marketplace today.

Pricing–fair, honest, accurate pricing–is the cornerstone of consumer protection for those who purchase coins in the current market.

At first glance, this may seem self-evident: The key to getting good value is making sure you don’t overpay. In years gone by, however, coin buyers’ biggest concern wasn’t pricing as such, but rather authentication and, more recently, grading.

In the early 1970s, counterfeit and altered coins posed very real threats; a wave of such material had poured into the marketplace, undermining consumer confidence and jeopardizing the stability of the market and even the very future of the hobby.

The American Numismatic Association responded to this threat in 1972 by establishing the ANA Certification Service (ANACS) to determine the authenticity of coins that were submitted for its review. As the decade wore on, it also sponsored well-attended counterfeit detection seminars, initially conducted by crusading ANA President Virgil Hancock.

Within a few years, counterfeit and altered coins subsided as burning issues–only to be replaced by a new overriding concern: the scourge of overgrading. Again the ANA reacted vigorously, adding grading to the services provided by ANACS in 1979. This calmed the concern for a time; by the mid-1980s, however, grading inconsistencies had caused the smoldering problem to flare up anew.

This time, the response came from the dealer community. In February 1986, a group of coin dealers led by David Hall announced the formation of the Professional Coin Grading Service to combat the grading problem through the use of such innovations as consensus grading and encapsulation of coins in sonically sealed, hard plastic holders. The “slabbing” revolution had arrived.

Shortly afterward, John Albanese broke away from PCGS to establish the Numismatic Guaranty Corporation of America (NGC), and since then these two companies–along with ANACS– have worked diligently to lessen coin buyers’ concerns about grading.

It would be nice to report that coin buyers’ worries are now at an end. Unfortunately, though, the 1990s are witnessing a new kind of assault on the coin market’s integrity and the pocketbooks and purses of those who purchase rare coins. This time, the assault is a frontal one: Instead of defrauding customers by selling them counterfeit or altered coins … or cheating them by overgrading coins, and thus inflating their cost indirectly … at least one unscrupulous dealer brazenly overcharged them simply by pricing very rare coins at a multiple of established market levels.

As a longtime consumer advocate, I have viewed this development with alarm. Indeed, it was this concern that helped me determine the structure for The Insider’s Guide to U.S. Coin Values. Other fine price guides exist–some whose earliest editions date back many years. But none of the other existing books adequately deals with crucial realities of the current coin market.

In The Insider’s Guide, I strive to provide across- the-board listings for rare certified (“slabbed”) coins in high grade levels–the kinds of levels buyers routinely encounter in the marketplace of the Nineties and the kinds of grades to which other annual price guides don’t assign values. For example, try to find values for Mint State- and Proof-63 and 65 Seated Liberty dollars by date in any other annual price guide.

Theoretically, at least, coin consumers don’t need the same degree of education and knowledge today as would have been advisable just a few years ago. They don’t need to be able to tell whether a given coin–let’s say a high-relief Saint-Gaudens $20 gold piece–is counterfeit or real, or whether its condition is mint state or about uncirculated. With certified grading, those ballpark judgments have been made by experts, and the non-expert buyer can have a reasonable degree of confidence in the accuracy and market acceptance of their conclusions.

One thing the general public does need, however, is an accurate price guide. Without it, they still can be ripped off through the simple, straightforward strategem of being charged far more than the coin is worth.

An accurate, readily available price guide is the single most important consumer protection tool in today’s coin market. The educational seminars of years gone by, where collectors learned the basics of counterfeit detection and grading, no longer loom as large as they did before. They still provide useful information, and those who have the time and inclination will benefit from attending them. Similarly, books dealing with these subjects are still well worth reading. But the certification services have removed a good deal of the risk from buying coins, obviating the need for buyers to be as knowledgeable on authentication and grading.

In much the same way, a thorough, readily available annual price guide serves as the surrogate expert on the value of the coins in its listings, allowing the average consumer who has no access to trade periodicals to determine ballpark values for very rare certified coins.

A number of different elements come into play in determining the value of a coin, and also in compiling a coin price guide. I drew upon all of these in formulating “The Insider’s Guide.”

Appraising–or pricing–a coin takes knowledge and skill, of course, but it also involves a degree of intuition. Experts develop this by trading coins extensively for long periods of time.

The value of a coin is determined by the interrelationship of three basic factors: the grade, the supply and the demand. The higher the grade, the lower the supply and the higher the demand, the greater the value.

“Grade” refers to the coin’s level of preservation: how many nicks or scratches or other flaws it has. Coins are graded on a scale of 1 to 70, with higher numbers signifying higher grades. The 1-to-70 scale is the numismatist’s shorthand way of referring to coins.

Supply is the number of specimens available. Among the most important reflections of supply in the current marketplace are the population and census reports issued by the leading grading services. PCGS and NGC issue these reports on a regular basis, and they indicate how many coins have been certified in the various grade levels by the service in question.

These reports are very helpful, but they’re also less than perfect, because they fail to measure the effect of resubmissions. Often, dealers will send the same coin to a grading service over and over in hopes of receiving a higher grade. If the same coin is submitted 20 times, the population or census report will indicate that 20 different coins have been graded, not that just one coin was graded 20 times, unless the submitter is conscientious enough to return the holder inserts to the grading service.

Demand refers to the number of people who desire a particular type of coin. A coin may have a mintage of only 1,000, but if there are just 500 people who want it, its value may not be especially high. On the other hand, a coin with a mintage of nearly 500,000–the 1909-S VDB Lincoln cent, for example–may have a million people pursuing it, and therefore may command a substantial premium.

Compiling a yearly price guide requires good insight into current market trends as well as strong forecasting skills. Consider the case of the 1881-S Morgan dollar. Since 1989, we’ve seen lessening demand for this particular coin in Mint State-65 condition. At the same time, the supply has actually increased because more specimens have been graded by the certification services. Thus, when I put together The Insider’s Guide to U.S. Coin Values (Dell, yearly, $6.99), I priced this coin conservatively, reasoning that the trends and future expectations both were bearish.

Assigning accurate values to common-date gold coins is particularly difficult months in advance, since these are tied to gold bullion prices, which can be highly variable. It’s hard to predict what gold is going to do even day to day–so figuring what it it may do from one year to the next, and coming up with reasonable fair-market values, is very difficult.

For accurate price information on a week-to-week basis, I highly recommend The Certified Coin Dealer Newsletter, a weekly listing published in Torrance, California.

For general information on how coins are bought and sold, as well as ballpark figures on the values of rare coins, The Insider’s Guide is extremely helpful–and it really is invaluable for investors buying high-grade, high- priced coins: It’s the only annual price guide currently available that’s singlehandedly authored by a full-time dealer.

How important is pricing to coin consumers today? We got dramatic evidence some years ago in a court case where the U.S. Department of Justice and U.S. Attorney brought suit against a coin dealer for allegedly engaging in fraud by grossly overpricing coins represented to be a good investment.

That dealer’s trial revealed many instances where coins graded by his firm had been overpriced astronomically. But if the consumers who bought these coins had simply purchased a price guide–right off the shelf at their local bookstore–for $5 and looked at the prices, they might never have been victimized.

It appears that all or most of the coins sold by that coin dealer had been certified by either NGC or PCGS. The fraud alleged by the government was based on overpricing.

In one case, for example, testimony showed that in July 1990, that dealer sold an 1894-O Morgan dollar graded Mint State-65 for $209,200. NGC founder John Albanese, who appeared as an expert witness for the government, testified that at the time of that sale, the coin’s fair market value was $40,000–less than 20 percent of what the dealer charged.

In December 1990, the dealer advised his client that the coin had increased in value to $607,200. Albanese testified that on the contrary, the coin had actually gone down in value in the interim and was then worth just $30,000.

Here’s another example: In August 1990, that dealer sold an 1890-CC Morgan dollar graded Mint State-65 with a tail bar imperfection for $203,150. Albanese estimated that at the time of that sale, its value was a mere $11,000. In December 1990, the dealer told the client the coin was worth $289,310. Albanese’s appraisal for December 1990: $6,000.

Price guides are clearly becoming the new cornerstone of consumer protection. Consumers who are willing to go out and spend $5 on a good price guide can prevent this type of fraud from happening to them.

Let’s take a look at one more example from the trial: In July 1988, that dealer sold an 1889 Morgan dollar graded Mint State-65 Deep Mirror Prooflike for $39,440–and in September 1991, he told his client the coin had nearly doubled in value, to $78,000. Albanese placed the value of this coin at $3,500 in July ’88 and $4,000 in September ’91. Again, the overpricing was enormous. And again, it could have been detected readily by checking a price guide.

It’s helpful to understand what kind of people buy rare coins. I know it was helpful to me in compiling the prices for The Insider’s Guide to U.S. Coin Values.

The rare coin market is really a spectrum made up of different kinds of buyers. Let’s put the collector on the lefthand side of this spectrum and the investor on the right.

The collector tends to buy coins by date and mint mark, type coins, coins which are unique and coins in unusually high levels of preservation. Traditionally, the investor has bought coins which are fungible and generic–and we can often predict with some degree of precision what the investor climate is going to be like for such coins. It’s more difficult to forecast the collector marketplace. High-grade type coins tend to be collector/investor coins, pursued by both collectors and investors.

When you go to sell your coins, there are several kinds of offers you may receive. I discuss these in The Insider’s Guide:

The lowball offer: You show a dealer a coin with a market value of $5,000 and the dealer offers you 300 bucks.

The fair-market wholesale offer. This is the price at which a coin would trade between two reasonably intelligent and knowledgeable professionals, both of whom are under no compulsion or compunction to consummate the transaction. This is generally the price a coin would bring on the dealer-to- dealer level at a coin convention or coin show.

Fair market value. This is the price at which a coin would change hands between two intelligent people, both of whom have no compulsion or compunction to consummate the transaction. They wouldn’t necessarily be professionals. “Fair market value” would normally apply when a dealer sells a coin to a client who is knowledgeable about the marketplace.

In determining the prices for The Insider’s Guide, I pay careful attention to several different economic variables which affect the rare-coin marketplace. Let’s take a look at some of these:

Inflation. Domestic monetary inflating has a very positive impact on the value of rare coins; coins have always been perceived as inflationary hedges. Back in 1979 and 1980, when inflation was rampant, people rushed to tangible assets and rushed to get their money out of paper investments. So inflation is a plus. If people perceive inflation, or even anticipate inflation, rare coins will increase in value.

Deflation. This is a negative factor. When real goods fall in value and monetary deflating takes place, rare coins will decrease in value. Deflation is often associated with depression or steep recession.

Increasing personal net worth. This is a plus for coin values. People feel good when the value of their home goes up from three-quarters of a million dollars to a million dollars–or even from $200,000 to $250,000. It make them more willing to spend $25,000 or $50,000–or even $1,000–for a little metallic trinket.

Decreasing net worth. This is bad for coin values. If a couple’s home drops in value from $250,000 to $200,000 and one of the spouses loses his or her job, then buying $25,000 or $5,000 or even $100 worth of rare coins is totally out of the question.

A strong bullion market. Increases in the prices of gold and silver bullion are very helpful to coins. Coin dealers often make money speculating in the bullion market, and they put those profits back into coins.

A weak bullion market. This, of course, is bad for the coin market.

Economic prosperity in general is very good for coins. Recession or depression is very bad for coins. But an economic catastrophe can actually be good for coins. In an outright catastrophe, with panic in the streets and the prospect that money won’t be worth anything, coins can be propelled into the stratosphere.

In evaluating coins, you need to understand that coins are graded on a continuum and, for the most part, the values in my book are for coins in the center of the continuum.

Coins don’t always fall into neat, compartmentalized grades. Experts know this from handling such high volumes of coins on a regular basis. They understand that even for coins of the same type, the same date and generally the same grade, values can vary considerably.

Thus, at a coin show, experts may segregate large numbers of generic, fungible coins of the same type into piles of somewhat varying prices, even though they’re all in essentially the same basic grade. If an expert has 1,000 Saint-Gaudens double eagles, for example, he may divide them up into separate piles arranged according to price, rather than grade: one pile of coins priced at $385, another pile with $400 coins, and other piles with coins priced at $425, $450 and $475.

The lesson here is that even though two coins might be graded the same way by a grading service, that doesn’t mean they have the same value.

Here are a few tips to keep in mind when you’re considering two coins side by side that have the same grade:

Look at the strike. Is it strong, or is it weak?

Look at the eye appeal, and use your common sense: Is the coin pretty or is it ugly?

Look at the luster–the way in which the coin reflects light when you hold it under a pinpoint light source.

Look at the toning. Has it been artificially toned?

Look at the surfaces. If the coin has questionable toning, try to look under the surfaces to see if there are any scratches or if the coin is damaged in any way. A lot of people are thrown off by toning and don’t look at the scratches underneath.

Environmental damage also can be a serious detriment to the value of a coin–not only because it’s unattractive now, but because this kind of “skin cancer” can actually eat into the surface of the coin later if the coin isn’t properly neutralized.

So there you have it–a brief review of what determines the value of a coin and how an accurate price guide can save you from extremely costly mistakes.

Pricing is a key to getting good value today, and with the proliferation of price guides, I would hope that we will see no further frauds–or at least fewer frauds–like the one that was perpetrated on unwary clients by the coin dealer described earlier.

That dealer, by the way, was convicted on 11 counts of mail fraud, four counts of interstate transportation of stolen property and three counts of wire fraud. He was sentenced to a prison term of 76 months.

ANALYZING COLLECTORS BY TYPE

A Look at the People Composition of the U.S. Coin Market

By SCOTT A. TRAVERS

COPYRIGHT © 2002, 2003 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

We are all seeing growing numbers of our clients collecting coins by “type” – buying just one exceptional coin from us to represent an entire series, rather than acquiring one example for every date and mint within the series.

Collectors, like coins, come in types. And the better we understand the differences in these types, the more we will appreciate what makes the coin market tick. That, in turn, will enhance our ability to nurture, grow and expand our marketplace.

How many people collect U.S. coins? There’s no way of knowing for sure, but the answer clearly depends on how you define “collect” – and “collector.”

The United States Mint has estimated that 120 million Americans are looking for, and setting aside, the 50 States Quarters – the special Washington quarters with reverse designs honoring the 50 states of the Union. Are all of these people collectors? Certainly not. They can’t be dismissed as irrelevant, though, for many of them are purchasing peripheral hobby items in connection with the quarters – and some of them have gone on (or will go on) to be avid, full-fledged collectors of coins beyond this series.

Indeed, this huge pool of potential recruits is all but sure to expand our hobby’s ranks in years to come, just from a statistical standpoint: Even if only one-half of 1 percent end up collecting coins on a regular basis, that translates into more than half a million dedicated hobbyists we probably wouldn’t have had without the statehood quarters. Best of all, many of them are youngsters – and in their case, the benefits will last for generations.

Just who are the people who buy and sell coins? What are the components of our marketplace?

It’s difficult to compartmentalize the buyers and sellers in our industry. Buyers and sellers of coins, like coins themselves, resemble snowflakes: Each one is different. Some general observations can be made on the subject, however.

I talk to thousands of people every year and get – and read – hundreds of e-mails, and based on my contacts with the public, I would divide most buyers and sellers of coins into four primary categories: mass-market accumulators, casual collectors, mainstream collectors and serious collectors.

Let’s examine these groups one by one.

Mass-market accumulators – all 120 million of them – come from all walks of life and socioeconomic levels. They collect America’s state quarters and they write e-mails asking about their two-headed nickels (doctored coins with “heads” on both sides). They’re intrigued by the possibility of finding 1943 “copper” cents in their pocket change. They buy mass-market books, but they don’t buy albums or specialized, sophisticated books – the kind you’re likely to find only in a coin dealer’s shop.

Some dealers have little patience with mass-market accumulators, disdaining them as “tire-kickers” – browsers, not customers – when they turn up at coin shows from time to time. But this is a misguided attitude. As an industry, we need to reach out to this group. This avenue is not just a one-way street. On the contrary, it’s Main Street U.S.A.

I feel a personal bond with Main Street collectors, for over the years many thousands of my books have been sold to mass-market accumulators. And though I agree that the vast majority never advance beyond the entry foyer of the coin market, I can attest from firsthand experience that some walk in and make themselves right at home. Precisely because these accumulators do come from all walks of life, and all socioeconomic levels, a fair number do become casual collectors – and every now and then, one of them becomes a mainstream collector or even a serious collector spending millions of dollars on coins.

We need to encourage these numismatic novices, rather than drive them away through indifference or downright hostility. True, we may spend lots of time answering their questions and then see them spend little or no money buying our coins. But it would be wrong to conclude on this basis that these people are just more trouble than they’re worth. On the contrary, we should look at this as a chance to plant seeds for future growth. Not every seed will take root, but the more seeds we plant, the bigger the harvest will be. And if we don’t act now, while the statehood quarter program is giving us such fertile ground in which to plant those seeds, we may find ourselves later with a disappointing crop and much more barren soil.

Casual collectors are fewer and farther between than mass-market accumulators, but they are hardly rare – or even very scarce. I estimate there are several million casual collectors in the United States. Many of them buy proof sets and other numismatic products each year from the United States Mint. Some pick up a copy of COINage magazine at the newsstand whenever it catches their eye. On occasion, they may even drop in at a coin shop, if there is one near where they live.

Casual collectors may attend coin shows, and during their walks around the bourse floor they may spend a few hundred dollars on circulated coins to plug the holes in their Lincoln cent or “Mercury” dime or Washington quarter albums. They also may make purchases at online coin sites, and may even buy a certified coin or two. For the most part, however, casual collectors haven’t taken time to gain an in-depth education about coins, either through reading books or from practical experience, and this inhibits their growth within the hobby. They don’t really have a game plan and don’t possess the tools they need to get the most out of coins.

This is the breed of collector that keeps the U.S. Mint’s proof set program afloat. Like many dealers, I have had numerous visits from casual collectors lugging an accumulation of 20 or 30 years’ worth of proof and mint sets, possibly along with bags of “junk” numismatic silver. Inevitably, their expectations far exceed the actual value of their holdings.

A little knowledge is a dangerous thing, as Alexander Pope once observed, and casual collectors illustrate his point. They know how to buy coins, but not always what, when, where or why to buy, since their knowledge isn’t usually accompanied by wisdom. Still, they play a significant role in stimulating wider interest in the hobby – and broader activity in the marketplace – through their ongoing involvement and enthusiasm.

Mainstream collectors may have started out as casual collectors, but they have gone to school and graduated with honors to the next collecting level – and that next step is a big one. It’s the one that separates window-shoppers and browsers from serious buyers and sellers in our marketplace. Education is the master key that opens the door to this more exclusive inner sanctum.

There are perhaps several hundred thousand mainstream collectors. Some of them subscribe to Coin World or Numismatic News. Some surf the Internet, or get catalogs from mainstream auction companies such as Stack’s, Heritage and Auctions by Bowers and Merena. Some of them belong to the American Numismatic Association. Mainstream collectors may spend only a few thousand dollars a year, but they understand what they’re buying and make educated purchases. And this, combined with their formidable numbers, makes them a group to be reckoned with.

Coin World lists its current circulation at just over 89,000, while Numismatic News has its figure listed at 32,000. Those numbers consist in large measure of mainstream collectors. Their regular, ongoing purchases of coins from mail-order dealers go a long way toward making these weekly coin newspapers successful – and, for that matter, possible at all. COINage and Coins magazine, the leading monthly coin magazines, depend more heavily upon newsstand sales, so their readers include a higher proportion of casual collectors. Latest available circulation figures are 100,000 for COINage and 71,460 for Coins.

By comparison, Guns & Ammo, the No. 1 newsstand magazine for gun enthusiasts, reports a monthly circulation of 607,971, followed by Shooting Times at 285,059 and Handguns at 157,016. Both of those publications also are monthly magazines. Clearly, more Americans are interested in guns than in collectible coins – but given the frequent references to how “powerful” the gun lobby is, coin collectors constitute a force to be reckoned with, too, based upon the sales of their leading periodicals, which really don’t trail the gun magazines’ figures by an inordinate amount. And much of that power is wielded by mainstream collectors.

Gun owners’ clout is reflected much more dramatically in the membership of the National Rifle Association. Latest figures show that American Rifleman, the NRA’s official monthly journal, which goes to all members, has a circulation of 1,244,714. By contrast, Numismatist, official journal of the ANA, lists its monthly distribution at a drastically smaller 30,000.

(These circulation numbers are from Bacon’s 2001 Magazine Directory, and numismatic publicist Donn Pearlman, president of Chicago-based Minkus & Pearlman, assisted in analyzing them.)

Serious collectors stand out from mainstream collectors because of the money they spend and, in some cases, the intensity of their obsession with rare coins. There may be only a few thousand people in this group, but their impact on the marketplace is exponentially higher than their numbers might suggest.

Serious collectors have what longtime dealer and astute market observer Julian Leidman calls a “project mentality.” And since money plays such a major role in making them serious collectors, many of the people in this category may be famous, successful celebrities in other walks of life. Few of them seek renown, though, as collectors: Most are extremely circumspect about their coin endeavors, keeping them secret from all but the dealers with whom they conduct their business. One client of mine, a major motion-picture mogul in Beverly Hills, won’t even talk to me on his cell phone or cordless phone. He’s afraid he’ll be overheard.

Serious collectors often have exceptional mental capacity, extraordinary ability to concentrate and unparalleled drive to complete the task at hand, even if it takes decades. They may have used this drive to run for public office on the national scene or build a real estate empire or achieve a position of power in the financial world. Applying it to coins, they use the same drive to complete their collections.

In almost all cases, serious collectors assemble their collections on their own – flying solo, so to speak. They speak to dealers, of course, and they may attend shows and auctions. But in the final analysis, their collecting activities are theirs and theirs alone. There are a few husband-and-wife collecting teams, but these are exceptions. Typically, the serious collector hunts for rare coins as a lone wolf – with passion but with privacy, away from the spotlight that all too often intrudes upon him or her in other pursuits. Coin collecting is an intensely private activity for many otherwise very public people; indeed, it is a way for them to escape that intrusive spotlight.

Almost without exception, when serious collectors reach their hobby goal, they’re ready to set their coins aside and pursue another endeavor. The highest-quality U.S. type set I’ve ever seen or handled, the Morgan Supergrade Collection, was sold by my client, Dr. Craig Morgan, soon after he completed the set. Forming this collection was a labor of love for Dr. Morgan; it took him years and years to obtain the coins. You would think that after completing it, he would have kept it for a while and enjoyed it. It was a dream that came true. But not in Dr. Morgan’s eyes: Mission accomplished, end of dream. Dream come true, time for another dream.

My admiration for serious collectors doesn’t diminish my appreciation, on a different level, for mainstream collectors. They play a vital role in keeping the coin market healthy through the day-in, day-out transactions in which they buy and sell meat-and-potatoes collectibles. Realistically, however, most mainstream collectors can’t possibly compete for the rarest and costliest coins with wealthy buyers who complement great passion with deep pockets. You can’t afford gem proof Lib $20s on a shoestring.

Over the last quarter-century, some in our hobby have come to regard “investor” as a dirty word. In the late 1980s especially, numismatic purists deplored the entry of Wall Street money into the coin market, complaining that investors with little knowledge of coins were driving up prices unreasonably and, in the process, driving out true collectors with limited budgets.

The image of well-heeled “barbarians” invading the rare coin marketplace may have had a modicum of validity at one time, but it certainly doesn’t reflect the serious collectors – yes, I said collectors – with whom I have done business in recent years. These clients may have had limited knowledge of coins when they first began acquiring them, but they soon overcame any deficiencies by reading voraciously, consulting and working closely with numismatic experts, analyzing the marketplace and then pursuing goals based on knowledge that would be the envy of the most advanced collector.

It’s a gross misconception that just because someone spends a great deal of money on coins, that person must be an investor, not a collector. This simply isn’t true. The affluent clients with whom I deal today, and with whom I have dealt in the past, place low – or no – priority on profit appreciation. They have a project mentality; they’re goal-oriented. They do it for the history. They do it for the fun. And they really don’t care if they make or lose money in the process.

Unfortunately, there’s still a great deal of animosity between haves and have-nots in this field. A lot of the have-nots are running around calling the haves “investors” and implying that they should be ostracized for this supposed infraction. On the contrary, serious collectors – with serious budgets to match – are an indispensable part of the current coin marketplace, helping to invigorate the high end of the market while other collector types keep the foundation firm and the lower levels bustling with activity.

As the saying toes, it takes all types.

Statehood quarter enthusiasts … Lincoln cent collectors … Morgan dollar specialists … proof gold aficionados – all play essential parts in making the U.S. coin market the busy, diverse, exciting place it is. All of them are integral components of the marketplace’s mosaic.

How fortunate for our marketplace that its type set of collectors is complete!

THE ART AND SCIENCE OF NEGOTIATING

By SCOTT A. TRAVERS

Let’s Make a Deal was a popular TV game show for many years. Host Monty Hall gave crazily costumed contestants a chance to exchange boxes for what was behind a curtain, or curtains for the contents of their boxes. Some ended up with prizes worth thousands of dollars, others with gag gifts worth a good laugh but not much more.

Coin buyers and sellers are constantly making deals. Some end up doing very well for themselves, while others learn later that the joke was on them. Unlike the contestants on Let’s Make a Deal, however, those who negotiate deals involving coins don’t have to operate strictly by guesswork. They can arm themselves with facts, figures, insights and common sense and emerge from just about any deal with at least fair value – and perhaps a good deal more.

Negotiating is both an art and a science.

It’s an art because it requires the use of your sixth sense – your intuitive feel for people – and this cannot be quantified. It’s a science because there are rules that can be quantified and defined.

Deal-making is second nature for professional numismatists. “Deal,” after all, represents two-thirds of the word “dealer.” You don’t have to be a dealer, though, to grasp and even master the art (and science) of deal-making.

At the outset, it’s important to understand some conditions that are peculiar, if not unique, to the rare-coin marketplace.

First, the circle of dealers with whom you will do business is relatively small and frequently intertwined, and many dealers have long careers and also long memories. This places a greater-than-usual premium on maintaining good relationships all around. It would be foolish to risk alienating a dealer permanently, and unnecessarily, for some trivial gain obtained through subterfuge. The dealer you bluff today for a $100 discount on a $1,600 coin may convey this information to someone you will desperately need, a year or two from now, as an ally in a six-figure transaction. Similarly, the vest-pocket dealer you snub at a show may hold that against you – and still be around to do so 10 years later. The moral is: Tread carefully.

Second, coin transactions can be subtle, even tricky, and often may require not only good information and a high degree of intelligence, but also lots of moxie – what some describe as “street smarts.”

My firm doesn’t maintain an inventory; my stock in trade is connections, not coins, along with my ability to negotiate deals. Over the past quarter-century, I’ve been engaged as a deal-maker by some of the most renowned captains of industry – from bankers to computer experts to government agencies and law firms. It truly amazes me that some of these people – people who routinely handle deka-million-dollar transactions – are babes in the woods when it comes to our street-smart industry.

The chief executive of one of the nation’s largest stock-brokerage firms hired me on an hourly-fee basis to walk him through the process of obtaining a $50,000 refund from a Long Island telemarketer – on coins whose return privilege had not yet even expired. He had me prepare a script and sit with him while he spoke on the phone to a company representative, asking for his money back. He got his refund – as well as an education about buying rare coins.

To maximize your return when buying, selling or trading rare coins, you need to develop self-confidence and become an astute deal-maker.

I’ve prepared a list of tips gleaned from my nearly 25 years of hands-on experience dealing in coins worth millions of dollars. Master these and you will be in position to make the best possible deal every single time.

Know the value of every coin you hope to buy or sell, or the value of the services for which you are negotiating. Buying or selling a coin without knowing its current market value is like navigating a plane without a compass. I know of one dealer who wrote a book in which he advised readers to start out by offering half of what a dealer was asking for any given coin. Suppose the dealer was asking $5,000 but the coin was really worth only $1,000: It would be foolish to open negotiations by offering $2,500. Similarly, if you are negotiating an auction contract, you should prepare some careful projections of the auction company’s costs. When I negotiate an auction contract, I’m intimately familiar with what it is costing the auction firm to conduct the sale – preparation of the catalog, labor, insurance, the staging of the sale at a hotel or convention site, and other expenses. Let the auction company make a profit; give it an incentive to obtain high prices for your coins. But don’t overpay unnecessarily.

Let your adversary make a living. Being a coin dealer is often a tough job. It’s demanding and expensive to maintain and transport an inventory of valuable coins from city to city, show to show, sale to sale. Respect the time and effort a dealer has spent preparing for a negotiating session with you, and strive for an outcome that’s fair to both of you. Remember what I said earlier about the low level of turnover in this field. It isn’t in your best interest to squeeze the other guy for a few extra tenths of a percent on your profit margin – not if you’re planning to do business again with that dealer or others with whom he converses.

Master the use of your emotions. With coins as with cards, a poker face will help you come out ahead; it keeps other people guessing about your intentions. No matter how badly you want to buy or sell a particular coin, try to appear composed and unemotional. Keep in mind, however, that every now and then, judicious use of the right emotional reaction at an appropriate time can clinch a deal for you.

Never bluff, and never lie. Bluffing and lying will always get you into trouble, damaging or destroying your credibility for future dealings. They might even ruin your chances of making the deal that’s at hand. Mean what you say and say what you mean. Let me assure you, if I make an offer to buy a coin and say that a certain number is my “last and final offer,” I won’t move up from that number by even one red cent. I would rather walk away from the deal – and I have! – than go back on my word.

Let the other party make the first offer. Deal-making is one situation where, quite often, it doesn’t pay to go first. There’s always a chance that the other person will offer to sell you a coin for substantially less than what you expect, or offer to buy a coin from you for substantially more than you would have asked. If you do have to go first, start very low in making an offer to buy. You can always come up, but you rarely can go down.

Simplify the issues. “Keep it simple, stupid” is rather good advice when it comes to making deals involving rare coins. Variables tend to slow down negotiations. Boil down your discussions to a single issue or number, or at most a very few. Otherwise, you may never reach an agreement. In one recent dispute on which I served as an adviser, the other side came in with a complicated set of proposals under which some coins would be traded, others would be sold, and still others would be bought back. In all, there were 33 variables. I advised the lawyer representing the side that retained me to ask the adversary to buy back virtually all of the coins at one specific number.

Never make an offer you’re uncertain about, and never withdraw an offer once you make it. In buying or selling rare coins, your word is your bond. You must be careful never to vacillate or dither after you make an offer. You’ll infuriate the person with whom you’re making the deal and possibly kill any chance of future deals.

Go to the top. Pick the person with whom you want to deal, and be certain it’s someone who has the needed authority – someone who can say “Yes” without getting somebody else’s permission. In many cases, this eliminates the middleman or the middle-woman. This, in turn, often eliminates unnecessary fees. It also averts the good-cop, bad-cop tactics which many coin companies like to use when working out a deal.

Find out who really owns the coin. Many coin dealers do business routinely among themselves and handle coins on “memo” from other dealers. For this reason, it’s important to negotiate with a coin’s true owner. To gain this information, you need to be very active and astute at coin shows – be “in the loop,” so to speak. But it’s worth it. Why pay Dealer X’s bottom-line price of $12,000 when Dealer Y really owns the coin and will sell it to you for only $8,000.

When making an offer, count out the money or write out a check on the spot. Being offered cash or a check on the barrel head can be very persuasive to someone selling a coin. Say a dealer is asking $2,000 for a coin and you’ve offered $1,600. Chances are, he might suggest splitting the difference. But if you pull out your checkbook and write a check for $1,600, he may simply say, “OK, I’ll take it,” saving you $200.

Always assume the position of power. Simply stated, this means giving yourself every psychological edge. When sitting down with someone to negotiate a deal, always try to get the most dominating seat. In order to look businesslike; wear a suit and tie. Above all, never let yourself be vulnerable; always strive to be in command. At coin shows, in an effort to level the playing field, I often go behind the other dealer’s table and discuss any pending transactions back there, where we are on an equal footing. Some shows don’t allow this, so if you intend to engage in this practice, check beforehand to make sure it isn’t a violation – especially if you don’t have a table of your own at a given show. But many conventions permit this, especially if you have a table there. Ideally, try to appear in charge when you’re working on a deal – but if that isn’t possible, at least try to level the playing field.

Be flexible and be ready to change the conditions of the deal on the spot. Sometimes a deal may seem hopelessly deadlocked. Rather than lose it entirely, be prepared to improvise and modify the structure in order to save it. Suppose you’re unwilling to pay more than $400 for a coin, but the dealer insists on getting $500. Look in his inventory for something else on which you can make up the difference – possibly a $600 generic gold coin you can sell elsewhere for $700. By adding that to the deal, you can still come out just the way you wanted. Similarly, if you’re negotiating an auction contract and the auction company won’t go any lower on its commission, you might ask the firm instead to guarantee you a photograph of that coin in the catalog. Or, if a large transaction is involved, such as the consignment of an entire collection, you might seek assurance that the auction company will do something extra to help promote it – something which might be very helpful to you in getting higher prices realized, but which would cost the company very little more, such as generating a special press release about the collection or perhaps displaying the collection at a show before the auction takes place.

Make the other person feel that it’s in his or her best interest to make the deal. Convince the other party that you, and only you, are the right person for this particular deal – that it’s an advantage selling the coins to you, rather than any other prospective buyer.

Don’t take things personally. This rule is last, but certainly not least. If a dealer rejects your offer or counter-offer, don’t go away mad. View negotiating as a game, even though the money involved is real. Keep a positive, enthusiastic outlook and leave the door open. He or she may even reconsider and make the deal with you after all.

COPYRIGHT © 2001, 2003, 2009 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.

COIN QUIZ: HOW TO TELL IF YOU’RE AS EXPERT AS THE PROS

By SCOTT A. TRAVERS

COPYRIGHT © 1987, 2003 BY SCOTT A. TRAVERS ALL RIGHTS RESERVED.

The coin field has had the reputation of being an easy- entry, easy-exit field. With little regulation —government, self-imposed or otherwise — that dealers are required to abide by, the coin business has grown into a multibillion- dollar industry.

What, if in an attempt at self-regulation, dealer organizations were to test dealer members on their knowledge of the field?

What if such a test could be taken by hobbyists, too?

How would you do on such a test? The following questions are based on information from 2 of my books, The Coin Collector’s Survival Manual™ and Rare Coin Investment Strategy. Knowledge of the contents of the American Numismatic Association grading guide also is required.

Just for the fun of it, let’s consider 65 percent — 13 correct answers out of 20 — a passing grade. After all, 65 (as in Mint State-65) is the big number in the coin businss nowadays when it comes to grading.

So go ahead. Give it a try!

1. A coin should be held
(A) with little care because it is so durable
(B) loosely in the palm of your hand
(C) with your thumb rubbing the portrait
(D) only by the Professional Coin Grading Service
(E) over a soft fabric, with your thumb and forefinger tightly gripping the edges of the coin

2. You should be careful when trying to insert a coin into a plexiglas-sandwich-type holder because
(A) too much pressure on the coin could cause metal loss from the edge
(B) too much pressure on the coin could cause  disruption of the coin’s light oxide coating, thus altering the coin’s appearance
(C) if you don’t put enough fingerprints on the holder, a prospective buyer actually might be able to view the coin clearly
(D) these holders are extremely fragile and break easily
(E) A, B and D

3. Some about uncirculated coins might appear to be mint state if viewed
(A) under sunlight
(B) under a tensor-type or pinpoint light source
(C) under a floodlight which increases the brilliance but decreases your ability to identify detracting marks
(D) too carefully
(E) none of the above

4. The American Numismatic Association recommends that coins be viewed under magnification of no greater than 10- power. However, before it ceased operations, the International Numismatic Society Authentication Bureau advised the public to grade coins
(A) under a stereo microscope
(B) with no magnification whatsoever
(C) using no more than 5-power
(D) using no more than 3-power
(E) either B or D, depending upon the coin series

5. Two identically graded coins, one weakly struck and the other sharply struck, do not
(A) have the same specific-gravity measurement
(B) have the same marketplace value
(C) have reeding
(D) have hairlines
(E) both A and B

6. “Proof” refers to
(A) a high grade of uncirculated
(B) a method of manufacture
(C) any coin with contrast between frosted devices and reflective fields
(D) any third-party opinion of a coin’s level of preservation
(E) all of the above

7. The third edition of Official A.N.A. Grading Standards for U.S. Coins (Western Publishing Inc., 1987) states that
(A) an MS-63 coin might reasonably be called MS-65, and the ANA Board of Governors has recognized that grading differences of fewer than four points on the 1-to-70 scale can be reasonable differences
(B) in ANA terms, “above average” is more attractive than “very pleasing”
(C) detracting marks cannot be measured, counted or otherwise mechanically assessed to arrive at an accurate grade
(D) an MS-67 coin may have three or four minuscule contact marks, with one or two in prime focal areas, and an MS-68 also may have three or four minuscule contact marks, with none in prime focal areas (an MS-69, however, may only have one or two of these marks, with none in prime focal areas)
(E) all of the above

8. A whizzed coin can be most easily identified by
(A) its natural luster
(B) its unusually low price
(C) its characteristic crudely cleaned surfaces, highly porous appearance and lack of detail
(D) its low weight
(E) the humming noise it makes

9. The easiest way to identify an about uncirculated coin is by
(A) knowing the person offering it
(B) carefully examining the rim for friction
(C) carefully examining the coin’s highest points for a difference in color
(D) looking at a coin’s low-relief portions with a 10-power magnifying glass
(E) dipping the coin in an acid-based solution

10. A coin with toning has to be examined especially carefully because
(A) the coin is probably counterfeit
(B) toning could be artificial and often covers up imperfections
(C) the toning could be unattractive
(D) the coin could be stolen
(E) peripheral patination cannot be removed with trichlorotrifluoroethane

11. A “rub” is
(A) a stolen coin
(B) a telemarketer
(C) a nick on a grade-sensitive area
(D) slight friction or wear that results from a coin’s having circulated slightly
(E) all of the above

12. The term “weak strike” refers to a coin which has been manufactured
(A) with a softening or lack of detail on the coin’s high-relief portions because the deepest areas of the die did not fill adequately as a result of insufficient pressure
(B) with a softening or loss of detail in the portions of low relief from die wear
(C) before 1855
(D) at San Francisco
(E) at West Point

13. The term “weakly struck from worn dies” refers to coins which have been manufactured
(A) with a softening or lack of detail on the coin’s high-relief portions because the deepest areas of the die not fill adequately as a result of insufficient pressure
(B) with a softening or loss of detail in the portions of low relief from die wear
(C) as business strikes, but with proof dies
(D) as restrikes
(E) all of the above

14. In order for a Franklin half dollar to be accorded the designation “full bell lines,” it must
(A) display no trace of a crack in the Liberty Bell
(B) be a proof which displays all six bell lines
(C) display all six bell lines
(D) display all seven bell lines
(E) be certified by the Professional Coin Grading Service

15. In order for a Standing Liberty quarter to be accorded the “full-head” designation, it must
(A) be a Type I which displays a full strike in the area below the neck and above the waist
(B) display a complete four leaves on the headpiece, as well as an unbroken hairline from over the forehead to the ear and ear opening
(C) display a complete three leaves on the headpiece, as well as an unbroken hairline from over the forehead to the ear and ear opening
(D) be a proof
(E) both A and B

16. Which of the following is not a sound method for use in determining whether a coin is a brilliant proof or a prooflike business strike?
(A) check the edge to determine if it appears perfectly reflective (proof) or if it has what look like many little parallel, vertical lines (business strike)
(B) check the rims to determine whether they are sharp and squared off (proof) or dull, rounded off and poorly defined (business strike)
(C) examine the depth of reflectivity to determine whether the reflective surfaces are throughout the fields (proof) or if there are patches of non-reflectivity (business strike)
(D) gently tap the coin on a hard surface to be certain it “rings true”
(E) none of the above

17. The three primary types of counterfeit coins are
(A) re-engravings, restrikes and forgeries
(B) restrikes, doubled dies and dual hubs
(C) primary restrikes, dual hubs and die strikes
(D) casts, electrolytes and die strikes
(E) casts, electrotypes and die strikes

18. If a coin is assigned a grade of MS-68/61, weakly struck, by the American Numismatic Association Certification Service, and it has PVC on its surface, what grade would it most likely be assigned by PCGS?
(A) MS-63
(B) MS-64
(C) MS-65
(D) no grade
(E) not enough information given

19. If gold is valued at $500 per troy ounce, what would be the bullion value of a Saint-Gaudens double eagle?
(A) $464.40
(B) $474.07
(C) $483.75
(D) $493.42
(E) $503.10

20. Which of the following is not a safe material in which to store coins over the long term?
(A) polyethylene terepthalate
(B) polyvinyl chloride
(C) acrylic
(D) triacetate
(E) A and D

ANSWERS: 1-E, 2-B, 3-C, 4-A, 5-B, 6-B, 7-E, 8-C, 9-C, 10-B, 11-D, 12-A, 13-B, 14-D, 15-C, 16-D, 17-E, 18-D, 19-C, 20-B

12 IMPORTANT CONSUMER PROTECTION TIPS

By SCOTT A. TRAVERS

COPYRIGHT © 1987, 2003 BY SCOTT A. TRAVERS ALL RIGHTS RESERVED.

The quaint coin store of yesteryear has evolved into the multimillion-dollar rare coin investment firm. Many coins are no longer bought by the consumer; they are sold by the coin firm to the consumer.

If you are sold coins, there are a number of precautions — besides exercising healthy skepticism — that you should heed.

The dozen consumer protection tips presented here are not meant for the casual coin buyer perusing the web who might stumble upon a coin or two for a few hundred dollars that an advertiser has for sale. These precautions are designed for persons investing large sums of money in coins.

A greater ethical burden rests upon the shoulders of the coin merchant than on the merchant selling a uniform commodity. The average consumer, however well read, might never be able to tell the difference between a coin in Mint State-64 condition and one in Mint State-65; the dealer is expected to be honest in telling the coin buyer which is which.

The single most important precaution is to know your dealer (thus, it is the most detailed tip presented here). You can make money in coins even if you don’t know coins. But be absolutely sure you know your dealer.

FIRST PRECAUTION: Deal with reputable dealers.

This used to be a simple caveat for any coin buyer. You could do business with any dealer who displayed emblems of membership in various dealer organizations and almost be assured of a good deal.

Today, however, the coin buyer must apply greater sophistication in checking out his or her dealer. A call to the Better Business Bureau is not enough.

A former customer of a large coin firm recently showed me coins for which he had paid tens of thousands of dollars to a coin firm accused of false and misleading practices in trade and in commerce by the Federal Trade Commission. In my opinion, the coins were worth a mere fraction of the purchase price.

But, before this buyer dealt with this firm, the Better Business Bureau, in an answer to his inquiry, wrote:

“Bureau file reports are confined to the past three years. BBB files show this firm has been cooperative in any matters brought to its attention and has maintained a satisfactory business performance record according to our files.

“The Bureau has no reason to deter anyone from doing business with this firm.

“[This coin firm] is a member of the BBB and has demonstrated its support of BBB goals of private business promoting the public interest through self-regulation.”

It certainly would not hurt to get a Better Business Bureau “Business Referral” (the BBB’s own words for the text quoted) for the dealer you intend to deal with. But you would be much better off making inquiries to the attorneys-general in the state in which you live and the state in which the firm is based (if it is different). If the prospective dealer checks out with the attorneys-general, contact the Federal Trade Commission and U.S. States Postal Inspector’s Office.

These agencies will not, however, confirm or deny any ongoing investigation, but they will confirm if a dealer has already been charged or convicted.

In the New York area, many telemarketers have been charged with defrauding customers. And, not surprisingly, the area is home to one of the most active postal inspectors in the country specializing in rare coin investment schemes.

After you’ve made these basic inquiries, you should be certain your dealer has operated under the same corporate name for a number of years. The question you should ask of your dealer is not how many years he or she has been in the coin business, but how many years he or she has operated under the same corporate name. Some dealers change their company names every two years, others every two months —and some as often as every two weeks.

Try to choose a dealer who has not been convicted of a felony or found guilty of racketeering in civil court.

The Professional Numismatists Guild (PNG) has strict membership requirements and polices its members. PNG member dealers are required to submit to legally binding arbitration if requested by the consumer.

In all fairness, it would be unreasonable for me to advise you never to deal with a dealer who ever has declared bankruptcy. Many of the nation’s leading dealers have done it more than once, and a recent declaration of bankruptcy might even have a positive aspect: It might mean that the dealer can’t declare it again in the near future.

There are some truly expert coin dealers with otherwise awesome credentials who would not qualify to be your coin seller if you follow my advice.

SECOND PRECAUTION: Buy the book or videocassette before the coin.

You should educate yourself to the ways of the marketplace. This doesn’t mean you’re expected to be able to tell whether a coin is a high-end MS-65 or an MS-66. It does mean you should learn basic grading techniques, as well as how the marketplace works.

A number of books will be helpful in your quest for knowledge, including some of my own.

Many people are more comfortable having information read to them, with photographs carefully presented. Some excellent coin videotapes are available from Media Resource Corporation (3100 Arrowwood Lane Boulder, CO 80303-2419).

It makes no sense to invest thousands of dollars in coins without basic knowledge of grading when you can be taught grading via videotape for less than $100.

THIRD PRECAUTION: Buy high-quality coins that are scarce or rare.

Coins which are scarce can become scarcer or rare; coins which are rare can become rarer. Coins which are common now will probably remain common in the near future.

Historically, United States coins in high levels of preservation have been the top performers. Coins touted by mass marketers as having potential to increase 500 percent in six months might not increase even 5 percent in six years. Mass marketers often need large quantities of a coin in order to fill orders. A mass marketer couldn’t possibly promote a proof Liberty Seated quarter — which has a mintage of 800 — when it anticipates 2,000 orders. Thus, less popular foreign coins are promoted and lower-grade (but very available) United States coins are hyped.

FOURTH PRECAUTION: Don’t shy away from certain scarce U.S. coins that can be promoted.

There are some coins which have universal appeal to investors. Morgan dollars and Saint-Gaudens double eagles are two such types. These coins are scarce enough to be considered investment items, but common enough to be promoted or hyped. If you buy these coin types in MS-65 at the market low, you can make a lot of money in a short period of time. But, if you buy them at the high (as too many people do), you can lose a small fortune in just as short a period of time.

If you do buy these coin types that can be promoted, you not only need to deal with a reputable dealer, you also need to deal with one who knows coin market trends and who regularly offers advice on when to sell these coin types. Further, my personal advice to the investor is to buy only those Morgan dollars and Saint-Gaudens double eagles which have had their grade and authenticity confirmed by an independent certification organization (more about that later).

You can monitor what’s happening with these types of coins by reading The Coin Dealer Newsletter (Box 11099, Torrance, California 90510), or just by reading COINage every month. In fact, some months ago, when Morgan dollars were at their peak and a number of other dealers were sounding the buy alert, I sounded the sell alert — in COINage.

The grading of Morgan dollars and Saint-Gaudens double eagles is very tricky, and I would advise anyone who isn’t a collector to buy these coins only if they have been graded by one of the leading grading services — or to send the coins in to be graded if they are sold “raw.”

FIFTH PRECAUTION: Be certain the dealer states in writing what grading standards are being used.

There is no uniform industry standard. Any dealer can look at a coin and say that it is, or is not, MS-65. But a multiplicity of organizations pass judgments on the grades of coins, and no two of these organizations grade coins alike.

For example, a little-known grading service might grade a coin MS-67; a more reputable grading service might grade that same coin MS-66; and the Professional Coin Grading Service (PCGS) might grade the coin MS-65. Each of these organizations could be correct — by its own standards — in the grade it has assigned. But this is of little help to you if you pay an MS-67 price for a coin that PCGS would grade only MS-65.

I recommend that you regularly use The Certified Coin Dealer Newsletter as a guide to the sight-unseen values of certifed coins and an indicator of what dealers are willing to offer for coins graded by the various grading services.

SIXTH PRECAUTION: Use common sense, and look at the coins.

Common sense is not all that common. If a coin looks like you had taped it to the bottom of your shoe and done a tap dance on it, it probably isn’t an MS-65 — no matter how many certificates say that it is.

You also should check the coins you receive against the invoice. You might have received somebody else’s coins. And, by all means, do open the box. I know one investor who never bothered to open his box of coins until it was too late: The box was empty, and the dealer had gone out of business.

Your coins should stand on their own merits, not those of a dealer’s guarantee or certificate of grade. And you should not borrow money to buy coins. No more than 15 percent of your total net worth (excluding the value of your primary residence) should be invested in rare coins.

SEVENTH PRECAUTION: Become familiar with the basic standards of certification services.

You should become familiar with the idiosyncrasies of the certification organizations — for the reasons listed above, as well as so you don’t get angry at your dealer when you submit coins.

Mint-state coins can be graded with any number from 60 through 70.

Leading grading services include, but are not limited to, ANACS, PCGS and the Numismatic Guaranty Corporation of America (NGC).

EIGHTH PRECAUTION: Buy a rare coin, not a certified product.

Buy the coin, not the papers. Coins can be a wonderful investment; certified products rarely are.

Michael R. Fuljenz, a former American Numismatic Association Certification Service authenticator-grader, said in 1987 that “ANA certified coins, unlike fine wines which increase with value as time progresses, turn to vinegar.” ANA has tried to halt this problem by removing the dates from its certificates. Grading standards have changed — and, for that reason, some certification organizations are not as popular as others.

A coin might be priced at $4,000 in MS-65, $1,200 in MS- 64 and $200 in MS-63 — so even a slight variation in grade can mean a big difference in market value.

There probably are more coins of this type which trade between $200 and $1,200, and between $1,200 and $4,000, than trade at the exact MS-63, MS-64 and MS-65 prices. Don’t balk at paying a bit above an MS-63 or MS-64 price for a high-end or premium-quality specimen of that coin. When you pay the minimum price required to secure a certified product, your investment is in the certification organization. When you pay the premium, it’s likely that you have a nice coin, provided you are an educated consumer and the seller is honest.

All MS-65 coins from each respective certification organization are not the same. A coin could, for example, be a dramatic cameo Proof-65, with startling contrast between snow-white fields and reflective devices. Or it could be a non-cameo Proof-65, with toning that isn’t so attractive. If you pay the lowest price for the grade, you’ll get the lowest quality coin for the grade.

NINTH PRECAUTION: Don’t give your credit card number to anyone that you haven’t called.

I’m not saying you shouldn’t buy coins from telemarketers. But, if a dealer calls you on the telephone and asks for your credit card number for a coin sale (and it is your prerogative to buy coins that way if you so choose), at the very least get the dealer’s telephone number and call him or her back.

Many wildly criminal activities have occurred with credit cards: non-delivery; unauthorized charges; no credit for returned merchandise; and charges to the card after the death of the card-holder. Further, if a reputable dealer is asking for a credit card, you might be able to strike a deal and pay a lower price for the coins by paying cash instead. If a coin firm has to give the credit card company 5 percent of the value of the transaction, you might be able to get a 2-percent or 3-percent (or even higher) discount on your order by not using a credit card.

The advantage of using a credit card is the recourse this gives you through the credit card company if the coins are misrepresented or not delivered. The disadvantages are limitless.

TENTH PRECAUTION: Take action against anyone who has sold you overpriced or overgraded merchandise. If you discover that you have purchased such material, take swift and immediate action.

Government agencies such as the Federal Trade Commission have been very helpful in looking out for the public interest. But the FTC is so structured that it helps consumers collectively, not individually. The FTC can and will do little for an individual investor who claims to have lost $1,000 — or even $10,000 — to a particular coin firm. But it can help if many thousands of investors appear to have been bilked out of millions.

In seeking redress, you’d be much better off getting the dealer to agree to legally binding arbitration if you can’t reach an amicable agreement between yourselves. As discussed earlier, PNG requires its members to submit to arbitration in disputes.

ELEVENTH PRECAUTION: Save all original holders, receipts, canceled checks and other proofs of purchase.

This material will come in handy to prove you purchased the coins when you say you did. It also will confirm that these coins were sold to you by the dealer who you claim sold them to you.

Coins in unsealed holders without photographs signed by the coin firm are an unending source of frustration for the investor. Some firms have been known to accuse investors of switching coins. When you buy “certified” coins, have the coin firm record the certification number on your invoice.

TWELFTH PRECAUTION: Be certain your coins are maintained in the same grade in which you purchased them.

With coins, there’s an unfortunate risk that if you buy a coin for $5,000 and drop it on the way home, its value may plummet to $1,000. An improperly preserved coin can be just as financially harmful as an overgraded or overpriced one.

Coins should be neutralized in Koinsolv for long-term storage. A vapor-phase inhibitor, such as Metal Safe (E&T Kointainer Co., P.O. Box 103, Sidney, Ohio 45365) should be used to prevent deterioration. Vapor-phase inhibitors change the molecular composition of the air so the coins don’t deteriorate.

There you have them: a dozen helpful hints on how to protect yourself when buying coins.

None of these safeguards is foolproof; there still may be occasions when a coin deal doesn’t work out as well as you’d hoped.

But, if you observe these 12 important rules, the setbacks will be less frequent and less painful — and the triumphs will outnumber the tragedies.

COIN FAQ – ANSWERS TO THE MOST FREQUENTLY ASKED COIN QUESTIONS

Excerpt from One-Minute Coin Expert®, Fifth 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:

bullet Professional Coin Grading Service, P.O. Box 9458, Newport Beach, CA 92658
bullet Numismatic Guaranty Corporation, P.O. Box 4776, Sarasota, FL 34230
bullet ANACS, P.O. Box 200300, Austin, TX 78720-0300
bullet 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?