PROTECTING YOUR COINS IN A DISASTER

by Scott A. Travers

Hurricane Katrina in 2005; Superstorm Sandy in 2012; Hurricanes Harvey and Irma in 2017; and the Napa Valley fires of 2017 have focused Americans’ attention over and again on the grim consequences of a potential disaster. Whether manmade or natural, the need to be prepared for such a catastrophe is of supreme importance.

The phrase “potential disaster” also encompasses such ominous black swan events as a nuclear weapon of mass destruction being unleashed by a terrorist force on a major U.S. city and an electro-magnetic pulse (EMP) attack that could potentially cripple a significant portion of the U.S. power grid and render useless unprotected electronic devices. A nuclear event or an EMP attack could lead to mass death and destruction of such insurmountable magnitude that it would pose a threat to all humanity.

Simple survival is the principal priority, of course. The U.S. Department of Homeland Security has made survival guidelines available for nuclear events. But beyond safeguarding your person, anyone who collects rare coins or has gold or silver bullion as a form of “insurance” should give careful consideration to how those coins or bullion would be safeguarded or accessed in an emergency–and how he or she would be protected against serious financial loss in the event these assets were lost, damaged or destroyed.

Unfortunately, disasters have become all too real for millions of Americans during the 21st century. Two of the worst, in fact, were virtually predicted by the Federal Emergency Management Agency (FEMA), the agency that coordinates disaster relief for the federal government.

In meetings before Sept. 11, 2001, FEMA identified three major catastrophic risks to the United States:

  • A terrorist attack against New York City;
  • A hurricane of cataclysmic proportions hitting New Orleans; and
  • A high-magnitude earthquake in San Francisco.

Since then, we’ve lived through the 9/11 terrorist attack on New York and, more recently, we’ve witnessed the devastation of superstorms and hurricanes. In 2005, New Orleans suffered tremendous loss of life and property from Hurricane Katrina.  And though San Francisco hasn’t yet been subjected to another historic earthquake like the one in 1906, there have been smaller quakes in the California area to remind us of what has been – and what may yet happen again.

So now, in the face of terrorist attacks, flooding, wildfires and earthquakes, the question very clearly presents itself: What can be done to protect your coins against potential disaster?

Storage and security have always been vital concerns for people who collect and own rare and valuable coins – but in the current climate, the approaches and methodologies required to provide adequate protection have taken on a completely new dimension. It’s more important than ever to store your coins safely and securely, insure them sufficiently against potential loss or damage, including the risk of terrorism, and keep everything in perspective so that you’ll be able to continue collecting coins in the future.

Before even addressing how to react to catastrophe, the first thing you need to consider is insurance.

After Sept. 11th, premium rates for insurance against terrorism increased very significantly and reinsurance by secondary insurers became difficult or impossible for primary insurers to obtain. As a result, primary insurers canceled insurance in virtually all areas of American life, including insurance for rare coins. They simply could not afford to assume further exposure to this risk.

In November 2002, President George Bush signed into law the Terrorism Risk Protection Act, under which the Treasury Department would subsidize recovery costs in the event of a terrorist attack. This legislation makes it easier to insure numismatic items against acts of terror and also against some natural disasters.

In obtaining insurance, you should be absolutely certain that your policy does not exclude coverage for floods, other natural disasters or terrorism. As a matter of course, many home insurance policies contain exclusions for natural disasters. In New York City, for example, some of the largest insurance companies routinely exclude coverage for earthquakes, and you have to specifically request that coverage and pay extra to obtain it – perhaps a couple of hundred dollars per year on an average policy or $25 to $50 on a smaller policy.

Victor Gonzalez and Richard Cleland of Cleland & Associates Insurance Inc. in Dallas, Texas, who obtain primary coverage through the Travelers Insurance Company, offer an “All-Risk” numismatic policy which also is covered by reinsurance.

Suppose Sandy-related claims against such policies totaled $50 million. Since some of the business was “farmed out” to reinsurers, or secondary insurance companies, Gonzalex and Cleland said that Travelers’ liability would be substantially less than $50 million, so Travelers wouldn’t have to bear the full impact.

Upon renewal of their policies, however, customers holding such insurance could well face significantly higher premiums because the reinsurers would either raise their fees substantially or decline to accept the risk altogether, forcing Travelers to assume more of the risk and charge more for the coverage. Anyone with one of those “All-Risk” policies could see an extraordinary rise in the premium – 25 percent or more.

In these turbulent times, it’s advisable to insure yourself against loss before you even go into a place where there could be a risk of terrorism, a natural disaster or something else unexpected, especially when traveling overseas.

Carrying coins – en route to and from a coin show, for example – can be risky, and you should be insured against hazards such as loss, theft or damage which can occur at such times.

Simon Codrington is the international director for Hugh Wood Inc. of New York, one of the largest insurance brokers for coin dealers and collectors and the officially designated coin insurance broker of the American Numismatic Association. He says the risk of theft has been heightened considerably because of the very public way carry-on bags and attaché cases are now being examined by airport security personnel.

It becomes general knowledge who is carrying coins in this manner, and the dealers or collectors thus identified can then be targeted. More than ever, insurance – including coverage for coins in transit – is a must.

One ANA midsummer convention was held in San Francisco in July 2005, and, thankfully, it took place without any natural or manmade disturbances. But suppose the convention had been scheduled for the next month in New Orleans, a city that has hosted a number of national coin shows through the years. The losses could have been staggering.

If the unthinkable were to happen and you found yourself caught at a coin show in a city under siege, you might end up losing your coins, but appropriate insurance would keep you from losing your shirt as well. Above all, you must not lose your life.

It’s important to keep things in perspective when this kind of catastrophe strikes. Robert Brueggeman, the president of Positive Protection Inc. in Fallbrook, California, says you need to use common sense when it comes to saving your coins – even millions of dollars worth – in a disaster. Look out for your personal safety first, then worry about the coins. They won’t be any good to you if you’re dead.

In a situation similar to Hurricane Katrina, with a Category 5 hurricane battering the city and floodwaters rising dramatically, you should leave your coins on the highest shelf or floor available, if practicable, and escape with your life.

Common sense, of course, would dictate putting your coins ahead of time in a safety deposit box or an explosion-resistant, waterproof safe. But if you couldn’t do that, the next best thing, time permitting, would be to take out the one or two coins of the highest value, slip it or them in your hip pocket and make a run for it, while leaving the other coins behind. In rising floodwaters, even an additional five pounds can slow you down significantly, and you could lose your life in trying to save your coins. In such a circumstance, it might be imprudent to attempt to carry even a single coin on your person.

On the other hand, a different type of potential disaster, perhaps a breakdown of the financial system, might require that you use your bullion-related coins for barter purposes. This would require that those assets be accessible. I will cover this in another article.

Safes and safety deposit boxes can add an important layer of protection to your coins’ security. Insurance companies look very carefully at these safeguards and factor them into their rates.

One of the most highly recommended safes today is the one with a rating of TXTL-60. Many people shied away from buying this kind of safe in the past because of its relatively high cost, but lately demand has been growing because it can withstand fire and flame for extended periods of time. Also, prices have come down substantially.

In my book The Coin Collector’s Survival Manual, Revised Seventh Edition, I have some very good advice from Robert F. McLaughlin, a security expert who is highly knowledgeable about safes.

McLaughlin says you can buy a relatively strong security safe for as little as $1,000. He also explains that most insurance underwriters will require a safe that is approved by Underwriters Laboratories Inc. (UL).

All insurance underwriters have formal guidelines, and their willingness to insure the contents of your safe is dictated by the degree of security it offers against different types of attacks.

A TL-15 safe would offer the minimal acceptable protection against burglary. When attacked on the door only with a portable hand tool such as an electric drill or a pressure-applying device, a TL-15 safe will resist entry for 15 minutes. That’s minimal protection, and probably won’t get you much of a reduction in your homeowner’s policy premium.

If a Category 5 hurricane blows your way, a TL-15 safe is not going to do you much good.

A TL-30 safe has similar specifications to the TL-15, but resists attack for half an hour. A TL-30×6 safe offers the same protection as the TL-30, but resists attacks on all six sides.

Safes are also classified according to the protection they offer against fire. A Class A safe offers four-hour protection against fire at 2000° Fahrenheit. A Class B safe offers two-hour protection at 1850° F, and a Class C safe offers one-hour protection at 1700° F. The prices of these safes vary according to the level of protection – but in general, prices have come down substantially.

Keep in mind that a lot of coin holders melt at a few hundred degrees. Even Saflips, which are among the best coin holders, melt at 480° F. So if you have a safe that protects up to 500° F and you have a 2000° F fire, that safe isn’t going to help you much.

In the 1990s, a new generation of safes was designed for computer supplies such as floppy disks and magnetic media and CD ROMs and DVDs. These safes carry UL certification of 125, and they’re the among the best type still available today. In the event of fire, the inside contents of such safes will not rise in temperature past 125° F. So if you have a fire of 2000°, 3000° or 4000° F, your certified coins should be protected – not just the coins but the holders, too. You won’t even see tinging on the edges of an NGC or PCGS insert if you store your slabbed coins in a 125 UL safe.

Safety deposit boxes are another matter.

If you store your coins in a bank vault, my basic advice has always been to look carefully at your insurance policy. Many times, this form of storage isn’t covered unless you specifically request it. Many policies don’t include it, and banks are usually careful to point out that they do not provide insurance coverage for boxholders. Always read the safety deposit box rental agreement as well.

Similarly, if you store your coins in a safety deposit box at a hotel, the hotel in all likelihood will not provide insurance coverage and you’re going to need to have coverage on your own.

Insurance for such storage isn’t particularly expensive, but you need to ask for it.

Keep your proofs of purchase separately from your coins. If you’re in a disaster- or terrorism-prone area, store your proofs of purchase with relatives, friends or business associates in another state. Also, take digital images of your coins and store the images separately as well. If you’re not comfortable making arrangements with people that you know, there are independent services that will store your digital images and records offsite.

One of the biggest mistakes people make in disasters is not having records of what they paid for their coins. They end up having to reconstruct those records under circumstances that are less than advantageous.

Always count and inventory your coins. If someone sells you a roll of coins, count them. And when you put coins in a safety deposit box, make sure you know what’s there. If you ever file a claim, you’ll need to know.

One of the most interesting and worthwhile developments in the coin field in recent years has been the emergence of coin conservation – a process by which damaged coins often can be restored to their original appearance with little or no evidence of the damage. This has been a godsend to collectors whose valuable coins have been exposed to harm in some form, especially through flooding.

We’ve learned that while grading-service “slabs” are sonically sealed and tamper-resistant, they generally are not watertight. In floods, water will often permeate these slabs and damage the coins inside. We’ve also learned, however, that this damage isn’t necessarily irreversible. And sometimes certain coins may not even be harmed.

A major flood hit the home of one of my clients, filling his basement and covering his first floor with water. When he went to survey the damage, he saw NGC-certified coins floating in their slabs and the coins themselves were unscathed. The other coins had sunk to the bottom, but these were floating.

Even if your coins are submerged in a flood, all hope may not be lost.

The first steps to take are to dry the coins, remove any foreign substances on their surfaces and neutralize the surfaces with pure acetone. It is advisable to take them out of their slabs first, but I would recommend having a professional do that for you.

In this case, I would recommend sending your coins through an authorized dealer to Numismatic Conservation Services in Sarasota, Florida, and having NCS experts attempt to restore them. They have an excellent laboratory where they have done remarkable work in restoring damaged coins.

In the case of my client whose house was flooded, he initially became so frustrated that he just bagged up many damaged coins and threw them away. He later showed me samples he had saved as souvenirs and I sent them to NCS. Miraculously, NCS restored most of them to their original pristine condition, and some even looked better than they had before.

It was a bittersweet experience for my client, because he had thrown away the other coins and NCS clearly would have been able to restore many of those as well.

I don’t advise collectors to try to restore their own coins. The process is delicate and painstaking, and really should be done by a professional. But many times, by removing a tiny, microscopic layer of metal from the surface of a coin, conservation experts can save that coin. It can then be put in a fresh new holder and sold into the marketplace very safely.

So all may not be lost. And to victims of Hurricane Katrina left with damaged coins after the storm, I recommended having them professionally curated. People who followed my advice were able to save a lot of them – especially gold coins, which tend to retain their luster almost indefinitely and can take a lot of abuse.

Disaster is a fact of life, and a greater concern today than ever before. But adequate preparation can make disaster’s aftermath far less disastrous for its victims.

 

Resources

Numismatic Conservation Services

Los Angeles Emergency Management

New York City Emergency Management

New York State Preparedness

State of California Emergency Preparedness

U.S. Department of State Travel Advisories

U.S. Homeland Security

 


The gold standard for coin information.

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?

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