2007 FORECAST: THE TOP 12 COINS FOR THE NEXT 12 MONTHS

2007 FORECAST: THE TOP 12 COINS FOR THE NEXT 12 MONTHS

BY SCOTT A. TRAVERS

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

Twelve months ago, I predicted that we might be “on the verge of one of the greatest years in history for rare coins.” Those words proved prophetic, for 2006 turned out to be an incredibly positive year – truly one of the best ever – for the coin market and the hobby on which it is based.

Will 2007 see more of the same?

The answer is, it’s altogether possible. The coin market built up very strong momentum during 2006, and some of the positive trends that made it such an exceptional year were still creating excitement as the old year drew to a close.

One of these was the strength we saw throughout 2006 in market demand for precious metals – and base metals, too – and the higher prices they brought in the marketplace. There were backward steps along the way, to be sure, but at year’s end all of the metals were significantly higher-priced than they had been 12 months earlier.

I expect gold and silver to continue going up in 2007, and the pace of that increase could well become much faster. I think there’s a realistic chance that gold may surge above $1,000 an ounce in the coming year, and silver could reach levels well above $12 an ounce. That would send coin prices sharply higher, too, for the metals and coin markets are closely intertwined.

Industrial metals such as platinum, palladium, copper, nickel and zinc also enjoyed big price gains during the past year, largely because of dramatically rising demand from China and India, where they are essential to those countries’ newly booming economies. The huge exports of base metals and accompanying price increases drove the cost of producing cents and nickels above those coins’ face values, raising the very real possibility that the U.S. Mint might have to stop making them.

If this trend continues, the Lincoln cent – and perhaps the Jefferson nickel, as well – may soon disappear from Americans’ pocket change, stimulating new interest in collecting those two series and boosting the demand for them as collectibles. As it is, the hobby’s base already has been expanded tremendously by the 50-state Washington quarters, which have captured the attention of millions of non-collectors and converted many into hobbyists.

All things considered, 2007 shapes up as another terrific year. To make it even more special, check out my list of the top 12 coins for the next 12 months – and after you’ve picked your favorites, give them a try!

(1) The 24-karat American Buffalo one-ounce gold bullion coin.

There has been a stampede for this coin since it made its debut last June. And though it is strictly a bullion coin and though I have disdain for it as a collector coin, I cannot singlehandedly stop the stampede to purchase it, nor can I hold back the tremendous demand for it in all forms – including certified examples graded Mint State- or Proof-68 or 69 and “first strikes,” a term of which I strongly disapprove as it is applied in this case. On the contrary, I see it – in the short term, at least – as a coin that should enjoy continued popularity and rise in value still more in 2007. And for that reason, it clearly merits a spot among the top 12 coins for the next 12 months – though not necessarily longer.

The American Buffalo coins are extremely popular. Coin and bullion dealer Mark Yaffe of the National Gold Exchange told me that during the summer of 2006, following their introduction, they siphoned $325 million out of the market for bullion-related gold coins, such as common-date double eagles ($20 gold pieces) in lesser grades, which generally have at least modest added value as collectibles. This money was poured instead into the pure gold Buffalo pieces, which, as I have noted, are entirely bullion coins, worth just the value of the metal they contain with no added numismatic premium. (They bear a face value of $50 – well below their intrinsic value.)

This diversion of funds was a real blow to the market for numismatic coins – including semi-scarce and semi-rare double eagles, each of which contains nearly an ounce of gold. These suffered significant losses in value as buyers bought Buffalo pieces instead. Nevertheless, I see no slackening of demand for American Buffalo coins. They’re growing in popularity and that’s continuing to push their prices higher – and I expect to see them achieve record or near-record sales during the coming months.

Try to buy these coins at bullion-related prices and, before you buy them, be sure to ascertain the price of gold. Remember, above all, that just because one of these coins is in a holder from a leading grading service saying it’s in a very high grade such as MS-70 or Proof-70, you shouldn’t be paying $2,000 or $3,000 for it. With gold at $600 an ounce, you shouldn’t be paying more than $650 or $675. Just use your judgment and pay a reasonable premium – and don’t pay thousands of dollars.

(2) Common-date Type 3 Liberty Head double eagles in grades of MS-60 to MS-62.

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

All that changed when the one-ounce American Buffalo coins hit the market. While the new coins were selling like hotcakes, the Type 3 Libs were languishing in dealers’ showcases – and their prices started to plunge. Before long, they could be had for little more than melt value. With gold at $600 an ounce, a Lib $20 in MS-60 or 61 might cost you $700. I recently purchased a magnificent MS-62 example of a slightly scarcer-date 1898-S Lib $20 at a time when gold was $600 an ounce, and I paid well under $700.

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

If analysts are right and gold goes up to $800 or $900 an ounce, you’ll end up with a double-barreled winner: a coin whose value rises both as bullion and as a collectible. That Type 3 Lib $20 you buy today for $700 might very well double or triple in value. What’s more, this is a lovely coin aesthetically. To me, it’s a tremendous coin to buy.

(3) Common-date Saint-Gaudens double eagles graded MS-63 to MS-65.

The much-admired “Saint” has long been acclaimed as the single most beautiful coin ever minted by Uncle Sam. In grades of MS-63 to 65, its stunning design – featuring a striding Miss Liberty on the obverse and a majestic flying eagle on the reverse – can be seen to good advantage, with a minimum of detracting imperfections.

Like Type 3 Liberty double eagles, these coins have fallen in value in recent months because of buyers’ love affair with the new American Buffalo. But since they were higher-priced to begin with, they haven’t fallen as far. As the end of the year approached, MS-63s were selling for about $800 and MS-65s for about $1,800 – several hundred dollars below what both were bringing earlier in the year, but still highly respectable.

If, as I anticipate, gold bullion soars in value and the buying frenzy for Buffalo bullion coins cools down, these Saints will rebound impressively and quickly reach and pass the levels they enjoyed before they fell. They’re frequently purveyed (and overpriced) by telemarketers and direct-mail marketers seeking older U.S. coins that are desirable but available – and, above all, promotable. They’re popular with more reputable coin dealers, too, because their handsome appearance makes them easy to sell. And, of course, they’ve been big favorites with collectors for a century.

If gold does reach $1,000 an ounce, I can easily see common-date MS-65 Saint-Gaudens double eagles going for $4,000 apiece – and maybe even $5,000 or more. The only thing that might prevent that is if grading standards get a little sloppy and the certification services start to award these grades to coins with a few more scratches. If the standards remain consistent and you buy only properly graded coins, you should do very well with these truly striking coins.

(4) Common-date Indian Head eagles graded MS-64 and MS-65.

The Indian Head eagle ($10 gold piece) is the fourth member of the gold family at the top of my list this year. It’s also a close relation of the “Saint,” for both were designed by renowned sculptor Augustus Saint-Gaudens, who was widely regarded as the finest American artist in that field at the start of the 20th century.

Like Saint-Gaudens $20s, Indian Head eagles bear magnificent portraiture – this time showing Liberty with a Native American war bonnet on the obverse and an eagle in repose on the reverse. And these coins are truly dazzling in grades of 64 and 65. Also like Saints, they’re very promotable because of their beauty and relatively high gold content – nearly half an ounce.

As of this writing, in the waning days of 2006, $10 Indians graded MS-64 are available for about $1,800 – hundreds of dollars below the levels they attained prior to the Buffalo stampede. MS-65s cost about $4,600 to $4,800. A premium-quality MS-65 piece might cost you $5,000, but such coins are scarce and well worth the small added premium.

If you’re fussy about grading and make sure to get coins with as few scratches as possible and with no carbon spots on the headdress, your profits from these coins can be as handsome as their design. They could easily double in value to the $10,000 range – a tidy return indeed!

(5) Registry coins.

Here’s another instance where one of my “top 12” selections is on the list not because I think it has great potential for long-term price appreciation, but because it seems likely to rank among the coin market’s hottest sellers in the short term – namely, the next 12 months. In a number of ways, it parallels my first selection, the American Buffalo gold bullion coin: It may be a big winner for some people, but only if they’re extremely careful (and perhaps very lucky).

Registry sets combine modern technology with the age-old competitive spirit that has burned within man since time immemorial. To form such sets, collectors acquire certified coins “slabbed” by PCGS (or by NGC, which offers a similar program), assemble them into sets, then register these sets with the grading service by entering the coins’ serial numbers on the company’s Internet Web site. At that point, the grading service uses special software to assign a rating to each coin, based upon its rarity not just in absolute terms, but also in the grade in which it was certified. (PCGS, which originated the Registry concept, accepts only coins it certified itself; NGC accepts coins from either service.)

As you might expect, there’s fierce competition among Registry set owners to have their coins listed at or near the top on the Web sites. This has driven up the prices of coins whose grades are exceptionally high – often well beyond the levels at which they would sell without such sets. I see no problem with this if the coins in question are long-established collectibles with proven track records for being scarce – or even rare – in top condition. I see very big problems, however, when people pay ridiculously high amounts for common-date modern coins because they have been certified in extremely lofty grades.

In a recent Teletrade auction, a bidder paid $15,120 for a 2003 Lincoln cent certified by PCGS as MS-70. A few years ago, a 1963 cent graded Proof-70 sold at auction for $39,100. PCGS later purchased the coin to take it off the market after spots appeared on its surface. But that cent became the poster boy for coins that sell at auction for a pretty penny but really aren’t very pretty at all. Prices such as these are outrageous, unjustified and bound to come back some day to haunt the “lucky” buyers.

Though I don’t recommend modern Registry coins as investments, I do encourage you to capitalize on this phenomenon if you can. Check your proof sets and search through bank-wrapped rolls, and look for a perfect coin. If you can get that coin certified as Proof-70 or MS-70, you may be able to sell it for hundreds – or thousands – of dollars. Some people have done just that since the onset of Registry fever. If you can’t find such a coin, simply sit on the sidelines and watch the show for its entertainment value.

(6) Early gold coins.

If high-priced modern Registry coins are the graffiti of the current coin market, early U.S. gold coins – those from the 1790s and early 1800s – are the Rembrandts. I am a great admirer of the Capped Bust eagles and half eagles ($10 and $5 gold pieces) minted during the U.S. Mint’s first decade-and-a-half. These coins are not only rare; they’re also great expressions of Early American artistic genius, with designs that are startlingly beautiful.

Collectors and investors have been focusing on these coins very closely over the last several years, and that focus has translated into dramatic price gains. Just a few years ago, a 1799 eagle in a nearly uncirculated grade cost $10,000; today, it’s a $30,000 coin. Higher-grade examples have risen in value even more spectacularly. These are not generic rarities; they’re truly rare coins and they’re devilishly difficult to find in original grades.

As we see the price of gold continue to go up, these classic rarities will far outpace more pedestrian forms of gold. A word of caution, though: The grading services have been fooled by some of these coins into giving them higher grades than they deserve. That happens, for example, when the surfaces of a coin are less than pristine, even though the grade on its holder suggests that it is original. I have seen a number of these coins in holders labeled MS-62 or MS-63 where the coins turn color after encapsulation or spots break out later because something was done by a coin doctor to enhance their appearance.

With that one caveat in mind, this is one area of the marketplace that should sparkle brightly this year, next year and for years to come.

(7) Scarce-date Morgan silver dollars priced from $300 to $1,000.

I like these coins very much and they have great potential to rise in value. There are lots of options, too, in this price range. The 1881 dollar from the Philadelphia Mint is a $550 coin in MS-65. An 1879 P-mint is $600 or $700 in that grade. And you can buy all but the scarcest coins from the Carson City Mint. You can go down the list and find many great coins for $300, $400, $500 or $600.

These coins have the potential to jump in price 40 to 50 percent in 2007 and beyond. The momentum is certainly there. Morgan dollars have always been popular with collectors and investors alike, and demand for them as collectibles is getting a powerful boost from the strong bullion market. This seems likely to continue, since silver, like gold, has been trending sharply higher and seems to be headed in that direction again as the new year begins.

In buying these coins, take a close look at Miss Liberty’s cheek, which is a grade-sensitive area. Make sure it’s free from nicks, flaws, scratches and other blemishes. Take the coin and tilt it under a pinpoint light source and make sure it reflects light in a circular pattern. A truly original coin has light literally dancing on its surfaces. Morgan dollars are beautiful to look at, wonderful as investments and surprisingly affordable to own.

(8) State quarter errors and varieties.

The 50-state Washington quarter series has been an unprecedented boon to the hobby since making its debut in 1999. The program is entering its next-to-last year, and it’s still enormously popular not only with collectors but with non-collectors too. Since they’re made for circulation by the hundreds of millions, the state quarters bring little or no premium as collectibles – but there’s one very big exception: mint errors, issued by Uncle Sam with some obvious imperfection or significant deviation from the norm.

Off-center coins … coins with clipped planchets … even coins that have a state quarter design on one side and a Sacajawea dollar design on the other. These and other mint errors hold greatly heightened interest when they appear on the popular statehood quarters. That’s because these quarters have special fascination for much of the American populace – even without such errors. So when minting mistakes turn up, that interest is magnified tremendously. These coins routinely command premiums in the hundreds –and even the thousands – of dollars. The few known examples of the state quarter/Sacajawea dollar “mule” have sold for tens of thousands.

In April 2007, Random House is scheduled to release the 7th edition of The Official Price Guide to Mint Errors by error-coin expert Alan Herbert, and I look for that book to spark great new interest in state-quarter minting errors. The information in Herbert’s book will create a wave of excitement in the general press and on TV – and that, in turn, will serve as a major catalyst for increased activity and higher prices.

The U.S. Mint claims that 150 million Americans are seeking out state quarters and setting them aside. That’s a lot of interest – and during the next 12 months, I think we’ll see that legion of coin enthusiasts energized even more as word spreads from coast to coast about the big profits available from unusual state quarters.

(9) Larger proof gold coins, from half eagles through double eagles.

Proof gold has an almost magical quality. The combination of shimmering precious metal and exquisite minting detail makes these coins spectacular to behold. And their high intrinsic value makes it clear that they belong on a very high pedestal. All proof gold coins – including “matte” proofs, which have a sandblast appearance – should do extremely well in the coming year as gold increases in value and demand for gold in general continues to grow. But brilliant proof gold coins will clearly be the biggest winners of all. And since they provide the most appealing showcases, larger pieces will be in the greatest demand.

Many coin dealers have a tendency to push gold bullion coins when customers first express interest in buying gold. They encourage these customers to buy American Buffalo coins, American Eagles and other bullion coins – and after a while, these purchases add up to holdings with considerable value. Sometimes they also include semi-scarce numismatic gold coins, such as MS-65 Saint-Gaudens double eagles worth perhaps $1,700 or $1,800 each. A steady gold buyer may end up with multiple safety deposit boxes filled with gold coins worth tens or even hundreds of thousands of dollars.

At that point, the buyer may feel the urge to trade all this gold for coins that are truly rare. He or she may go to a coin show and see a magnificent proof example of a Type 3 Liberty double eagle – a coin with a proof mintage of only 80 or 90 – and jump at the chance to buy it for $50,000.

Many people now possess large quantities of bullion coins and common-date Saints, and they’re in a prime position to trade these coins for rarities, including proof gold from 1915 and before. Quite a few will – and they’ll be glad they did, since these are the gold coins with the greatest upside potential. They’re totally irresistible, and I see them soaring in value, especially in grades of Proof-64 to 67.

(10) The 1909-S VDB Lincoln cent.

I recommend this coin almost every year – and just like clockwork, it almost always goes up in value. I’m not about to change my approach this year, for this “king of Lincoln cents” – a perennial favorite with collectors – seems likely to enjoy an especially strong run in 2007 and beyond.

Lincoln cents are spending lots of time in the limelight these days. In one respect, all this attention is good: The U.S. Mint is making plans for four special cents in 2009 to mark the bicentennial of Abraham Lincoln’s birth and the 100th anniversary of the cent that bears his image. In another way, however, the publicity has been negative, focusing on the fact that rising metal prices have made the cost of producing cents more than a “penny” apiece. That has many Americans calling for a halt to further production.

No news may be good news, but this time just the opposite is true for the popular “S-VDB.” All of the news – including the bad news regarding metal prices – is pumping up interest in putting together sets of Lincoln cents. And as the longtime centerpiece of the series, the 1909-S VDB is drawing the greatest attention.

I recommend the S-VDB in all grades from fine to MS-66 Red and beyond. It’s a wonderful coin to own – and with all the ongoing news about the Lincoln anniversary and possible discontinuation of the cent, it will remain in the limelight for years to come.

(11) Proof type coins.

Proof gold isn’t the only proof coinage I’m recommending. Proofs in other older series – Barber and Liberty Seated dimes, quarters and halves, for example – also have captivating beauty and also are attracting a great deal of interest in the current super-active marketplace. These coins will hold their own – and possibly do even better – during the next 12 months. They are very strong collector coins, and as we see more and more newly minted collectors progressing from modern coins into more established series, the spillover effect will be significant – and highly beneficial.

In the last half of 2006, we saw much more interest in proof type coins in the Barber and Liberty Seated series – more than we’ve seen at any other time in the last three years. People realize that these are great values and very underrated. Coins with minuscule proof mintages are available in the $1,200 to $1,500 range. Some can even be had for $500 to $600 if you go down to grades such as Proof-63. I recommend these coins in grades from 63 to 66, and I expect that within a few years, we’ll see a 50- to 75-percent increase in value.

(12) Mint-state type coins.

My final recommendation is a mate to proof type coins. Mint-state coins aren’t as flashy as proofs and as a result, mint-state type coins will lag the proofs a little. A lot of new collectors are looking for flashier coins and coins that are easier to grade, and on both those counts, proofs are the better bet. Business-strike coins can be treacherous to grade.

But mint-state examples of business-strike coins are tremendously popular just the same, and demand for them has risen sharply since the advent of Registry sets. These have given a shot in the arm to all mint-state type coins – and some of the rarer issues, such as Draped Bust silver dollars, have gone up in value by 100 percent or more.

There you have them – my top 12 coins for the next 12 months. These predictions and projections are based on marketplace momentum and on the assumption that the market will continue to be vibrant and the current exuberance will continue. They also assume that metals – both precious and base – will keep trending upward in value.

With that, I wish everyone a prosperous 2007 – confident that when it’s done, we’ll all have many reasons for celebration.

I can think of at least 12!

2007-2008 COIN MARKET FORECAST SCOTT TRAVERS’ COIN MARKET OUTLOOK INTERVIEW

2007-2008 COIN MARKET FORECAST
SCOTT TRAVERS’ COIN MARKET OUTLOOK INTERVIEW

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

We had a great market until May 2006 and then a slump. What’s your outlook for 2007/2008? Please explain in detail.

I expect that precious metals will be higher, that the uncontrolled deficit and the problems in Iraq will be exacerbated by continuing terrorist fears and that both investors and collectors will continue to enter the coin marketplace in larger numbers than previously expected. However, it’s going to be a mixed bag in terms of inflationary expectations, because I think the Fed is well focused on inflation. Metals will go up, inflation will stay in check or increase a little bit, and higher metals prices will strengthen the coin market. If gold goes to $800 or $900 an ounce, then certain areas of the coin market will get stronger.

What areas of the market look to be the best performers for 2007/2008? Please explain why.

For the last couple of years, I’ve been placing great emphasis on classic gold coins such as Early American gold from the late 1700s and early 1800s – and with higher precious metals prices and especially higher gold prices, I would expect these coins to continue to outperform the market as a whole. I also expect generic gold coins, the entry-level coins for new gold investors, to continue to pique the interest of the initiated.

What areas of the market look to be the worst performers for 2007/2008? Please explain why.

I think you’ll see some unexpected surprises in coins that are rare but have been over-promoted. Some of these coins, such as Continental dollar patterns, have gotten out of hand in terms of price. Some of the high-grade Continental dollars and even some of the great rarities will see a bit of correcting in 2007/2008, even with higher precious metals prices. Take the gem half disme, for example. That has become a seven-figure coin, and I think it’s a bit overpriced. It’s not going to be a worse performer, but it’s also not going to go from seven figures to eight. The absolute worst performers for 2007/2008 are probably going to be some of the First Strike coins and a lot of the high-grade modern coins. Both are selling today for much more than their actual available supply would seem to justify.

Since the lows of 2001, gold almost tripled, but rare coin performance severely lagged gold. Some indices show gains of 20%-40% from 2001 to the highs of 2006! (A) What accounts for the disparity? (B) What does this portend for the future?

(A) In the last great gold boom, back in 1980, all the excitement and irrational exuberance were generated by coin dealers themselves. They were buying and selling rare coins on their own accounts and for inventory. As gold soared ever higher, they were buying ever more rare coins and paying ever higher prices. Dealers themselves are the greatest marketplace engine for demand. Conditions were similar in the smaller bull market of 1989. Today, the situation is just the opposite. Dealers are being more cautious and not buying as many rare coins with their profits from precious metals, knowing from sad experience that if the gold market drops, the rare-coin market could follow suit. The current demand is strictly from consumers – and it’s healthier this way. But the reality is, a lot of gold coins are not performing as well as we would like because of this.

(B) This portends that gains will be more solid and that if gold goes down in value, coin prices probably will not decline precipitously, as they did in the early 1980s. We will have a marketplace that’s far less volatile than we had in 1980 and 1989 and, to a lesser degree, in 1992. On the other hand, if gold goes up in value, we probably won’t see as dramatic an upturn in coin prices as we might have seen in the past, with the possible exception of some of the generic coins, such as Mint State-65 Saint Gaudens double eagles, which are the signature coins of numismatic gold promotions.

Do you think that “Ohiogate” had a detrimental impact on the market? If yes, how so and why? If not, why not? What lasting effects can we expect from “Ohiogate”?

Ohiogate really became an external event, with the coins being sold in a bull market very expertly over time in sales well coordinated by John Albanese. He advised Ohio on how to sell the coins systematically. There were no fire sales and the whole thing had zero impact on the market. I see no lasting effects whatsoever.

What will it take for a large financial institution to make a commitment to the coin market? What specific sectors of the market would be most likely emphasized in the portfolio of a large coin fund?

It will take impressive price performance statistics combined with an excellent outlook for the future, combined with the appearance of a high upside and a low downside, combined with honorable fund managers. I think all this is a possibility, but we don’t seem to have the statistics that we need to show robust past price performance – and some of the projections that I’ve seen don’t suggest performance as strong as I’d like to see for the future. Still, I think deficient areas can be strengthened and that this will happen relatively soon. I think large coin funds would seek great rarities and generic rarities such as proof gold coins. I don’t think we’d see these people running out to buy rolls of 1950-D Jefferson nickels.

As we close 2006, how do you assess the state of coin grading?

I see things improving. I think the grading services are making a greater effort to be consistent. I don’t see the standards loosening from where they were a year ago, so it’s a case of status quo. But I think we’re in a better position now than we were a year ago. I applaud the grading services for learning as much as they can about coin doctoring and for taking a lot of doctored coins off the market. At this point, I would be very surprised to see grading loosen further. I think we’re at the point where people understand what the standards are.

How important are modern coins becoming to the market? What are your overall views and recommendations for investors?

I don’t believe modern coins are becoming important at all, except to the promoters who foist grossly overpriced super-high-grade examples on the unwary. Sadly, they also will become important to those who buy them – but in a negative sense, when they learn how much they’ve lost on their “investments.” And yet, while many deride them, such coins continue to bring ridiculously high prices in super grades.

I recommend not buying modern coins in grading-service holders, since these coins’ super grades – the basis for their outlandish prices – have already been established. If people want to dip their toes in the shark-infested waters of modern coins, they should do so by purchasing – or cherry-picking rolls for – coins that appear to be very high grades and send those coins to the grading services to see if they can get them certified as MS- or Proof-70. It may cost $15 or $30 apiece to get them certified, but it’s an educative process. If you submit 10 coins and even one comes back as 70, you’ve gotten a $1,000 coin for an investment of a couple of hundred dollars. If all of them come back with lesser grades – say, 68 or 69, then you’ve spent a few hundred dollars to learn about grading standards. That’s how I recommend investors get involved in modern coins.

Two sophisticated investors come to you to invest for the long term. One has $25,000, the other $250,000. Each investor wants only a few coins. What do you recommend to each and why? Please state the upside potential for your picks.

For the investor with $25,000, I would pick virtually all gold coins from $5 Libs to $20 Saints in the grades of MS-64 to MS-66. For the one with $250,000, I would recommend a portfolio of all gold coins with the exception of an MS-65 1909-S VDB Lincoln cent and a couple of other coins – perhaps an 1856 Flying Eagle cent and a few key-date coins of that nature. The rest would all be gold coins – an MS-66 Saint and early gold coins in MS-63 and above. These might include a prooflike 1799 $10 in an old holder in 63 or 64, a 64 $5 gold piece from 1799 or even an XF 1795. That’s how I would put together that portfolio. The upside on all those coins is tremendous, and I would expect that in a few years, all could double in value.

Increasing government regulations, further losses of privacy, more taxes, these are all likely to impact our lives in the years ahead. How might they impact the coin market? What specific advice do you have for today’s investors?

That’s an open-ended question, and it’s difficult to say. I really don’t see much more impact on the coin market than what we already have. I think we’re at a point now where we’re not going to see a greater overall across-the-board government impact on the marketplace. I think we’re at the high point of government regulation. If we have another terrorist attack and there is another spectacular event like 9/11, all bets are off; there will be more restrictions on funds, and banks will look more carefully at movements of large sums of money because they will be forced to do so by the government. But barring another terrorist attack, I think we’re at the height of regulation and we should actually see an easing of these regulations in the months and years ahead.

My advice to today’s investors is to keep very good records of all transactions, especially trades. Just make sure the transactions are all well documented.

What follows are a series of questions where I request you to state your Best Buys in a number of market sectors. Please list the ones you favor, (B) explain why you picked them, and give us an idea of their investment potential.

Best Buys for Type Coins in MS and Proof

Twenty-cent pieces certified as Proof-63 or 64

You’ll pay about $2,300 in Proof-63 and $4,000 in Proof-64. But when it comes to investment, these coins have lots of life in them. Appreciation of 15% should be the norm.

Common-date Barber silver coins in Mint State-64 or 65, or Proof-64 or 65

The Barber coins served Americans long and well in commerce, and relatively few were preserved in mint condition. As a result, they’re elusive in high mint-state grades. You can expect to pay hundreds of dollars for even a common-date example in Mint State-64 or 65 – and more for a Proof-64 or 65, for proof mintages rarely exceeded 1,000. But these coins are legitimately scarce and the prices are justified. There are important bellwether coins and have lagged the market, so don’t go overboard and load up on them. But any recommendation of Type coins would be complete without these coins included.

State 1809-1837 Capped Bust dimes

Capped Bust dimes had extremely low mintages, judged by current standards. In only four years did their output exceed 1 million – and then not by much. On the other hand, there were nine years when the total came to less than 500,000. Furthermore, few were saved, since coin collectors were similarly sparse in those early years. You can expect to spend close to $600 for the “small size” (1828-1837) and $1,000 for the “large size” (1809-1828), even for specimens graded just Mint State-60, and several times as much for one that grades MS-63. But these coins are legitimately scarce and well worth the premiums they bring. These coins are undervalued by 25-40%.

Copper-nickel Indian Head cents graded Mint State-64

Although its annual mintages weren’t small by the standards of the day, ranging between 10 million and 50 million, this “white” Indian cent enjoys wide popularity as a type coin. In Mint State-64, it costs about $300 (not counting the higher-priced 1859), but I consider that a good value and a coin that could easily double in price.

Trade dollars graded Proof-64, 65, 66 or 67

Considering how elusive they are, they represent good values at current market levels – about $4,200 in Proof-64, $10,000 in Proof-65, $12,000 in Proof-66, and $20,000 in Proof-67. They are rare, beautiful, old, historic and desirable. 25% appreciation during the next couple of years is realistic.

Franklin half dollars graded Mint State-66 or higher

The design is deceptively simple, with Benjamin Franklin’s portrait and the likeness of the Liberty Bell both having clean, open looks. But subtle details are missing from most of these coins, even in mint condition; few, for example, display full lines on the bell. Franklin half dollars are common in grades of Mint State-63 and below; in higher grades, however, they command substantial premiums, generally much more than $100 – and based on their scarcity, they’re well worth it. Prices sometimes reach into the thousands of dollars depending on specific coin. Some dates in the 1950’s with full bell lines that are priced at $500 or so could easily reach into the thousands of dollars within a couple of years. This is one of my personal favorites, and I have salted away a number of beautifully toned examples for myself at relatively cheap prices.
1793 Chain and Wreath cents

The Chain cent and Wreath cent are obviously coins of tremendous historical significance. More than that, however, both are major rarities. The Mint produced only about 36,000 Chain cents and 63,000 Wreath cents, and in both cases those mintages are subdivided into several highly collectible varieties. You can expect to pay hundreds of dollars for low-grade specimens of either coin and thousands for high-grade examples, but they’re worth it. Seldom in U.S. coinage have history, rarity and romance intersected so dramatically – and so appealingly. A doubling in value within 3-4 years is realistic.

Two-cent piece in Mint State-65 Red

Because of the high usage of early two-cent pieces and the low mintage of later ones, relatively few exist today in pristine mint condition. Even among the ones that were saved initially, many were mishandled over the years. In Mint State-65, common-date examples cost $1,300 or more today – but the price is right, for these are truly scarce, historic coins. A realistic trading range should be above $3,000 per coin, but many coins such as these never achieve their potential because they are a part of an obsolete series.

Draped Bust silver dollars and half dollars graded AU-50 to AU-55

The earlier coins in the series, from 1795 to 1803, while attainable, also are far from inexpensive, for all have mintages under half a million and, in most cases, under 100,000. Draped Bust half dollars lingered until 1807, but topped 500,000 in just one year, 1806. Both denominations are prohibitively expensive in mint condition. They’ll set you back several thousand dollars even in about uncirculated (AU) condition – but as rare, historic and highly coveted coins, they’re well worth the outlay. These are perennial favorites that should appreciate 10% or more per year.

Best Buys in the Gold Coin sector

Early $2½, $5 and $10 gold pieces in mint condition

Early U.S. gold coins are beyond compare – in a class by themselves – in mint condition. In fact, early gold pieces graded MS-63, 64 and 65 are the most important coins in the marketplace as this is written. And they will remain so as long as gold continues to increase in value. As this is written, these coins are absolutely on fire. Everyone who can afford them wants to buy them, and collectors, investors – and even dealers – are throwing away their price guides when they bid on them at auctions. It’s not unusual to see such a coin with a price-guide value of $40,000 bring $90,000 or more at an auction. This is a textbook case of supply and demand: Very few of these coins are available, and the universe wants to buy them. With early gold coins, the momentum has been fueled by gold’s continuing surge and the powerful demand from determined buyers. And both of those propellants seem likely to persist. Under such circumstances, that $90,000 early gold coin – far from being overpriced – may look like a bargain before long. These are the coins you should be pursuing if you want to maximize your gold-related gains in the current marketplace.

Type II and III Liberty Head double eagles graded Mint State 60 through 63

This coin is listed as a winner, as I am optimistic about the outlook for gold. However, if you see gold bullion decreasing in value dramatically, you can reasonably expect Type II and III Liberty Head double eagles graded Mint State 60 through 63 to be big losers if you purchased them when gold was higher. Further, Section 352 of the U.S. Patriot Act could significantly impact the investment attractiveness of these “Libs,” as many dealers of these kinds of gold coins are now required to keep detailed records of transactions to comply with anti-money laundering requirements that are now being enforced. In December 2006, with gold at $617.30 per ounce, a common date Type III Liberty Head double eagle retails for $685 in MS-60; $725 in MS-61; $740 in MS-62; and $825 in MS-63. Type II is rarer and, thus, more expensive. These are bullion investments at these low prices, and could easily double or triple after the Buffalo bullion coin novelty wears off and if gold increases in value. I see virtually no downside at these levels and am aggressively recommending them not only to my best clients, but to my closest relatives.

Type 3 Liberty double eagles graded Proof-65

Type 3, is the gold proof I especially recommend. A Proof-65 example will cost you about $100,000 – but with mintages ranging from a low of 20 to a high of just 158, these coins are not only dazzling but downright rare. A doubling in value is realistic with higher gold bullion values creating economic justification.

Best Buys in Silver Dollars
1885-CC Morgan dollar graded Mint State-65 (and similar dollars that have only slightly higher values in Mint State than in circulated conditions)

The 1885-CC Morgan dollar is rare in every condition because the Nevada mint produced just 228,000 cartwheels that year—the fourth-lowest mintage in the Morgan series. A circulated piece will cost you much more than the corresponding 1886-O; even in the grade of Extremely Fine, for instance, the ‘85-CC dollar sells for nearly $600. But there are no huge increments as you go up the grading scale. On the contrary, the jumps are quite small until you reach the high mint-state range. This rare-date coin can be obtained for less than $1,300 in MS-65 and less than $2,600 in MS-66. True, this reflects the fact that much of the mintage survives in uncirculated condition, having been stored for decades in U.S. Treasury vaults. But given the low mintage, the current market values have a bedrock base of rarity. And you can go to bed not having to worry that your rare, beautiful coin—struck at a colorful mint spawned by the historic Comstock Lode—will have lost much of its value overnight. Carson City dollars in U.S. government General Services Administration (G.S.A.) sealed cases are often worthy of a premium, especially if NGC has offered its opinion as to the coin’s grade and affixed its hologram to the holder. Coins in these holders, sold by the G.S.A. to the public from 1972 to 1980, can be considered original and not tampered with. This is an excellent safeguard for collectors concerned with coins having been doctored or altered after they left the Mint. Be careful not to get too enthusiastic over the concept of a sealed government holder and an NGC grade: Sometimes these coins will sell for hundreds of dollars more just because they are in G.S.A. holders. Crack the holder, and you will never be able to recover the premium.

Better-date silver dollars

Many Morgan dollars and other traditional cartwheels have bright, dazzling luster and razor-sharp detail. You need to be careful, however, not to fall in love with just a pretty face. Certain common-date dollars – the 1880-S and 1881-S, for example – exist in large quantities in pristine mint condition and really are overvalued even when purchased for a fair market price. You should concentrate instead on coins with lower mintages, even though their condition might be a bit less spectacular. They needn’t be rare – only scarce. The 1886-S Morgan dollar and 1928 Peace dollar are two good examples. These coins will always be in demand, yet they’re difficult to promote (offer in ads with wide circulation and on television shopping programs with high viewerships because these marketers need coins of which many exist). They’re safer and sounder values. These coins have momentum and a rock-solid base and should continue appreciating smartly.

Best Buys in the U.S. Commemorative series

I specifically and emphatically do not like run-of-the-mill $500 commems. Many are overgraded, artificially toned, dark in color and generally undesirable. I also realize that the gold commems have experienced substantial price appreciation. Nonetheless, I believe that with higher gold, these gold commems will reach even higher levels—while the $500 problem coins will continue to languish in dealer inventory boxes.

The 1915 Panama-Pacific $50 gold piece, either octagonal or round

The $50 coins were identical in design, both depicting the Greek goddess Minerva on the obverse and her symbol, the owl, on the reverse; one was round, however, while the other was octagonal. These coins have been acclaimed for their beauty. Even more attractive to investment-minded buyers are their mintages: After unsold specimens were melted, the net remaining figures were 685 octagonal pieces and 483 round. These coins are expensive, typically bringing strong five-figure prices. But they’re rare, beautiful, desirable – and likely to continue rising in value as time goes by.

Best Buys among 20th Century Series coinage

All legitimate rarities that are truly considered necessary to complete a collection should see considerable price support. Examples are the 1955 Doubled die Lincoln cent (MS63 Red is the best value) and 1990 No-S Lincoln cent Proof (Proof-67 red is a good value). These types of coins will retain their value when the MS- and Proof-70 modern coin bubble bursts.

What changes or innovations are needed to make the pricing of coins a better deal for investors? Just as reduced commissions (even the elimination of commissions!), plus much narrower spreads between bids and asks, have dramatically lowered trading costs for stock traders, what can be done to make our market more efficient and a better deal for investors?

Spreads are about as low as they are going to get. The product is relatively decent. We need a big player to step up to the plate and recommend coins as an investment. Much of this is bandwagon effect and psychological. Gradual, reasonable steps to help make this come about are being taken. I have a new book scheduled for July, and I will try and help everybody by being positive. This book is very a departure from my role as a consumer advocate—which I have toned down for now in order to help the industry try and attract some institutional funds so everyone can make money.

Since PCGS and NGC began, we’ve seen a general loosening of grading standards. (A) Could standards in the future become stricter, thus reversing the trend of the last 20 years? (B) If yes, what event or events would cause this to take place. If you disagree, please explain why.

The standards will not become stricter permanently. The way the system is designed, standards move within a narrow range.

What 1, 2, or 3 coins are your favorite “sleepers,” coins you know to be much scarcer than generally perceived and, as a result, undervalued. Anything from the 1700’s to date, your picks. Please explain why you picked them and tell us their potential.

Proof silver Type from late 1800’s to early 1900’s—grades Proof-63 through Proof-64 (and possibly some Proof-65’s). Trying buying some—you will have to pay over sheet now. The coins are very scarce, and haven’t moved. A prominent trader told me he could raise the bids by about 20% and expect to receive no more than 5 coins total. With a little demand, these coins could double.

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