Over 200 Years Of Combined Numismatic Experience At Your Disposal.
|March 2016 Issue|
My Coin Journey Part IX
By Warren Mills
I was not privy to the ins and outs of how PCGS came to be. I’m sure my employer at the Rarities Group was involved in discussions with the original PCGS owners relative to the viability of an industry-accepted and supported grading service. My job was to sell coins.
In 1986, the industry was very active. Martin would buy coins and organize them, and from there, I would fine-tune the coins into groups that I knew I could offer to specific market makers. Our operation ran like clockwork. It was stressful and exciting at all times, and it seemed like there was always a large deal somewhere to be bought and sold. The time and effort to keep up with the avalanche of buying was very tough. One of my colleagues would regularly step outside and occasionally throw up. It seems hard to believe that working in the coin business could result in that much pressure. I told him it was time to either find a new line of work or a less intense environment, and that his health was more important.
PCGS became the new game in town. The concept was great and sounded like it should work, but we were in unchartered waters. Originally, the grading standard was very strict. You could have a coin that you thought was a lock MS-65 that would only grade as a MS-64. It hardly ever went the other way that you had a lock MS-65 that went to an MS-66. The grading was conservative and I was happy to see it that way.
Since PCGS was so new, it was business as usual for a while, with raw coins trading easily. However, as PCGS gained more acceptance, there was a calling from dealers for the product. Many dealers started to post bids for PCGS coins, but it was still new. I remember getting anxious when a dealer would hit our bid for multiple coins. Early on, you had to accept the coin as long as it was graded. You did not have the option of posting a sight seen bid or a sight unseen bid.
One day, Larry Whitlow hit our bid for a few Barber Halves in PR-65. When we received the coins, they were originally toned but not attractive. We looked at each other and said, “How the heck do we re-sell these coins?”
As the growing pains eased, so did the grading. The original strict standard started to loosen up a bit. PCGS also made it a rule to hire graders that were no longer working in the industry. When they first started, the graders were fulltime dealers and would occasionally see their own submitted coins in the grading room! In addition, the bidding network allowed dealers to post sight seen bids and sight unseen bids, which helped us to offer coins that we felt were more appealing.
With the acceptance of PCGS and demand for certified coins increasing, a new layer of pressure was added to find more coins worthy of certification. Forty-hour work weeks were more like a vacation week. It was always 60-80 hour weeks.
In 1987, I had enough of the constant travel and high pressure. I decided it was time to move on for my own well-being. I didn’t want the constant high pressure of wholesale business, so I decided to step back into the realm of retail. I could work a more reasonable schedule and actually have some time for my family. After handling tens of millions of dollars’ worth of coins, I felt I could select the best coins from any inventory and help a client build a great collection. So, the winds of change blew once more and I was onto a new company and venture in the coin business.
In our next newsletter, I will focus on the run to the mega-bull market of 1989.
What Do I Like?
By Warren Mills
I think true Red 1936 to 1942 Lincoln Cents in PR-65 and PR-66 are a good buy. Beware of faded and spotted coins in holders. CAC stickers a lot of them with too many carbon flecks. In addition, beware of washed out Reds. These coins that have been rinsed are subject to spotting in the future. Original true Red with nice Mirrors and minimal spotting are hard to find. I also recommend they be CAC’d.
One of my loves is the Seated Half series. I think they are under-rated from Fine to MS-66. Nice VF to XF coins that are original and fresh, particularly scarcer dates, are great. Focus on any and all original pieces, especially the slightly scarcer to scarce dates. PCGS and NGC certify too many circs that are so screwed up that they should have gone to the smelter! A CAC sticker is not necessary on these grades but can’t hurt. However, CAC is not strong on circulated type. I see coins with problems that have no business with a sticker, but again, it can’t hurt. For AU and higher grades, I prefer them CAC’d. Watch out for over-dipped pieces with stickers. As always, I prefer original coins. Many Halves were used to pay down debts and for commerce overseas. They are available to a degree, but some of the scarcer issues could be real sleepers. A couple of dealers controlled the bids in the Greysheets for decades on Seated coins. I hope that with a new group publishing CDN, that these coins get their due.
How about those $10 Indians? Great aesthetic appeal and almost a half-ounce of gold? I like Choice MS-63 and MS-64 examples, CAC only. They are a good buy at current levels. For the person with more discretionary income, nice dates on up to MS-66 could be a good acquisition. If you feel the world could fall in a hole, a select group of CAC 63’s would be a good hold.
Bullion Consumer Alert
By Warren Mills
Please be aware that more and more bullion counterfeit items are entering the coin market on a daily basis! The PNG (Professional Numismatist Guild) sent over an alert this week about a dealer buying (200) one-ounce silver layered copper bars. The workmanship was exceptional. These bars were mixed assayers from Engelhard to Apmex, but they were all top-quality fakes with many assay names.
We recently saw a Perth Mint gold bar with the certificate and all outer packaging that turned out to be fake! Every few weeks Coin World or Numismatic News has a counterfeit alert coming through. Even American Eagles are subject to this awful growing problem.
We acquire all of our bullion from long standing top-notch market makers with decades of experience. Our belief of servicing our clients with the most fairly priced bullion is important to us. Every day, we hear people wanting to buy bullion for the cheapest price. I once lost a $10,000 deal for $10. I explained the ins and outs, and spent a half hour giving tips on deliverable quality and other important bullion facts. My follow-up call resulted in how I found out that the customer went elsewhere. It was funny because my price was better initially, but the dealer asked what we quoted the client, and when the client told him, he undercut us by $10. The funny thing was that our shipping cost was $10 less. I educated this client, but lost a deal to someone who only spent two minutes on the phone to fill an order. I mention this story for one reason; most bullion buyers just want the cheapest price possible, period!
This attitude is going to serve perfectly for crooks to sell gold and silver bullion for what seems like a cheap price. Many people buy over the internet specifically to find bullion deals; the lower the cost, the happier the buyer. They don’t realize they are setting themselves up for a problem in the future. It’s just starting, but we are only in the beginning stage of an epidemic. We are buying state of the art testing machines and, if necessary, old fashioned acid testing to protect our clients and ourselves.
Years ago, people would acquire U.S. gold in the Middle East and think they were making a killing. When they found out the gold was fake, they felt as if they were killed. Rest assured that this is a problem that will spread like wildfire.
Here are my recommendations:
- Only do business with long standing reputable dealers. Aside from our normal numismatic affiliations, since 1991, RCNH has also been a PNG Accredited Precious Metals Dealer (APMD) member -- one of only 50 or so such dealers in the world.
- Don’t buy any bullion over the internet. It isn’t all bad, but in time as this plague rears its ugly head, more and more people will be looking for outlets to get rid of their mistakes.
- Buy bullion that is harder to counterfeit. At this time, I only recommend circulated junk silver coins. They are just not worth the effort to counterfeit. In the future, the premium for junk silver will skyrocket. These coins are pre-1965 10c, 25c, and 50c. I also like silver dollars; however, I have seen counterfeits….so refer to recommendation #1. I always like American Eagles, but the future counterfeiters may hurt them.
- Consider certifying your bullion gold. It’s cheap insurance and assures you of liquidity. We are speaking with the services about offering a genuine slab for bullion at a reduced price. My hope is that the service will be less than $10 per coin and hopefully for a group closer to $5 per.
This issue will be addressed more in the future. For now, I urge caution. Be smart about with whom and what you are dealing. I don’t mean to be Chicken Little, but I am deeply concerned.
Partner and owner of Rare Coins of New Hampshire, Inc. since June, 1990 and a full time coin dealer since 1979. Warren is a full member of the Professional Numismatists Guild and a life member of the American Numismatic Association. He was selected by the Rosen Numismatic Advisory as one of the ten leading numismatists in the country for twelve consecutive years. He was selected by PCGS and written up in their newsletter as handling and submitting some of the nicest coins they have ever seen.
Pogue Sale III – Aberration Or Predictor?
By Joseph Presti
The Pogue Sale Part III was recently held in New York City and there were certainly some interesting observations to come from it. The sale like the previous two, contained a small number of lots but the coins were of extreme quality and rarity. Pre-1800 half cents, 1793 large cents, Capped Bust dimes, Bust half dollars dated from 1823-1836, Three Dollar Gold and Half Eagles ($5 coins) dated from 1807-1820 were included in this sale.
I spoke with several attendees and buyers who were at the auction and the conclusion from experienced dealers was that there were definitely some bargains to be had. Bargain is obviously a relative term. In the previous two sales there were several coins to break the $1 MM mark, this auction did not have a single lot enter that lofty club. This is not to say that every auction must have some coins that break the million dollar mark and certainly some of the coins in Pogue I and II were rarer than coins in Pogue III and warranted those high prices.
Some of the coins brought prices that were considered fair, while others brought significantly above what dealers would consider reasonable. Two coins of particular note that most thought would and should have brought more than $1MM were the 1793 Chain cent in MS-65 RB and the 1815 $5 in MS-65. The consensus is that people attending the sale were stunned when these coins sold for what they did and in the case of the 1793 Chain cent, it was reported that the buyer turned down a $150,000 profit after he purchased the coin! Another dealer with whom I spoke told me that he spent a little over $1 MM spread over eight or nine coins and all but one sold within a week.
There is much speculation about why there were some coins that sold for substantially less than their presale estimates. Some say the coin market has been in a correction for the last year, others say it was the “perfect storm” of the stock market taking it on the chin and oil prices sinking, all at the same time. There are others who say that the Chinese and Russian buyers have stopped buying coins because their economies are in shambles. At a recent major coin show in Germany which is the equivalent of the ANA for foreign coins and also took place at about the same time as the Pogue III sale, quite a few dealers complained about the lack of buyers and activity, citing many of the same reasons stated above for a poor performance for some lots in the Pogue III sale.
While many of us will never have the opportunity to buy coins of Pogue quality, the fact remains that high quality coins that are “all there” are consistently bringing more than what one would consider wholesale prices, and often more than retail prices at shows and auction.
Skin – When a coin is original, undipped, the surfaces are referred to as skin or original skin.
Orange peel surfaces – Oftentimes associated with proof coins and more specifically, proof gold coins. The surfaces of these coins will sometimes resemble the skin of an orange, hence the reference. Sometimes mint state examples of one dollar and three dollar gold coins in prooflike condition will also be referred to as having orange peel surfaces.
Field – The portion of a coin that has no design.
One More Thing To Be Aware Of
We recently received a notice from The Numismatic Crime Information Center out of Arlington Texas, along with a picture showing a grouping of counterfeit one-ounce silver bars (pictured on the right) that were recently purchased in the New York/New Jersey area. An acid test shows a copper base with a silver overlay. Over 200 counterfeit bars had been passed.
We have been aware of this problem for years and a few of us have taken counterfeit detection courses at the American Numismatic Association (ANA) in Colorado Springs, Colorado. However, those classes were primarily for numismatic counterfeits and not so much for modern bullion coins.
The article sparked a call to action and we held a meeting at RCNH to discuss the problem and how we plan on dealing with it as we’re sure it will only get amplified over time. One item that was discussed was that we need to leave the buying to the buyers. Sometimes, when one of our numismatists has a customer coming in with bullion-related material, he or she will get buy prices from one of our buyers so that they can personally assist the customer. This has to change because there are too many potential traps in which to fall for the people that don’t buy on a regular basis.
I was reminded at the meeting of a transaction I did quite a few years ago when a person with whom I had done very limited business came in with one hundred one-ounce Maple Leafs. He told me that he had a fire at his place of business and that the coins survived because they were in a safe. As I reviewed the coins, it was obvious that they had been in a fire because they were dingy, dark and smoky. I called our bullion supplier and told them about the condition of the coins as I assumed they would discount their buy price, which they did. At that time I confirmed the transaction at $1,010 each. We only make 1% on Gold when we sell and 1% when we buy, so I wrote a check to the gentleman for $100,000 Dollars and he was on his way.
Shortly after he left, Joe Presti, one of our buyers, came in and I told him about the purchase I had just made. I didn’t expect him to do cartwheels, but when I told him about the fire and he saw the coins, his look of disapproval was evident. He picked up one of the ounces and balanced it on the tip of his finger and then tapped the side of the coin with a pencil. I’ve done this before and when everything is in order, the sound is a very nice ping. Well, when Joe hit the coin, all we heard was a big clunk - no ping.
Needless to say, my heart sunk and I was thinking, wouldn’t you know it, I try to do a good deal and I messed it up, not to mention the $100,000. Actually it had a lot to do with the bucks; here, I’ve written a check for $100,000 to make $1,000, and we may be out the whole $100,000. I can’t tell you how sick I was waiting to get the final word from our bullion people as to their authenticity. The Maple Leafs, as it turned out, were fine and I assume the intense heat had changed the coins in a way that they had no more timber. I dodged a bullet that day, but it did finally sink in that not everything is as it seems; if you can’t tell the difference, it can be to your demise.
I leave all the buying to our professional staff as they are constantly availing themselves of relevant changes in our market, especially counterfeits. I know some of the other numismatists will be addressing this situation in their articles, now and in the future.
David Carleton, a New Hampshire native was introduced to coin collecting by his father and Grandfather in the 50’s. Gold bullion speculation dominated the 70’s culminating in 1980 when focus on Numismatics returned. He became a life member of the ANA , met Warren Mills (his coin Guru) and they cofounded RCNH in 1990.
Letters From Our Mailbag
Questions and Answers:
Question: I have just started to collect Morgan Dollars. With six in my collection, they are relatively common Morgan's in MS-64, all of which would retail for around $80 each.
Where is the market for Morgan's going? Would I be wiser to acquire a higher level, e.g., MS-65 or MS-66, and is the additional investment a smart move on my part? For what should one be looking insofar as what makes a Morgan Dollar special, e.g., toning, frosting, etc., so as to best appreciate and enjoy their collection?
R.S., Jaffrey, NH
Answer: I’d stick with the 64’s. They are on the lower grade for investment coins, which runs from MS-64 to MS-67. They’re affordable, beautiful, and there is less risk.
Morgan’s are the most highly collected series of all US coins.
I’d buy the most original coins that are available. Brilliant coins are fine if undipped. Light or attractively toned original pieces are also eagerly sought after. Personal preference is the rule here.
I believe that Morgan’s will continue to be highly sought after. A wholesome circulated common date is a $30 coin. To step up for an MS64 at less than $80 is a good value.
We welcome your questions. So please send them to me directly or emailfor future newsletters and if you prefer, I will answer them for you privately.