How to Survive at Auction
By Warren Mills
Welcome to the March Edition of The Rare Coin Enthusiast. This month I want to address the need to acquire coins from auctions. This is my 39th year in the coin business and it is a true blessing to work at your hobby. However, there are times when I encounter situations that can be very frustrating. Allow me to give you a description of such a scenario.
We connect with a customer by phone, email, or at a show. After pleasantries the question is, “Are you still buying coins?” In many instances the answer is, “Yes, but I buy most of my coins in auctions now.” I follow up with, “How come, you’ve acquired great coins from us in the past, why now mainly auctions?” Usually it has to do with our inability to supply or find solid coins when there are tremendous amounts of marginal ones in auctions. Auctions do have some great coins, but most are marginal at best! Okay, I get it, but three recent encounters with clients made me see a need to address potential pitfalls here.
Auction houses are great at marketing their products. Once your buying patterns are established, they email you about future lots that are coming up for sale which may be of interest to you. This is fine if you know what you are doing. Many buyers only have an idea of what they like. They may have started buying coins with one or two reputable dealers, then figured out they’ll cut out the middleman and buy direct. This is just enough knowledge to actually have a negative effect on the value of your purchases. Here are a few examples that we recently encountered:
The Morgan Dollar Enthusiast - He found a wonderful offering of dates and price ranges in auctions, checked out the scans, focused on the lots he liked and went to town. When I reviewed his purchases, I found that he had no ability to detect original white from over-dipped bright. His nicely toned coins had way too many marks to justify grades, but the marks were partly hidden under the toning. Proof-likes and Deep Mirror Proof-likes had too many die striation lines to technically warrant the designations. Older holder P/L’s and DMPL’s are particularly subject to this.
So after years of making these types of acquisitions, the client decided to send them all in for CAC review. Only a handful CAC’d and although there was disappointment, I informed the customer of why the coins didn’t work out and the education benefits made it all worth it to him. The customer received a better understanding of what to buy and how to grade. We also re-established a relationship with a customer who has since acquired very nice dollars for his set from us. He still buys from auction, but allows us to review all the lots ahead of time for him so he is getting the best value for his hard earned dollars. We do charge a modest fee for this service.
The Beautifully Toned Proof Indian Cent Buyer - I love original, pretty toned Indian Cents, however focus on the keyword “original”. Nice iridescently toned Indians take decades to acquire their beauty and to top it off, we’re talking about proofs! However, I have an awful time finding any in the market that I am 100% sure are original! I know that is sad and a shock, but there are many dealers that doctor coins, who have spent decades perfecting techniques to fool the grading services and retail buyers. If I handle a handful a year that are 100% original, I’m lucky. I see quite a few at auctions and in dealer cases that makes me suspicious. In all cases, I err on the side of caution and pass.
One collector recently told me that he sent in about 30 of his pretty toned Indian Cents, which were all acquired from well known companies, to CAC. Alas, only one stickered, wow that’s a shock! Again, the lesson here is don’t let your passion cause you to acquire coins that are a terrible value or compromise the liquidity for you or your heirs in the future. Be patient and continue the learning process with honest dealers, so tens of thousands of dollars later, you’re not wondering what went wrong!
The Pretty Toned Silver Type Buyer - He recently decided to have his collection CAC’d. We sent in 73 of his 19th Century type coins, all with varying degrees of bullseye and rainbow toning from PCGS and NGC. Many were auction purchases, but a fair amount were from dealers.
When I was previewing the coins, I noticed a lot of his dimes graded Proof-67 with bad surface hits, I couldn’t believe it! I told him that small Proof coins should not have marks, and any denomination that has abrasions on Proof surfaces should be graded substantially lower. Nice color can only forgive so much, especially on a Proof coin. Also, many of the coins were lightly cleaned and/or dipped and toned back. The surfaces at some point were tampered with. There were also quite a few coins that I thought had color added and were Q-tipped with dip to give it that bullseye toned appearance.
Remember, when an auction house sees your pattern of buying, they pigeonhole you to be notified on those coins. Also, when a dealer knows your pattern of buying, you will be fed, or should I say stuffed. In many instances, there will be no regard for the true technical nature of the grade. It will be, “Sell it and forget it!” Oh yeah, and about those 73 pretty toned coins we sent in to CAC for him. Only 11 of them CAC’d, a success rate of only 15%! I know for some dealers that’s good, but it should be much, much better.
In all of these recent cases, there is obviously still a lot to learn. Remember, high grade coins are around, you just need to focus on the cream of the crop. Why? So you can get real value for your money. Beware of dealers running your bids up on you if you attend the auction. I always stay at the back of the room so as to not publicize my buying for customers. I want to attend just to get a feel for how the sales are. I try to watch out for shill bidding and inordinately high reserves. Also, beware of dealers calling your attention to auction lots and then kindly helping you formulate bids. These coins could be their own pieces in the auction or coins that friends of theirs consigned and then they split the profit!
Many people buy in auction because they feel that under-bidders assure them of limited downside. That is wrong! If an under-bidder doesn’t really know what they are doing, they could be caught up in auction fever and guess what, that’s contagious! Plus, a dealer or two may focus on a coin because they feel it is an upgrade. They chase it for that reason and you have the fever, so you go right along and feel great to get it. This is when you need to step back and examine recent auction sales to see why this is dangerous. Look at the Gardner and Newman sales, some of those coins sold for great numbers. Yet, less than a year later those coins are being auctioned again and voila, they sell for substantially less! In some instances, less than half the original sale price! Why? Well, in many instances they are tainted. The perception is that they didn’t work for upgrade, so here they are again. Then they sell for substantially less. There’s more to consider, but let’s not write the whole book today.
So what do you do?
First, stop being a slave to auctions. Align yourself with not just knowledgeable, but honest dealers that truly work to deliver value. Go back to school and realize you don’t know what you think you know. When you open your mind and not just your wallet, the value for your money will improve. Also, you can still have the fun of bidding on auctions. Just pay a fair compensation to a dealer to review lots for you. This way the traps will be sprung on someone else. In the end, you will end up with less coins, but the quality of the coins you do buy, will be way better. And guess what, in many instances a good dealer can sell you great coins at a lot less money than what you’d have to pay in auction!
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.
Gold Eagles – Proof or Uncirculated
By Joe Presti
Most bullion calls we receive, center around the American Eagle gold coin in uncirculated condition. These coins can theoretically be minted in unlimited quantities, as long as there is gold available to mint the coins. The government produces enough coins to meet demand, and as such, mintages have ranged in the 500,000 to 1,000,000 coin range since the inception of the series in 1986.
On the other hand, proof gold Eagles are struck on specially prepared planchets, encased in a velvet box, and packaged in a cardboard outer box. They have mintages that average around 50,000 coins. Anyone who collects coins would readily admit that there are not many coins more beautiful than a proof gold piece, even if recently minted.
If someone wanted to purchase a backdated gold Eagle today, that coin would cost approximately $1346.50 per coin, plus associated costs including shipping. That price is based on gold spot of $1321 per ounce and current premiums could possibly change, increasing or decreasing that price. On the other hand, proof gold Eagles with their beauty and limited mintages can be bought for something in the $1375-$1400 per ounce range, with earlier dates and sets sometimes commanding a premium. These proof Eagles, up until about a year ago, were selling for upwards of $300 per ounce premium over gold, as compared to a $50 premium today.
What has changed?
Back in the 1980s, the government instituted regulations which prevented individuals from putting rare coins into their IRA’s. The exception was that bullion of various types were still allowed. What the government did not foresee was that proof gold and silver Eagles, as long as they were ungraded, were considered bullion. As this loophole began to be exploited, some dealers saw an opportunity to focus on this area and began to sell massive quantities of these coins. This caused premiums to skyrocket as high as $500 per ounce or more on a retail basis.
The reason for the price collapse, appears to be two fold. First was the lack of people funding gold and silver IRA’s. The other was that some of the dealers that charged high premiums, went out of business. Both situations resulted in decreased demand.
If someone is interested in buying any of these proofs, we only recommend that they be in their original mint packaging, which includes the inner and outer boxes mentioned above, along with the certificate of authenticity issued by the mint. By all means do not buy graded gold Eagles. Many dealers have scammed the uneducated buyer on Proof-70 silver and gold Eagles, charging outrageous premiums based on a low population story. Don’t be fooled!
The thought here is that if one were to purchase uncirculated gold Eagles, why not contemplate buying proofs, which have much more going for them. Beauty, limited mintage and a history of higher premiums than the uncirculated version has ever had.
The Calvin Coolidge 1928 Hawaiian Sesquicentennial Half Dollar Presentation Piece
By Dave Carleton
Last Monday was President’s Day, and because we are located on the top floor of The People’s United Bank that honors the holiday, we found ourselves having a three day weekend too. This I thought would be one of our last chances to go skiing in Vermont before the snow melts. Our mountain, Mad River Glen, was extremely crowded on Sunday because of the holiday and school vacations, but the skiing was wonderful.
When we return back to our home in New Hampshire from these trips, we like to take alternative routes with the hopes of stumbling on some interesting sites or historical markers along the way. On Monday we really weren’t thinking about President’s Day at all as we traveled south on Route 100. I was checking out the map and noticed that we would be traveling right through a town named Plymouth Notch, which happened to be the birth place of our 30th President, Calvin Coolidge. We decided to stop and check out the Coolidge family homestead.
When we arrived at the location, it was very quiet and peaceful and we walked around reading all the informative markers. Then we noticed a building that turned out to be the Calvin Coolidge Visitor Center with a parking lot full of cars. The center isn’t usually open until the middle of April, but because it was President’s Day, they were open and there was a crowd listening to an orator reciting one of the President’s speeches. We came in towards the middle of the presentation, so we went in to another room and watched a movie of his life.
Some of the facts that we learned was that while he was Vice President to Warren G. Harding and on vacation at his homestead in Plymouth Notch, VT in August 1923, he was informed of President Harding’s untimely death. Later that day, he was sworn in as our 30th President by his father. He was known as the first President to address the American people by radio.
This is where the coin part comes in. In 1928, during his administration, the Territory of Hawaii asked our government to produce a coin commemorating the 150th anniversary of the arrival of Captain James Cook, the first European to come to the island. At that time, getting such a request granted was almost impossible, but for some reason it was approved without any hold backs and President Coolidge signed the order.
While touring the visitor center we also went into a room with all kinds of documents and some very interesting coins, like the President’s inaugural medal. That’s when I realized that I had a connection to this. It came to me all of a sudden, five years ago I had placed with one of my collectors the 1928 Hawaiian presentation coin that was actually given to President Coolidge by the Territory of Hawaii!
The US Mint produced 10,000 Hawaiian Commemorative half dollars, and out of that number 50 were made for presentation. They were originally referred to by the Mint as Sand Blast Proofs and had similar surfaces as the Proof gold coins from 1911 through 1915. Many of these coins were acquired by non-collectors and were mishandled. The Proof Hawaiian my friend has is graded by PCGS as a PR-64, with all the proper paperwork that accompanies and authenticates the coin’s provenance. Not only is it the actual coin given to President Coolidge, but it’s the only Proof Hawaiian that CAC has ever approved.
These are the kind of happenings that make me love coins. It seems to me that the saying, “a coin is a piece of history in your hands,” never stops ringing true.
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.
Questions From Our Mail Bag
By Warren Mills
What’s your viewpoint on toned Proof Indian Cents? The rarity of them, originality and pricing? - D.M.
Thanks D.M.! This is a question that fits right in with the first article of this newsletter.
I love nicely toned Proof Indian Cents. Copper tones differently than silver, so really nice colored coins are like works of art. They were popular at shows in the early 1980s, so much so that many artificially toned pieces were being sold. Then the grading services came along and wouldn’t grade blatantly artificially toned coins. On many occasions at shows, I saw people that had no interest at all in original red coins. They seemed to always want nice toned ones.
True original toned beauties are scarce! Unfortunately, there are some dealers that spend years perfecting techniques to deceive. It’s at the point today that probably less than half of the certified toned Proof Indians are close to original! Now, instead of total artificial color, some dealers will enhance color. This enhancement is still artificial, but a lot harder to tell.
For the no doubt, original, pretty 65’s, start at $1,000 against a bid of $400+. Proof-66 beauties are what a buyer will tolerate for the price. With these coins, originality is of the utmost importance. CAC is a good starting point. They are very much aware of enhanced toning and try to err on the side of caution. Remember, some dealers that handle these coins are making no representation other than they are nice looking. To get the real value for your money stick with CAC coins, not all of them are nice, just the ones that you really like.
Feel free to email me with any questions you have.