15 Coins You Don't Want to Buy or Hold


Published on

15 Coins You Don't Want to Buy or Hold

Published in: Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

15 Coins You Don't Want to Buy or Hold

  2. 2. 1American Federal Rare Coin & Bullion THE 15 COINS YOU DON’T WANTS TO BUY OR OWN The following 15-point synopsis will illustrate those categories of coins that in my opinion do not offer significant upside potential and should therefore be viewed as unattractive investments. Here are the first four points you’ll want to consider before making a rare coin purchase. • The rarity of the coin • The coin’s value as a recognized collectible • The coin’s trading history • The coin’s status among the network of dealers and collectors Dear Coin Investors and Collectors, As president of American Federal Rare Coin and Bullion, I have compiled my 30+ years of experience into this easy-to- read booklet in which you will learn to identify the 15 coins to completely avoid. Don’t get caught in one of the many scams out there! I am a member and abide by the Code of Ethics of both: PNG–Professional Numismatic Guild (Member #553) and the American Numismatic Association (Life Member # 5211). I also belong to a host of other coin organizations including NGC, TNA, CSNA and FUN. Remember that here at American Federal, we believe in educating our clients so that YOU can make the right invest- ing decisions for your life. Call us at 800-221-7694 or email me (nick@americanfederal.com) and we’ll help get you on the right track. Sincerely, Nick Grovich President American Federal Rare Coin & Bullion 500 Easy Street P.O. Box 5810 Carefree, AZ 85377-5810 www.americanfederal.com
  3. 3. American Federal Rare Coin & Bullion2 3American Federal Rare Coin & Bullion MODERN COINS Modern coins includes the Jefferson 5¢, Franklin 50¢, Roosevelt 10¢, Kennedy 50¢, and most other coins that were minted after 1945. To put it bluntly, most of these coins are simply not rare and due to their abundance and availability, have no real chance of seeing any significant increase in value. You may notice a trend of collecting these coins in the highest grade possible. In my opinion, this trend may well turn out to be a fad. #1 NEW MINT COINS #2Modern commemoratives such as State Quarters, Washington 50¢, Olympic Gold coins, USO and other new issues almost always experience a decline in price after the first offering. Initially, the United States Government sells these coins at a somewhat arbitrary price, letting the market determine the secondary value. Keep an eye out for the recent editorials and news stories that are commenting on the dubious investment value of such coins. Occasionally there are new mint coins that skyrocket, but this is virtually impossible to know ahead of time and therefore a high risk investment.
  4. 4. American Federal Rare Coin & Bullion4 5American Federal Rare Coin & Bullion COMMON COINS THAT ARE STUCK IN TRADING LEVELS#3 HOARD COINS #4This includes such “rare treasures” as the Wells Fargo 1908 $20 St. Gaudens and Redfield $1. Initially, millions were minted. Large quantities were bagged and stored in bank vaults, private hands, or lost. The market was then determined by a supply that was kept artificially low. That is, until these “rare” coins were dumped on the market. Consequently, what may seem like a good price based on the previous valuation of the coin becomes a money losing proposition once the quantity is increased by a multiple of ten to a hundred times and the dealer network stops supporting the prices. Whenever you have an ever-increasing supply of any item and a market becomes saturated, elementary economics dictate that the value of the product will decrease significantly. Many of these hoard coins are historically significant and you may choose to buy for this reason alone, just don’t expect to make money. Coins such as the common date MS-65 Buffalo 5¢, 1938-45 MS-65 to MS-66 Mercury 10¢, and common date Morgan and Peace $1 in MS-63 and MS-64 condition are not rare or collectible due to their relatively high supplies. Since the value of these coins are typically only marginally higher than the cost of grading, the minute the market does show some life, hundreds and even thousands get submitted for grading, thereby causing a glut in the market and decreasing the price back to its previous level.
  5. 5. American Federal Rare Coin & Bullion6 7American Federal Rare Coin & Bullion LOW POPULATION, UNRECOGNIZED RARE COINS#5 LOW POPULATION COINS #6 Certain rare date gold and type coins are especially vulnerable to high premiums, even though they contain no corresponding market demand, meaning that the price is artificially set by the few trading in such rarities. Coins like the 1873 Open 3 $20 Liberty are not well recognized, and therefore only have a slim chance of appreciating, as you must find the one-in-a-million collector who is actively seeking that coin. This makes for an investment that is not liquid in nature. If you want to reduce your risk and make money in the coin market, it is imperative that you stick to actively traded coins with some degree of market appeal as opposed to making emotional decisions in your portfolio strategy. The $20 Liberty Type II coins in AU to MS-62, for example, are not recognized or collectible. Generally speaking, the market cares little about coins of a low grade regardless of how rare they are, except for those few exceptions like the 1909-S VDB cent or the 1895 Morgan Dollar. Remember, when purchasing rare coins, you are doing so with the intent of selling them one day for a profit. If a coin is so rare that it is not known, and therefore not coveted by the market at large, you may have little chance to sell it, let alone at a profit. This has been increasingly touted with a huge variety of modern foreign coins. Some Mints will actually make “special order” coins for dealers in select cases. Often mintages as low as 99 coins or up to a couple thousand are made and sold to a single dealer. These coins are created expressly for the resale market and often no real collectors market exists except for the one the selling dealer can create. They include huge Kilo sized coins and special occasion coins as well as exotic sounding pieces. I have even seen coins with diamond chips or rubies mounted on them. Some are actually quite beautiful. However, they rarely turn out to be profitable collectables. Even the coins with low mintages will rarely appreciate in any secondary market because once the dealer sells out there is no one left to run up the price. It’s hard to grasp that a coin with a mintages as low as 99 pieces is not a rare coin. If you consider though, that there are thousands of coins with small mintages and not nearly enough collectors to care about that many coins, then it begins to make sense.
  6. 6. American Federal Rare Coin & Bullion8 9American Federal Rare Coin & Bullion TREASURE COINS #7 FOREIGN BULLION TYPE COINS #8 “Gold Doubloons,” “Pieces of Eight” and other shipwreck coins make for great conversation, but are normally poor investments. These coins do not fit my initial criteria of being rare, collectable or recognized. Most “treasure ships” are loaded with tons of these coins. Since they were the most widely used method of payment they were manufactured in bulk. While they are indeed old, age has little to do with coin value and appreciation. Foreign bullion coins come from countries other than the U.S. These include coins such as Russian 5 Rubles, Pandas, foreign Olympic coins, U.K. Proof Gold sets, 20 Francs, Kilo silver coins, and a huge variety of newly minted oddities that are not collectable. This means that you will have a hard time recouping your investment, even if gold takes off. Their only real worth is the value of the gold contained in them, which will very likely be below the original purchase price.
  7. 7. American Federal Rare Coin & Bullion10 11American Federal Rare Coin & Bullion COMMON COINS #9 BU ROLLS AND LATE DATE PROOF SETS #10Coins in this large category are usually the ones being pushed by the large telemarketing firms. This category includes all grades of St. Gaudens, common Morgan $1 in MS-60 to MS-66 condition, and common Peace $1 graded at MS-60 to MS-65. Brokers love these because buying huge supplies makes them very inexpensive at wholesale. Common coins have consistently under-performed in the market by a large margin, even losing value while other coins were going up. For example, between January of 1987 and June of 1989, the “rare coin market” appreciated by as much as 335%! However, certain common coins, like the $20 St. Gaudens, Morgan Dollars and $20 Liberties, dropped in value as much as 18%. If you didn’t know this and your portfolio currently contains them, do yourself a favor and convert them into coins that have a real chance of appreciating in value or simply stick to bullion. Proof Franklins, Washington 25¢, BU Buffalo 5¢ rolls, Jefferson 5¢ rolls, Lincoln 1¢ rolls - all are a fluke of promotional efforts made back in the 60’s. These products are far too common to have any upside potential due to the large amounts that currently exist on the market. Although the price of silver has risen from $3.50, many rolls like Buffalo nickels and Mercury dimes have decreased as much as 50%, during the same period of time. Even if the prices of rare coins dramatically increase due to their quantity and availability, I would expect minimal upward movement for this class of coin.
  8. 8. American Federal Rare Coin & Bullion12 13American Federal Rare Coin & Bullion #11CALIFORNIA FRACTIONAL GOLD COINS Although very rare and somewhat collectable, these items are not well recognized and do not have an active trading market. Often, the spreads are so large that it becomes difficult to make money. However, if you simply want a fun coin to collect, these coins are certainly very historic. ESOTERIC COINS #12Esoteric coins, like the Kellogg $50 Restrike, are rare oddities that have no established liquid market. They are very thinly traded and only a small number of collectors buy them. These coins also include Territorials and early 19th century rare date coins. My word to the wise: leave esoteric coins to the egocentric collector.
  9. 9. American Federal Rare Coin & Bullion14 15American Federal Rare Coin & Bullion COMPLETE SETS OF COINS#13Many dealers will encourage you to purchase coins in an attempt to complete a full or “short” set. The pitch is that once you complete a set, the coins are worth more than the sum of the coins’ value. By going through the hard work of finding the whole set it should make sense that your payoff would come once you complete the set. Unfortunately, that almost never happens. If you look into auction records you’ll see that sets are completely broken down into individual coins. Many of those dismantled sets took some very dedicated numismatist a lifetime to acquire. I personally have seen auctioneers take separate bids on a collection or set. The first bid would be as a set. The next would be by taking bids individually on the coins in a set. In my 30+ years attending auctions, I have never seen the set price come out equal to or more than the individual bids. Why is this the case? The auction company is paid to get every dollar out of the collection and often splits the set apart to maximize the price. This happens on a regular basis. I handled the finest known “Registry Set” of $10 Indian Head gold pieces. This was truly a one of a kind set. To get the most money for it, I had to sell the coins individually. Again, many would question why? Think about it though… buyers are merely other collectors or dealers supplying their clients with coins. If the buyer
  10. 10. American Federal Rare Coin & Bullion16 17American Federal Rare Coin & Bullion #14 needed a certain coin to upgrade or fill a hole in his set, he would certainly be likely to pay something extra to get what he needed. The problem is that none are willing to pay extra for every coin in the collection. This is a selling tactic used by dealers to talk you into buying more coins. It’s easier to lock you into future sales and usually charge you more than top dollar to finish your set. Ironically, it is very likely that they bought a lot of other coins from other sets that were being broken up. Coin sets that dealers love to assemble for collectors include: • $2 ½ Indian Heads • Franklin Half Dollars • Walking Liberty Half Dollars • Gold Commemorative Coins • Peace Dollars • Silver Eagles These are just a few examples of what I see most often. These are favorites because it is fairly easy for dealers to obtain all the coins in the set. I frequently run into investors who mistakenly think that they have a one of a kind item because the set is complete. For investment purposes, you would be better off only buying the key coins to the set so that you hold the most sought after coins. PATTERN COINS Before a coin is issued, a prototype called a pattern is made. Some of these coins are very collectable and do become profitable, although narrow markets again limit the appeal. Only a handful of experts are able to accurately evaluate these coins and finding a collector for specific examples can be difficult. Pricing is often a problem. If you are not well connected to serious minded collectors who deal in such coins, it is better to invest your money elsewhere.
  11. 11. American Federal Rare Coin & Bullion18 #15FIRST STRIKE AND EARLY RELEASE COINS. For the past few years, dealers really jumped on a completely arbitrary designation to add to their profit margins. In fact, the U.S. Mint actually reported on their website that no such thing as a First Strike exists on the modern Eagles or Buffaloes. In the past, a First Strike was more of a ceremonial coin that was documented and presented by the Mint and therefore more valuable. Today, there is really no way to tell the first strike from the last. The Mint uses very high standards and goes to extremes on quality control. In fact, the Mint reports that only 1500 coins are made on a single die and only 300- 500 on a Proof Eagle die for just that reason. Some services went to Early Release instead. Take note that the only criteria the grading services use is the date on the packaging from the Mint. A serious collector will not pay extra for that. I believe this is a totally contrived market that allows dealers to make a larger mark-up on bullion coins. I can tell you for a fact that when I sell these coins back into the market, they do not command any premium whatsoever, even from the guys who are touting them. CONFIDENTIAL PORTFOLIO REVIEW SHEET IMMEDIATE EVALUATION REQUIRED Qty of Coin(s) Date on Coin Mint Mark Grading Service Grade of Coin Denomination of Coin RARE COIN & BULLION, Inc 500 Easy St. - P.O. Box 5810 - Carefree, AZ 85377-5810 Phone (800) 221-7694 - Fax (480) 553-5290 SPECIALFREE OFFER Please use the backside of this form for additional coins. Tearhere
  12. 12. Qty of Coin(s) Date on Coin Mint Mark Grading Service Grade of Coin For longer coin lists copy this form or use the additional forms enclosed Denomination of Coin CONCLUSION I hope that you find this information helpful as I use it to make my everyday decisions in the business. I’ve given you a general overview of the 15 coins you want to avoid or get rid of if you own. Coin investors have too often told me that the best rare coin investment was the coin they didn’t buy. Our goal here at American Federal Rare Coin and Bullion is to help you avoid the financial pitfalls in deciding when to buy and (or) sell. We encourage and teach our clients how to research before buying any rare coin. We’ll show you how to get alternative opinions and get agreements in writing. Also, we can review your coin portfolio and show you how to keep a close eye on coin values. If you find yourself holding coins that have lost value, sell them! If the value has dropped, holding and waiting for the value to go up is not an option. It is not going to happen. Please feel free to call us at 800-221-7694. With over 30 years of experience, we at American Federal are always available to offer alternative options about coin values when buying and (or) selling. We hope you take advantage of our FREE offer to review the current value of your coins. You can either fill out the adjacent form for a Free confidential Portfolio Review or visit www. americanfederal.com to send it to us electronically. We look forward to working with you in meeting your coin investing goals.
  13. 13. American Federal Rare Coin & Bullion22 American Federal Rare Coin & Bullion 500 Easy Street P.O. Box 5810 Carefree, AZ 85377-5810 Phone (800) 221-7694 Fax (480) 553-5290 www.americanfederal.com