Buy Coins

Numismatic News

NGC MS66 Morgan Dollars

eBuys

Coin Talk

Coin News

Monday, August 31, 2009

Mint Needs New Innovative Direction


By Gary Huskey



I am an avid coin collector and owner of Legacy Numismatics, LLC, located in Doctors Inlet, Fla., just a few miles from Jacksonville. As a retailer of coins from around the globe, it has become apparent to me that the United States Mint is falling way behind in many aspects of our beloved hobby. Some of the Mints' shortfalls include innovation, technology, value, options, customer service and a serious lack of passion for the hobby.

By definition, innovation is a new way of doing something. It may refer to incremental, radical and revolutionary changes in thinking, products, processes or organizations. A distinction is typically made between invention, an idea made manifest, and innovation, ideas applied successfully (Mckeown 2008). In many fields, something new must be substantially different to be innovative, not an insignificant change. As you visit the Web sites of The Royal Canadian Mint and The Perth Mint of Australia, you soon discover the cutting edge of innovation and how far they push the envelope to develop and introduce new coins to the marketplace like we have never seen in the U.S. Some examples are the applied color hologram technique, coins with crystal raindrops and odd-shaped coins that are currently being produced by the RCM. Other examples include coin firsts such as orbital coins with moving parts, dynamic imaging, colorization and gilding as produced by The Perth Mint.

Innovation can be as simple as placing a serial number on the Certificate of Authenticity, as do other countries, so as to create a feeding frenzy for collectors to obtain the lowest numbered certificate possible when newly released coins hit the market. A manganese dollar coin is not innovation. A new Lincoln cent reverse is not innovation. A Lincoln silver commemorative coin is not innovation. It is even safe to say that the 2009 Ultra High Relief is not innovation. Of course I will own at least one, but even this coin is a sequel. Why would the mint go through the trouble of recreating this masterpiece only to have to enjoy it through a magnifying glass due to its reduced size when the original issue in 1907 was a full 34 millimeters without all of today's technology? And by all means let's not overlook the fact that the face value of this one ounce gold coin dropped to that of 1907 values, as if a face value of $50 isn't way undervalued already for 1 ounce gold coins. I will discuss more on value a bit later.

When talking technologically challenged, one need not look any further than the U.S. Mint online catalog. As the world's largest coin dealer, a visit to the U.S. Mint Web site should make you proud to be an American. Instead, it resembles a generic, do-it-yourself, $50 per month, self-edit, home-based Web site. The Treasury United States Mint logo with the American flag is barely legible and appears to be an afterthought in the upper left-hand corner of the page. The home page displays one featured coin. That's right folks, one coin. Maybe if the Mint used all of the available monitor space instead of the 75 percent currently being used there would be enough space to feature many coins on the home page making site surfing a breeze. To benefit from modern technology, it must be implemented to its fullest capacity. Giving credit where it is due, let it be noted that digital technology was used to map the coin plasters for reproduction of the UHR. With world leading technology available in the U.S. today, I demand that it be implemented by the Mint to create the most unique coins the world has ever seen.

Now let's tackle the subject of value. The value of a modern coin should be based on its ultra high quality, intrinsic value, collectibility, rarity and re-sale. Let's take a silver Eagle proof for example. If the face value remains at $1 and the retail price at $33, the coin is undervalued by 3,200 percent. However, if the face value of these coins was increased to $10 per coin and the retail price remained the same, then the value of the coin over its face value is dramatically reduced to around 225 percent. With silver trading at $14 per ounce, the coin is still undervalued by just over 130 percent.

Let's go back to the 2009 Ultra High Relief gold coin for a moment. Gold has been trading near $950 per ounce for several weeks now. The Mint has this coin available for a staggering $1,289 each. This is a margin of nearly 40 percent. Keep in mind that there is no mintage limit set for this coin and no way to know how rare this coin is going to be, so why the hefty premium? In the year 2000 the face value of the 1 ounce gold Panda was increased to 500 yuan from its previous value of 100 yuan; an increase in face value of 400 percent. This coin now trades at a 100 percent margin over its face value. U.S. gold bullion coins still have a face value of $50 and trade for nearly $1,000. That puts the margin of its true value over face value at 2,000 percent. Certainly the U.S. Mint can increase the face value of these coins since they will never trade at $50. The rolls of state quarters have no intrinsic value and are minted in very high quantities yet are priced at over 60 percent of their face value at the Mint.

Let's look at the Presidential dollar first day coin covers. The face value of this product is $2 yet it retails for a mind-blowing 650 percent markup over its face value. There should be laws against this. Numbers published last year indicated that the cost of producing a single cent at the Mint has now exceeded the face value by 70 percent. Information was also published that taxpayers pick up the tab for the additional cost beyond production costs to produce the cent. If this information is correct, then why does the Mint charge a premium of nearly 800 percent over the face value of these coins for the two-roll set? Again, please keep in mind that these are modern coins with no intrinsic value that are minted in very large quantities.

The only explanation for this is simply profit. The Mint's earnings declined in 2008, falling 25.7 percent to $806.4 million compared to the $1,085.6 billion it generated in 2007. Even with the 2008 decline, and nearly $3 billion in gross sales, the overall profit margin averaged just over 325 percent. If it's unacceptable for the oil companies to generate ridiculous profit margins by overcharging for their products, then it should be just as unacceptable for the United States Mint to do the exact same thing. If the Mint retains just over $100 million to operate and returns over $700 million back to the Treasury, then the cost of numismatic items could be made more affordable by lowering the price to consumers and thus encouraging new interest in coin collecting by people that may otherwise not be able to afford to collect coins. If the Federal government can dictate what profit margin is too high for the oil companies, why aren't they doing anything to protect numismatic consumers from being overcharged by the Mint?

We, the coin collectors of the United States of America, would solemnly appreciate some options. For example: we are about to be introduced to the exciting world of America's National Parks through yet another sequel, the quarter dollar program. Another clad quarter dollar program does no justice to the majesty of our treasured National Parks. Why not actually make them more collectible by producing a 40 percent silver half dollar that would not only renew interest in the half dollar and make the design larger and easier to see, but also give the coin intrinsic value at the same time. How about any coin, preferably a totally new design altogether, in 40 percent or even 92.5 percent silver. Why not a new coin in 14 or 18 karat gold? Why not rose or white gold? Silver coins (excluding bullion) produced today by the Mint are either 90 percent silver or no silver at all. Gold coins also are either 22 or 24 karat with no other, more affordable options available. The Royal Canadian Mint has raised the bar and is leading the way in options for metal composition while the U.S. Mint is stuck in a rut with few options.

"While we have fulfilled our mission and have various individual successes, as a whole, the United States Mint should excel beyond minimal requirements. From the outside the United States Mint appears to be delivering an average performance, and it is, but we aspire to more. We aspire to excellence." These are words from the Mint director himself that were published in the 2008 U.S. Mint Annual Report, which I urge everyone to read. It is available on the Mint's Web site. No truer words could be spoken when relating to customer service. Many times I have attempted to contact customer service only to hear that no one is available. How difficult can it be to e-mail my questions and concerns to the Mint and actually have them answered by a simple return e-mail? I'm not talking about being referred to the commonly asked questions page but rather a live chat perhaps with a living, breathing Mint representative. Not to be redundant, but technology plays an important role here as well. When customers are the most important aspect of your business, shouldn't customer service be as important?

A survey was conducted in 2008 by the Mint (also published in the 2008 Annual Report) to rate how good a job the Mint is doing and the results are as follows: Poor = 4.4 percent, Below Avg. = 6 percent, Avg. = 31.3 percent, Good = 32.3 percent and Excellent = 26 percent. These are overwhelming statistics that show the vast majority of people surveyed felt the job the Mint was doing was at best good or worse. The percentage of highly satisfied customers and the percentage of orders filled in seven days or less was lower in 2008 compared to previous years. This is a trend that is only getting worse as years pass. Customer service has become nonexistent in many large organizations as employees show up for work Monday through Friday only to be able to collect a check on payday while doing as little as possible to earn it. Never forget that without customers there is no paycheck.

What ever happened to the passion evidenced by the Mint of yesteryear? Passion evidenced and made manifest through the production of unique gold and silver coin masterpieces from long ago. Passion should be the driving force behind all that is accomplished by the Mint. Is passion for quality, originality, design, innovation, technology, integrity and art a thing of the past? God, I hope not, as in him I do trust, but the Mint I believe is in desperate need of new direction.

Sunday, August 30, 2009

Coin Chat Radio
Bonhams & Butterfields Coin Auctions
Standard Catalog of US Paper Money
By Darrin Lee Unser



Bob Van Ryzin’s "What’s In The News" begins this week’s episode of Coin Chat Radio with release of the 2009 Lincoln One Cent Proof Set from the US Mint.

For $7.95, collectors can purchase proofs of the four new cent designs honoring the bicentennial birth of Abraham Lincoln. Of interest to most, the cents are struck from the same bronze alloy (95% copper and 5% tin and zinc) used on the first Lincoln penny minted back in 1909.

Also mentioned by Ryzin is the announcement by Krause Publications that it will assume full in-house control of the three numismatic events it produces in Chicago, namely the Chicago Paper Money Expo, the Chicago Internation Coin Fair and the Mid-America Coin Expo.

Numismatic News Editor Dave Harper takes a few moments to interview dealer Paul Song from Bonhams and Butterfields, which is starting a new coin division. Harper digs into the details of how the startup is going and how it will be different from other coin auctions, to which Song replies:
"There has been a great demand for this type of service, especially at Bonhams. I think the fact that we are actually tapping a market that has been somewhat underserved by a traditional auction house that has collecting categories and expertise in over 80 areas."

"I don’t want to be in a situation where I am trying to build a huge volume business. I want to build this incementally, and I want to build it my way, which is with good interesting material."

Online Editor Lisa Bellavin talks with Editor George Cuhaj about the newest edition of the Standard Catalog of United States Paper Money.

"The book covers quite a bit," Cuhaj responds when asked what kind of collector will enjoy the book. "It has the large size and small size federal currency. It incorporates national bank notes by type, and then there are extra listings for the pre-federal notes, going back to the War of 1812 through the 1850’s. And also special sections on encased postage envelopes, encased postage stamps that were used during the Civil War, fractional currency as well as military payment certificates."

Closing out Coin Chat Radio this week is Publisher Scott Tappa and the "Freshly Minted" segment. He discusses new offerings from the National Bank of Poland which commemorates the start of World War II as well as new coins from Finland and Singapore.

To listen to this program, go to http://www.coinchatradio.com/.

Thursday, August 27, 2009

Rare Coin Markets in August 2009
By Greg Reynolds



This is the second part of my August market report (Read Part One Here) regarding scarce or rare U.S. coins, with a focus on bourse activity at ANA Convention in Los Angeles in early August, along with references to pre-ANA and ANA auctions. This part mostly includes analytical comments from experts relating to copper, nickel and silver coins, along with some passages relating to very rare gold coins. Analytical remarks of mine are found herein as well. I suggest reading Part 1 first. Next, please see my companion article on the growing price gap between high end and low end coins.

In addition to a relative increase in demand for high end coins on the bourse floor at the ANA Convention, there was intense trading in many areas, partly because there was so little fresh material available. Most market participants, who properly recognize the current levels, are cautiously optimistic about the near future. There is a good chance that underlying market levels will hold steady or increase slightly over the next few months. Keep in mind that I am talking about pre-1934 scarce or rare coins, or condition rarities, not generics or bullion items.

The market for generics is driven by speculators, and mass marketing operations, and has little to do with coin collecting. Generics are very common, often hundreds of thousands or millions are known of specific coin issues, and collectors only buy a small percentage of them.

Since numerous market participants in 2009 are gradually adjusting, or refusing to adjust, to the lower levels that have prevailed for months, it would be easy for some to get a false impression that coin trading is very slow and demand is falling. Volume is considerable, and, on average, market prices were holding steady or increasingly slightly. Most of the market declines occurred in the last quarter of 2008 and the spring of 2009. Many of the declines were not then recorded in price guides, which are becoming relatively less useful for scarce or rare coins.

John Feigenbaum has “seen Morgans drop quite a bit lately. Buffaloes are soft as is Proof type.” Steve Contursi agrees that the market for “Proof silver type is soft.”

All type coins are not acquired by collectors assembling type sets. In this context, 19th century type coins are the least scarce dates of their respective types, or are coins that do not sell for a significant premium over the least scarce dates. Many Liberty Seated coins, Barber coins, pre-1914 nickels, trimes, and bust silver coins are type coins, though such ‘type coins’ are often acquired by buyers who are collecting ‘by date.’ Usually, type coins are the least expensive coins of each respective type. The term ‘type’ also refers to series that are usually collected ‘by type’ rather than ‘by date.’ Liberty Seated series are usually collected ‘by type,’ while Morgan dollars, Buffalo Nickels and Mercury Dimes are more apt to be collected ‘by date.’

Matt Kleinsteuber is lead trader and grader for NFC coins. He believes “that all bust and seated coins in uncirculated and circulated grades are down over the last year. [He] can still sell almost all circ seated and bust fast, just at prices from 10% to 30% less,” and these “have a lot of activity at the new levels.” Matt goes on to reveal that “MS-64 and above bust halves are weak and hard to sell. Finest known Liberty Seated coins are way off, in some cases as much as 50% less” than they were priced twelve months ago. Liberty Seated ‘type coins,’ and “slightly better dates,” that grade from “MS-61 to MS-64 are doing okay, as prices are not down much,” Kleinsteuber concludes.

Wayne Herndon finds that business strike Barber coins “have been slow for the past year, both uncirculated and circulated coins.” Rich Uhrich points out that 1901-S quarters, which are the keys to sets of Barber Quarters, “have gone down 15% to 20% over the past year.”

Contursi believes that demand for gem uncirculated Barbers has fallen since January 2009, when “Dale Friend’s Barber halves brought especially strong prices at auction.” I agree.

Barber dimes, quarters and halves that grade MS-64 or higher now constitute one of the coldest categories in coin markets. Is this a good reason to start collecting them?

It is interesting that Rich Uhrich draws attention to severe weakness in particular categories of silver type coins. “For bust silver [1794-1830s] and Liberty Seated series [1837-1891], non-rare Very Fine [grade] coins are probably down 20% to 50% since August 2008.” Uhrich declares that the “price guides do not indicate how much common date coins have dropped in value.” In contrast, Rich says that “many rare dates in these series that are priced under $5000 have not gone down in value over the last year; some are even up a bit.” As examples, he mentions 1867 and 1886 quarters, and 1852-O halves. Uhrich also finds, however, that “the number of buyers of rare date silver coins that cost more than $5000 has declined over the past year, and prices have gone down 10% to 20%.”

Proof Liberty Seated and Barber coins are faring somewhat well. Garrett has a customer who is seriously collecting Proof Liberty Seated coins, and Garrett was “able to find a few of those” at the ANA Convention. Wayne Herndon “sold out of [his] Cameo Proof Seated and Barber material,” which were “all gem grades” (65 and higher). Wayne states that prices for these “were a little lower than six to twelve months ago, but not by much.” He “would estimate a 5%” drop in prices for gem quality Liberty Seated and Barber coins.

Pre-1858 Proof Liberty Seated coins did amazingly well in the Heritage auction, and Stack’s sold a few for strong prices. These, though, are typically much rarer than post-1865 Proofs, and really merit a separate discussion. They are not indicators of a large part of coin markets.

“Before the ANA show,” reports Andy Lustig, it was pretty clear that most market sectors are weak. Rare date gold, [classic] gold commemoratives, silver type, better date Morgan and Peace dollars, and certified colonials all seemed especially weak.” I agree with Andy. These are all areas that have faltered since the winter, and have dropped significantly in value since August 2008. Uhrich and Contursi also point to weakness in silver type coins.

“Over the past six months,” Schweitz concludes, “prices have fallen for gem quality small cents [Indians & Lincolns] and Buffalo nickels, and the market has not found stable levels” for these. In my view, such levels have also not been found for Morgan dollars. Kris Oyster reports, however, that, on the ANA bourse floor, “trading was brisk for mid range to high end, better-date Morgans.”

Matt Kleinsteuber asserts that “Buffalo nickels have taken it on the chin in the grades of 65 and above,” with “exceptions.” Matt exclaims that Buffalo nickels that are clearly the highest certified by the PCGS or the NGC, not just tied for the highest certified, for their respective dates, are “still bringing crazy prices.” Kleinsteuber finds “that $10,000 Buffalo nickels are down 20%, that $30,000 one are down 30%, and six figure nickels are down 40% or more, over the last twelve months.”

Though down 10% to 30% over the last twelve months, very rare gold coins were strongly demanded and seemed to be selling well at their new levels, especially in the pre-ANA and ANA auctions.

A PCGS graded AU-58 1804 Quarter Eagle ($2½ gold coin), with thirteen stars on the back, realized $322,000 in Heritage’s auction. I was expecting it to sell for around $200,000. Market prices have dropped since the Ed Price coin of the same variety brought the same $322,000 price a year earlier, and many of the results in the Ed Price sale were considered outrageously high at the time. In the same Heritage pre-ANA 2009 auction, Steve Contursi bought an 1841 Quarter Eagle. It is NGC certified Proof-58, for $132,250, a healthy price in the current market, but significantly less than it would have brought had it been auctioned in Jan. 2008 or even Jan. 2009. Also, an 1873-CC $10 gold coin, which is NGC graded AU-55, sold for $63,250, which is a very strong price, even considering that it is one of the highest certified.

In the B&M auction, an 1808 Quarter Eagle brought $161,000. It is PCGS graded MS-61, a high grade for this very rare one-year type coin. Markets for early gold coins skyrocketed for years and then dropped considerably over the last twelve months. This coin is early, very rare, and an extremely important type coin. It brought a healthy price, while less than it would have brought during the first half of 2008, the $161,000 price is a lot more than I expected.

After the close of the ANA Convention, Lustig concludes that, “given the obvious weakness in the market, [he] was very pleasantly surprised to see truly great and/or interesting coins selling very easily”! Andy was “also surprised at how easily less interesting coins sold if they were properly discounted.”

Assuming that the 2009 ANA Convention was necessarily to be held in the Western United States, I found that the attendance was consistent with current market conditions. I do not believe that attendance would have been greater in Seattle or Denver. Anaheim, which is also in Los Angeles County, might have been a better choice because Anaheim is geared for tourism. Moreover, this convention suffered a little because people had a false impression, worsened by ridiculous rumors among coin enthusiasts, that the area around the LA Convention center is dangerous. I investigated the area; it is not dangerous. Rich Uhrich feels that “it is much like” the area around the “Baltimore Convention center.”

I found it to be more comfortable at night than the vicinity of the Baltimore Convention center. Almost immediately West and Southwest of the Los Angeles Convention center is a friendly, middle income, residential area.

Rumors are often untrue. Someone who was buying or selling low end coins, perhaps unknowingly, is likely to draw a false negative conclusion about coin markets or about bourse activity at the ANA Convention. Some of the dealers who complained to me about the ANA Convention were selling low end coins, had not adjusted their asking prices to reflect current market realities, and/or were specialists in areas that are very weak in 2009. Others are not accepting the reality that fewer collectors can afford to travel and buy in 2009. The incredibly intense demand, from 2004 to mid 2008, for almost all scarce U.S. coins could not continuously last forever.

Markets for excellent rare U.S. coins, in all grades, have only fallen 5% to 15%, for the most part. Excellent U.S. coins are truly rare, or in some cases very scarce, are in the mid range to high end for their respective certified grades, have mostly (or preferably entirely) original surfaces and/or natural toning, and have some significance in the traditions of coin collecting in the United States. The substantial demand and active trading in excellent U.S. coins, as I have defined them, made the bourse activity at the ANA Convention successful. The price distinctions between high end and low end coins are analyzed in my companion article, The Coin Market Phenomenon of 2009 is the Widening Gap between the Prices of High End and Low End Certified Coins.