Sidestepping The Bubble

In my earliest years as a coin dealer – primarily the 1960s and 1970s – early coinage and key date pieces in the Seated and Gold series were very scarce, and when they appeared, it was an occasion to remember.

For example, I attended a show in Los Angeles sometime in the 1960s where there was a serious buzz pervading the bourse floor. 
A dealer had brought one 1796 Quarter in XF-AU to sell.  A pack of dealers swarmed his table, each vying to outdo the other to procure the coin.  It’s difficult to adequately illustrate the drama and commotion created by a single not-unique coin during that time period.  Nowadays appearance of that coin would not elicit much more than “oh!”

1796 Quarter
www.ha.com

So what made the presence of a single old rare coin such an event?  In those days rare coins were not worth a great deal, so the smart old money kept their rare coins in safekeeping.   They knew what they possessed!

This all changed during the inflationary binge of the late 1970s and early 1980s when increased coin values brought multitudes of rare coins to market.

The next development that unearthed closely held rarities from their storage cabinets was the creation of third party grading.  And what a party that became!

I remember 1989 like it was yesterday.  The certified coin market was boiling over and I sensed a price bubble soon to burst.  In April, Debbi and I attended a Central States show in Overland Park, near Kansas City.  We brought along all the certified coins in our stock, then roughly 400 pieces of mostly common U.S. coins.

1989
Up, Up, Up:
How Far Will It go?

During the show set up period, I announced to dealers at hand that I was selling all certified coins at Graysheet bid.  First come, first served.

About one hour later every single certified coin was gone; we had completely sold out.  I have never seen such a feeding frenzy.

As luck would have it, the coin market for certified coins topped out in June 1989, so we sold just in time.

     
In case you wonder how crazy common certified coin prices were then versus now, take a look at these details:    

Certified Coin	1989	2014
1881-S Morgan Dollar, MS-65	$500	$135
1921 Morgan Dollar, MS-65	$600	$115
1941 Walking Half, MS-65	$475	$ 88
1926 Oregon Commem, MS-65	$770	$190

What about the scarce coins, like the 1796 Quarter discussed above?  While the good old blue chip coins were definitely affected by the overall market bubble burst in 1989, they have slowly and steadily continued to gain value.

Let’s look at the pricing for our quarter coin from the 1960s forward.  In the 1968 Graysheet we find no pricing information for old coins (pre-1900), except Dollars.  But, as we move closer to current date, we find these Graysheet values for our 1796 Quarter in XF-AU:

                                1978                           1989                            2014

                               $8,500                    $13,750                       $48,000

What can we take away from these examples?  Common coins are somewhat like commodities, evidenced by their sight-unseen market trading, and have regular up and down cycles.  Rare coins have no sight-unseen market and continue to become scarcer with the passing of time.  Rare coin prices are somewhat resilient to other market forces.

Both common and rare coin have their time and place.  Learn about the market; understand the forces and factors that affect its actions.