Coin Collecting

Peak Prices Don't Always Remain that High
By Paul M. Green

Whatever goes up either must or might come down. It’s probably one of those scientific rules I never bothered to learn in school, but it certainly is true. More often than not something that goes up will either come down or at minimum it will not keep going up at the same pace.

I have seen it happen over and over again and so have you whether it’s a NASA rocket or the stock you just bought that could not lose. Interestingly enough, however, where coins and coin prices are concerned we have many times acted like prices had only one direction and that was up.

In fact, for many years and especially when the conventional wisdom such as it was in the hobby felt that the way to get new collectors was to have coins be the hottest investment in the world, many did not even want to hear about the idea that a coin might drop in price.

I remember vividly an incident that occurred right about 1990, just after the 1980s coin market peak. I had finished what I thought was a pretty good analysis of some coins that had dropped in price, but was told by the publisher of another publication, “Oh dear, I don’t think we want to do that. What we need is happy talk.”

The publisher did not mean anything sinister. He didn’t own some coins that he wanted to hype at a profit. He was simply reflecting the times and the widespread belief that if we actually suggested that coins might go down in price people would not buy coins at all, opting instead for stocks or real estate or onion futures.

I tried to explain to him that in my less than humble opinion going down in price was not bad for everyone. True, if a coin dropped in price it was bad if you happened to own it, but if you were like the majority who did not own it and were considering a purchase, a drop in price was good news as it meant you would pay less.

As I suggested to him a price decline was good or bad depending on your position, he saw my point, but still wasn’t buying it, suggesting that “happy talk” should be the order of the day.

Realistically, I learned pretty early that coins could in fact go down in price and for a variety of reasons. We like to think of the 1950s and in this case early 1960s as a kind of a glorious but quiet time when Norman Rockwell scenes were repeated over and over as youngsters collected coins and received guidance from older mature collectors while harmlessly sipping lemonade. In fact, that did happen and it was wholesome and one of the great memories of the time.

There was, however, another side as virtually all of those collectors back in the 1950s simply loved to speculate on coins. It did not change our regular collecting, which involved looking through roll after roll from banks and filling Whitman folders. Filling folders seemingly was the eternal goal, but since we were looking at thousands if not tens and hundreds of thousands of coins anyway we simply could not resist the idea that we might be able to find a coin that would end up at remarkable prices.

The evidence that while filling collections we were cheerfully speculating in all sorts of coins was everywhere. In fact, there was a so-called “bag and roll craze” that was nothing but speculation as neither bags nor rolls fit into Whitman folders. Based on things like the 1950-D Jefferson nickel, it was a simple matter of mathematics. If one nickel would jump from its face value to $6, that meant a roll could make you rich as in the case of a nickel you multiplied the price increase by 40 and came up with $240. By 1964, that roll was almost $1,000.

Actually, I was never very excited about rolls as they were too much money for someone like me on a limited budget, but there were plenty of other things. The poster child was the 1955 doubled-die obverse Lincoln cent and it was a great play for those who bought it. In fact, the 1955 doubled die is one of those coins that so far seems to resist the idea of ever dropping in price or even stalling for long in its price climb. Perhaps it is the exception that proves the rule.

Other coins, however, were not as good and they were numerous. The 1945-S “micro S” dime, 1957-D Lincoln cents with a filled “9,” so-called “poor man’s” doubled dies and 1960 small-date Lincoln cents were all part of the mixture of great coins you might find in circulation. To read the promotions of some of them you could easily be excused for thinking that by finding a smaller than usual mintmark or other variety or error you might well be spending the winter in a villa in the south of France. It wasn’t the case, but everybody wanted to find the next doubled die and get in on the ground floor.

I was not immune to such ideas. The 1960-D small date Lincoln cent was where I pinned many of my hopes for retiring before reaching 13 simply because I was able to find a 1960-D Lincoln with the smaller “6” the very first day I learned there were such coins. At the time some were getting perhaps as much as a quarter for a small date 1960-D and the more Lincoln cent rolls I checked the greater my stash of this treasure grew.

After a few months of looking, however, it dawned on me that maybe I was not really that lucky. A little conversation in the coin shop confirmed my fears that the 1960-D small-date cent was not tough at all and the price started to soften or drop. I did not panic but quickly made a deal for my roll assembled from circulation realizing the 1960-D small date was probably going down. It was a relatively reasonable decision at the time based on fairly good information.

At other times I have made similar decisions based on far less information. Back in 1979 I was watching friends’ antique store while they were on vacation. It was logical as every day there would be a parade of people attempting to sell their silver and gold coins. Then the price of silver was heading toward $50 an ounce and gold was working its way toward $850. People were bringing in coins and everything else. One man handed me a napkin that contained two of his teeth. Rings, watches and just about anything and everything were fair game.

Many times the potential sellers balked at the price because they were certain gold would top $1,000 an ounce and that silver might go to $75 or $100. They wanted someone to pay prices that might happen and were seemingly unconcerned that the prices of the day already were so high that it was increasingly difficult to sell the silver and gold to refiners.

I tried to explain to one person that if someone paid $30 an ounce for their silver and then tried to sell it they would not get paid for a couple months. What they would be paid would be the price at that future time. His response was, “So that means you should pay more as the price will be higher.” Being the contrary person I am, that idea had never crossed my mind.

The breaking point for me came late at the end of the week. I was closing when a pickup truck drove up and a man dashed in, handing me a Coronet Head double eagle with the usual question of what it was worth. It was the worst looking double eagle I have ever seen or ever hope to see. I checked the date quickly and informed him it was worth about $800 at the time, but that the price changed nearly every minute with the price of gold.

I did not want to buy the coin but gave him the name of a local coin shop that would. Just the sight of the coin and the realization that it was $800 almost made me ill. About a decade earlier I had purchased great looking Saint-Gaudens double eagles for less than $80 and the thought that something as truly ugly as his Coronet Head double eagle was so valuable caused me to decide on the spot to sell all my gold and silver as the prices just struck me as simply unreasonable.

They will go down I thought and then I can buy everything back and have a profit to buy other things. The price did not go down immediately, but once it started dropping, it went down a long way.

The price declines of gold and silver coins were dramatic and changed the values of a large percentage of the gold issues and silver coins from the 20th century.

Like the price increases preceding them, the price declines resulted from the impact of speculation and that was nothing new.

The up-and-down rides affected many coins, but in the 1970s there had been a couple classic cases in the form of the 1970-D Kennedy half dollar and the 40 percent silver 1973-S proof Eisenhower dollar. The two coins had a lot in common as the 1970-D Kennedy half dollar had only been available in mint sets from the year of issue and the Mint had failed to tell anyone beforehand that that would be the case.

When it came time to put a 1970-D half dollar into their collections, many hobbyists found there were none in circulation. The only way to get one was to break up a mint set and their sales had barely topped 2 million. The 1970-D promptly soared to $10 within months and by 1980 reached around $40 and eventually fell.

The 40 percent silver 1973-S proof Eisenhower dollar was always in my mind closer to sheer speculation. It was packaged in a large brown box. Issue price was $10. It was not really required for a set as a business strike 40 percent silver 1973-S would fill that hole. The latter came in a blue envelope and sold for just $3.

With a sales total of barely 1 million, the proof 1973-S headed off to prices of $100 and more, but it too crashed as you can see by its current $35 Proof-65 price.

The 1986 Statue of Liberty $5 gold coin is another classic example of up- and-down price swings caused by speculation. Offered at $165 for the uncirculated and $175 for the proof, the authorization of 500,000 was far too low in the face of a collector population that was just wild about commemoratives. This one, after all, was just the third theme of the modern commemorative program, which began in 1982 with the Washington half dollar and was followed in 1983-1984 with Olympic coins.

The gold $5s sold out quickly and then took off like a rocket, with the price soaring to about $500 in a very short period of time. The Statue of Liberty secondary market demand got so crazy people were offering close to $100 for the empty cherrywood box that the full six-coin sets had come in as it was back ordered for a time and collectors couldn’t get delivery from the Mint.

That was another moment when I just knew things had gotten out of hand as $100 for a blooming box seemed way out of line. Like one of those classic films of early attempts at launching a rocket, the Statue of Liberty $5 took off well, but boy when it went out of control, you did not even want to watch as you just knew the fall would be spectacular. It certainly was.

In the slow grind of the 1990s market the 1986 Statue of Liberty $5 fell below $100. It is hard to imagine what could ever cause it to be $500 again short of $2,000 gold.

That sort of decline does not make for much happy talk but it has always been a great story.

Every price decline you see in the market is not due to speculation. No one was speculating on the 1903-O Morgan dollar back in 1962. There were virtually no 1903-O Morgan dollars to speculate on. It was scarce in any grade and virtually unknown in top grades with a price of close to $1,500.

Then suddenly the 1903-O started appearing on the market and more surprisingly it began to appear in some numbers. It turned out there were millions of Morgan dollars sitting in government vaults for decades. Some of those Morgans were 1903-O coins and other scarce dates. The 1962 price of the 1903-O reflected the fact that none was available, but when the bags emerged from the Treasury vaults and hit the market there was nothing anyone could do to save the price. The $1,500 1903-O was being sold by the bag at the Treasury for face value and the 1903-O and others had no place to go but down and that is what happened with the 1903-O ending up around $15.

Everyone felt badly for those who had been able to purchase an example at $1,500, but those who could purchase one for $15 did not feel too badly. It was a kick to own a previously unobtainable coin.

Even today you can still do better than the 1962 price on a 1903-O as it lists for $685 in MS-65. This continues to be the most spectacular example of what an unexpected appearance of a hoard can do to the market price of a coin.

Nowadays, hoards have a different impact. The U.S. coin market is so strong and marketing skills are so refined that the chances of a quantity of a certain date causing a major price decline are greatly reduced.

We have now seen sunken ships with large numbers of Mint State gold coins from San Francisco recovered and despite being rare coins before the salvage, the addition of the coins to the market has done very little to the price and in some cases the publicity has increased demand and caused prices to rise.

For average collectors, the best case is probably found in the Carson City dollars sold by the General Services Administration after the Treasury wised up and stopped paying out the coins for face value.

Some three million coins were sold in a series of sales, five in 1973-1974 and a final one in 1980. The initial sales did not help prices, but a peculiar thing happened afterwards. Despite selling over 50 percent of the entire mintage of some dates in Mint State, the prices of the dates involved currently are far above the price from the government, a true indication of just how strong the coin market can be when it comes to absorbing large numbers of rare coins.

Perhaps the new supplies slowed down the rate of price increases for a date like the 1884-CC and others, but by all normal standards prices should have declined. Instead, thousands of collectors who were trying to figure out what they were going to do without circulation finds available to them were inspired by the hoard coins to start collecting silver dollars seriously. Prices went up. In the 1980s they soared. After the 1989 peak, the began to drop.

Usually speculation in any coin issue is over fairly quickly, but when collector habits change, as in the case of silver dollars, it can start a new trend that can go on for many years. Knowing the difference is the key and despite years of observations, I can offer no sure-fire method. If you can get in at issue price and get out quickly as prices are rising, that is probably the best way, but the collector impulse can easily get in the way.

It was hard to sell out near the peak of the bullion coin market in 1980. As a collector, you get attached to your coins. Many collectors couldn’t bring themselves to act then. They were transfixed by the spectacle of it all.

Image market conditions that caused the highest price paid for silver coins to be 24 times face value when the actual silver value for those very same transactions was about 36 times face? That was the result of the backed-up refineries and the long payment delays.

Could you sell your coins at basically a one-third discount?

Those who did so made the right call. Those who didn’t saw a hugely profitable opportunity vanish. Silver went from $50 to under $11 in two months’ time. Buy prices dropped to less than 8 times face.

Holding on can be rewarding, though, as 1970s buyers of GSA silver dollars found out in the 1980s. It is part of collector nature to speculate, but no matter how much experience you have, you will not always make the right call.

This uncertainty is what makes a study of coins dropping in price well worthwhile. You just might discover some bargains. Even if not, studying price declines might lead to an understanding of the market and its sometimes surprising movements. Without doubt, though, such a study is very interesting and more useful than “happy talk.”