Archive for June, 2010

The PCGS Set Registry Effect

Posted on June 28, 2010 by 1 Comment

Coin prices are driven by a number of different factors: supply and demand, a preference for top-condition coins, and popularity of a series.  For instance, an  1804 Silver Dollar is a very rare coin (fifteen known) and there are many collectors who would love to own one, thus new price records are set virtually every time an 1804 Silver Dollar appears on the market.  On the other hand, there are many coins that are much rarer than an 1804 Silver Dollar but because they are not as popular and the demand is not as great, they sell for a fraction of the price.

In the U.S. coin market, the demand for high quality coins has created big differences between grade levels, particularly at the top end.  For instance, an 1890-O Silver dollar is valued in the PCGS Price Guide at $375 in MS64, $1,800 in MS65, and $8,500 in MS66.  A plus sign (+) turns the MS65 into a $2,700 coin.  Clearly, the demand for quality translates into big premiums for the best coins.

Here’s another factor that helps drive prices…what I call the PCGS Set Registry Effect.  Simply put, the demand for top quality coins is increased further by collectors seeking to join or maintain the top ranks of the PCGS Set Registry.

In the U.S. market, the PCGS Set Registry Effect is a reflection of the demand that has always existed for top quality coins.  Hence, one might conclude that the PCGS Set Registry Effect is negligible.

However, as one looks at the world coin market, one sees that the PCGS Set Registry Effect is an important factor in coin prices.  Here’s one example:

Germany produced a series of 1 Mark coins from 1873 to 1916.  They are silver coins the size of a U.S. quarter dollar.  Some writers have likened them to their contemporary, the U.S. Barber Quarter.  In spite of a few key rarities, most years are common and can be found in nice condition.  Most dates range in price in Uncirculated condition from $20-$300.  For a long time, superb quality coins could be had for a small premium over the price of an average-quality Mint State coin.

Today, however, things are different.  Approximately two years ago, PCGS added 1 Mark sets to the German section of the Set Registry.  As a result, prices for the best quality German 1 Marks have begun to increase dramatically.  This demand comes in part from the German coin market, which is increasing in its sophistication, but the larger impact comes directly from the PCGS Set Registry Effect.  Today, coins that catalog for $20 routinely sell for $50-$100 and coins that catalog for $100 often sell for $300-400 (not in all cases, of course, but in enough instances to attract the attention of collectors and dealers alike).

Here are some observable results of the PCGS Set Registry Effect:

  1. The first appearance of a coin (in any grade) results in a premium.
  2. The first appearance of a “finest-graded” coin results in a significant premium.
  3. As more collectors participate in a PCGS Registry Set, prices increase overall.
  4. Prices remain high as long as PCGS Set Registry participants are building or upgrading their sets.
  5. As PCGS Set Registry participants complete their sets, prices begin to normalize at the high end.
  6. The demand for coins for the PCGS Set Registry causes more coins to be graded, thus giving a better picture of the true rarity of coins in different grades.

Filed Under: News

914 N Mountain View, Santa Ana and the price of gold

Posted on June 22, 2010 by 4 Comments

As I’m writing this gold is at $1221, near its all-time high. Everybody seems to be talking about gold nowadays. And many experts have been predicting gold prices to go to $2,000, $3,000, and even $5,000 per ounce. I am not going to make any predictions. But I want to present a different view of how to think about gold. We’ll start with the fundamentals…actually THE FUNDAMENTAL.

I don’t want to beat a dead horse and I’m sure you’ve probably heard it all before, but the bottom line is that the United States has a fiat currency. The paper money in your wallet and the “electronic money” in your bank accounts is supposedly backed by the “full faith and credit of the U.S. Government.” It’s not backed by gold or any other tangible asset. This “money” is just a bunch of pieces of paper that proclaim “This note is legal tender for all debts public and private.” It’s just paper. And yes you can go to the grocery store and exchange this paper for food. But the fact is that this money buys less food than it did ten years ago, which was less than it bought 20 years ago, which was way less than it bought 30 years ago. To state the obvious, the value of the U.S. dollar has deteriorated dramatically over the long term. If you’re older than a teenager you’ve seen the purchasing power of your dollars decline dramatically.

I think we all need think about this in a way that gets our head on straight about gold, coins, and our real net worth. Don’t think I’m going radical on you, but I believe this is all just a big government Ponzi scheme. I don’t think politicians consciously think about reducing the purchasing power of the dollar and I doubt that they call what they do a Ponzi scheme. I’m pretty sure politicians just think about getting re-elected and the tools to accomplish that are silly deficit spending and catering to special interests and/or anyone who will vote for them. But this whole mechanism is a Ponzi scheme of sorts…robbing Peter to pay Paul, in this case robbing the future to pay the present. And it it is destroying the value of the dollar. And it’s put our country in a pretty precarious position. This robbing of the future to pay the present has been going on for decades and eventually there comes a point when the house of cards gets pretty shaky. When, if, and how the house of cards gets shaken into reality is something I don’t know. But I do know…and this is THE FUNDAMENTAL…that IT IS NOW MATHEMATICALLY IMPOSSIBLE FOR THE U.S. GOVERNMENT TO PAY ITS DEBT.

The question is what to do about the dollar denominated house of fiat money cards. And the first thing I think everyone should do is get their head on straight about dollar denominated thinking. This is part of the problem. You think you live in a million dollar home. But a lot of people live in million dollar homes…the government has made us property millionaires…it just doesn’t mean what it used to. In 1962, my parents bought a house in Santa Ana, California. it was pretty nice for the time…1500 square feet, 4 bedrooms, and a real swimming pool. I’ll even give you the address…914 N Mountain View, Santa Ana, California (it was a track home…not in any mountain and sure didn’t have a mountain view). You can go to Zillow.com and see a picture of that house and the swimming pool I swam in as a teenager. My parents paid $12,000 for the house. At the time there were no million dollar homes…maybe Hearst Castle, but no real homes. An ultra mansion, the biggest in Beverly Hills, was maybe $100,000…maybe. According to Zillow.com the house at 914 N Mountain View is now worth $377,000 (down from $600,000 in 2007). But did the house really go up 31 times, 1.e. 3000%, in the past 48 years? Let’s look at it another way. In 1962, the price of gold was $38 an ounce so it would have taken 317 ounces of gold to buy that house. As I’m writing this gold is at $1220 an ounce so today it would take 309 ounces of gold to buy that house. So, if my parents were alive and they still owned that house they could say they had made over $350,000 on that house. But would they really have? They would if you think of that house as a dollar denominated asset. But in terms of their real tangible net worth nothing really has changed. And you know what…that house i still the same house (basically) that it was in 1962. The house hasn’ changed, and an ounce of gold hasn’t changed. What has changed is the value of the dollar, and the dollar’s value has collapsed long term.

Let’s talk about gold and getting your head on straight about the value of the dollar. When it comes to gold, you need to avoid the trap of thinking about the price of gold in U.S. dollars, or any other currency for that matter. I NEVER THINK ABOUT THE PRICE OF GOLD IN DOLLARS. it’s not the number I pay attention to. The number I think about is THE NUMBER OF OUNCES I OWN! That’s the number I want to get bigger. And I don’t care about the price of gold in dollars. If the dollar price goes down, I buy more. If the dollar price goes up, I smile. Either way I’m happy…and it’s also very liberating. I no people that are always trying to pick the best time to buy some gold. I know a few people who have been waiting for the best time since gold was $450 an ounce. But I never try to pick the best time to buy gold, I just buy it when i feel like I want some more. And I advise you to take the same approach. It’s so much simpler and so much less stressful. You should own gold…no question about that. And you should buy gold when you feel like you want to own it.

What about rare gold coins, or rare coins in general? They are another tangible asset class and a great one at that. And over the long term, they’ve been an even better hedge against the dollar than plain gold bullion. It would take a lot more proof gold coins, rare $20 St. Gaudens, 19th Century silver type coins, Gem quality Walking Liberty half dollars, etc. to buy the house at 914 N Mountain View in 1962 than it would today as unlike gold bullion which has held its value compared to that house,  quality rare coins have actually gone up in real value. And rare coins have a tendency to lag during sharp run-ups in gold prices.  So right this moment, rare coins are relatively inexpensive as a real asset class. But like gold bullion, you need to get your head on straight about prices.The right time to buy is when you feel like it…when you want to own some more rare coins.

Bottom line for me…the dollar will continue to depreciate in value long term, and nothing will be done by politicians to stop the trend…they don’t even talk about it…and they couldn’t do anything about it even if they wanted to. So make sure you own some gold bullion, and if you like rare coins, now’s a great time for them too.

Get some gold and have fun with your coins!

Filed Under: News

Those Crazy Mintmarks

Posted on June 17, 2010 by 1 Comment

Mintmarks are the tiny letters on coins that identify the mints that produced them.  U.S. coins can feature any one of the following:

P (or none) for Philadelphia
D for Denver or Dahlonega
C for Charlotte
S for San Francisco
CC for Carson City
W for West Point
O for New Orleans

Mintmarks sometimes take on a life of their own.  They can be big, medium, or small.  They can tilt left or right, or even be upside down.  Sometimes they’re on the front of the coin, sometimes on the back.  They can be double-punched, triple-punched, or there can even be two different mintmarks on the same coin, one punched over the other.  They may not always be placed where they’re supposed to be.  Sometimes they are punched into a coin, other times they are added by hand, sometimes they are left off completely.  They can get filled with gunk, they can rust, they can be weak or strong.

In short, mintmarks can be one of the most interesting aspects of a coin.

Here’s what prompted this blog entry.

As I was reviewing images on the PCGS CoinFacts site, I noticed that the mintmark on most No Motto $10 Liberties is placed just below and between the eagle’s talon and the fletch (feather) or the arrow.  However, most of the S-Mint No Motto $10 Liberties have a mintmark further to the right, below and between the fletch and the tip of the stem.  Supposedly, mintmarks are added to the dies by employees at the Philadelphia Mint BEFORE the dies are shipped out to the branch mints, so the obvious question is “Why is the placement of the mintmark on S-Mint $10 Libs different than it is on coins from New Orleans.”

An even bigger question (which illustrates the craziness of mintmarks) is why 1856-S Eagles come with mintmarks in either the “normal” position or the “far right” position!  What were those wacky Mint employees smoking?

Filed Under: News

PCGS Paris!

Posted on June 15, 2010 by 2 Comments

Bonjour to all our new friends in Paris. PCGS just concluded its first week of grading onsite in our new offices in Paris France. The anticipation on the part of all the PCGS personnel involved as well as PCGS authorized dealers from around the European Union was intense as we began accepting submissions last Monday. The turnout was quite good as many dealers from around Europe brought in a wide variety of coins for us to grade. Coins delivered to us on Monday and Tuesday were returned graded on Thursday and Friday just as promised. We were all a little bit like kids in a candy store wondering what we would be given to grade while the submitters awaited receiving their grades with great anticipation. We gave several tours of our operation, which as some of you know is rather unusual for us. Curiosity ran strong as everyone wanted to learn about grading and see first hand what our operation consisted of. Hats off to Muriel Emery, PCGS Director of International Operations and the manager of our Paris office, for a fantastic job of pulling together this event. Thanks also to our crack Operations and IT groups for a flawless inaugural trip. We may have been a few thousand miles from home, but the entire PCGS team put on a superb performance – as usual.

Paris is such a beautiful city. We didn’t have much time to play tourist but with the sun setting around 10:30 PM there was a little time to get around at the end of each day. My favorite thing about Paris is people watching. There are thousands of cafes with outdoor tables facing the sidewalks where everyone sips their coffee and engages in a process of mutual admiration!

We are looking forward to our next trip which will be in early September after everyone has returned from their month long August holiday. Stayed tuned for further details. Until then – au revior!

Filed Under: News