Hello and welcome back,

We hoped that you enjoyed your complementary edition of The Insider’s Edge. This issue and future editions will contain even more insider information that others simply do not know or will not share. In this edition, we will discuss in greater detail a few of the 10 Myths of Coin Investing in our column, Exposing the Myths. In the Blue Chip Picks column, we will discuss a solid investment pick that is poised for continued growth. The Find Me One column will disclose an underappreciated coin that is easily worth multiples of any printed wholesale or retail price guide listings. This edition will also feature a special interview with ex NFL star and expert collector, Gregg Bingham. He will provide insight on his personal experiences in rare coin investing. 

The coin market remained strong throughout January, fueled by strong metals markets and an active F.U.N. show. At present, gold is trading at 894.50 per ounce, silver is trading at $16.48 per ounce and platinum is at $1,773.50 per ounce. These levels are down from highs late last week, primarily due to the increased strength of the U.S. Dollar. The Dollar rallied against European currencies, as investors noted the signs of an economic slowdown throughout Europe. The fall in oil prices over the past week, as well as some profit taking in the metals market, also helped push gold prices lower.

The rare coin market has also showed considerable strength. The January F.U.N. auctions realized nearly $70 million, as aggressive bidders fought for numismatic rarities and investment quality pieces. Among the highlights were a 1796 $2 ½ Gold No Stars graded MS-65 by PCGS that sold for $1.725 million, a 1796 $2 ½ Gold Stars graded MS-65 by NGC that sold for just over $1 million and a 1792 pattern One Cent which sold for over $600,000.

Just last week, a rare 1870-S Seated Dollar traded hands privately for $1.3 million dollars. There are only 9-11 examples of the coin, and this piece was one of the finest known. The dollar was pedigreed to Louis Eliasberg and was graded AU-53 by PCGS. Ultra rarities and investment quality coins like this are stronger than ever, realizing strong profits for those prudent enough to hold them.

During the introductory issue, I discussed the 10 Myths of Coin Investing. Over the next few issues, I would like to dispel these myths in greater detail, further helping the reader to understand the foundations for the misconceptions. 

Many of the larger numismatic firms advertise various buy-back guarantees. They insinuate that by buying their coins, your liquidity is assured. One firm is currently flooding conservative talk radio with ads and telling their customers that they will buy back their coins….forever. What they are not saying is how much they will pay. If they were to make this mistake they would be committing themselves to a repurchase at a specific price, irrelevant of market factors. Any prudent individual can see that this is financial suicide. But, the problem goes beyond just this. By stating that they will repurchase a coin in a specified period of time for an exact amount, the company is implying that the coin is a liquid commodity. Consequently, they would expose themselves to commodity trading laws, which are strictly regulated. When Elliott Spitzer, then State’s Attorney for New York, shut down several prominent Long Island rare coin firms, it was specifically for this reason.

The bottom line is that most buy back guarantees say absolutely nothing. Yes, they will buy your coins back when you are ready to sell. But then, who wouldn’t? If you paid $1000.00 for a coin, and the firm then offers you $500.00 for that same coin a year later, how useful is their buyback?

The fact that a coin has gone up in value does not necessarily mean that it will continue to do so. A good example would be a common date $20 Saint Gaudens in MS-63. This coin was selling for $650.00 a year ago and is currently valued at $1100.00. This particular piece has gone up 70% in value in one year. It’s obviously a hot commodity and probably something that would be worth owning, right? Wrong! In this example, the aforementioned coin went up in value almost solely because of its intrinsic value. The increase is a byproduct of the gold market rather than a reflection of numismatic demand. What if gold were to reverse its current path and go down in value? The upward trend of metals is not going to continue forever, and to own coins that derive their value from the bullion content alone could be a risky proposition. In hindsight, the Saint would have been a great coin to own a year ago and probably would have been a good coin to own even 6 months ago. But at today’s levels, one has to step back and ask himself whether this is still a prudent acquisition.

Almost without exception, the successful coin investor is a contrarian. This is an individual that is not afraid to go against the grain. Buy low-sell high is the investor’s credo. He is not out to win a popularity contest, but rather realize a profit by carefully investing in the coins that are temporarily out of favor.

Using the profile above, I have a friend that started purchasing certified MS-63 Saints several years ago when they were about $550.00. Because there was little attention for the series as a whole, he concentrated on slightly better dates with small premiums attached. He amassed several hundred pieces with many “P” mints in the teens, paying just slightly over generic prices. Several of his trusted associates questioned his purchases. Was this the right thing to be buying? After all, Saints had been going down in value and few people were expressing interest in the series. In my friend’s opinion, these were precisely the reasons why he wanted to own these coins. About two months ago, my friend liquidated his entire position in Saints selling almost 300 pieces for an average price of $1250.00 per coin.

My friend will be the first to admit that he’s not the most numismatically astute individual. However, he does have great business sense. Not one to fly solo, he realized that he needed help with his investment and contacted a respected southern Florida dealer. My friend listened to the dealer’s strategies and reasoning. After agreeing upon a set commission, the dealer started purchasing him coins. My friend estimates that he paid the dealer almost $15,000.00 in commissions over the next several years. His profit at the time of sale was approximately $200,000.00! (We will be discussing the middle man concept in more detail in a future issue.)

As an investor, I don’t want to own common-date Saints at the current levels. Neither do I want to be the buyer for my friend’s Saints @ $1250.00 a coin. However, if I had been in at the ground level and purchased Saints for $550.00 - $650.00, that would have represented real opportunity!

What are the undervalued coins of today? What coin or series is being largely ignored because it is temporarily out of favor? These are the questions that the prudent investor is always asking. Although common Saints could continue to go up in value, I would personally avoid coins like these that now have everybody’s attention.

The Blue Chip Picks column will feature a specific coin that I believe represents solid value in a collector/investor’s rare coin portfolio. Like blue chip stocks, these pieces have performed quite steadily over time, consistently increasing in value. These types of coins are extremely popular, with a strong collector base. They normally have great liquidity when the time comes to sell.

My first coin worthy of discussion is the 1804 Large Cent. One of the key dates in the U.S. Large Cent series, the 1804 Cent was one of the first U.S. coins to be viewed as a major rarity among collectors. This coin traded at a premium as early as the mid 1800s, when coin collecting first gained popularity in the United States. As early as December, 1879, an About Uncirculated example traded for $205. The coin was so sought after that crude restrikes were privately struck around 1860 with discarded Mint dies. Actually a fantasy piece, the restrikes were struck from an altered 1803 obverse die and the reverse die of an 1820 cent. These low quality pieces supplied coin dealers with examples of the date to offer collectors.

The official Mint records show 756,838 cents struck in 1804, significantly lower than any of the 1800-1803 dates. The lower mintage may have partially been the result of a yellow fever outbreak that plagued the nation during the year. It would seem that a three quarter million mintage would provide an ample supply of survivors for present collectors. However because of high manufacturing costs, it was common practice to use coin dies until they expired. Most experts believe that the cents struck until November of 1804 were created with 1803 dated dies. It is now accepted that the mintage for the 1804 cent was the 96,500 pieces struck in November and December of the year. The entire mintage was struck from a single die pairing, with four different die states (States I-IV) showing an increasingly severe rim break.

Breen estimated that fewer than 1,000 pieces survived, making any example scarce. PCGS has only graded 123 total examples of the date and NGC has only graded 48 examples. In mint state condition, the 1804 Cent is prohibitively rare. NGC has only graded one uncirculated example and PCGS has only graded an additional two. The copper experts concur with the rarity of high grade pieces. Breen only listed one Mint State example in his census, but noted that it had surface issues. Noyes lists no uncirculated examples in his census, and Sheldon listed only two uncirculated examples. In the past 15 years, the highest grade example appearing at a major auction has been a single NGC XF-45 example. Breen noted that due to quality control problems with copper planchets, even high-grade 1804 Cents often have problems with granularity and pitting. 

When one considers the large base of early copper collectors, there have never been enough 1804 Cents to satisfy demand for examples in any grade. There are over 1,200 devoted copper collectors in the Early American Coppers organization alone, who are always seeking examples of this date. Some advanced collectors also collect the 1804 Cent by all four die states, further draining the available supply. The date is also targeted by collectors/investors who specialize in key dates and early Federal issues. 

Due to strong demand, the 1804 Cent has been a consistent performer over time. About Uncirculated and Mint State pieces trade so infrequently that their true values are difficult to actually gauge. Circulated pieces can be located with some effort and provide better value indicators. From 1997 to 2007, auction results show that a PCGS F-12 1804 Cent gained an average of 8.7% annually. Coin Trends retail valuation has shown the price of the 1804 increase in Good-4 condition from $600 in 1995 to $1,500 at the end of 2007, and average increase of 12.5% annually. In January of 2008, a PCGS Good-4 1804 Cent realized $2070 in a Heritage F.U.N. sale, showing that this date continues to be a blue chip investment.

Since 1950, one can see the value increases of a Good-4 1804 Cent, as illustrated by the graph below.

Note: One must be careful when examining auction records, as many of the high grade pieces listed in auction results are actually the 1860 restrike. It should also be noted that many of the ANACS graded coins are problem coins that have been net graded to account for scratches, environmental damage, and cleanings.

In conclusion, the 1804 Cent represents an excellent value for the coin investor. Compare 1804 Cent populations and values with other key date coins. For example, NGC and PCGS have graded a combined 3,878 1877 Cents, 5,327 1916-D Mercury Dimes and 1,947 1916 Quarters. In each case there are more graded examples of each of these coins than total surviving examples of the 1804 Cent. Examine these comparative values:

The 1804 Large Cents graded by PCGS and NGC are 11 to 31 times scarcer than these other key date coins. The total 1804 survivors both graded and ungraded are 2 to 5 times as rare as the graded examples of each of the other keys. The preceding chart shows that the 1804 Cent compares very favorably from an investment standpoint to the other key-date pieces.

Even when compared to the key date 1799 Cent, the 1804 holds up well. Sheldon states that 1799 and 1804 cents have similar survival rates in lower grades. PCGS and NGC population reports show a graded total of 173 1799 Cents, compared to 171 1804 Cents. Yet, the 1799 cent sells for multiples of the 1804 cent in all grades. This is not to imply that the 1799, or the other key-date coins do not represent good values. However, the combined popularity and rarity of the 1804 cent certainly makes this large cent standout as my Blue Chip Pick.

Welcome to the first installation of my new column, Find Me One! The goal here is to isolate a seemingly ordinary United States coin that is all but impossible to find. This edition’s discussion will feature the 1885 3 Cent Nickel business strike.

Not to be confused with the more common proof issue, the business strike 1885 will show no evidence of a re-punched date. Often, satin proofs are misidentified as business strikes. Breen states, “Business strikes are very rare, often simulated by dull proofs.” In fact, so few of these coins have ever been positively attributed, that little more is known about them. With an original mintage of only 1000 pieces, this may be one of the single rarest nickel coins to ever leave the United States Mint.

The grading services certainly support the rarity of the 1885 3 Cent Nickel. PCGS has graded a total of only 59 pieces in all grades from VF to MS-67. NGC has graded fewer yet with a total of only 23 pieces ranging from XF-40 to MS-66. Both services combined have graded a paltry 82 pieces in over 20 years of grading, an average of about 4 coins per year!

As a basis of comparison, let’s look at some other heralded rarities along with their respective PCGS/NGC populations: 1877 Indian Cent-3,912 pieces graded; 1909-S VDB Lincoln Cent-13,635 pieces graded; 1937-D 3 Legged Buffalo Nickel-8,776 pieces graded; 1916-D Mercury Dime-5,359 pieces graded; 1916 Standing Liberty Quarter-1,956 pieces graded; 1893-S Morgan Dollar-5,276 pieces graded. It is also interesting to note, according to January 2008 CDN Monthly Summary, the aforementioned coins bid from a low of $1,000.00 to a high of $9,250.00 in the median grade of XF. The 1885 3 Cent Nickel currently bids at $545.00 in the same XF grade, even though it is anywhere from 24 times to 166 times as scarce as any of these rarities!

Now I ask you, is the 1885 3 Cent Nickel really that rare? Let’s look at the recent number of auction appearances to help support the answer to this question. After an exhaustive search, I have been able to find exactly three coins that were auctioned in the last 5 years, the most noteworthy being a PCGS MS-66 that sold in August, 2004 at a Superior sale for $23,000.

So go ahead, and Find Me One! As a potential reward for some lucky reader, I will make the following offer. At the current Greysheet Monthly Summary levels, I would be willing to pay three times “Bid” for any PCGS or NGC certified example graded between GOOD and MS-65. Although I recognize that anything is possible, I’m not going to run for my checkbook anytime soon!

This month, The Insider’s Edge interview features Gregg Bingham, Commemorative Collector Extraordinaire.

Gregg currently owns 8 automotive stores in the Houston area, including brake shops, oil change shops and automated car washes. NFL fans will recognize Gregg’s name from his 13 year career as a middle linebacker for the Houston Oilers (1973-85). Gregg also holds an undergraduate degree in Industrial Economics and a graduate degree in Macro Economics, both while attending Purdue University.

Like many collectors, Gregg’s coin collecting interest was piqued as a child when his grandfather gave him some Morgan Dollars. Gregg, who calls Houston home, bought his “first real coin” a $20 Saint Gaudens, in 1973. He continued collecting Saints until a hometown dealer warned him of repatriation of large quantities of twenties coming out of Europe. Wisely, Gregg sold out of his Saint position at a profit and shifted his emphasis to Morgan Dollars. Gregg completed and later sold his Morgan Dollar set, which still ranks as one of the top certified Morgan sets ever assembled. Today, Gregg is working on a 144 piece U.S. commemorative set, with an emphasis on beautifully toned pieces. His set is currently ranked 2nd on the NGC Registry with 98% complete.

Gregg’s life experiences have given him a unique perspective which he applies to his collecting passion. What follows is The Insider’s Edge interview with Gregg Bingham:

Insider’s Edge: What is your advice to collectors when it comes to targeting a specific grade of coin?

Gregg Bingham: Buy the value grade, the premium quality pieces. Buy what dealers call the monsters. Part of the learning curve is to understand that these coins don’t trade at sheet levels. When I’m at a coin show, I use the blink theory as a test of value. Blink, and if the coin is gone an hour later, then you know that it was priced right.

IE: Although I know that you have owned coins graded by both PCGS and NGC in the past, your present set is encapsulated by NGC. Why?

GB: I believe that NGC properly grades coins. And from my perspective, my toned commemoratives look better in their white holders.

IE: How long have you been collecting commemoratives?

GB: Since 1990

IE: What attracts you to this series?

GB: Within the commemorative series, you have more makes. For instance, with a 50 piece set you have 50 makes and with a 144 piece set, you have 144 makes. Each coin varies by date and mintmark, each is different. You won’t find a 1936 Boone Half Dollar in proof-like, but you may find a 1937-S Boone in proof-like. A 144 piece set is complicated. The more complicated it is, the more of an advantage that you have. And that is, because of the knowledge required. A dealer usually sells a lot of different coins. He may know a little bit about a lot of coins. I know a lot about one series. Knowledge is king. Your ultimate report card is when the dealers start calling you for advice.

IE: Why do you like coins as an investment?

GB: I firmly believe that at some point many collectors pass from just having fun to having to have financial responsibility which varies from check book to check book. Seeing that I have passed the fun point - and don’t get me wrong, I still have fun with my collection, but collecting in my case has evolved to an investment and I am 100% comfortable with my knowledge of the market place and all its nuances. You see coins are a commodity with a fixed supply and a little tug on the demand and the price has to go up. The future looks very bright in numismatics at this point in time, as there is what I call the “perfect storm" all converging at once. Where as we have a fixed supply coupled to the Mint, who has raised awareness of coins with all their recent coin issues and will continue to do so (beginning with the US State Quarter program). With this is a baby boomer group who has been the most productive class of people in the history of the world and has a bank full of spare productivity (aka cash). These individuals are looking for fun things to do that they have not done before - and many have found coins.  Now, in commemoratives, there are some coins that are really rare. For instance, consider the Boones, with a mintage of only 2,000. Now that's rare! The only problem is that demand begins at the top of the food chain at the best and then works down the food chain. If you bought a coin somewhere in the middle, it cannot increase in value very much until there are 1,000 wanting it; that could be a long wait. But, if you bought a great looking coin as close to the top of the food chain as you could afford, those pieces can and will increase in value as the market expands - and believe me there are thousands of affordable coins in that space. The challenge is to not get stuck buying generic stuff or you might be waiting a while to make your money back

IE: What is your outlook for the coin market?

GB: In 1994-95 I realized that the grading services were ranking coins. I was one of the first collectors on the registry, which I knew would create a demand for the better coins. I realized then as I realize now that nice coins aren’t cheap and cheap coins are seldom nice. You must get your hands on as many coins as there are available to you. By looking at both PCGS and NGC coins, you’ve doubled the number of coins to choose from. And we both know that there are nice coins in both holders. It’s not just one or the other.

IE: What role has the coin dealer played for you in your collecting endeavor?

GB: As you go down the trail, you need to learn about your hobby. You need to know which dealers have good eyes. Getting the first shot with dealers is important. You need to be on their good list. But, you also need to show initiative with dealers. If you visit their table at a show and you’re a first grader, and then revisit them a year later and you’re still in the first grade, then you’re not doing your part.

IE: Have trade publications been important to you?

GB: Read articles as a hobbyist. We both know that after a dealer has been at this all day for 10 hours, he’s probably not going to go home and start reading a coin publication. Collectors can learn a lot from reading articles. Often they can share things with dealers that the dealer may not even be aware of.

IE: Are trade or hobby organizations an important resource for you?

GB: Shows are more important to me than the local coin club. I’ve spoken at coin clubs, but as far as attending the meetings, well they’re more of social affair. I’ve outgrown the clubs, so I stick with the shows. I realize that if a monster hits the floor, and it leaves the floor, it’s gone. It’s competitive at shows, and often, I have to cut off the collector. If a collector gets to a coin before I do, chances are, I’m never going to see it.

IE: I think you’ve provided some good insight for our readers. I really appreciate it.

We would like to make this newsletter interactive with our readers. Our goal is to create a list of coins that our readers believe represent excellent investment potential. We can then chart their performance over time, comparing results.  If you would like to submit any selections to include in the list, please send your selections to robbie@reedededge.com. All selections will be kept confidential.

The Reeded Edge, publisher of The Insider’s Edge, offers a portfolio management service for the serious coin investor. Whether you want to invest as little as several thousand dollars or as much as a million-plus, The Reeded Edge will custom tailor a plan just for you. We take into consideration your investment goals as well as the level of risk that you are comfortable with. Then we apply our proven strategies, using data similar to what you see presented in this newsletter.

We were one of the first major market makers in 1794 Silver Dollars. Circulated examples were then selling in the $40,000.00-$125,000.00 range. We remember constantly hearing how overpriced this coin was. But it did not deter us, because we knew this coin had the essential fundamentals to be a great long term play. About the only mistake that we made was the time element. Where we had forecasted these coins to be 7-10 year holds, they ended up doubling in value in just 3 years. Two years later, they had increased in value another 50%. Today, the $40,000.00 example referenced above is worth about $125,000.00! Fortunately, there were 20 individuals who followed our lead with these coins. Were you one of them?

Please, if rare coin investing has piqued your interest, don’t delay and call us today. You can reach either Rob Lehmann or Robbie Jenkins at our offices, 301-724-0400. Or, email either one of us, roblehmann@reedededge.com or robbie@reedededge.com.

Many opportunities in rare coins still exist, but for how much longer? Let the professionals at The Reeded Edge help you build you a serious numismatic investment portfolio.

We would like to thank you for taking the time to read The Insider’s Edge. If you ever have comments or inquiries about The Insider’s Edge, rare coin investment questions, or are looking to begin building your own numismatic portfolio, please do not hesitate to contact us.

Individuals can subscribe to The Insider’s Edge by sending an email to insidersedge@reedededge.com.

The Insider’s Edge is a publication of:

The Reeded Edge, Inc.
113-115 Baltimore Street
Suite 102
Cumberland, MD 21502
(301) 724-0400
(301) 724-0478 fax