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Are Vintage 1980s Collectibles Investment Worthy Yet?

Are Vintage 1980s Collectibles Investment Worthy Yet?

It’s no secret that the hottest part of the antiques market in recent years has been Mid-Century Modern, with its sleek lines and uncluttered decoration.  And this trend got me thinking.  Are vintage 1980s collectibles – complete with angular aesthetics and luscious neon colors – investable yet?

It is a loaded question.  The 1980s is only about 30 to 40 years ago at this point, so it doesn’t quite reach my personal definition of antique yet.  But although such labels used to be vitally important distinctions in the antiques trade in times past, they hardly matter anymore in the modern era.  What sells, sells, and what doesn’t sell, doesn’t.

I understand and embrace this philosophical flexibility.  I’m interested in identifying items that are destined to reliably appreciate in value in the future, regardless of when they were produced.  In fact, I’m not above recommending contemporary pieces of art or jewelry as investments, provided they are well-executed and priced right.  I call these modern tangible assets “future antiques” because I strongly believe they are destined to age into desirable antiques after a few decades have passed.

But where does this leave vintage 1980s collectibles?  They are on the cusp of becoming antique (just another 10 to 20 years to go), but aren’t quite there yet.  In the end, however, it doesn’t matter.  Regardless of their age, they are on the verge of a massive breakout, both in terms of popularity and price.

Now I want to make it clear that I’m only talking about very select vintage 1980s collectibles, not all of them.  For example, vintage 1980s pop culture items like your Care Bear lunch box or your G.I. Joe motorized battle tank might hold a special place in your heart, but they are highly unlikely to ever be investment grade pieces.  The same goes for 1980s comic books, baseball cards and Alf memorabilia.

This is where the Antique Sage’s 5 rules of investment grade antiques come in handy.  These rules allow the layman to quickly separate common collectibles from high end antiques that will have superior future appreciation potential.

Vintage items that are portable, durable, scarce and high quality inevitably become more desirable over time.  The 5th and final attribute on this list is zeitgeist, or how well an item reflects the stylistic sensibilities of its era.

Because of these requirements, certain types of items – notably those made from precious metals, gemstones and exotic woods – consistently take center stage.  And this rule of thumb holds true when examining vintage 1980s collectibles as well.

For instance, vintage mechanical wristwatches have become increasingly popular over the past 20 years.  But 1980s mechanical wristwatches are still largely overshadowed by their more well-known 1940s, 50s and 60s predecessors.

In the late 1970s to early 1980s, the Swiss-dominated mechanical watch industry suffered a near-death experience.  The volume of mechanical wristwatches sold plummeted worldwide, almost driving the entire industry into bankruptcy.  This event, known as the Quartz Crisis, was due to the introduction of cheap and reliable quartz watches in the mid-to-late 1970s.

One of the little-appreciated side effects of the Quartz Crisis is that high quality (read: non-Swatch) 1980s mechanical watches were produced in much smaller quantities than mechanical wristwatches in earlier decades.  This increased scarcity isn’t readily apparent in the vintage watch marketplace yet, but is bound to reveal itself sooner or later, thus driving up prices.

In addition to increased scarcity, some vintage 1980s wristwatches practically define their era, exuding tremendous zeitgeist.  Two underrated examples are the classic Must De Cartier tank dress watch and the rugged Seiko 6309 diver’s watch.  Better yet, many fine 1980s era mechanical wristwatches are still relatively affordable, with prices of often just a few hundred dollars each.

Vintage 1980s bullion coins are another category of collectible that is rapidly coming into its own.  After a massive run-up in the price of gold and silver during the 1970s, national governments (which had previously shunned the precious metals markets) decided that it was better to profit from widespread public interest in precious metals by striking bullion coins.

The Royal Canadian Mint got things started in 1979 when they first struck the 1 troy ounce gold Maple Leaf coin.  The United States followed a few years later in 1986 with the American Gold Eagle series of bullion coins and its twin, the American Silver Eagle bullion coin.

Great Britain followed up with its Britannia gold bullion coins in 1987, as did Australia with its Gold Nugget series in the same year.  Mexico, a prolific silver producer, minted silver Libertad bullion coins from 1982.  Even China joined the club with its iconic gold Panda coins in 1982.

Now, under most circumstances bullion coins should trade like…well…bullion.  But special proof versions of these vintage 1980s bullion coins are becoming increasingly popular with farsighted collectors because of their beautiful designs, near-perfect execution and substantial intrinsic value.  As an added bonus, proof versions of these vintage bullion coins were never over-issued, unlike 1980s commemorative coins.

I’ve already featured a couple fine vintage 1980s gold coin proof sets in the Spotlight section of my site over the past few months.  One is a 1985 British gold sovereign proof set and the other is a 1987 Australian Gold Nugget proof set.  Although the $3,000 price tag for each set might seem like a deal-breaker at first, it becomes much more palatable when you understand that they each contain around 2 troy ounces of pure gold.  In effect, you are only paying between 10% and 20% over the spot price of gold for these magnificent 1980s coins.

I’ve only covered a couple vintage 1980s investment grade collectibles categories here.  There are many that I’ve omitted due to space and time constraints, such as vintage 1980s fountain pens, jewelry, hand-poured silver bars and art prints, just to name a few.  There is an investment grade 1980s collecting niche for everyone.

Let’s face it.  Vintage 1980s collectibles are on the cusp of being discovered.  Prices for these under-appreciated, retro-chic investments are low today, but I don’t expect this state of affairs to last for long.  Don’t say no one warned you.

 

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The Secret History of 20th Century U.S. Currency

The Secret History of 20th Century U.S. Currency
Photo Credit (CC 2.0 license): J W

The United States dollar is currently the world’s reserve currency.  One factor that has undoubtedly helped secure this coveted position is that almost all U.S. currency issued by the Treasury or Federal Reserve from 1863 to the present is still legal tender, acceptable for debts, commerce and taxes.  This is exceptional, as most countries regularly demonetize old notes and withdraw them from circulation.

But demonetization simply does not happen in the United States (although obsolete notes are sometimes withdrawn from circulation).  In fact, when I worked as a bank teller in the mid 1990s, I found a Series 1934 $20 Federal Reserve Note in my till.  That particular $20 bill had probably been in circulation for a good 50 years, if not longer.

Many people do not realize that U.S. currency has a secret history.  There have actually been 4 (or 5, depending on how you count) different types of U.S. paper money in circulation during the 20th century.  Below I will reveal the untold history of U.S. paper money, concentrating on Series 1928 and later bills.

I consciously chose 1928 as a starting point because in that year all U.S. currency was radically redesigned.  For the sake of convenience, these new notes were shrunk in size compared to previously issued bills.  They also began to feature the presidential portraits (Lincoln on the $5, Hamilton on the $10, Jackson on the $20, etc.) that we are familiar with today.

On the whole, the average American would recognize a Series 1928 note as being essentially modern, although anti-counterfeiting design updates since 1996 have endowed newer notes with larger, off-center portraits, more color and less scrollwork.

As an FYI, a U.S. currency’s series refers to the year a design was first initiated, not necessarily the date the note was printed.  So if a Series 1928 note was later followed up by a redesigned Series 1953 note, the Series 1928 note could generally have been printed anytime between 1928 and 1953.

And now let’s examine the different types of U.S. currency that were issued during the 20th century:

 

U.S. Gold Certificates (Gold Seal Notes)

The United States Treasury issued gold certificates from the end of the Civil War in 1865 until the Great Depression in 1934.  As the name implies, these iconic U.S. notes with their characteristic gold seals were exchangeable into gold coin upon request.  In fact, each one has a gold clause that unequivocally states:

“This certifies that there have been deposited in the Treasury of the United States of America XX dollars in gold coin payable to the bearer on demand”.

These beautifully engraved notes were issued in denominations ranging from $10 to $10,000.  Starting in 1928, U.S. gold certificates were, like all other U.S. currency, redesigned with the presidential portraits and smaller-size familiar to us today.

Unfortunately, the advent of the Great Depression in the 1930s soon put an end to the international gold standard.  The catastrophic failure of Austria’s Credit-Anstalt bank in May 1931 increased pressure on over-extended banks and governments around the world, eventually forcing the Bank of England to break the British pound’s peg to gold in September 1931.  After this, the United State’s abandonment of the gold standard was inevitable.

The honor of reneging on U.S. gold certificates ultimately fell to President Franklin Delano Roosevelt, who declared a nationwide banking holiday on March 5, 1933, shortly after taking office.  One month later, on April 5, 1933, FDR decreed that all U.S. gold coins and gold certificates had to be exchanged for non-gold coins and notes on pain of imprisonment.  After a short grace period, it became illegal for any American to own or possess gold certificates.

But history wasn’t over for that most revered of U.S. paper currencies.  In 1934, the U.S. Treasury actually printed a new series of U.S. gold certificates in denominations of $100, $1,000, $10,000 and $100,000.  These non-circulating notes were distinguished from older, previously circulating series by their orange-toned reverse and amended gold clause, which reads “payable to the bearer on demand as authorized by law“.

Series 1934 gold certificates were used exclusively for bank reserves and inter-bank transfers.  They are exceedingly rare and valuable today.

In 1964, the restriction on American citizens owning U.S. gold certificates was removed.  Although no longer redeemable for gold coin or bullion, gold certificates are still legal tender today at their stated face value.

 

U.S. Silver Certificates (Blue Seal Notes)

Silver certificates were another kind of note issued by the U.S. Treasury between 1878 and 1963.  They were redeemable at the rate of 0.77344 troy ounces of pure silver for each dollar.  Much like gold certificates, each silver certificate had the following silver clause printed on it:

“This certifies that there is on deposit in the Treasury of the United States of America X dollars in silver payable to the bearer on demand”.

After 1928, U.S. silver certificates were issued in $1, $5 and $10 denominations, although denominations as high as $1,000 were printed in the late 19th century.  Post-1928, small-size notes are easily identifiable by their blue treasury seal.

The only exceptions to this rule were a couple of World War II emergency issues.  The first of these was a $1 silver certificate with a brown seal and the word “Hawaii” over-printed in several areas.  The other was a set of $1, $5 and $10 yellow seal silver certificates intended for circulation among U.S. troops in allied-occupied North Africa.  Both types of these distinctive notes were issued so that they could be easily demonetized if those territories were overrun by Axis forces.

By the early 1960s, it had become increasingly apparent that the rising price of silver would soon render it impossible for the U.S. Treasury to continue redeeming silver certificates.  As a result, the legal obligation to exchange these notes for silver dollars was suspended on March 25, 1964, with a provision that they could still be redeemed for the appropriate weight of raw silver granules or bullion bars until June 24, 1968.  It has been speculated that the U.S. treasury modified the redemption of these notes from coins to bullion in an attempt to dissuade people from cashing them in.

Much like U.S. gold certificates after 1933, U.S. silver certificates ceased to be exchangeable for any precious metal after 1968.  However, they still remain legal tender.

 

United States Notes (Red Seal Notes)

United States Notes were another variety of paper money issued by the U.S. Treasury during the 20th century.  These notes, which are also known as Legal Tender Notes, are characterized by their red seals.  They were first issued during the Civil War in 1863 and last released into circulation in 1971.

Since 1928, red seal United States notes have been issued in $1, $2 and $5 denominations, along with the singular and uncommon Series 1966 $100 bill.

United States Notes have not been redeemable for specie since the U.S. abandoned the gold standard in 1933.  Consequently, they were eventually determined to be redundant, and were gradually withdrawn from circulation in favor of Federal Reserve Notes in the 1970s.  However, like all of the other currencies detailed here, United States Notes continue to be legal tender.

U.S. Federal Reserve Notes (Green Seal Notes)

Federal Reserve Notes are the most recognizable of 20th century U.S. currency types because they are the paper money we still use today.  First printed in 1914 (in a large-size format), Federal Reserve Notes have been issued in denominations ranging from the lowly $1 bill to the mammoth $10,000 note.

The chief distinction between red seal United States Notes and green seal U.S. Federal Reserve Notes is that the latter have been issued by the Federal Reserve instead of the United States Treasury.

In addition, Congress has decreed that Federal Reserve Banks must retain collateral that is equal in value to all outstanding Federal Reserve Notes.  This collateral primarily consists of gold certificates (including the intriguing Series 1934 gold certificates mentioned above) and U.S. Treasury securities.  Theoretically, Federal Reserve Notes held by the public have a first lien on these assets, but are not redeemable for them.

Federal Reserve Notes eventually displaced gold certificates, silver certificates and United States Notes to be the only form of paper money issued in the U.S. by the late 20th century.  All Federal Reserve Notes ever issued are still legal tender.

 

High Denomination U.S. Paper Currency

High denomination U.S. currency refers to anything larger than a $100 bill.  These include the $500 note featuring President William McKinley, the $1,000 note with President Grover Cleveland, the $5,000 note with President James Madison and the $10,000 note with Treasury Secretary Salmon P. Chase.  The U.S. Treasury even issued an elusive $100,000 gold certificate with the portrait of President Woodrow Wilson on it.  However, only a handful of these ultra-rare $100,000 bills survive – all of which are in the possession of the Federal Government.

Although I’ve placed high denomination U.S. currency in its own category, all of these notes technically belong to one of the previously discussed types: gold certificates, silver certificates, United States Notes or Federal Reserve Notes.

High denomination U.S. paper money was regularly printed in the late 19th through the mid 20th century.  In most instances, these monster notes were used primarily by banks and other financial institutions.  Few individuals ever saw a circulating, high denomination bill due to their immense purchasing power.

For example, a $1,000 bill issued 90 years ago in 1928 would be equivalent to almost $15,000 in 2018 dollars, due to inflation.

High denomination U.S. currency was last printed in 1946, although they remained in circulation until they were actively withdrawn in 1969.  The decision to withdraw large denomination bills was largely driven by political anxiety over their potential use in organized crime, although there was never any explicit evidence that this happened systematically.

As a result, high denomination U.S. currency is very scarce today, especially denominations above $1,000.  Because there are a fair number of counterfeit notes targeting collectors, buyers of high denomination notes are advised to only purchase bills that have been third-party certified by Paper Money Guaranty (PMG) or PCGS Currency.

One of the most interesting high denomination notes is the Series 1900 $10,000 bill.  It is the only U.S. high denomination note found in the wild that is not currently legal tender.  Consequently, when these notes occasionally come up for sale, they sell for significantly less than face value – something that collectors love.

 

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American Gold Eagle Coins – the Treasury Bonds of Alternative Assets

American Gold Eagle Coins - the Treasury Bonds of Alternative Assets

Photo Credit (CC 2.0 license): Eric Golub

U.S. Treasury bonds are the 800 pound gorilla of the modern securities market.  With the sole exception of global FX markets, the U.S. sovereign debt market is the deepest and most liquid of the capital markets.  As of Q4 2017, there are a whopping $14.5 trillion of U.S. Treasury bonds held by the public.  The average trading volume in the U.S. Treasury market is a monstrous $500 billion turnover every single day.

The reason that U.S. Treasury bonds hold this hallowed position in the securities markets is because they are direct obligations of the United States, with a superb credit quality rating to match.  Of course, the interest and principal of these sterling securities are payable in U.S. dollars – currently the world’s reserve currency.  And to date, the United States Government has never defaulted on its debt obligations.

Consequently, U.S. Treasuries are almost universally accepted to settle financial transactions.  They are also widely used as collateral in financial transactions, most notably repurchase agreements and reverse repurchase agreements.  Both buyers and sellers know that U.S. Treasury bonds are money good.  They are the very highest quality investments available in the world of paper assets.

But U.S. Treasuries aren’t the only high quality securities out there.  For those investors interested in alternative assets, there is another intriguing option: American Gold Eagle coins.  These bullion coins have been issued by the U.S. Government since 1986.  They are struck to exacting standards by the U.S. Mint in solid 22 karat gold.  The most common size is 1 troy ounce of fine gold, but 1/2, 1/4 and 1/10 troy ounce fractions are also minted.  The weight, purity and gold content of all American Gold Eagle coins are explicitly guaranteed by the U.S. Government.

These superlative attributes make American Gold Eagle coins the alternative asset equivalent of U.S. Treasury bonds.  For example, the U.S. Treasury market is liquid and deep, meaning that you can place large buy or sell orders without moving the market.  American Gold Eagle coins hold a similar position in the precious metals complex.

Between 1986 and 2016, over 25.4 million troy ounces, or 792 metric tonnes, of American Gold Eagle coins were struck.  Today, with the spot price of gold trading at around $1,300, this translates into a total market capitalization of over $33 billion.  This ensures that there is always a ready supply of these coveted bullion coins available for investment, commerce or any other financial need.

American Gold Eagle coins are also the most internationally recognized form of gold bullion today, giving them a distinct advantage over other gold bullion bars and coins.  In decades past, the honor of the world’s most well known bullion coin was held by other market participants.  From the late 1960s until the early 1980s the South African Krugerrand was the world’s gold bullion coin of choice.  Then, in the early to mid 1980s, the Canadian Maple Leaf usurped the Krugerrand’s title.

But by the mid 1990s, American Gold Eagle coins had come to dominate the global gold bullion coin market.  Yes, Canadian Maple Leaf and South African Krugerrand gold coins are still struck today and are widely available in the bullion marketplace.  But none of them have the international prestige, instant recognizability and impeccable reputation of American Gold Eagle coins (although the Canadian Maple Leaf comes very close).

Another edge that American Gold Eagle coins have over the competition is their resistance to counterfeiting.  Over the last decade or so, fraudulent tungsten-filled gold bars have become an increasingly severe problem in the precious metal market.  Most of these fake gold bullion products originate from China, where sophisticated manufacturing equipment and techniques are used to create these counterfeits.

However, gold bullion coins are much harder to convincingly counterfeit than gold bars.  In addition, when gold bullion coins are counterfeited, they are less profitable to fake than gold bars due to their smaller sizes and higher technical requirements.  But not all gold bullion coins are equally resistant to counterfeiting.

American Gold Eagle coins are some of the most difficult gold bullion coins to convincingly forge.  In contrast, the South African Krugerrand has suffered from a significant number of counterfeits because it is less technically challenging to forge.  Having said that, there are a few examples of counterfeit American Gold Eagle coins floating around.  But these fake American Gold Eagles are generally fairly easily to distinguish from genuine coins due to their lack of crisply struck details and off-color gold.

Up until now, this article has been exclusively about the bullion version of American Gold Eagle coins.  And while they are certainly an excellent choice for alternative asset investor, I also want to take a moment to talk about their close cousins – proof American Gold Eagles.

Proof coins are pieces that have been specially struck in order to appeal to coin collectors and connoisseurs.  The proof versions of American Gold Eagle coins have superb details, frosted finishes and have been hand inspected for defects.  In short, proof American Gold Eagles are the very best coins that the U.S. Mint can strike.

Some gold buyers dislike these coins because they are priced (slightly) higher than their bullion counterparts.  As a result, if you only want to acquire the maximum number of ounces of gold for the minimum amount of money, proof gold coins of any type make little sense.  However, I have a different viewpoint.

I believe that proof American Gold Eagle coins are the alternative asset equivalent of Treasury Inflation Protected Securities (TIPS) in our Treasury bond analogy.  TIPS are bonds that pay interest based on a fixed real rate and a floating inflation-linked component.  Many investors like TIPS because they offer an explicit, after-inflation return and can potentially outperform traditional Treasury bonds under the right circumstances.

Similarly, proof American Gold Eagle coins give savvy investors two different vectors for appreciation.  Like other gold bullion coins, proof American Gold Eagles benefit from any increase in the price of gold bullion.

But they also have the potential for numismatic appreciation – the possibility that their embedded collector’s premium will increase.  This second avenue of return potential is completely independent from the underlying price of bullion – an attribute known in the financial industry as non-correlation.  Non-correlation is a highly prized attribute among alternative assets.

With so many excellent attributes, it is easy to envision a future where American Gold Eagle coins are the bedrock of the alternative investment industry.  A variety of different sizes, from 1/10 to 1 troy ounce, are available in large quantities in the marketplace.  They are always struck to the very highest standards, with a gold content that is guaranteed by the U.S. Government.

I believe it is obvious that American Gold Eagle coins will naturally become the alternative asset of choice for investors seeking a safe, low-risk, cornerstone investment for their portfolios.  Regardless of whether you choose the bullion American Gold Eagle or the proof version, I don’t think you can go wrong.

 

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Looking to Invest in Rare U.S. Coins? Read This First!

Looking to Invest in Rare U.S. Coins? Read This First!

One of the tidbits of investment advice that you will hear again and again in the numismatic world is to only buy rare coins, particularly rare U.S. coins.  These coins, usually low mintage semi-key or key date specimens, have had an impressive track record of appreciation over the past several decades.  The underlying assumption is that any coin that has performed well in the past will continue to outperform in the future, as well.

Many rare U.S. coins have appreciated tremendously in value over the last 60 or 70 years.  Specimens that only cost $25, $50 or $100 in the 1950s now routinely trade for thousands or even tens of thousands of dollars.  A good example of this would be the 1909-S VDB Lincoln penny in AU-50 (About Uncirculated) condition.  With only 484,000 minted, the 1909-S VDB is one of the major key dates in the extensive Lincoln penny series.  In 1950, this coin would have only cost you about $10.  By 2016, this same coin was worth around $1,250 – an impressive 7.59% annual rate of appreciation over the past 66 years.

The 1916-D mercury dime is another prime illustration of this phenomenon.  Excluding overstrikes and other errors, it is the rarest coin in the mercury dime series, with a mintage of only 264,000.  In 1950, a problem-free, 1916-D mercury dime in AU-50 condition would have run about $70, versus $9,000 in 2017.  This represents a robust 7.52% annualized rate of return over the last 67 years.

So the conventional investment wisdom in rare U.S. coins is to look at the price data for a specific coin and see if it has had a consistent upward trend over the last few decades.  If it has, you are golden; the semi-key or key-date coin in question is a buy.  In contrast, if the price trend has been flat or inconsistent, then pass it by.  This advice would apply to most common-date coins.

But there is a flaw in this reasoning.  It doesn’t examine why rare U.S. coins have appreciated in value so briskly over the past several decades.  So here is my theory.

Back in the 1950s, relatively few people collected coins, so prices were low.  As the U.S. economy grew briskly over the latter half of the 20th century and the middle class became wealthier, more people began collecting U.S. coins, driving up prices.  Values increased most rapidly for semi-key date and key date coins, because these were the scarce specimens everyone needed in order to complete their Buffalo nickel, Standing Liberty quarter or Walking Liberty half dollar collections.

But as the prices of rare U.S. coins increased, they began to price average, middle-class collectors out of the market.  The 2008-2009 Great Recession was the coup de grâce for many collectors, who could no longer afford to build traditional date and mint collections for many U.S. coin series.

So if we think rare U.S. coins are going to be good investments in the future, we need to ask a couple questions.  Who is going to buy these coins in the decades to come?  And who can afford to buy these coins at prices substantially higher than they are at the present?

Let’s conduct a thought experiment to help us puzzle this out.  Imagine we have two different coins.  The first is a common date coin that costs $100.  The second is a rare date coin that costs $2,500 – 25 times what the common coin does.  Take a peek at the chart below and see what happens if we assume the common coin appreciates at an anemic 2% per annum while the rare coin compounds at a healthy 8% every year.

 

Common Rare
Coin @ 2% Coin @ 8%
Years Return Return
0  $         100  $         2,500
20  $          149  $       11,652
40  $          221  $       54,311
60  $         328  $     253,143
80  $         488  $ 1,179,887
100  $         724  $5,499,403

 

You’ll notice that after a century of 8% appreciation, our key-date coin would be worth almost $5.5 million versus just $724 for our common date coin!  In this case, the rare coin would be valued at almost 7,600 times the common date coin.  Attempting to inflation-adjust the price of the rare coin doesn’t help the situation much either.  Assuming 2% average inflation over our hypothetical 100 year period, our rare coin would still be priced at a flabbergasting $759,000 in current dollars!

As you can clearly see, it eventually becomes mathematically impossible for a rare coin to continuously appreciate at a rapid rate.  After all, outside of the occasional centi-millionaire or billionaire, who could afford to pay $5.5 million (or $759,000 in constant dollars) for a single key date coin?

Now there are a handful of unique or incredibly rare U.S. coins that have sold for unbelievably high prices.  An example of this is the coin shown in the photo accompanying this article – the 1933 Saint Gaudens $20 gold piece.  This ultra-rare coin was struck just as President Franklin Delano Roosevelt issued an executive order taking the U.S. off the gold standard and making private gold ownership for U.S. citizens illegal.

None of the 1933 dated U.S. double eagles had been released for circulation at the time of F.D.R.’s pronouncement and they were all supposed to have been melted down shortly afterwards.  But a handful escaped the melting pot and found their way into the shadowy underworld of high-profile stolen art.  Today, there are only 10 specimens in existence, with two of those coins permanently held at the National Numismatic Collection in the Smithsonian Institute.  The only 1933 U.S. double eagle gold coin ever legally sold brought a stunning $7.59 million at a 2002 auction.

But ultra-expensive, rare U.S. coins like the 1933 $20 gold piece are exceptions that prove the rule.  They aren’t simply key-dates or rare; they are breathtaking pieces of numismatic history.  They all have intriguing stories behind them and there are usually no more than a handful of extant specimens.  This holds true regardless of whether it is the 1794 Flowing Hair silver dollar that sold for $10 million or the 1913 Liberty Head nickel that brought $3.17 million.

The fact is that shockingly few rare U.S. coins enjoy the unique combination of history, scarcity and mythology necessary to be considered numismatic legends.  Your average semi-key date or key date rare U.S. coins, like the 1909-S VDB Lincoln Penny and the 1916-D mercury dime, will never command multi-million dollar prices (barring significant inflation).  This means you just can’t throw your money haphazardly at “rare” U.S. coins at any price and expect to see good investment results.

A lot of these key-date coins have already had great runs.  The 7% to 9% returns that many rare U.S. coins have seen over the last 60 to 70 years are not reproducible.  They have already had their time in the sun.  I cannot make predictions about near-term performance, but time is not your ally when you pay tens of thousands of dollars for a rare U.S. coin that isn’t truly exceptional in some way.  Rarity, by itself, isn’t a sufficiently compelling attribute to drive high numismatic investment returns.

Rare U.S. coins are really constrained by a concept known in finance as the law of large numbers.  It is relatively easy for something that costs $100 to appreciate rapidly – it might eventually become $1,000, which is expensive, but not ridiculously expensive.  But when something starts at $100,000 or $1,000,000, it has a much harder time compounding at a high rate because no one can afford the final price.

Now, I’m not saying that rare U.S. coins are universally bad investments or that you should buy common date coins because they are destined to “catch up” to scarcer coins in terms of value.  I’m simply stating that the excellent buying opportunities that prevailed in the 1950s for key date U.S. coins are over.  Instead we should look forward and ask ourselves “What $100, $200 or $300 coin today, will be worth $10,000 tomorrow?”

 

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