by Adam Crum
Investors and collectors who have kept on top of the numismatic market are being rewarded handsomely these days. With all the money moving into the rare coin market throughout the past year, we are now well into the New Year without so much as a hint of a slowdown.
“Big money” is very open to buying coins…especially expensive classic rarities recognizing that in a long-term bull market this movement should prove tremendously beneficial to the value of rare coins. Will we look back at the year 2003 as the greatest year in history for collectible coins or will the continued decline of the dollar show that 2003 was only the beginning?
- More individuals are learning about the rare coin market and buying what the insider’s consider the “right coins.”
- Rare coins are disappearing from the market and being added to collections faster than dealers can replace them.
- Savvy individuals are devoting more money to hard assets because of the low interest rates.
- Precious metals are clearly in a bull market and amazingly still remain a secret to the masses and “open interest” in U.S. gold futures have hit record highs. (Historically, open interest has been followed by events that move gold prices higher rapidly.)
- The FED has confirmed that interest rates will remain low, a good sign for tangibles such as coins.
- Along with a falling U.S. dollar and an uncertain geo-political environment, many people are becoming disillusioned with, bonds and interest-bearing investments that are producing no appreciable return, while other folks have made a lot of money in the stock market and feel a need to diversify.
A falling dollar generally means an increase in rare coin values
Economic and Geo-Political challenges exist everywhere in the world with no end in sight. These factors have played a key role in the significant adjustment downward in the value of the dollar, 39% against the Euro and multi year lows against most big currencies.
There are many reasons to believe the U.S. dollar will continue to decline in value. David Scott, a global bond portfolio manager for Citigroup Asset Management, thinks the dollar is stuck in a long-term bear market. Some of these reasons are an increasing trade deficit, growing government and private debt, a weak global economy and declining confidence by many in the United States government. The latter is a growing trend that is much more prevalent than state side news chooses or is allowed to publish.
Due to this erosion of investor confidence in paper assets, many are transferring a portion of their wealth to hard assets, one of which is rare coins. Naturally, the resulting increase in demand is helping to push up prices. But this is definitely not the whole story.
The timing may be the best in history for Rare Coins
When you consider the benefits a combination of the aesthetic and economic—it’s easy to see why rare coin collecting and investing is on the rise. Today, there are an estimated 20 million rare coin investors and collectors in the United States alone and that number is growing exponentially as a result of the “Baby Boomers” unprecedented wealth.
Recent data by the United States Mint and the American Numismatic Association confirms this growth. According to a recent article in the respected Coin Dealer Newsletter, “Optimism in the marketplace is higher than we have seen for many years. Dealers are certainly encouraged with the interest and demand from the public. If even a small percentage of those new coin collectors of State Quarters branches out to other areas of the market, the potential for a price explosion is great. There just may not be enough supply to go around if these new collectors begin Type and/or Series collections.”
Certainly the United States Mint and the ANA patching up their relationship in the mid-1990’s has helped to increase the numbers of collectors and investors willing to enter the market. The U.S. Mints modern commemorative program, American Eagle program and the State Quarter program has helped educate and excite collectors, as well as, enhanced the business for dealers in helping them become more successful. All three of these programs have helped to motivate the investor and collector to consider other areas more interesting and compelling as a store of wealth.
I have written about and held discussions regarding the phenomena of the “Baby Boomer Bubble” which is just beginning to pass through our economy. Not only is this generation the largest in American history, but it is without question the wealthiest in human history.
This huge generation, with its mass amount of wealth, also happens to be the largest generation while in its youth became avid coin collectors. Does anyone remember the little blue fold out books we all used for holding our coins? Of course you do, if you are reading this letter I am willing to bet you had a few of your own. I remember filling my first book of Lincoln Wheat Cents. I was on cloud nine. In fact, I think was around nine years old when I finished. And then completing my Buffalo Nickel book wow!
There is no question that what we did as youngsters, we have nostalgic tendencies to want to return to in our later years. The manifestation of this fact is just beginning to have very positive effects on the rare coin market and I am not alone among the industry’s insiders who are intensely aware of it.
Don’t miss out on what could turn out to be the longest sustained growth the coin market has ever experienced. Information from qualified sources is essential. Make this the year to get started with your own private rare coin portfolio or review and expand an existing portfolio. The timing may be the best in history.
I know the following may be rather novice sounding for you veteran rare coin collectors/investors, but please consider that we have had a huge number of entry level buyers enter the market over the past 12 months.
10 compelling reasons to begin or add to your collection
In October 1997, the John J. Pittman collection was auctioned and demonstrated that the average appreciation on select U.S. rare coins for the previous 20 years was over 70% per year on the original investment. While gold appreciated less than 100% from 1982 to 1989, prices of select rare coins appreciated 600% during the same period. Since rare coin prices are affected by collector demand, consumer affluence and inflation expectations, rare coin prices can rise during periods of low-inflationary prosperity, even while gold is falling. For example, there was a period between 1988-89 that was bearish when it came to gold, but that same time period was bullish for rare coins.
If that isn’t enough to convince you, consider these ten compelling reasons to begin or add to your collection immediately.
- Historical and artistic significance. Rare coins are a physical link to significant points in time. They are also quite literally works of art. When one considers this combination, plus the practical and economic attributes, it’s easy to see why rare coin collecting and investing is enjoying skyrocketing popularity. Remember the “Baby Boomers”.
- Excellent way to diversify. While John J. Pittman, touted as one of the most successful rare coin buyers of all time, put all his resources into top quality rare coins and made a fortune, most financial advisors recommend that the average investor devote 10% to 20% of their portfolio to hard assets such as rare coins.
- Value based on more than precious metal content. The value of most U.S. rare coins depends upon quality (condition), rarity and most importantly DEMAND, not the innate value of their precious metal content.
- Certified quality and greater investment protection. Because the Professional Coin Grading Service (PCGS) and Numismatic Guarantee Corporation (NGC) have been grading, certifying and protectively packaging select U.S. rare coins since 1986, rare coins can offer certified quality and greater protection. Professionally graded and certified coins command higher prices than raw, uncertified coins. Unless you consider yourself an expert, DO NOT BUY UNCERTIFIED COINS!
- Liquidity. Third-party grading and certification described above and expanding electronic buy-and-sell networks permit rare coins to be sold easily at fair market values. Thousands of coins are traded daily among the nearly 20 million buyers in the United States alone.
- Complete privacy and easily transported. Rare coins are one of the few remaining investments that can be accumulated with complete privacy and moved easily from place to place.
- Protection from confiscation. An exemption was included for “coins with a recognized special value to collectors of rare and unusual coins” during the government’s past prohibition of gold ownership, later to be expanded to include “gold coins made prior to April 5, 1933.” The Eminent Domain Clause of the United States Constitution requires that private property can’t be taken for public use without just compensation. It seems highly unlikely that our government would ever confiscate coins minted prior to 1933, since it would most likely lead to disputes and an enormous administrative burden required to valuate all the privately owned coins.
- Tax benefits. Coins can only be taxed when profits are actually realized, and there is no taxation on undistributed profits. Unlike most other investments, there is no federal income tax liability on like-kind exchanges or “trading up”.
- Affordability. Despite consistent price gains over the years, quality rare coins are still affordable for the private investor.
- Easy to get started. A savvy collector or investor out to build a world-class collection strives to have every advantage and knows that it takes a dealer with vast resources, broad-based experience and an unending commitment to providing the utmost in client services. It takes an expert like Monaco Financial. Getting started is as simple as calling a Monaco coin specialist at 888-900-9948.
- Expertise, experience and financial muscle. Monaco Financial offers a unique blend of expertise, experience and financial muscle few rare coin companies can match.
Because Monaco has its corporate finger on the pulse of the rare coin market, its clients have access to the latest trends, developments and opportunities often unknown or simply unavailable to less-established dealers. Monaco professionals can help you guard against the pitfalls a less-experienced dealer simply may not have experienced or of which they have no knowledge. And, because Monaco is in constant contact with dealers across the country and around the world, our staff can often secure the highest possible prices for your rare coins, should you want to sell or trade them.
Membership in numerous trade organizations such as the American Numismatic Association, Professional Coin Grading Service, Numismatic Guarantee Corporation of America, Certified Coin Exchange and Central States Numismatic Society enables Monaco Financial access to the best, highest-quality rare coins available at the best prices.
I invite you to call one of Monaco’s coin specialists toll-free today at 888-900-9948 to initiate or enhance the rare coin portion of your portfolio.