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| " It's the coin " and the holder by Phil Kaufman For many years responsible numismatic dealers have preached "Buy the book before you buy the coin." This obviously makes good sense. You should have some knowledge of what you are doing or, at the very least, faith (hopefully based on due diligence) in the people with whom you deal. Since the advent of third party independent grading services in the mid 1980s, we've heard another maxim, "Buy the coin-not the holder." Though most likely "coined" by opponents of independent grading, this phrase makes sense even to those who accept slabbing as a positive development in the evolution of coin collecting and investing. The May 29, 1999 auction of the SS Brother Jonathon treasure coins was a perfect laboratory in which to test whether buyers (at least buyers who attend major auctions) base their bids solely on grade, or study the individual coins. At this auction, conducted in Los Angeles by Bowers and Merena, 501 of the approximately 1000 coins were mint state 1865-S US $20 Gold pieces (Double Eagles). The Double Eagles were graded MS60 through MS66 by PCGS. If the 142 MS64s, for example, were bought "by the holder," each coin would have gone for the same, or close to the same, price. After all, the grade, the grading service, the day, the place, the potential bidders, and even the provenance of the coins were identical. The individual coins were the only variable. Some MS64s are more PQ than others The two coins graded MS66 were gorgeous, yet most who viewed them felt that one was of a higher quality than the other. The bidding reflected this perceived difference. The "premium quality," or "PQ," coin brought $63,000; the other went for $32,000 (hammer prices, to which a 15% buyer's fee was added). The MS65 Double Eagles were also a sight to behold. However, when all 14 coins were laid out next to each other, quality differences were apparent. I felt that the best specimens approached the quality of one of the MS66s. These 14 coins were hammered down for as low as $15M to as high as $27M. Why would a dealer, collector, or investor bid $22M, $23M, or $27M for an MS65 coin but pass while other MS65s went for $16M, $17M or $18M? The truth is every coin grade encompasses a range of quality, and, as this auction made clear, there are those willing to pay extra-sometimes over 100% extra-to own a coin at the upper end of the grade range. Bowers and Merena next auctioned 92 individual lots of MS64 $20 1865-S Gold Pieces. The lowest hammer price was $6500. This amount approximated the highest price realized for the MS63s auctioned later. The highest hammer prices for an MS64 specimen were $14M (for each of 2 coins), $16M, and $17M. These prices approximated the prices realized on the lower end of the MS65s auctioned earlier. One half of the MS64s hammered for between $8M and $9M; however, 22 coins went for $11M or more. Once again bidders were willing to step up and pay a premium for those "PQ" coins. Grading is a subjective art Over the past decade, collectors and investors have heatedly discussed the pros and cons of third party grading services such as NGC, PCGS, ANACS, SEGS, and IGC. While many don't like it, the trend is ever-accelerating acceptance of third party grading-especially of the two majors, NGC and PCGS. As more and more "old time" collections are sold, we see them being slabbed prior to sale or, if sold raw, many of the coins are immediately sent to the grading services by their proud new owners. As a coin investor-collector for over 40 years, I feel comfortable buying either raw or slabbed coins. I send new raw purchases to NGC or PCGS for authentication, grading, and encapsulation (slabbing). Most of the time, the coins are graded exactly as I and my advisors had graded them. Sometimes I am pleasantly surprised by a 1 point higher grade and occasionally disappointed by a 1 point lower grade. Grading coins is more like judging figure skating than timing speed skating. Although it has rules, it's a subjective art, not a science. Range within grade brings opportunity It is my belief, born out by the outcome of the Brother Jonathan auction, that as the value of a potential purchase increases, so does the importance of "Buy the coin." However, I would change the phrase to "Buy the coin as well as the holder." PCGS has to draw a line between grades but how much difference can there be between the best of the 188 MS63's and the lowest quality of the 142 MS64's? Coins are not just a number grade. You, the buyer, must decide if you want to own coins that just make the grade or true premium quality coins. In today's market far too much emphasis is put on grade number alone. This can work to the advantage of investor-collectors. You, through your dealer's efforts and knowledge, can buy PQ coins for not much more than low end coins. I purchased one of the MS64s for $11M at the auction. I don't think this coin is MS65 quality but I am sure it was one of the highest quality coins offered for the grade. Phil Kaufman is a nationally known investor-collector who specializes in proof Seated Liberty coinage. His virtually complete collection of about 210 proof cons minted from 1837-1891 is featured on the web at ngccoin.com. Go BGC's Gallery section, click on Kaufman, and you will be in the "Kaufman Room". Click on the coins for enlarged views. |
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