This article was originally printed in the latest issue of Numismatic News.
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Even as Congress and the President settle on tax cuts that are designed to rebound to the national economic benefit, some simultaneous surveys performed nationally with data bases that are well-known suggest that the recession is still having a serious impact on prices of rare coins, regardless of their condition.
On Dec. 18, 2010, President Barack Obama inked his name to a tax cut that will provide relief to many Americans and simultaneously offer unemployment insurance payments for up to 99 weeks in what is the worst period of joblessness since 1938. There will be a reduction in Social Security payments and other taxes that will have a net effect of 2 percent on most paychecks.
In the midst of all this, Professor Michael Duffy of the University of Iowa Extension System announced Dec. 15, 2010, the annual price that land is going for these days in Iowa. The number is a point of comparison in many economic analyses and was also a key number for many years in the Salomon Brothers examination of the rare coin industry.
For the record, farmland in Iowa jumped over $690 an acre (on average) in 2010 to $3,500 an acre, a new record price. In 2001, it was valued at $1,926 an acre.
For the purist who wants to know the rate of return from 2001 to 2010 it is an 11.3 percent compounded rate of return – not bad for something that is not transient and easily transported.
I guessed originally a 5 percent increase in farmland values over last year. Duffy set me straight.
“The bankers estimated that our values went up 7 percent in just the first quarter,” Duffy said. “I would think that we are probably about 10 percent up from the November estimate.That would mean about $3,500. It could even be higher.
“Things have slowed down a bit but there is still a lot of strength in the market.”
Three-quarters of a century ago, in 1935, the correlated price of Iowa land was $71 an acre. The compounded rate over 75 years is an impressive (but respectable) 5.8 percent compounded daily over the period of time.
How does that compare with, say, gold?
In 1935, gold was $35 an ounce (having been recently raised by devaluing the dollar from the prior rate of $20.67 an ounce. On Dec. 15, 2010, gold’s price was $1,376 per troy ounce or about 40 times the price during FDR’s administration. The rate of return is 5.01 percent compounded daily. Also impressive for something that is so portable.
And what about that other precious metal that is more common and not serious, much of the time, in its price as an investment vehicle – silver?
Well, in 1935, silver was 58 cents an ounce. On Dec. 15, 2010, it was $29.16, or about 50 times the price during the Roosevelt administration.
If you use 2002 as a base line ($5 an ounce silver), today’s $29.16 silver means an annual rate of return of 28 percent. The precious metal rate of return isn’t bad at all.
There’s another precious metal to check out in all this: platinum, a much newer number on the periodic table that has a group of metals that follow it in every respect, including price. Although Congress once tried to hammer the Soviet Union over gold and platinum issues, today it is strictly mercenary.
Platinum today has a price of $1,693 an ounce and a market peak of about $2,000 during calendar year 2008.
My charting that accompanies figures the Dow for what it was on Dec. 15, 2010, at 13,649.
I retroactively changed farmland to cover only that in Iowa because the data seems more current, is reliable, and accessible. U.S. government statistics are sporadic and finalized numbers are still 2 to 3 years old.
For many years, I have both published and analyzed the Salomon Brothers coin survey, which made a public appearance in 1978 in the Federal Reserve Bank of Boston quarterly journal.
Salomon Brothers measured tangible assets such as coins, later stamps, old master paintings, foreign exchange, farmland, precious metals (gold and silver, but not platinum) and saw where it all went.
Just whose laundry turned out to be dirty was the surprise each year, and how the coin market did compared to all of them was what attracted the numismatic industry to their method of measurement, and result.
The list was disclosed in the Neil S. Berman and Hans M.F. Schulman book on coin investing that the Coin & Currency Institute (Art Friedberg) published in 1986.
Stack’s, of course, did the pricing on this. They always claimed that the choices were generic so that, for example, an 1873 proof 2-cent piece could be a proof tupper of another date.
A total of 20 different individual coin types were included in the Salomon Brothers examination, none of them gold, most of them subsidiary coinage (dimes, quarters and half dollars), some of them minor coinage (half cent through 3-cent nickel), and a couple of silver dollars and commemoratives.
Each is broadly representative of a class of coins, or a type that is widely collected and hence easy to value, even if the individual coin date and condition is not easily replicated. For example, an 1876 20-cent piece in uncirculated condition is approximately the same as a an 1875 20 cent piece and even an 1875-S.
A 1795 Draped Bust dollar is similar to the 1796 or even the 1797 or 1798 silver dollar.
Mintages and scarcity vary, but overall trends can be followed with reasonable adjustments.
Tracking the coins on a computerized spreadsheet has been done by me for many years. Besides the coins, statistics include a total amount (aggregate) for the coin portfolio and its annual average plus rate of change from year to year; the average price of gold and silver; the CPI and its rate of change; gold’s rate of change; the Dow Jones Industrial average and its rate of change and the price of platinum.
All of them go back to 1938 (except or Platinum which I initially tracked back to 1978). I recently found good data (government mining sources) that allowed me to value it for charting purposes back to the late 1930s.
I took the time to count, and what all of this means that the current spread sheet has over 3,700 data entry points that analyze a variety of markets.
There are no secrets about this; when you chart gold, there’s not a lot of movement between 1934 and 1968 – a $35 an ounce rate was enforced by the government’s purchase and sale program and by a prohibition against domestic private gold ownership. The charts are more interesting when looked at over the last 25 or so years when gold or platinum are involved.
Regardless, my index points utilize the same coins that Salomon Brothers did. My pricing source is Dennis Baker’s NumisMedia, which has supplied me with working data for many years.
Here’s an actual example of pricing for a particular coin, the 1794 half cent in XF-40 condition, which shows that rare coins go up, down and sideways – that is, sometimes they don’t change from year to year at all.
Even with no change, the overall picture over a 68-year period shows an average annual return of 10.65 percent since 1935 – not bad for a circulated coin with a mintage of over 81,000 pieces.