What are today’s best values in numismatics in terms of future appreciation prospects? On the other side, which numismatic items seem to be overvalued now and, therefore, have the poorest potential future gains, or even the possibility of price declines? These are questions that just about every collector has, but for which there are not sure-fire answers.
I think just about every coin dealer would like to be able to tell prospective buyers that the coins and paper money they offer are solid value in today’s market and are more likely than not to represent good value in the future. Long industry experience can provide some guidance as well as industry knowledge of supply and demand. Such information, however, is not really something that can be put down in objective form for the general public.
Nine years ago, I came up with one objective analysis that I applied to several series of U.S. coins. The components of the analyses I prepared consisted of comparing my company’s retail selling prices at the last major peak in the U.S. rare coin market in early June 1989, current Professional Coin Grading Service and Numismatic Guaranty Corporation population data for coins of a designated grade and higher, current catalog values for these coins, and the relative rarity of the coins in a series compared to the most common date and mintmark in high grade of the series.
The results of these mathematical calculations established what I refer to as my Undervaluation Index™. It helps identify which coins in a series or which types in a type set have higher and lower future appreciation prospects. I initially prepared analyses for the following series: Standing Liberty quarters, Walking Liberty half dollars, Morgan dollars, Peace dollars, $2.50 Indians, $5 Indians, $10 Indians, $20 Saint-Gaudens, and the Liberty and Indian gold type set. Grades evaluated, depending on the series, ranged from Mint State-62 up through Mint State-66.
When I completed my analyses, I segregated the results on the Undervaluation Index™ into four categories: Highest Recommendation for future appreciation, High Recommendation, Recommended and Not Recommended.
There are a number of limitations of such an analysis. For instance, collector demand tends to increase when popular new research catalogs come out. Such shifts in demand do affect prices even though they do not directly impact most of the components in my analyses. Also, changing metals prices, especially for gold coins, can distort the results. Next, such analyses are only practical where there is reference pricing for the specific grades. As a consequence, such analyses may be less useful for coins of lower grades than those in my analyses.
You also have the problem that population figures from one date and mintmark to the next are not necessarily comparable. As an example of that, I have seen individual transactions for as many as 126 1,000-coin bags of Mint State 1881-S Morgan dollars. Such coins are relatively so common in MS-63 quality that a smaller percentage of that date would be sent to the grading services than would be MS-63 specimens of the 1895-S Morgan. What this means is that relying strictly on population data with this methodology will tend to come out with scarcer dates and mintmark coins being under-ranked compared to the more common issues.
Another problem is that as grading services alter their application of grading standards over the years (as perceived by many collectors and dealers), the population data over the entire history of these certification services is somewhat less accurate.
Finally, these analyses only compared results of coins in the same series in the exact same grade. The analyses did not provide guidance on whether the same coin in, for instance, MS-63, MS-64, or MS-65 might be the best value even if all three merited the Highest Recommendation. It also would not tell you whether the Morgan dollars or the $5 Indians, as another example that merited the Highest Recommendation, would be more likely to outperform coins of the other series.
One other factor to keep in mind is that, as prices and populations change, the Undervaluation Index™ for each grade of each coin will go up or down. Obviously, coins that appreciate in price will usually see lower (but not always) future gains.
Given these limitations, however, how have my analyses fared? In early 2010, I updated my analyses of the Morgan and Peace dollar series, the $20 Saint-Gaudens series and the Liberty and Indian gold type set. The results were not consistent across the board. There were winners and losers in each of my four categories for appreciation potential. For the Morgan and Peace dollars, when you looked at all of the coins that merited the Highest Recommendation, as a group these outperformed those with the High Recommendation. The coins that merited the High Recommendation, as a group, had better results than the coins that were simply Recommended. The coins that were included in the Not Recommended group collectively turned in the worst results.
The results for the $20 Saint-Gaudens and the Liberty and Indian gold type sets were distorted because of the much higher gold prices. Gold was around $360-$365 in early June 1989. It was well over $1,000 in early 2010. The selling prices and catalog values of such coins relative to the intrinsic metal value tended to fall, even though many prices rose. Still, the analyses did tend to identify which dates and mintmarks would, on average, outperform others of the same grade in the series or the set – even if to a lesser degree than with the dollar series.
On balance, this concept seemed to have performed well for the dollars from 2007 to 2010.
I recently did an update of the Morgan dollar series and the Liberty and Indian gold type set. Once again, the Morgan dollar series tended to have the best results from 2010 to 2016, as a group, for the coins that were classified as Highest Recommendation, with High Recommendation being the next best category, and the Not Recommended coming in worst (though several individual extreme rarities in this group had significant appreciation). The Liberty and Indian gold type set were only marginally better than picking coins at random.
The results of these two latest analyses have reinforced my confidence in these analyses where precious metals prices are not major components of the prices of coins analyzed. That means that it works better for non-gold coins. Details of my recent analyses are contained in the June 1 issue of “Liberty’s Outlook,” the monthly newsletter I write for Liberty Coin Service. Printed copies are available at no charge in our store. By June 7 it should be posted online at www.libertycoinservice.com by clicking on “Current Issue” under the Newsletter heading.
If any readers have suggestions on developing a better objective analysis of relative numismatic values, I would be pleased to hear your ideas.
Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He is the owner emeritus and communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com). His radio commentaries titled “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).