Know your motive before purchase

This article was originally printed in Numismatic News.
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Are you a collector of American Eagle bullion coins or are you an investor? It might seem like a foolish question but knowing which you are will save you from losing a lot of money.

If you mix the motives, the outcome might not be pretty.

I am reminded of this as I saw an advertisement in the Wall Street Journal offering MS-70 examples of the 2011 silver Early Release American Eagle for $99 each.

I expect that an example of this famous A.A. Weinman obverse design slabbed as MS-70 is quite pretty. The design always pops up at No. 2 on the all-time popularity chart right behind the Saint-Gaudens $20 Liberty portrait.

Getting one example will be a jewel in any collector’s set. Get one of the proofs later in the year and the collector’s game is complete.

However, I worry that it does not stop there. The place where the ad appears is designed to catch the eye of investor readers. They might decide that where one coin might be good, a whole bunch is better.

But that’s just the problem. If you can buy a whole bunch, the coin is the opposite of rare. It might not be exactly common, either, but this kind of logic spurred the price of BU 1950-D nickels to just shy of a $1,000 a roll, or $25 a coin in 1964 – almost 50 years ago.

That the 1950-D was the key to the Jefferson nickel as measured by mintage could not be challenged, but the fact it could be accumulated in BU roll and bag quantities should have tipped off the buyers that this was not a long-term place to put your money.

If it is the goal of an investor to maximize the returns on whatever medium he decides to invest in, then a buyer of MS-70 coins as a play on bullion is squandering approximately two-thirds of his investible funds, as simply buying them in tubes will get a collector almost three coins for $99.

Aren’t three coins better than one? Certainly if you are betting on a rise in the price of silver it is.

While it is fair to covet the highest graded coins of any series, what kind of price will an MS-70 2011 silver American Eagle bring in 10, or 20, or 50 years?

I decided to look in the NGC census to see what numbers of MS-70 coins there were for the 2010 coin.

For the Early Release 2010 coins, NGC graded 711,033 pieces. Of that number, 44,177 were graded MS-70 and 666,814 are MS-69. That works out to 6.2 percent making the grade of MS-70. That might seem small, but will there be 44,177 collector buyers in the future for the MS-70 version? I have my doubts.

I expect that the number so certified in 2011 will be higher than the 2010 total.

It probably would be far better to get the Early Release MS-70 coins of 2009 where there were only 8,815, but then again, what’s your motive?

If you are seeking a play on the rising value of silver, unless they are a scuffed up mess, I would rather have three 2011 coins of any MS grade for my $99.