Still magic in 2014?

What will the hobby be like five years from now when more and more coins are graded MS-70?

One of the things that I learned at the American Numismatic Association convention is that the professional third-party grading services are staying afloat financially because of the their willingness to grade the modern coin series that then get sold on television or through direct marketing efforts.

The holy grail for the marketers is to get coins that they can turn around and market to people as the near magical MS-70 or Proof-70.

This effect occurs both at the top end of the market and the bottom. Part of the motivation for the run on Ultra High Relief Saint-Gaudens gold $20 gold pieces was the chance to get a few that will make Proof-70 and thereby command in the current marketplace premiums of hundreds of dollars over the $1,289 issue price that prevailed at the time.

This is what gives the dealers the profit margin to essentially pay people to stand in line for the coins at the show.

But this isn’t just a high-end phenomenon. It happens with issues like Presidential dollars. Each new design generates yet more submissions to the grading services. It is a wonderful profit generator for all parties to it – except perhaps the end buyer.

The end buyer in 2014 or 2015 will suddenly come face to face with the question: “What’s an MS-70 John Tyler Presidential dollar worth?”

If I want to be funny, I would say it will be worth more than an MS-65 John Tyler. But what exactly is that value?

Coins are valued according to supply and demand. If demand exceeds supply, prices rise. If supply exceeds demand, prices either fall or stabilize. I can write stabilize because in a weak market, coins can simply stop trading and guide book prices can simply sit there for years until the next renewal of interest occurs.

What will thousands or even tens of thousands of MS-70 John Tyler dollars be worth in 2014? I fear much less than the buyers paid for them. Gold coins at least have a floor put under their prices by the gold bullion market. Presidential golden dollars will not have that benefit.

The lesson: If you like collecting Presidential dollars in the finest possible condition, great. Go for it. But if you are hypnotized by the sales pitch of buying the finest grade and paying a premium price that can never be recovered in the secondary market, you had better think again.