What Accurately Reflects Numismatic Appreciation?
From market indices and price guides to auction results, measuring numismatic appreciation is complicated, and experienced collectors know that no single source tells the whole story.
How do you measure the overall changes in numismatic prices? There is no one-size-fits-all solution to this question.
In 1978, the Wall Street investment bankers, the Salomon Brothers, established their proprietary Coin Index. The purpose was to evaluate the performance of numismatic assets versus traditional stocks and bond investments. During periods of high inflation in the late 1970s into the 1980s, the Salomon Brothers Coin Index typically outperformed financial assets.
On the basis of these favorable comparisons, some dealers used the results to promote “investment” in numismatic coins and currency to the general public.
Salomon Brothers kept the components of this Index secret to prevent market manipulation of the specific issues. It was eventually disclosed that their Index consisted of just twenty coins, each of which was a high-value rarity. The component coins did not reflect the kinds of coins being promoted by some dealers as investments.
In the late 1980s, Kidder Peabody and Merrill Lynch established rare coin investment funds in which investors could purchase shares. These funds were supported by the creation of third-party grading services such as the Professional Coin Grading Service (PCGS) in 1986 and the Numismatic Guaranty Corporation (NGC) in 1987. There was enough momentum from the early influx of investor funds that rising prices encouraged even more investor cash flowing into these funds.
Eventually, incoming investor funds tailed off, which generally halted appreciation in June 1989. The Federal Trade Commission started to raise concerns about unscrupulous dealers using the Salomon Brothers Coin Index to market common or overgraded coins. Consequently, Salomon Brothers discontinued its Index around 1990.
Long before the creation of the Salomon Brothers Coin Index, there had been a variety of coin catalogs such as the Redbook (A Guidebook of United States Coins) and the Bluebook (A Handbook of United States Coins), which had the disadvantage of only coming out annually with prices that might be several months old at the time of publication. There was also The Greysheet (Coin Dealer Newsletter) and later The Bluesheet (Certified Coin Dealer Newsletter) to track dealer-to-dealer wholesale pricing.
There were also coin dealer trading networks that evolved with the appearance of the internet to include the Certified Coin Exchange, Coinnet, and CDN Exchange. PCGS and NGC also now offer their own online price guides. The Greysheet also provides its own Collector’s Price Guide (CPG).
You can find a variety of numismatic indices, which have differing components and methodologies used for their calculation. Some numismatic auction companies now make available records of past auction sales.
Still, even with the advent of third-party grading services, analyzing numismatic appreciation remains as much an art as a science, as you can confirm with a quick review of auction results. Different coins and currencies of an identical technical grade may trade at different prices because of the eye appeal factor, which judgment can vary from one collector to the next.
Experienced numismatists understand that any price guide is only that—a guide. In addition, the actual value to you depends on your judgment of the individual pieces, how easy or hard it would be to find another specimen of like or similar condition, and your finances. Don’t consider any price guide you may reference as necessarily being right on target.
The previous numismatic trivia question.
Last time I asked—Why did the U.S. Mint go from issuing 34 different designs and mintmarks of commemorative coins in 1936 to none in 1940? Before 1934, most U.S. commemorative coins were issued for what could be considered national themes. Beginning mostly in 1934, the number of commemorative issues increased, such as the Maryland Tercentenary, Texas Independence Centennial, and the Daniel Boone Bicentennial, which carried more of a local or regional significance. Promoters of events realized that commemorative coin issues could be an additional source of funding. Five new issues followed in 1935, along with continuing issues of the Texas and Boone series. In 1936, a total of 34 different designs and mintmarks of commemoratives were issued.
In 1935 and again in 1937, President Franklin Roosevelt wrote letters to Treasury officials complaining that the plethora of commemorative issues was not a proper function of the U.S. Mint. Public Law #278 enacted on Aug. 5, 1939, halted the minting and issuance of all approved but unissued coin series. This ended the issues of any commemorative coins until the debut of the Booker T. Washington Half Dollar series in 1946, after the end of World War II.
This column’s new trivia question
Here is this week’s question. What was the first U.S. coin to read “U.S.A.? Come back next week for the answer.
Patrick A. Heller was honored as a 2019 FUN Numismatic Ambassador. He is also the recipient of the American Numismatic Association 2018 Glenn Smedley Memorial Service Award, the 2017 Exemplary Service Award, the 2012 Harry Forman National Dealer of the Year Award, and the 2008 Presidential Award. Over the years, he has also been honored by the Numismatic Literary Guild, Professional Numismatists Guild, National Coin & Bullion Association, and the Michigan State Numismatic Society. He is the communications officer of Liberty Coin Service in Lansing, Michigan, and writes “Liberty’s Outlook,” a quarterly newsletter on rare coins and precious metals subjects. He now volunteers with the National Coin & Bullion Association as its Industry Issues Advisor. Past newsletter issues can be viewed at www.libertycoinservice.com. Some of his radio commentaries, "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 archives posted at www.1320wils.com).
Catch up on more from Patrick Heller below.
