Coins Stay Strong as Stock Market Routed By
David L. Ganz, Numismatic News
October 16, 2008
The Dow Jones Industrial Average October plummet
and the worldwide consequences of Lehman Brothers filing for
bankruptcy and its stock going from a 52-week high of more
than $50 to a low of about eight cents a share, has brought
unparalleled activity in the numismatic market. It has also
in the face of wild price swings made rare coins appear to
be the pillar of stability.
It also has brought out consultants and commentators involved
heavily in the rare coin market, and given the impression
that gold remains an object much admired as well as feared
- the ultimate hedge against inflation and runaway tangible
assets performance, and a solid, not disjointed market.
In a record week of market trading Oct. 6-10, American corporations
have lost equity of over $11 trillion. The amount is estimated
by CBS radio and seems reasonably accurate. At the same time,
gold has marched forward and there is solid demand for bullion
as well as numismatic products.
As the accompanying charts show, the Dow has lost a lot of
ground. Gold acted protectively and has been a steady riser;
silver and platinum have declined from 2008 heights.
Tangible assets in general did well in the past six months.
Farm land, for example, held its own according to Iowa State
University professor Michael Duffy, who maintains a farmland
Web site that has captured the spirit of the challenge.
"[T]he latest surveys, as of September,
still showed a 17 percent year-to-year increase in value [for
farm land]. As for now, I think it has stabilized. Whether
or not it has dropped I can't say for sure," Duffy declared
in an Oct. 7 e-mail.
Duffy's opinion is based on old, dirty data; his response
today, "We are starting our survey the 1st of Nov. My
gut feeling is that it has stabilized but not started dropping.
Grain prices are off and input costs are through the roof."
Dennis Baker's NumisMedia constantly monitors price, and
supplied the citations and other problems in a less than ideal
situation. I asked Baker if he could update some gold coins
for a "daily" response, but his answer is that the
market is not homogeneous, prices are not only not uniform,
but it is impossible to give back the reliable data that the
50+ breakfast table generation usually sees in the financial
pages of daily newspapers because of a clear problem in accumulating
Excerpts from a long e-mail with Baker: "All [price
guide] prices are recycled every three weeks. However, we
update some series intermittently between this period. You
get the wholesale booklets from us ... Take a look at the
specific prices from the HD booklets over the last several
weeks and see how they look."
Baker's overall comment: "Initially, $20s went down
and there were lots of supplies with no buyers. Then when
all hell broke loose, this is when premiums started to increase
I had an idea of tracking $20 gold pieces against
the market. Baker suggested it was impractical, given the
"free market" already established: "I cannot
give you prices for $20s on a daily basis. We don't track
them daily. And I don't have the time to try and develop something
for you," Baker said. Maybe next time.
Baker's views may be synthesized with these concluding comments:
"Money is the strength of the coin business and there
has never been a more opportunistic time to purchase rare
coins." He's right about that.
His final word: "Whether buyers are acquiring numismatic
coins or bullion-related modern coins, dealers are noticing
a tremendous increase in business currently taking place.
Buyers want physical coins in their hands because they do
not trust paper stock certificates."
Baker was able to give me pricing for what represented the
list found originally in a Salomon Brothers survey, back when
it was a investment company embarrassment. The Oct. 9 pricing
makes this column more than an estimate - it jumps up to a
more effective research tool.
The value of the Salomon charts derives from
the fact that old Salomon Brothers information sheets knew
nothing of these expansion plans, yet is flexible enough to
be usable in 2008, even if the data harvesting began in earnest
The contents of the portfolio was never revealed by Salomon
but was revealed in a book by Hans M.F. Schulman and Neil
S. Berman in 1986. Coin & Currency Institute published
a new analysis by Berman and Silvano DiGenova in 2007.
Baker's October 2008 price changes show that this year, up
$13,380 for year to date and about $2,500 for the past quarter.
Salomon created an investment analysis model using a small
number of just 20 silver and copper coins, some Proof-63 but
mostly choice uncirculated specimens. (No gold was included
because investment was too new - not until December 31, 1974,
was private gold ownership permitted in the U.S. after a shut-down
of more than 40 years.
Surprising results when 20 coins were factored into a portfolio:
it outpaced the equities market. Using the same 1976 starting
point, it would have cost about $33,000 to assemble a holding
of each of the coins. The following year, 1977, showed a 5.61
percent gain. Not rocket gains, but when measured against
a flat market, impressive. The following year, a 4.17 percent
gain and in 1979, the portfolio acquisition cost jumped to
$43,000 and a gain of more than 19 percent.
In the short span of three years, an average
exceeding 8 percent annually was achieved.
The remarkable feat of holding its own as the Dow stumbles
and other stocks tumble shows how many are viewing the Dow.
The reasons why tangible assets such as coins are more than
holding their own is covered in the next report.