A Pretty Penny
The rare coin market is hot, thanks to the
Internet and soaring gold prices Courtesy of: Nick Timiraos,
The Wall Street Journal
- Six years ago, New York investment adviser Robert Beckwitt
was looking for an alternative to the increasingly expensive
equity market. While other investors were busy scooping up real
estate, Mr. Beckwitt returned to an old love -- rare coins.
One of his first big purchases: a red 1909 Lincoln penny,
part of the first issue of U.S. coins to include a portrait.
Also featured on this particular coin was a feature that the
mint removed from subsequent issues: the initials of the portrait's
Mr. Beckwitt paid a New Jersey coin dealer $10,000 for his
pretty penny five years ago. His investment today has grown
tenfold, thanks to a hot rare-coin market fueled by hungry
collectors, greater transparency in the market on the Web,
and the surging price of precious metals, especially gold,
which earlier this year hit a 26-year high.
Indeed, the 48-year-old Mr. Beckwitt reflects growing ranks
of wealthy baby boomers whose desire for alternative assets
has led them to invest in a hobby they discovered as a child.
Mr. Beckwitt, who started collecting coins at the age of 8,
sorting for old pennies in bowls of spare change, says he
owes his interest in coin collecting to his "love for
the history and the idea of finding something rare."
Among collectors and investors at large, rising gold price
and publicity generated by record-breaking coin sales have
piqued interest as well. In a 2002 auction, a 1933 double-eagle
gold coin sold for $7.6 million -- a price widely acknowledged
by people familiar with the market as the highest ever paid
for a coin in a public auction. The 1933 double-eagle coins
were never issued, and nearly all of them were melted down
during the Great Depression, after President Roosevelt discontinued
the gold standard.
Perhaps the biggest boost to coin investing, though, has
come from the market's greater transparency -- a state owed
largely to the rise of Web sites that display price histories
and sell rare coins inspected and rated by coin-grading services.
The two major services, the Professional Coin Grading Service
of Newport Beach, Calif., a unit of Collectors Universe Inc.,
also of Newport Beach, and Numismatic Guaranty Corp. of Sarasota,
Fla., were established in the 1980s to reduce counterfeit
coins and make the trading of coins more liquid by establishing
uniform standards for grading. Collectors bring their coins
to the services, which rate them on a scale representing poor
to mint conditions, then seal them in see-through cases that
state their grade.
What the collectors do with their coins after that is up
to them. But many post them on various Web sites, some run
by the grading services themselves, others run by hobbyist
associations and coin dealers, where collectors and investors
can admire, evaluate, buy and sell the coins online.
"There's more interest in coins now than there has ever
been, and it's across the board," says Jeff Garrett,
president of the Professional Numismatists Guild, Fallbrook,
Calif., which is composed of various coin dealers, sets standards
for coin trading and works as a kind of peer-review organization.
Heritage Auction Galleries of Dallas, the largest coin-auction
house in the country based on revenue, expects its sales to
double to $575 million this year from $225 million five years
ago. And nearly one-third of its sales this year will come
from the Internet, President Greg Rohan says.
Seats of Liberty
Online registries of graded coins -- which aren't always for
sale -- tap into collectors' competitive sides and help drive
prices higher for coins that are for sale. There are online
contests, for example, in which grading services recognize,
say, the most-complete collections of certain kinds of coins.
The finest collection of late-19th-century Seated Liberty
and Trade Dollars on the registry maintained by Professional
Coin Grading Service, for instance, belongs to Bruce Morelan,
owner of an electrical contracting business in Spokane, Wash.
Seated Liberty dollars depict Lady Liberty sitting; Trade
Dollars were used in trade.
The 45-year-old Mr. Morelan says that posting
his coins in the PCGS registry, at www.pcgs.com, is like pushing
his pennies into their cardboard display cases when he was
a kid. "It gives you that same great feeling of accomplishment,"
Mr. Morelan is perhaps better known among rare-coin collectors
as the purchaser last year of a 1913 Liberty nickel, of which
only five are known to exist. The Philadelphia mint is believed
to have coined only five before the design changed from the
Liberty Head to the Indian Head, used from 1913 until 1938.
The price to Mr. Morelan: $4.15 million, an amount considered
by market experts to be the second-highest ever paid for a
A word to the wise for newcomers: Rare coins can hold dangers
for novice collectors and investors. One can run into counterfeit
coins, as well as disreputable dealers pushing low-quality
coins that have little resale value, warns Scott Travers,
a collector and president of Scott Travers Rare Coin Galleries
LLC, New York.
Mr. Travers says collectors can protect themselves by buying
from dealers who are members of the Professional Numismatists
Guild or the American Numismatic Association and by buying
coins that have been certified by one of the two professional
grading services. Experts also warn that grading and pricing
are separate issues. Just because a coin has been certified
doesn't guarantee the seller is asking a fair price.
The market presents other risks, as well, for those who don't
do their homework. According to the CU3000 Rare Coin Index,
which tracks the 3,000 most actively traded coins, prices
are up 1.3% year to date to Dec. 1 and about 11% for the past
three years. But while many coins have produced strong returns,
experts warn that, like stocks -- not every coin is a buy.
Gold price, too, have fallen since reaching a 26-year
high in May of $719.80 an ounce. But many analysts believe
those prices have room to rise, based on a weakening U.S.
dollar and an uncertain global political outlook; gold is
regarded as a safe haven in times of economic and political
uncertainty. Goldman Sachs Group Inc. forecasts an average
2007 gold price of $785; J.P. Morgan Chase & Co.
estimates next year's average price at $655.
All bets aside, experienced collectors say that newcomers
who put together collections because they have a genuine interest
in coins will be more successful than those who simply seek
coins for investment profits. "If I don't make a dime,
I still get all the enjoyment from my sets," Mr. Morelan
Some collectors compare their rarest coins with expensive
works of art: Both have a value that transcends market worth.
"You can't sit in the bank with a stock certificate
and a magnifier and go, 'Oh, wow,' " says Jay Brahin,
52, a Chicago stockbroker who since 2002 has assembled collections
of early-20th-century $20 gold pieces. Says Mr. Brahin: "The
'coin geek' has turned into 'coin chic.' ".