Q. David Bowers
As the main market for slabbed coins, particularly those assigned grades of MS-65, Proof-65, and higher, was with investors, and as the typical investor didn't know one coin from another, many common issues increased in demand and rose sharply in price. It was much easier for telemarketing firms to buy quantities of plentiful coins than elusive ones, so their inventories could be continually refreshed without much effort. The editor of Numismatic News was prompted to comment that it was indeed a strange market in which common coins were in greater demand than rare ones!
At the same time, all of this investment interest affected the prices of rare commemoratives, and now in the late 1980s there was a strong market for 1938 P-D-S Texas sets, 1938 and 1939 Oregon Trail and Arkansas P-D-S sets, and other low-mintage varieties, which had previously attracted just limited interest from collectors (who were more concerned with forming type sets rather than complete variety collections). In essence the market of 1988, 1989, and early 1990 was a replay of the market of the late 1970s through April 1980 when investors ruled the roost.
There were differences, however, with the new scenario. As noted, slabbed coins made selling easier, for no longer did an investment client have to learn about grading or be concerned if a coin was assigned the proper number. Nor, apparently, was it any longer necessary to do business with a coin dealer in order to purchase effectively. The very mention of PCGS, NGC, or some other grading service name gave them the assurance they wanted. Moreover, much advertising hype was given to a new market: trading Sight-unseen in coins. Now, it wasn't even necessary to look at a coin in order to buy or sell it, and just as Mike Gumpel observed, anyone could sell coins; no experience was necessary.
Some trading rules on electronic exchanges mandated that firms posting "bid" prices must honor them no matter what. If a coin was found to be ugly, stained, etc., it could not be returned. Investors apparently didn't care what a coin looked like. Collectors did care, but they formed a minor part of the market for MS-65 coins. The prices were simply too high for most savvy numismatists to pay, whether they could afford them or not.
In 1989 and especially in early 1990 there was much ado about a Messiah who was about to visit the rare coin field and bestow upon it the gift of virtually unlimited money. This vast influx of cash would elevate the prices of all "investment quality" coins, and dealers and investors would really be sitting pretty. The Messiah was "Wall Street money," as it was termed.
Hundreds of millions or billions of dollars would be showering down upon those fortunate enough to own coins.
By late spring 1990 the coin investment market was all set to make a killing. The anticipated profits were beyond imagination. In newsletters and advertisements there were plenty of helpful suggestions to guide those individuals who for some reason had been shy up to this point about investing. Now was the time to buy. Prices were only a tiny fraction of the levels soon to be seen, it was claimed.
What did this do to the market for commemorative coins? The issues of "investment quality" (a term heard with increasing frequency; to be of this standard a coin had to grade MS-65 or better) became priced not only out of sight, but, as one observer put it, "in orbit." Collectors rubbed their eyes in amazement and kept their checkbooks tightly buttoned. They were not going to buy commemoratives (or any other coins) at prices widely perceived by old timers to be ridiculous. Quite a few old timers were smart enough, however, to sell their commemoratives (and other coins) to the new crop of investment buyers.
Collectors still desired to collect, and to those with a numismatic interest the market for Uncirculated commemorative coins in such grades as MS-60 and MS-63 (and even MS-64) were in many instances still reasonably priced, for investors preferred MS-65 and higher levels, and lower grade coins had advanced in price to a much lesser extent.
By late spring 1990 it seemed as if something was going wrong. At first it was the delayed arrival of "Wall Street money." While a few funds had been launched for tens of millions of dollars, sums in the hundreds of millions or billions were no-where to be found. Surely the delay was only temporary, and Wall Street would be loosening its purse strings soon. Weeks went by. Nothing happened. Nothing at all. What a letdown. Prices started to slip, not overnight but over a period of several months. By August many dealers were re-porting slow sales, investors were scarcely to be seen in the market, and prices were lower. The investment market has always been cyclical, and after a rise of several years a correction was due-if not overdue. Over a period of time more investors left numismatics. Those who cashed in had to be satisfied with lower prices. Common issues came on the market in quantity, and prices continued to fall.
The Commemorative Market in December 1990
In December 1990 the investment market bore little resemblance to the investment market of just one year earlier. Now no one was talking about new "Wall Street money." Coin trading on electronic exchanges was at a snail's pace, and the leading exchange had suspended operations. The sight-unseen market was dead. Nobody but nobody was buying coins sight unseen. (The sight-unseen market revived in early 1991, but as a shadow ofits former self, and with Sight-unseen bids at low levels in comparison to bids for coins that could be inspected before making a final purchase.) The volume of coins submitted to commercial grading services plummeted, and several services went out of business. Those that remained saw layoffs, diminished profits, or both.
Enter the collector. Actually, the collector did not have to enter the market; he was already there. But in the investment razzle-dazzle of the late 1980s and the first part of 1990, the collector was not buying MS-65 and other high-number-grade coins. The prices were too high. By December 1990 the prices had subsided, and many collectors found commemorative (and other) coins in such grades as MS-63 and MS-64 to be exceptional values. Those who stopped to think that a coin graded as MS-63 in December 1990 was apt to be as good as or even better than one graded MS-65 only five years earlier realized that there were indeed some excellent values out there. There was a renewed appreciation for the professional numismatist, the type of individual who had years of experience and who could assist his or her clients in making good buys.
In December 1990 the stage seemed to be set for a low spot in the traditional investment cycle. Early in 1991 the market was still weak, but prices of certain series (including most commemoratives in grades below MS-65) were inching up slowly. While it is not my intent to predict the future, I have always felt that one can learn a lot from the past. If history repeats itself, there will be a year or two or three of quiet in the market, during which time those who have a long-term view, or who feel confident in their numismatic and market knowledge (or who enlist the assistance of professional numismatists who can help them), will make purchases readily. Investors will sit on the sidelines and do little if anything, for it is very difficult for the typical investor to buy when the market is not rising. As noted earlier, history has demonstrated that investors like to pay high prices rather than low prices! Of course, no investor deliberately wants to do this or will ever admit to it. However, it works out that way.
In the long term the outlook seems favorable from a fundamental viewpoint. The continuing program of new commemorative issues will build interest and attract new collectors, and the current low prices will make the acquisition of scarce and rare older commemoratives (especially those in grades of MS-64 or less) cheaper than any other time in recent years. There is a renewed interest in the history and romance of commemoratives. The Society for U.S. Commemorative Coins and its publication, The Commemorative Trail, have accomplished much in this regard.
I like commemoratives, as you know by now. You also know that the story of commemorative prices is one of ups and downs, a chronicle of cycles. Undoubtedly, the future will see more of the same. Buy wisely and carefully, enjoy commemoratives for their history and romance, and chances are you will do just fine. If another boom ignites and outsiders (from Wall Street or elsewhere) come along and want to pay double or triple the prices collectors are willing to pay, then will be the time to sit on the sidelines and enjoy what you already own, or sell some of what you have.