Bowers on Collecting: Surprises in the marketplace

The following was re-posted from the “Bowers on Collecting” column on Coin Update

On April 17 to 19, 1980, the Central States Numismatic Society Convention was held in Lincoln, Nebraska, preceded by Professional Numismatists Guild Day on the 16th. The atmosphere was uncertain. Prices of gold and silver were down from their recent all-time highs, and everyone was waiting for the rise to continue, but it hadn’t happened. Many dealers held large inventories of gold and silver coins in high Mint State and Proof grades as these were of “investment quality” and had led the market.

PNG Day opened with great expectations for some and fear for others. Then came the reckoning: Word spread around the dealer community that cash was scarce, and coins were not selling. All of a sudden, buying came to a screeching halt! “Bid” prices were discarded. Everyone wanted to sell, and hardly anyone was buying. In one instance, a gem Proof silver coin priced at $15,000 was marked down to $5,000 with no takers. The market nosedived dramatically in a day, a numismatic “flash crash.”

In October 1980, I was interviewed by Jim Lyons, who had recently launched the Coinwatch newsletter. Emphasis was on market conditions as of July 15, the date he interviewed me at the ANA Summer Seminar. Here are some extensive excerpts from a much longer article:

Jim Lyons: What coins would you say are increasing in popularity with investors?

Dave Bowers: If an investor buys something, he will automatically buy something where he doesn’t have to think. An investor would love a roll or Proof set or bag, by all means in MS-65, because they don’t have to learn anything about it. With investors, MS-65 is very popular. With collectors, MS-65 is probably very unpopular. If I were a collector I probably would not be able to afford to collect an MS-65 set of Morgan dollars. Or an MS-65 set of Liberty Walking half dollars. So with collectors, MS-65 coins are becoming very unpopular; with investors, they’re becoming popular. And there are more investors than there are collectors. The prices continue to go up because investors like them.

Lyons: Which coins would you pick for long-term investment?

Bowers: If you didn’t want to become esoteric, I would say possibly looking at Extremely Fine Liberty Seated and Barber dimes, quarters, and halves, just because the prices are so cheap in relation to MS-65 coins. When I did my High Profits from Rare Coin Investment book back in 1974, I recommended Choice BU. (They didn’t have MS-65 then, but Choice BU was the equivalent.) The reason for that was that the difference in price between Extremely Fine and Uncirculated was not great at the time. For example, a typical Barber half or Liberty Seated coin at the time might have been $100 in Extremely Fine and $250 in Uncirculated. So I said to buy Choice BU. And a lot of people did. Thousands of our customers did this. But now, in 1980, we have the situation where Extremely Fine has increased in value to $200, but MS-65 has jumped up to, say, $5,000.

In my opinion, I would rather have a customer with $5,000 today, go out and buy 25 EFs rather than one MS-65. I’d be willing to bet again that he’d do better in the long run. The only catch to this is that EFs are scarce to begin with. They’re legitimately scarce in relation to demand. You can’t buy them by the dozens or by the bags full. It takes a little bit of looking to find them. That’s just an example of one type of coin which I consider a good buy. But they’re not that romantic. They’re not shiny and lustrous. They’re not MS-65. If the investor tells me he wants to buy $100,000 of them, I can’t say, “Well, I know where you can buy them,” because you can’t. You might have to buy one here and one there, and it takes a little bit of effort to buy them.

Colonial coins are a field with a lot of good values for a person who wants to get involved in history. Certain areas of paper money, I feel, have a long way to go. Likewise, in the field of tokens. Tokens aren’t listed in the Guide Book of U.S. Coins, but you can buy very interesting Civil War tokens, Hard Times tokens, store cards, and merchants’ tokens, for very reasonable prices. In the Garrett Collection last March, there were some great rarities in the Hard Times token series. Specimens for which there might be only a dozen known coins, in very excellent condition, brought, say, $1,000 to $3,000 each. They’re rarer than the 1804 dollar. These are real bargains. I think in the token field there are a lot of tremendous bargains.

Lyons: The problem with that from the investors’ standpoint is that these fields take studying, and a lot of investors don’t want to do that.

Bowers: Well, study is the hallmark of success. If you want to make money without studying, then I suggest that the typical reader open the pages of Coin World and order the latest silver dollar that is advertised in a full-page ad as being a real bargain. They don’t have to do any studying at all.

Lyons: What warning would you give to today’s investors?

Bowers: Be careful. Don’t spend your money the first day you learn about coins. Keep your money in the bank in an interest-bearing account for a few months until you have a chance to buy the books.

I recommend: Read the books, then take your budget and spend maybe a third or a quarter of it. Once you get your coins, look at them, study them, and then cautiously spend some more. Don’t do it all at once.

Lyons: What future long-term changes do you see in the hobby?

Bowers: I think counterfeiting will become more sophisticated, but at the same time, the ANA is sharpening its abilities and will be able to head it off at the pass. I see the hobby becoming an investment more and more.

Lyons: As mentioned earlier, Q. David Bowers has just released the seventh edition of his book on coin investment. I haven’t yet received my copy, but if it’s anything like the previous editions, you would be well-advised to buy it.

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