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Rare Coins: In Need of a Few Good Men.

Opinion on rare coin investments is divided with most not understanding the fundamental reasons why people invest in a collection; it is not what you may think either. Peter Schiff argues on these very pages, that numismatics are fool’s gold. Equally respected commentators claim that numismatics offer the greatest deal in gold right now. With 24 years experience researching, locating and buying the world’s rarest coins I can report that the rare coins market is working exactly as it should.

Mr Schiff argues that the rare coin market relies on “greater fools” (just like gold) and numismatics are not an investment. This is true because telemarketers running boiler room operations cannot mass market rare coins. If you can buy something from the TV shopping networks, believe me, it is not rare.

The flip side of this argument is that the numismatic premium over the price of gold is at the lowest level it has ever been and offers the greatest deal in gold right now. To an extent this is also true. The coins telemarketers knock out by the thousands have collapsed. Coins once selling for two or three times the melt value now sell for only 50% over melt.

As the financial catastrophe continues into its fourth year, it is reasonable to expect a huge wave of forced sellers. They may not be selling at the top, or receiving gains equivalent to spot gold prices, but most long term collectors do receive more than they paid.

It is here that reality on the front line of numismatics diverges from the commentary. Rare coins are numismatic, but numismatics are not rare coins. Every dealer has targeted coins, the ones they will buy everyday of the week at any price. Being one of the last truly free market assets, the ultimate buyers are willing to pay the dealers premium in order to own a bearer asset.

It is easy to identify and price rare coins, the problem is finding them. With over two decades full time as a dealer, my Damascene moment occurred a few short weeks ago, and it this tale I wish to share with those of a like mind.

Not only do I own my own company in London, I am president international sales at New World Rarities on Long Island, New York. Whilst attending some shows and auctions over the summer, I spent my spare time in the office helping across the counter. On Wednesday August 17th spot gold hit an intraday high of $1,912. On that day we bought $236,000 of scarp gold, old and rare coins.

The previous day we spent $124,000 on a pile of old paper.

To explain: A customer entered the office with a selection of coins- old and rare. As the valuation was proceeding, we could see the customer was clearly distracted and under some stress. After making an offer on the coins, she tentatively asked if we would be interested in some framed documents.

The first was a handwritten letter signed by Abraham Lincoln. The second Thomas Jefferson and the third an appointment signed by John Hancock when governor of Massachusetts. But that was not all. Recovering from the initial discoveries, a folio of documents was put on the table. It contained Teddy Roosevelt, as well as his cousin Franklin Delano, Napoleon, Wellington and even a note from Josephine, Bonaparte’s bit on the side.

We do not know what was paid for those documents, but we do know that when the cash was most needed, cash was available. During the greatest financial crisis most of us will ever experience Mr Schiff’s greater fool was willingly there.
 
That, dear reader is the rare coins market: owning a quality asset of last resort. If ones objective is purely monetary gain, the likelihood is that another asset class would suit.

If your motive is safeguarding an asset for generations to come, you will be handsomely rewarded- most likely when you need it most. It is for this reason; the rare coin market is in need of a few good men. Those that have the ability to set aside short term gain for longer term security.