IS 2013 THE YEAR FOR THE
GREATEST COIN BOOM?
Japanese Investors Buy Over $500
Million in U.S. Coins
Investors From Other Countries
Following Their Lead
by Charles Baker
Mr. Baker is the former editor of The Coin
Investment Newsletter from 1978 to 1987 and is a retired Numismatic
Investment Consultant for California Federal Bank and many other banking
instituions from 1987
to 2001. He is currently a contributing editor for Rare Coin
Magazine and spends most of his time investing and collecting coins.
is happening this year that I have never seen the likes of in forty years
of collecting and investing. All this week, excited and enthusiastic
members of the American and Beverly Hills Coin Clubs have been sending
dozens of e-mails about very heavy demand for ALL U.S. coins at the FUN
show. One investor, Paul Cooper, told me that many collectors, dealers
and investors started the show a day early, buying in hotel rooms,
lobbies, restaurants, and anywhere else they could secure a spot to
conduct business. “This was the strongest show I’ve seen in thirty
years, even stronger than the last major coin boom of 1978-1980. I think
a coin boom is going to occur that will make all the other coin booms of
last century pale in comparison”, he stated.
So what is a coin boom
anyway? Many new collectors I’ve asked have not heard of this phenomena.
A Coin Boom occurs when there are sudden and dramatic demands in coins
due to a number of factors which causes prices for most if not all coins
to suddenly rise sharply in value in a period of a few weeks or months.
During these boom periods, most if not all coins increase by at least 50%
or more, and many even double or triple in value. Such periods occurred
in 1936 to 1942 during the introduction of U.S. Proof Sets by the mint.
Demand for these sets went up over 50% per year during the time, as
evidenced by the increasing numbers produced each year. Another great
boom occurred in the mid 50s, as evidenced by a doubling in proof
production almost every year from 1953-57. Other booms occurred with the
increase of gold and silver in 1974, 1978 and 1989.
Overall, the value of
all older coins, be they low grade, cull copper, nickel or high grade
silver and gold, have out performed most stocks and bounds and even real
estate in the past few years. Because of this, some now see more evidence
than ever pointing to a potential coin boom:
favorable exposure about coins in the press, eBay, electronic media,
and by word-of-mouth.
2.) Growing demand from a
collector/investor/dealer base that in turn keeps growing with population
pressures and increases in spendable income.
3.) Inflation and distrust in paper
investments and currencies that are no longer backed by gold or silver.
4.) Insecurity in the global economy
and national economies during times of unrest or potential war.
As most of my readers
know, I normally don’t make solid predictions about the future, as one
never knows what tomorrow can hold. But sometimes, we can measure a
closer approximation of the future by carefully examining past and current
trends that have a long history of consistency. We have consistently had
coin-booms since collecting became popular in the U.S.. The numbers of
collectors and the prices of coins have consistently risen in the past
hundred years, even when “down cycles” are factored into the equation,
which is why long-term investing of ten to fifteen years usually yields
profits of two to three times the investment. But this is more widely
known and general information. Let’s now examine some specifics for this
theory that 2007 may be the biggest coin boom yet, starting with the most
recent evidence, and then going back to older, more general evidence:
According to many well
respected wholesale dealerships, including Blanchard and
CollectorsInternet; in the past few months alone, Japanese investors have
purchased over $50,000,000 (that’s $50 million) in U.S. collector coins.
This is important to note for several reasons. Firstly, most Japanese are
known for their investment intelligence. For example, they hold a lot of
real estate, gold and silver, which have increased in value by about 20%
in the last few months. Secondly, many tend to hold their investments for
a lifetime, sometimes passing holdings along from generation to
generation. This $50 million in coins sucked out of the U.S. market last
year will probably not be in U.S. hands for a long time, even if prices
double or triple. “We have sold thousands of BU gold coins, Morgan dollars
and type coins to Japanese investors just in the past two weeks of 2007,”
reported Anthony Sears of CollectorsInternet.com, “Everything from low
grade Indian cents to average BU silver dollars and Choice BU gold coin.
They tend to buy everything we have that’s unslabbed, because they don’t
want to pay higher prices for expensive slabbed coins than for the less
expensive, unslabbed coins that are in strong demand and going to increase
in value anyway. We are already seeing larger e-mail orders from Taiwan
and Europe”, he notes. “We used to buy and sell holed, damaged
large cents and seated coins for under a dollar each. Now, we
can’t get these for less than $4 each, a four-fold increase. We
were selling average BU (MS 60) Morgan dollars for $12 each a couple of
years ago, and now are offering to buy them back from customers for $24 each,
essentially doubling their money. We were selling BU $20 gold coins
for about $325 each four years ago, and now are offering to buy the same
coins back at $650 each. This is just another case where our customers
have doubled their money in a few years, and this applies to all coins across the board, from cents to
dollars and gold, no matter how low the grades or prices. But
our customers are holding on to them, and we don’t blame them."
“Collector coins of all
types and denominations offer stability”, notes Greg Austin, a millionaire
investor in Texas, “and I’m buying everything from half cents and large
cent to Walking halves and silver dollars. It’s not just about gold and
silver, because collector coins satisfy the growing demand for rarity, art
and history. You can’t get that with the modern bullion coins.” Indeed,
oil paintings that are much more fragile and vulnerable to the elements,
are selling for tens of millions of dollars. It appears that finally rare
coins are catching up (see chart). Many people from other Asian and
European countries tend to follow what the smart Japanese investors do, and
therefore many analysts predict that the $500 million spent by the
Japanese will easily be tripled or more by the end of this decade.
Thirdly, add greater foreign demand to already strong demand here in the
U.S., and we begin to see a coin boom probability like no other in
history. Fueling the demand for coins in the U.S. are the state quarters,
increased exposure to coins on the internet, positive press about rising
coin prices in the news, and investors’ distrust of paper investors and
more trust in solid investments that investors can hold , share and
enjoy. All reports so far from the FUN show indicate it was very
difficult to buy anything, since most dealers had sold most of their
inventory and were looking to buy more for their inventories. This law of
supply and demand is just a small part of the large body of growing
evidence that suggests we just may be in for a large and long coin boom
that will probably be heard around the world pretty soon.