Dear Friends:

Recently I have been approached by several new clients who expressed a desire to invest in rare coins. Most did not have any experience in coin collecting but wanted to place several tens of thousands of dollars into rare coins. I figure that I am not the only rare coin dealer being so addressed. In most cases, I strongly recommend that the potential "investor" read up on rare coins and send them away with a list of reading materials-usually never to be seen again.

Lately, I am seeing more serious buyers who insist on investing in coins. I usually tell them that coins are not "investments"-neither are stock equities, for that matter. Rare coins, as much as I love them, are financial speculations, subject to liquidity problems and numerous market influences. In order to maximize one's return, knowledge of the rare coin market is essential. You either need to be a dealer engaged in the regular buying and selling of rare coins or have a trusted dealer with that experience. Unfortunately, not all dealers have the required knowledge and experience-in fact, only a handful of dealers would qualify. Added to this mix is the fact that the rare coin market is very volatile.

Despite all the shortcomings, I would rather speculate on several coins that have a good chance of being a "ten banger" (my term for anything that goes up ten times in a set time frame) then tie up my money to earn a few percentage points each year. Rare coins offer that opportunity and more. Here's why I think that way.

First of all, rare coins are very cheap right now. How can I say this when many rare coins have gone up in price significantly in the last ten years? Well, first of all, in dollar terms, rare coin prices have gone up only a fraction of the increase in the price of gold and silver. Although the price of gold has risen more than five times and silver has gone up more than 8 times since the beginning of 2001 (gold was at approximately $267/oz. and silver at $4.50/oz.), most rare coins have "only" doubled in that same period. When rare coins are priced in terms of gold and silver, the real price of rare coins are now selling for much less than 50% of their 2001 prices.

Second, although the smart money have already entered and taken positions in the ultra rare coins, mainstream and Wall Street folks are completely ignorant of the rare coin market. The gold and silver bulls maintain that their market size is so tiny compare to other financial markets that any additional interest from Wall Street would ignite their market. I certainly don't disagree with their proposition. But if the gold and silver markets are tiny with respect to other investment markets, the rare coin market is microscopic in size. Should a small fraction of the money inflow to precious metals were to be placed instead into the rare coin market, rare coin prices would shoot through the roof and to the moon!

Third, with all the ETFs and special funds that allow investors to place bets in just about anything, it is just a matter of time before a good size ETF or rare coin fund takes up the rare coin arena. This has happened in the past with several rare coin funds coming into the market. When that happened, rare coin prices shot up to multiple gains leading to the market top in 1989-90. The two known rare coin funds were estimated to be between $50 to $150 million. The next ETF and/or rare coin fund will most likely be in the billions of dollars.

Finally, of all the collectibles, rare coins are the only investment vehicle with a track record of investment success. During the 1970's and 80's, Salomon Brothers consistently rank rare coins number one of all investments at that time. Rare coins as a category were taken off the list due to the unscrupulous promoters who sold common or overgraded coins as rare coins using the Salomon Brothers' rankings to unsuspecting buyers. Now with the existence of the major coin grading companies, especially PCGS and NGC, the problems regarding authenticity and grading have been resolved in most part.

With the likelihood of a major Wall Street move into rare coins a matter of time, the question is what would be the most likely rare coins to be targeted. This is the easy question and one that I have been responding to for several years. The major funds will go for the best of the best, meaning the finest and rarest of all coins. Unfortunately for many of us, this is the area of the multi-million dollar coins like the 1804 Silver Dollar, 1913 Liberty Nickel and the 1933 Double Eagle. As the number of such coins being chased by the funds will not be adequate, other market sectors will be also be targeted. At this point, I think that two sectors are likely candidates. One sector will be key date coins in collectible grades (which I have previously cover extensively). The other area will be in high grade type coins (which I have also previously cover). A few of my favorites are listed below.

The following is a short selection from my updated recommended buy list for high grade type coins. Always keep in mind that I only recommend high end quality for each assigned grade. Prices are based on recent sales records and may not reflect current value.

These same issues in higher grades (up to MS-67/PF-67) are also highly recommended. As always, I only recommend coins graded by PCGS and NGC and that are of the highest quality for the assigned grade. These two grading services have a proven track record and have strong market support.

Happy collecting!

Best regards,
Duncan