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All Posts Tagged With: "Tips for collectors"

Smart Coin Collecting 101: Is It Ever Right to Buy the Wrong Coin?

By Doug Winter – www.RareGoldCoins.com

In the first installment of Smart Collecting 101 I discussed the “coin churn” and how to avoid it. One reader made a great suggestion for the second topic and I’m going to discuss it at length here. The topic involves buying the “wrong” coin and if there is ever a right time to buy a coin that you clearly know is not optimal for your collection.

The brief answer is yes. It depends on what sort of coins that you collect and what your ultimate goals as a coin collector are. Let’s look at a few scenarios.

If you are a die variety collector there will probably be a number of instances that you’ll be offered a coin that is a major rarity but which is either ugly or damaged or harshly cleaned or maybe even a combination of all three. But you may still have to buy the coin. Let’s say you collect die varieties of early quarter eagles. There are a few varieties that are exceedingly rare and might literally be available once per decade; even once in a generation. In this case, if you aspire to have a truly complete collection, you’ll buy whatever becomes available for the extreme rarities; even if the coin is damaged. And you’ll probably be thrilled just to have the chance.

Let’s say that you are a date collector and you are focusing on a series with major rarities in it. If the series that you are pursuing has some incredibly rare issues (say Fat Head half eagles) it certainly wouldn’t be “wrong” to purchase a decent looking but cleaned example of a coin that you know might not be available again for years or which may exist in decent condition but which might be ungodly expensive if ever offered. My feeling here is that if you are someone who likes high grade coins you should avoid specializing in a series that has certain issues that almost never come in high grades.

This leads me to another scenario. Let’s say you are a person who hates flatly struck coins. You have waited many years to fill a hole in your set and the date in question finally becomes available. The only problem with the coin, and let’s say it’s fairly decent in terms of overall quality, is that it is flat as a pancake at the centers. What should you do?

I’d suggest that you research the series and learn what percentage of the issue in question comes with this sort of strike. If every known example is weakly struck, then you just need to buy it. If some examples do exist with decent strikes, I’d say that you pass and wait for a sharper example.

There are some issues that are just so rare or so popular that I will compromise my standards and purchase problem coins now and then. As an example, if I saw a decent looking but cleaned 1870-CC eagle for sale I think I’d buy it; as long as it were priced fairly. It’s rare, its in demand and its a cool first-year-of-issue. Plus I think its undervalued in comparison to other high profile Carson City issues. But I wouldn’t buy most of the other CC eagles with problems. The reasons for this are simple: they would be hard to sell, they aren’t in great demand and nice examples are available with enough frequency that the wrong coin makes no sense. I would take this even further with scarce but not overly rare issues. I’d be patient and wait for the exact coin I wanted.

My high degree of standards would also slacken on great rarities (notice I didn’t say “expensive coins.” I said “great rarities.”) I would have no interest in a damaged ex-jewelry Stella but I would consider an 1864-S half eagle or an 1875 eagle if it were cleaned, very well worn or heavily abraded. In fact, these two issues are rare AND undervalued so I would probably not only buy one “wrong” example, I’d buy as many as I could find. (more…)

Smart Coin Collecting 101: Avoiding the Churn

By Doug Winter – www.RareGoldCoins.com

When talking to collectors, I often find myself giving them advice as to what makes a “good collector.” I thought it would be interesting to share some of my thoughts and observations in a series of blogs entitled “Smart Collecting 101.” These will run, from time to time, over the next few months.

One of the mistakes that many collectors make is allowing themselves to be “churned;” either by their dealer/adviser or by themselves. Churning is an expression that means too much buying and selling from an account (or in this case a collection) by a salesperson in order to generate profits for the company and commissions for the broker.

Many of the big marketing firms in the coin business (and some of the better known boutique retail firms) are notorious churners. They will sell a collector a coin and then, a few months later, encourage him to upgrade it.

What many new (and even old) collectors fail to realize is that there are hidden transaction costs involved in any numismatic transaction. Most collectors who deal with the larger marketing firms are paying at least 20% over cost and in many cases more. Now this isn’t meant to imply that a 20% or 30% markup is unfair; it’s not. But what the collector needs to understand is that the market has to rise at least 20-30% in a short period of time in order to break even on a transaction.

And this fails to take into account another hidden cost: selling. A firm that churns isn’t expecting to take back a coin at a price level in which they can break even. Typically, though, they will mask this in a cunning way.

Let’s say a dealer sells a coin for $10,000 and his cost is $8,500. And let’s say that the current wholesale value for the coin is still around $8,500. What a clever salesperson might do to churn a client is to tell him that his coin is now worth $12,000 or $2,000 over the collector’s cost. The salesperson has a coin in stock that represents an upgrade. It’s worth $15,000 on a wholesale basis. He charges $19,000. He knows he will lose money on the trade-in but he is selling the new coin for enough of a profit that he is still able to generate a healthy profit. There is nothing really “wrong” with this but what it means is that the collector now has a new $15,000 coin that he is way upside-down on as opposed to an old $10,000 coin that he is only slightly upside down.

Not all churning is the result of sleazy or even “aggressive” dealers. Much of it is self-imposed by collectors.

One of the pieces of advice I try to give to new collectors is that they should “but the right coin the first time.” What this means is that instead of impulsively rushing through a set of, say, Dahlonega quarter eagles an then upgrading their mistakes as they go along, they should take their time and buy the coin they will want in their set for the long term the first time.

Of course there are exceptions to this rule. You might have bought a great AU55 1854-D quarter eagle that has pretty natural color and surfaces as well as a great strike. But a few years later, a really superb MS61 becomes available; a coin with an even better strike, a nice pedigree and fantastic coloration. In this case, an upgrade might be a very smart move.
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Preparing Yourself for the FUN Coin Show in Orlando

BY Doug Winter – Raregoldcoins.com

Amazingly, the 2010 FUN is a scant two weeks away. If you have decided to attend the show (and I strongly suggest that if you go to just one show all year that this you consider this one) here is a short list of things to consider.

orlando_convention_center1. Bring a good lamp. Viewing conditions at the FUN show are not optimal and a good coin viewing lamp is essential. Try if possible to recreate the conditions that you use when you view coins at your home or office.

2. Pull the trigger on really cool coins. My gut feeling is that really good coins are going to be in short supply at this year’s FUN show. My best advice is that if you see something that looks really great or something that you’ve wanted for a long time, don’t waffle.

3. Take an hour lunch break every day. The FUN show is huge and it can be a pretty intense experience for the collector and dealer alike. I think it’s a great idea to leave the show for an hour every day in order to eat a good lunch and take a coin break. Some of the worst purchases I’ve ever made at shows have been when I’ve been tired, cranky and hungry.

4. Have a game plan. If you’ve never been to a major show like FUN, it can be really intimidating. There are hundreds and hundreds of dealers and it’s hard to know where to start. Before you go, spend time on the FUN website (www.FUN.org) and make a list of the dealers that you want to see first. (more…)