In connection with the FUN coin show in January of 2009, PCGS founder David Hall was to speak on a panel discussion moderated by Scott A. Travers (author of Coin Collector's Survival Manual, and others). Due to illness, Hall wasn't able to attend, but he gave Travers some written advice, which was to be read on Hall's behalf. Unfortunately, time did not permit the reading of Hall's suggestions, so Travers provided them to me as an exclusive.
First, I'd like to provide a little bit of background about who Hall is. Widely regarded as the best marketing genius in numismatics, Hall was one of the founders of the Professional Coin Grading Service (PCGS). The PCGS concept of consensus coin grading with a market-value guarantee completely changed and revitalized the coin collecting marketplace. Hall continues to create numismatic services that vary from brilliant (such as the Set Registry concept) to controversial (First Strike and First Day of Issue grading designations.) There is no doubt that Hall is one of the most influential numismatic businessmen that ever lived.
David Hall's Advice for Buying Coins in a Depressed Economy
The material below was written by David Hall, to be presented on his behalf at the FUN show in Orlando, Fl, on Saturday, Jan. 10, 2009. The title of the presentation was, "Coin Collectors Survival® Conference 2009 - Is 2009 Like 1929?"
In 1929, the US was on the gold standard. $2.5, $5, $10, and $20 gold pieces circulated at face value, and all dimes, quarters, half dollars, and silver dollars were 90% silver.
Today, those gold coins trade for approximately 50 times face value, and the silver coins trade for about 10 times face value.
Has the value of gold and silver gone up 1000% to 5000% in the past 80 years, or has the value of the dollar gone down?
40 years ago, a gallon of gas was 29 cents, a new Chevrolet was $1,500, and a nice house was $15,000. Have these items gone up in price 800% to 2000% in the past 40 years or has the value of the dollar gone down?
The financial survival issue we all face has nothing to do with unemployment, tax breaks, social security, health care, unions, the auto industry, or stock market prices. The financial survival issue we all face is…
The continual and inevitable decline in the purchasing power of the dollar.
Your financial future is dependent upon how you position your current and future net worth to deal with this huge issue.
Buying gold and silver coins is a direct hedge against the dollar’s decline, and you have several choices that work.
You can buy gold in the form of lower commercial grade $10 and $20 gold pieces, coins that grade MS61 on the Sheldon grading scale. These coins are high demand items that sell relatively close to their bullion value.
And/or, if you have some collector market knowledge, you can buy rarer gold and silver coins.
Either choice gives you a hedge against the inevitable further decline in the purchasing power of the US dollar.
Interpreting David Hall's Advice
Because Hall's advice was written for an intermediate-to-advanced coin collector, I'd like to provide a little bit of interpretation for you. I want to be clear that this interpretation is my own analysis of what Hall wrote, and is not endorsed by him.
One of the big debates going on in bullion investment circles these days is, is the value of gold going up, or is the value of the dollar going down? (Bullion investors are people who buy pure gold and silver coins and ingots, hoping to make money when these items rise in value.) Most feel that that the value of the dollar is decreasing relative to gold and silver, so when you see gold getting more expensive to buy, it is because your dollar is buying less gold (not because gold is rising in cost.)
In Hall's comments, he is making the case that if you had held onto the gold $2.50, $5, $10, and $20 coins that circulated at face value 80 years ago, your return on investment would be a great deal higher than if you had held that same dollar value in non-gold and silver coins. Although Hall doesn't explicitly state this, his example refers to common-date coins. If the coins you held onto were very high-grade or rare, they would be worth even more today.
The point that Hall is making is that even if you buy only common-date classic U.S. gold and silver coins in the "lower commercial grades" (what Hall characterizes as MS-61), you'll do better than if you kept your money in the bank. If you have knowledge of rare gold and silver coins and can make smart purchases of these, so much the better.
The big bonus in buying common-date classic U.S. gold is that you get a double-duty investment. The coin itself is priced based on its bullion value plus a small mark-up. However, since the coin is also a rare item that was minted 100 years ago or more, it might also go up in value for this reason, too. In the worst-case scenario, you'll always have the gold bullion value of the metal, but if the best happens, the coin as a collectible will appreciate in value even more than its gold does.
Classic U.S. gold means that the coin was minted for circulation purposes back when the U.S. was on the gold standard. When talking about classic gold, we are not including American Eagles, Gold Buffaloes, or other bullion coins which were struck for the purpose of investment only (rather than circulation). I recommend the common-date classic U.S. gold coins very highly in my Top 10 Coin Picks for 2009.
