where is coin collecting going? a group discussion by michael s. fey, ph.d

WHERE IS COIN WHERE IS COIN COLLECTING GOING?COLLECTING GOING?

A Group DiscussionA Group Discussion

By

Michael S. Fey, Ph.D.

The Evolution of Coin Collecting: The Evolution of Coin Collecting: Raw vs. CertifiedRaw vs. Certified

By Year By Type By Mint Mark Patterns & Proofs Date Sets, Proof Sets Commemoratives, Rolls Errors & Varieties State Quarters For Fun & Profit

Time Line of Significant Time Line of Significant Numismatic EventsNumismatic Events

1850’s—Collecting Proofs, Special Strikings/Restrikes, Washingtonia, Colonials, Medals

1858—ANS Founded 1864-1870’s—Golden Age of Patterns (Motto & Nickels), Proofs 1893 — ANA Founded 1893—Heaton’s Treatise—Mint Mark Collecting 1933—U.S. Gov’t Ban on Gold Collecting (Recall) Spawns Gold Collecting 1936—Height of Commemorative Collecting; First U.S. Proof Set (1936-1942) 1930’s—Wayte Raymond Albums w/Type, Date and Mint Mark Sets (Emergence of Modern Coin Collecting). 1944—Howard Newcomb publishes “United States Copper Cents” 1816-1857 1947—First “Red Book” stimulates Mass Market Coin Collecting 1950—Re-emergence of U.S. Mint Modern Proof Sets(1950-Date)

Time Line of Significant Time Line of Significant Numismatic EventsNumismatic Events continuedcontinued

1950---1964 Roll/Bag Collecting Craze 1952—Chet Krause First Publishes “Numismatic News” 1958—William Sheldon Publishes “Penny Whimsy” 1958—Martin Brown & John Dunn publishes “A Guide To Grading US Coins” 1960’s---Frank Spadone publishes 1st Error/Variety Book- stimulates E/V

Collecting 1963---Coin Dealer Newsletter is First Published 1967---Al Overton publishes First book on “Early Halves Dollar Die Varieties” 1971---Leroy Van Allen & A. George Mallis publishes 1st “Encyclopedia on

Morgan & Peace Dollar Varieties---stimulates VAM Collecting 1978---Bullion Boom & Energy Crisis--Precipitous Increase in Coin Prices as Coins as an Alternative Investment becomes popular—

Market Peaks!

1978---ANA Publishes First Official ANA Grading Standards

Time Line of Significant Time Line of Significant Numismatic EventsNumismatic Events continuedcontinued

1979—ANA Forms First Grading Service ANACS 1986—PCGS Grading Service Emerges 1986—U.S.Mint Issues First Bullion Gold & Silver Coin

(Competes w/S.A. Kruggerand)---Modern Bullion Coins Emerge 1987—NGC Grading Service Emerges October 19th, 1987—Black Monday—Stock Market Crash 1988---Kidder, Peabody Wall Street Fund; Merrill Lynch Coin Fund Coin Investment Interest Peaks (Mid 1989) Mid-1989---U.S. Rare Coin Market Index Peaked! Mid-1992---U.S. Rare Coin Market bottoms out as U.S. Recession/Gulf War Ends 1993—Bill Fivaz and J.T. Stanton publish first Cherrypickers’ Guide—Stimulates

Variety Collecting. Mid-1990’s---Teletrade Auctions Offers Collectors Coins via Telephone/Computer

Time Line of Significant Time Line of Significant Numismatic EventsNumismatic Events continuedcontinued

1997—Jeff Oxman & Michael Fey publish Top 100 Morgan Dollar Varieties

book---Stimulates VAM Silver Dollar Collecting. Mid 1990’s---Computer Revolution: Proliferation of Home Computers Spawns

Many Numismatic Books. 1999—U.S. Mint Issues First of 10 years worth of State Quarters—Quarter Craze! 2000---Bullion Increases as Y2K Spawns Fears of Computer Meltdown 2000---WWW Revolution: Growth and Proliferation of Instant Communication

via the World Wide Web 2000----Proliferation of Home TV Coin Marketing/U.S. Mint Advertising 2000 —U.S. Mint Collector Bases grows to over 100 Million 2000---E-Bay Stimulates Huge Coin Trading Activity Daily 2000-2002—Registry Sets at PCGS & NGC are Developed—Drives High End Collecting September 11, 2001---9/11 Bombing at WTC Changes U.S. Attitude on Security October 7, 2001---U.S. and Allies Go to War with Afghanistan March, 2003---U.S. and Allies Go to War with Iraq

Time Line of Significant Time Line of Significant Numismatic EventsNumismatic Events continuedcontinued

2004---Heritage Image/Auction Technology Paves Way for Virtual Bourse

via Home Computer (Huge Record $78 million during FUN auctions)

2005—Fed Chairman, Alan Greenspan Increases Interest Rates (Upward Trend)

Budget Deficit Increases Negative Balance of Trade Increases Concern for Social Security Retirement Fund Solvency in 2040 Declining Dollar Loss of Jobs Overseas “Bankrupting America” U.S. Economic Concerns; Sideways Stock Market Record Oil Prices War with Iraq Drags On

THE FUTURE:THE FUTURE: 2005 and Beyond 2005 and Beyond

Real Estate Boom Peaks Stock Market Stagnates OPEC Threatens with further Oil Price Increases Foreign Countries (S. Korea)/Investors Pull Out of Stock Market/U.S Dollars Supply of Silver Narrows. Increased hoarding of Gold (China) Greater Numismatic Communication via Books, CDs and WWW. Faster Internet Communication Better Images/Image Enhancement; More Powerful Computers Developing a way to see Mint Luster Band/Hidden Hairlines, Marks Development of Hand Held Computer/Telephone (Voice Activation) Ability to Find/Acquire Common Coins Very Quickly More Difficult to Find/Acquire Classic Rarities, Key Dates, Rare Die Varieties Proliferation of Specialty Coin Clubs (SSDC, John Reich, Liberty Seated, EAC…)

THE FUTURE:THE FUTURE: 2005 and Beyond 2005 and Beyond

Legislation Approves Bullions Coins as part of IRAs Flight to Safe Haven from Inflation in U.S.—Positive for Gold & Silver Coins Continuance of U.S. and World Mints to Capitalize on Selling their Products Increased Marketing/Advertising for Coins. New Coin Designs, New Commemoratives, New Mint Products and Advertising by

U.S. Mint Increases Consumer Awareness of collecting. Increased Home Shopping and E-Bay Sales Further Stimulate Trading/Collecting Registry Craze continues

   2006-2011---First Early “Baby Boomers” Retire---More Time and Disposable Income!

A New Golden Age of Collecting?

The Internet & BeyondThe Internet & Beyond Numismatic Associations and Coin Clubs Coin Shops Local, Regional and National Coin Shows Mail Order Teletrade (Telephone and Computer) E-Bay (Internet auctions) Auction Houses (Heritage, Bowers & Merena,

ANR, Superior, Ira & Larry Goldberg, Stacks) Home Shopping Channel & Television Internet auctions

Impact/Trends on CollectingImpact/Trends on Collecting

U.S. MintsWorld MintsMajor Numismatic Organizations

American Numismatic Association

American Numismatic Society

Canadian Numismatic Association

The Future of U.S. The Future of U.S. NumismaticsNumismatics

The Economic Impact on Collecting

An Uncertain Future—There’s No Crystal Ball!

Why do you Collect?Why do you Collect?

For the Joy of Collecting?Future doesn’t matter.

As a collector/investor?

Future does matterStrictly as an Investor?

Timing is Everything!

What is your Exit Strategy?What is your Exit Strategy?

Sell/trade coins now.Sell/trade starting _____ ?Pass collection to your spouse, children,

relatives, or donate it to your favorite charities (ANA, ANS, or ?).

Will your heirs know what it’s really worth?

Do you have a Plan?Do you have a Plan?

An updated will?An Estate Plan? A Deacquisition Plan for your Collection? Have you made any arrangements?

The Auction MarketThe Auction MarketE-Bay, dealers, shows, wholesaleStacks/ANR, Bowers, Goldberg, EAC &

others…Heritage

300,000 registered bidders

500,000 mailing list

Some Future U.S. Economic Some Future U.S. Economic IndicatorsIndicators

An Aging Population DemographicA Growing Federal DeficitA Weakening DollarLower SavingsMore Competitive World Markets

U.S. Rare Coin Market 1973-1995U.S. Rare Coin Market 1973-1995

Life Trends of ConsumersLife Trends of Consumers

Source: Harry Dent. 1999. The Roaring 2000s Investor

The Baby BoomersThe Baby Boomers

Source: Harry Dent. 1999. The Roaring 2000s Investor

Correlation between Spending Correlation between Spending and the Dowand the Dow

Source: Harry Dent. 1999. The Roaring 2000s Investor

An Aging Population in JapanAn Aging Population in Japan

Source: Harry Dent. 1999. The Roaring 2000s Investor

Japan Nikkei AverageJapan Nikkei Average

Source: Internet

U.S. Population Distribution U.S. Population Distribution by Ageby Age

Source: Harry Dent. 1999. The Roaring 2000s Investor

National Debt as % of GDPNational Debt as % of GDP

National Debt Peaked in 1946 at 120% of GDP due to war.

Federal Debt per PersonFederal Debt per Person

Estimated US Population:

300 Million

Estimated Federal Debt:

$30,000 per person

$120,000 per family of 4

Still Rising

Currently nearing $10 Trillion!

No one is dealing with the problem!

Foreign Holdings of U.S. DebtForeign Holdings of U.S. Debt

Purchasing Power of U.S. DollarPurchasing Power of U.S. Dollar

Off Gold Standard

Currently about 7 cents of the value of 1927

Fiat MoneyFiat Money

U.S. Historical SavingsU.S. Historical Savings

SOURCE: U.S. Commerce Dept. 2005= -0.4%

Real Price of Gold for 600 Real Price of Gold for 600 yearsyears

World Economic Outlook World Economic Outlook ReportsReports

Projections of Annual GrowthProjections of Annual Growth

U.S Growth Slowing to 3% and lower

China/India Projected Growth at 9%-10%

Hard Times in The U.S.Hard Times in The U.S.The Depression of 1804-1814. Likely result of

trade embargo imposed by Jefferson to prevent U.S. from getting into war in Europe. Depressed U.S. imports/exports.

The Depression of 1837-1844. Jackson’s “Specie Circular” aimed to reduce excess paper bank notes in favor of hard currency (gold & silver) to buy land. Reduced money supply-deflationary.

Hard Times in The U.S.Hard Times in The U.S.The Depression (Crime) of 1873.

Demonetization of silver from Hamilton’s 15:1 bimetallic standard ratio established in 1792. Unemployment 18% in 1894. More demand for gold than silver.

The Depression of 1929-1939. Unemployment rate goes from 3.2% to 25% in a short time. Investment fell, GDP fell, inflation became negative (deflation).

Modern Currency DevaluationModern Currency DevaluationDevaluation:

Reduction of the value of a currency with respect to other monetary units.

Germany 1923Mexico 1993Russia 1998Argentina 2002Turkey & Romania 2005

Hyperinflation in Germany 1923Hyperinflation in Germany 1923Germany went off gold standard in 1914Printing presses kept running to catch

spiraling increases in prices after the war. Germany also needed to pay its debts.

The flight from currency that had begun with the buying of diamonds, gold, country houses, and antiques now extended to minor and almost useless items

Exchange rate between dollar and mark was $1 trillion in 1923

1921 German Notgeld

Mexico Devaluation 1993Mexico Devaluation 1993 Mexican government's finances and cash availability were hampered by two decades of

increasing spending, debt loads, and low oil prices While the crisis took place under President Zedillo, the causes are usually attributed to

Carlos Salinas de Gortari's outgoing administration. Salinas de Gortari partly coined the term "December Mistake" when he stated in an interview that Zedillo's sudden reversal of the former administrative policies of tight currency controls was "a mistake.

The peso crashed under a floating regime from four pesos to the dollar (with the previous increase of 15%) to 7.2 to the dollar in the space of a week.

A week or so of intense currency crisis was stabilized when US President Bill Clinton, in concert with international organizations granted Mexico a $50 billion loan.

1921 2 Peso Silver

On 1 January 1993, the Bank of Mexico introduced a new currency, the nuevo peso ("new peso", or MXN), written "N$" followed by the numerical amount. One new peso, or N$1.00, was equal to 1000 of the obsolete MXP pesos.

N$1.00

Russian Devaluation 1998Russian Devaluation 1998First Ruble—1 ruble=100 kopecks; 1710 to

1921; gold, platinum and silver basedSecond Ruble—1922, 1 new ruble =10,000

old rublesSeventh Ruble—1 ruble=1000 old rubles

1828-1845 Platinum 3 Ruble 1895-1911 Gold 5 Ruble 1998 Copper Nickel 1 Ruble

The Economic LessonThe Economic Lesson

"Those who cannot remember the past are condemned to repeat it." –George Santayana

The U.S. Welfare SystemThe U.S. Welfare System Over the long-term, however, the greatest threat to our fiscal health comes from

unsustainable growth in entitlement programs such as Social Security and Medicare. Toward the end of the next decade, deficits stemming largely from these programs will begin to rise indefinitely, and no plausible amount of spending cuts in discretionary accounts or tax increases could solve the problem. If unaddressed, these unfunded obligations will put an increasing burden on our children and grandchildren. To solve this problem, we do not need to cut these programs, but we do need to slow their growth. OVERVIEW OF THE PRESIDENT’S 2007 BUDGET, OMB White House

Alan Greenspan---Solution: Combination of extending the age of retirement upward from 65; Increase taxes

OMB, 2004

Factors Affecting the Future U.S. Coin Factors Affecting the Future U.S. Coin MarketMarket

The Economy…Stupid! First wave of baby boomers retiring in 2008 Trend toward downsizing, saving, living on a retirement budget Increased time on hobby, but on a budget related to economic security. Low savings; insecure/low social security, less purchasing power, increased taxes,

weaker dollar, more debt results in less buying (ie. hard times).

Large Supply with Less Demand=Lower Prices

Prediction: A Sustained Depressed Market in U.S. Prediction: A Sustained Depressed Market in U.S. Numismatics starting 2007-2009 until Demand Numismatics starting 2007-2009 until Demand

increases, which could be decades!increases, which could be decades!

The Good News!The Good News! Gold/silver bullion coins should hold value or appreciate

relative to the US dollar.

The rich will always be able to afford classic rarities. Select foreign coins, those with booming economies, should do

well.

Ancients should do well by virtue of a World Market. It will be a good opportunity to acquire great coins for future

generations.