Sale results prompt performance update

Sale of the Adams-Carter 1804 silver dollar on May 1 for $2.3 million to John Albanese, as well as the sale at the Central States Numismatic Society by Heritage of a 1794 silver dollar in AU-55 for $345,000 and an MS-61 at $503,125 afford a good opportunity to take a look at the rare coin market in a unique perspective.

Add a 1794 silver dollar that was sold by Heritage as F-12 at the Florida United Numismatists sale in January, and you have a rare opportunity to examine how a true collector coin stands up to the Salomon Brothers index in extended attenuated form.

For more than 30 years, the gold standard of viewing the coin market in perspective has been the Salomon Brothers survey of tangible assets, begun in 1978 and officially continued into the 1990s when the Federal Trade Commission forced the venerable white shoe investment firm to discontinue its monitoring.

Among the assets compared in the charting of yesteryear were stocks, bonds, foreign exchange, farmland, old master paintings, Chinese porcelain, gold, diamonds, postage stamps, and other tangible items of value. Each June, R.S. Solomon wrote an annual accounting and charted it.

In 1982, “A Guidebook of United States Coins,” known popularly as the Red Book, devoted an entire chapter that I wrote to examine the phenomenon of the Salomon Brothers study and the impact that it had comparing coins with other investment vehicles. At the time, coins were winning and Wall Street was scared.

Annual results could be startling as well. The report covering the period June 1, 1988, through May 30, 1989, for example, concluded that during the preceding 12-month period of time, rare coins offered a return of more than 30 percent, ranking behind only old masters and Chinese ceramics.

For the following year, 1990, the results flipped. The Market basket of coins increased at a rate of 14.6 percent annually, but the Dow Jones Industrial Average went up 15.89 percent

In 1991, Salomon Brothers kicked coins out of their hard asset portfolio. The firm itself was history not long afterwards.

It was left to others to pick up where the index it popularized left off.

I created a takeoff of the Salomon index about 20 years ago when I started to chart the coins of the index in much the same way that Stack’s did. That was the firm that originally picked the coins included in the market basket approach.

There are some flaws in the Stack’s-Salomon Brothers Market Basket index approach. No gold coins are included, and none of the coins are created gem uncirculated or gem proof. Rather, the coins are choice uncirculated (MS-63), which makes their success all the more remarkable.

It does not measure circulated coins (except for a 1794 half cent in XF-40), but instead focuses on Mint State-63 and Proof-63 coins. A Fine-12 silver dollar, even of a rare date like 1794 is completely ignored. So are comparisons of a better-grade 1794. It discourages comparisons of identical coins except for the grade.

Salomon’s market basket of coins included in the portfolio were intentionally generic. Thus, an 1873 two-cent piece in brilliant proof can roughly be substituted for many other two-cent pieces.

Although the prices are substantially higher today, back in 1978 they were modest and within the realm of many collectors. The entire portfolio started at $35,135, with one portion of that being a significant one, a 1795 Draped Bust dollar prize of $15,000. Most of the other coins were valued at under $4,000, and many under $1,000 including an 1884-S Morgan at $900.

Hindsight is 20/20. That same 1884-S. Morgan dollar is today valued at more than $40,000 and has a significant percentage of the overall portfolio and its gain. But all that lay in the future.

About nine years ago, Dennis Baker of NumisMedia came along and volunteered to provide pricing on an ad hoc basis, which is truly proven to be a godsend. I have found his prices to be “dead on” and highly reliable, and even as I have expanded writing about this several times a year from once, Dennis has never blinked and has always, in his friendly way provided the data reliably and on time.

I started to write this column in January, again in February, and finally have gotten to it the first week of April, 2009 only to be superceded by the Central States show with its 1804 silver dollar (a chance to track a great rarity) and more 1794 dollars in a variety of conditions. Dennis updated each time, but the Dow was so fluid as to make it difficult to draw comparisons.

It reminded me of doing my book, Profitable Coin Collecting, which Krause Publications brought out last year; the hard part was pinning down the statistics which we did on my wife’s birthday, St. Patrick’s Day, March 17, 2008. The Dow was over 14,000 – and oh, has it been a ride ever since.

Comparison of the market nasket is interesting for lots of reasons, because in recent years I’ve been able to add a number of other reliable data bits as farmland, Standard & Poor’s, Moody’s, and the precious metals (gold, silver, platinum).

I decided to do an analysis of 1794 silver dollar, which is not included in the Salomon study, because it has a long history of many sales. I took the FUN result and the accompanying chart shows the 1794 silver dollar compared with the Dow).

Also I’ve included some other comparisons of farmland prices, and precious metals that the graphs have their way with. This is truly an instance where picture is worth 1.000 words.
I did the same thing with the 1804 silver dollar. Although the first record for this coin is an 1876 sale, I went back to John Lyman, an S.H. Chapman sale in 1913; followed by a 1923 sale by Col. Ned Green for $3,200.

Resold in B. Max Mehl’s Jerome Kern sale (1950) at $3,250, the buyer was Amon Carter, well known collector and American Airlines board chairman. Stack’s sold his collection in 1984 when the king of coins brought $198,000; from there it went to L.R. French who in turn sold it (1989) for $242,000.

Bowers & Merena’s Flanagan sale (2001) saw an $874,000 price realized, then B&R sold it at the 2003 American Numismatic Association Convention Auction for $1,207,500. The 2009 resale went to John Albanese for $2.3 million; its pedigree will likely become known as the Carter-Albanese specimen.

The collector coin 1794 F-12 has a who’s who among the pedigrees in its sales history. Its known prior owners include Lorin Parmalee (1890) whose collection sold one for $225; Jerome Kern, whose collection B. Max Mehl sold in 1950 for $825, the 1955 Stack’s sale of the Farish Baldenhofer collection, and then it stayed hidden for more than a generation.

In 2001, Bowers & Merena sold the LaRiviere collection where it realized $132,500; from there it was sold by Heritage as part of the Jack Lee in November 2005 at $431,250. The 2009 price went at $345,000, probably in direct response to the evolution in the marketplace.

The 1794 dollar in MS-61 has a different, more cautionary tale. In 1903, the Murdoch collection example sold for $230. B. Max Mehl sold it as part of the 1946 Atwater collection auction at $1,575. It next was sold as part of the Charles Williams (Empire) collection (Stack’s, 1957) at $6,500.

From there, the 1974 Gibson-Groves collection (Stack’s, at $32,500) hosted it; the coin found its way to Harry Bass, whose sale by Bowers & Merena in 1999 saw a price of $241,500. The 2009 Central States resale was $503,125.

Its also interesting to see how the grading has been less than static. Mehl catalogued it in the Atwater collection as “uncirculated” with “just a touch” of cabinet friction. Bass termed it MS-62; the 2009 offering cataloged it as MS-61. Jack Collins and Walter Breen in their monograph on the 1794 silver dollar (written in 1996, published posthumously a year ago) calls it AU-55. Martin Logies in his historic study calls it NGC MS-62.

The accompanying graphs contrast all of these coins with other tangible assets.The comparison speaks favorably of rare coins as an investment vehicle.