Rare Coins
"In the absence of the gold standard, there is no way to protect
savings from confiscation through inflation." ~Alan Greenspan,
1966 One of the things every investor quickly discovers is that
there are no sure deals or "can't lose" investments in this wild
and wooly world. There is always risk in the marketplace.
Always. The key to success is to weigh the pros and cons of
every investment, and determine the prospects of success. I
remember a time when we were told that old rare coins were a
"guaranteed" moneymaker. During the 1970s and 1980s, Salomon
Brothers published an investment index that showed that the
price of rare coins had never declined.
During this time, Harry Browne appeared in an ad on the Howard
Ruff Show holding a silver dollar, and declared, "They aren't
making any more of these..."
But limited supply isn't the only determination of price. Demand
is also important, and demand for collectibles fell sharply
after 1989. The Professional Coin Grading Service produces a
long-term rare coin index: the PCGS 3000 Index. For the past 10
years, rare coins have had their ups and downs. Right now, they
are enjoying a major bull market, though they have a long way to
go to match the dizzy heights of the late 1980s.
Now Is a Good Time to Buy "Old Money"
I've always had a fascination with historical coins and
currency, and now is a good time to buy. Old money is hot! I
recommend you buy coins you actually enjoy owning and learning
about. For example, several months ago I bought two Roman coins
for my wife. She teaches Sunday School, and was thrilled to
receive as a birthday gift coins with the image of Caesar
Augustus, the Roman emperor who ruled in the New Testament
period.
One day, she passed around the coins to her class, and everyone
was fascinated to hold coins that existed in Jesus' time. She
told the story of when Jesus was asked if it was okay for Jews
to pay taxes to the Romans. Jesus asked to see a coin. "Whose
image is on the coin?" he asked. "Caesar," they said. Then Jesus
declared famously, "Render unto Caesar the things that are
Caesar's and unto God the things that are God's."
Roman coins sell for several thousand dollars apiece, depending
on condition and rarity. (At a sale of Roman gold coins in May
in Zurich, some top-quality coins sold for double their
estimates.)
Valuable Coins, Valuable Lessons...
Last year, I taught a class on Money and Banking to 120 students
at Columbia University. I spent some time educating them on the
origin and mysteries of money, and why paper money has value
today - even though it's not redeemable in gold, silver or other
assets.
The great Austrian economist Ludwig von Mises answered this
puzzler with his "regression theorem." Un-backed paper money has
value today because it used to be backed by gold and silver -
until we went off the gold standard in 1933 and the silver
standard in 1964. I drove home the point by giving each student
an 1881 uncirculated silver dollar. Why 1881? Because it is the
date that Ludwig von Mises was born. I buy "Morgan" silver
dollars in rolls of 20 - in uncirculated condition - and give
them to friends and relatives as gifts, and sometimes as tips
for a job well done. The Rare Coins I'm Buying Now: Unusually
Good Deals for Extraordinary Currency
Lately, I've been buying the 2005 American Eagle Silver Dollars,
which are slightly larger than the Morgans, and have exactly one
troy ounce of silver in them. The American Eagles cost less than
$10 each - a real bargain. Common dated Morgan silver dollars in
BU condition sell for less than $30. (Lately, rare coin dealers
have been hoarding the Morgans and repackaging and selling them
on television, thus driving up the price. Buy them now before
it's too late.) Your best bet is to buy high quality coins. I
also love to collect gold coins, especially the Saint-Gaudens
Double Eagles and the foreign gold bullion coins, such as the
Mexican 50 Peso, the Canadian Maple Leaf, and the Vienna
Philharmonic (with musical instruments on one side and the opera
house on the other).
As you can see, you do have some choices when it comes to
investing in rare coins. But do be sure to buy high-quality
coins, whichever ones you choose.