Courtesy of:
Nick Timiraos,
The Wall Street Journal
Dec.
18th - Six years ago, New York investment adviser Robert Beckwitt
was looking for an alternative to the increasingly expensive
equity market. While other investors were busy scooping up
real estate, Mr. Beckwitt returned to an old love -- rare
coins.
One
of his first big purchases: a red 1909 Lincoln penny, part
of the first issue of U.S. coins to include a portrait. Also
featured on this particular coin was a feature that the mint
removed from subsequent issues: the initials of the portrait's
sculptor.
Mr.
Beckwitt paid a New Jersey coin dealer $10,000 for his pretty
penny five years ago. His investment today has grown tenfold,
thanks to a hot rare-coin market fueled by hungry collectors,
greater transparency in the market on the Web, and the surging
price of precious metals, especially gold, which earlier this
year hit a 26-year high.
Indeed,
the 48-year-old Mr. Beckwitt reflects growing ranks of wealthy
baby boomers whose desire for alternative assets has led them
to invest in a hobby they discovered as a child. Mr. Beckwitt,
who started collecting coins at the age of 8, sorting for
old pennies in bowls of spare change, says he owes his interest
in coin collecting to his "love for the history and the idea
of finding something rare."
Eagle
Matters
Among collectors and investors at large, rising gold prices
and publicity generated by record-breaking coin sales have
piqued interest as well. In a 2002 auction, a 1933 double-eagle
gold coin sold for $7.6 million -- a price widely acknowledged
by people familiar with the market as the highest ever paid
for a coin in a public auction. The 1933 double-eagle coins
were never issued, and nearly all of them were melted down
during the Great Depression, after President Roosevelt discontinued
the gold standard.
Perhaps the biggest boost to coin investing, though, has come
from the market's greater transparency -- a state owed largely
to the rise of Web sites that display price histories and
sell rare coins inspected and rated by coin-grading services.
The two major services, the Professional Coin Grading Service
of Newport Beach, Calif., a unit of Collectors Universe Inc.,
also of Newport Beach, and Numismatic Guaranty Corp. of Sarasota,
Fla., were established in the 1980s to reduce counterfeit
coins and make the trading of coins more liquid by establishing
uniform standards for grading. Collectors bring their coins
to the services, which rate them on a scale representing poor
to mint conditions, then seal them in see-through cases that
state their grade.
What
the collectors do with their coins after that is up to them.
But many post them on various Web sites, some run by the grading
services themselves, others run by hobbyist associations and
coin dealers, where collectors and investors can admire, evaluate,
buy and sell the coins online.
"There's
more interest in coins now than there has ever been, and it's
across the board," says Jeff Garrett, president of the Professional
Numismatists Guild, Fallbrook, Calif., which is composed of
various coin dealers, sets standards for coin trading and
works as a kind of peer-review organization.
Heritage
Auction Galleries of Dallas, the largest coin-auction house
in the country based on revenue, expects its sales to double
to $575 million this year from $225 million five years ago.
And nearly one-third of its sales this year will come from
the Internet, President Greg Rohan says.
Seats
of Liberty
Online registries of graded coins -- which aren't always for
sale -- tap into collectors' competitive sides and help drive
prices higher for coins that are for sale. There are online
contests, for example, in which grading services recognize,
say, the most-complete collections of certain kinds of coins.
The finest collection of late-19th-century Seated Liberty
and Trade Dollars on the registry maintained by Professional
Coin Grading Service, for instance, belongs to Bruce Morelan,
owner of an electrical contracting business in Spokane, Wash.
Seated Liberty dollars depict Lady Liberty sitting; Trade
Dollars were used in trade.
The 45-year-old Mr. Morelan says that posting his coins in
the PCGS registry, at www.pcgs.com, is like pushing his pennies
into their cardboard display cases when he was a kid. "It
gives you that same great feeling of accomplishment," he says.
Mr.
Morelan is perhaps better known among rare-coin collectors
as the purchaser last year of a 1913 Liberty nickel, of which
only five are known to exist. The Philadelphia mint is believed
to have coined only five before the design changed from the
Liberty Head to the Indian Head, used from 1913 until 1938.
The price to Mr. Morelan: $4.15 million, an amount considered
by market experts to be the second-highest ever paid for a
coin.
Caveat
Collector
A word to the wise for newcomers: Rare coins can hold dangers
for novice collectors and investors. One can run into counterfeit
coins, as well as disreputable dealers pushing low-quality
coins that have little resale value, warns Scott Travers,
a collector and president of Scott Travers Rare Coin Galleries
LLC, New York.
Mr.
Travers says collectors can protect themselves by buying from
dealers who are members of the Professional Numismatists Guild
or the American Numismatic Association and by buying coins
that have been certified by one of the two professional grading
services. Experts also warn that grading and pricing are separate
issues. Just because a coin has been certified doesn't guarantee
the seller is asking a fair price.
The
market presents other risks, as well, for those who don't
do their homework. According to the CU3000 Rare Coin Index,
which tracks the 3,000 most actively traded coins, prices
are up 1.3% year to date to Dec. 1 and about 11% for the past
three years. But while many coins have produced strong returns,
experts warn that, like stocks -- not every coin is a buy.
Gold
prices, too, have fallen since reaching a 26-year high in
May of $719.80 an ounce. But many analysts believe those prices
have room to rise, based on a weakening U.S. dollar and an
uncertain global political outlook; gold is regarded as a
safe haven in times of economic and political uncertainty.
Goldman Sachs Group Inc. forecasts an average 2007 gold price
of $785; J.P. Morgan Chase & Co. estimates next year's average
price at $655.
All
bets aside, experienced collectors say that newcomers who
put together collections because they have a genuine interest
in coins will be more successful than those who simply seek
coins for investment profits. "If I don't make a dime, I still
get all the enjoyment from my sets," Mr. Morelan says.
Some
collectors compare their rarest coins with expensive works
of art: Both have a value that transcends market worth.
"You can't sit in the
bank with a stock certificate and a magnifier and go, 'Oh,
wow,' " says Jay Brahin, 52, a Chicago stockbroker who since
2002 has assembled collections of early-20th-century $20 gold
pieces. Says Mr. Brahin: "The 'coin geek' has turned into
'coin chic.' ".