Dan Holmes part-2 Highlights

The 2nd sale of the Dan Holmes collection was held by Goldbergs Coins & Collectibles in Beverly Hills, CA on May 30, 2010. This sale, of Dan's middle-date large cents (1816-1839) followed the triumphant sale of his early dates in Sept. 2009 (during which the first U.S. large cent was sold at auction for more than $1 Million!). Two more sales are planned for the remaining Holmes coins - the error coins will be sold in Fall 2010 and the late-date cents (1840-1857) will be sold in early 2011.

Dan Holmes is a copper connoisseur of the 1st order, and his collection of middle-date cents is a strong reflection of his tastes - many condition-census coins and finest-known coins can be found among the 654 lots that were sold.

I was fortunate enough to attend this sale, and I even managed to bring home a few of the lots. Attendance for the auction was very much in line with what I have seen at past auctions of major copper collections. The bidding was generally strong, but not incredibly impressive. The median hammer price was about 40% higher than the pre-sale estimate. There were a number of coins that brought many multiples of their pre-sale estimates, and yet some of the marquee coins in the sale fell short of their pre-sale estimates.
Below I will attempt to capture some of the "surprises" in the Holmes part-2 auction, from my perspective. Please keep in mind that, while the reported hammer prices reflect reality, the opinions are mine alone.

LOT 20 provided an early surprise. This 1816 N8 (R3) in PCGS MS64 RB had a lot of flash, and plenty of red color. After spirited bidding, it was hammered for $9750 (vs. an estimate of only $1000).

LOT 56 was an 1817 N12 (R3) in a very rare terminal die state (with a large cud die break connecting stars 1-3). Although it was only graded G-5, this coin sold for a hammer price of $2800.

Just a few lots later, LOT 71, an 1817 N17 (R4) graded G-6, but in terminal die state was hammered for $1650. I concluded that these die-state collectors mean business!

LOT 73, a relatively problem-free G-5 example of the very rare 1822 N14 (R7) brought a winning bid of $18,000 (vs. an estimate of just $8000).

LOT 254 (1827 N12 (R5) graded only VG-7 but in terminal die-state) and LOT 267 (1828 N8 (R3+) graded only G-6 but in terminal die-state) continued the theme of extremely strong bids for rare die states.

LOT 322 and LOT 323, both 1830 N9 (R6+) were surprises because of the weakness of the bidding for these rarities. LOT 322 was hammered for $15,000 (vs. estimate of $20,000-up) while LOT 323 realized a hammer price of $6500 (vs. estimate of $8000-up).

LOT 398 was one of the marquee coins in this sale - a very rare proof-only 1834 N7 (R7) and tied for finest known. I was surprised when the bidding for this wonder-coin stopped at $43,000 (vs. a pre-sale estimate of $50,000-up). Rest assured the winning bidder is very satisfied with his purchase.

The 1839/6 (N1) Cents in the Holmes sale (three beautiful coins, representing different states of the famous obv die-break) provided some drama. The first coin (EDS in EF-45) surprised on the down side when it was hammered at just $14,500 (vs. an estimate of $25,000). However, the 2nd coin (MDS in EF40) met expectations(with a hammer price of $17,500 vs. an estimate of $15,000), while the 3rd coin (LDS in choice VF35) provided an upside surprise when it was hammered at $19,500 vs. an estimate of only $10,000.

In reflecting upon this sale, I have this to say:
As always, quality & rarity ruled the day, but there were many surprise bargains among the marquee coins in this sale. One of the biggest surprises for me was the strength in low-grade coins in rare die-state. This is an area of early copper to watch closely!

EAC 2010 convention

EAC2010 has ended, but the pleasant memories should last for the rest of this year. I enjoyed myself more this year than any other EAC convention I have attended. There are many possible reasons:
I spent more time chatting about copper with old EAC friends than at prior conventions
I met more new EAC friends than I usually meet
I overcame my fear of a mistake and “stretched” my budget just enough to obtain a few special coins
I participated in many of the activities that were planned & brought about by generous EAC members just for our enjoyment.

A few of the personal covention highlights include:

>attending the grading seminar with Doug & Steve – this is a very entertaining and informative seminar, with the added bonus that the knowledge that is obtained can save many thousands of dollars!

>attending ALL the happenings – The large cents on display were awesome (as usual), the bust coinage die-state progressions were fascinating, and I was quite gratified to learn that my humble 1850 half cent earned a few complimentary comments.

>lot viewing for the EAC sale – There happened to be a number of half cent collectors in the room when I was viewing the lots, so the conversation tended to be dominated by speculation about the value of an 1811 C1 half cent with a 2-star break, or what might possess someone to modify a high-grade 1804 half cent to an (impossible) 1801. I found it all pretty fascinating, and I also located a few nice coppers to "shoot for" during the EAC sale.

>lot viewing for the Dan Holmes middle dates – although all the lots were present & available, it just so happened that Dan himself was also available, so I was happy just to grab a copy of the catalogue and spend some time talking to one of the “masters of our universe”. It helps to know the coins will also be available later, in Beverly Hills. The sale of the Dan Holmes middle-date cents is scheduled for May 30th, and it promises to be another BIG copper event (sorry - bad pun).

>prowling the bourse floor – Although the bourse is typically all about “buying & selling the coins”, there are plenty of interesting & useful diversions as well. I found this year’s exhibits to be fascinating & informative. I was especially enthralled by Jim Neiswinter’s 1793 Lib Cap cents. The guys from Heritage had a wonderful bit of Washingtonia on display at their table. This year, my “mission” was hunting down some decent, affordable 1796 Liberty Cap. Varieties to add to my meager holdings. I guess that I can claim some success, with three new varieties purchased during EAC, and I can now (for the first time) report that I hold an example of all 11 1796 Lib Cap varieties!

>late night lobby sessions – after dinner on Sat. night, I shared a couple of rounds beers with a few EAC buddies. Some old copper was soon on the table, and the lubrication seemed to improve our grading skills as the evening wore on!

>the EAC auction – this is often the marquee event for the convention, and once again this year we had a very successful sale. Bob & Chris produced a fantastic catalogue and a very smooth auction. The auctioneer maintained a blistering pace through most of the sale, which meant that snoozing could be potentially costly! I managed to snag 7 lots in the sale, which is better than average. Bob later announced that the EAC auction generated $273K in sales. A special note of thanks to ALL the volunteers who helped with the production of the EAC sale!

>the annual meeting – Denis Loring has piloted the EAC ship with grace & discipline, and he did an excellent job of giving credit where it was due for this terrific EAC convention.

So, that about wraps it up, at least for EAC2010. Brett Dudek (and his team) earned a standing ovation for this year’s event in Annapolis! Next year's convention in Portland faces a mighty challenge to top this year's event!

The Dan Holmes Sale (part-1): Finding the Bargains!

The recently-completed sale of the Dan Holmes early-date large cents (1793-1814) garnered so much attention, and set so many price records (including the highest price ever recorded for an American Large Cent, at $1.265 million, and the most valuable large cent collection ever sold at auction, $15.17 million) it might be hard to believe that anyone could find a bargain at this sale. Yet, believe it or not, some of the coins sold in this auction were legitimate bargains!
Prices overall for the Holmes early-date cents were very strong. In general, the headline rarities and coins in very high condition (strictly mint-state & high in the condition census) often exceeded pre-sale estimates by a wide margin. Meanwhile the NC (non-collectible) varieties and the scarce varieties in lower grades realized weak prices. However, there were many exceptions, so it is impossible to make sweeping statements with complete accuracy.

Below I will discuss about a dozen coins from the Holmes sale that I consider (with the benefit of my 20:20 hindsight) were great values for the winning bidders:

1. LOT 25 was the 2nd-finest of the two known 1793 NC-6 Liberty Cap cents. The winning bidder paid $35,000 (plus buyer's fee) to own this G4 coin. You might be asking: "How can a coin that cost $40K be considered a bargain?". Let me spell it out: R-A-R-I-T-Y! Consider that a few lots earlier, someone bid the 2nd-finest (of 3 known) strawberry leaf cents (LOT 8, 1793 NC-3) to $190,000! Sure, that was a strawberry leaf, and as a type, they are much scarcer than 1793 Liberty Caps. To tell the truth, $190,000 (plus buyer's fee) could easily turn out to be a bargain price for a strawberry leaf cent, given how legendary these rarities are. Still, since every serious collector needs a 1793 NC-6 to complete the 1793 NC's, and only two people at a time can do it, this coin looks like a good candidate to become more valuable!

2. LOT 75 was a 1794 S-46 (R3) in EAC MS60. This CC#2 coin (2nd finest known) was hammered for just $23,000. I know that is a lot of money for a cent - the point is that this is a MINT STATE 1794 cent! There are no more than a handful of MS 1794's around, period. There are probably more 1797 S-123's in mint-state known than ALL the 1794 varieties combined, and even an S-123 in MS condition will cost more than $10K (for example: LOT 222 in the Holmes sale). Is it a better investment to own the one CC#2 MS60 1794 S-46, or two MS60 1797 S-123's? The answer is left as an exercise for the reader.

3. LOT 117 was the finest-known 1795 S-73 (R5) by a wide margin, and a coin that once resided in Sheldon's collection. The winning bid for this VF35+ example was $28,500. Apparently circulated 1795 cents are the Rodney Dangerfields of the early copper world - they "can't get no respect". By contrast, the 3rd-finest 1794 S-36 cent (LOT 58, also a VF35 example of an R5 variety) hammered for $36,000. Of course, there are more people looking for 1794 large cents. Therefore, while this lot was not a screaming bargain, it should easily hold its value.

4. LOT 159 was another example of a rare, but circulated coin that failed to impress bidders. The finest-known 1796 NC-3 (R6+) in VF30 came with an impressive pedigree that went back to 1929. The coin was hammered for $21,000 vs. a pre-sale estimate of $20,000. This coin was a good buy at that level.

5. LOT 236 was the unique (R8+) 1797 NC-8 stemless wreath cent in VF20+. While the hammer price of $32,000 accurately reflects the current market value of the coin, I believe the future will be bright for this problem-free high quality RARE large cent, unless more examples are discovered.

6. LOT 295 was a high-grade 1798 S-161 (NGC MS63 / EAC 55, and CC#3 in Bland's census). Perhaps the low rarity of this variety (R2) led to lower bids, but in my view, the price of $12,500 (plus buyer's fee) is pretty reasonable for ANY 1798 in mint-state. After all, there have not been any hoards of mint-state 1798's found (such as the Nichols find cents from 1796 & 1797). This coin might not have been an obvious bargain, but it was still a good value.

7. LOT 302 was a 1798 S-164 (R4) in F12. There was nothing particularly noteworthy about the coin. I chose to highlight this coin because it was one of the few low-priced bargains in this sale. Most of the Holmes coins worth under $1000 got bid well beyond their book value; probably by people seeking the Holmes provenance for one of their coins. This coin sold for just $340 - far less than the value of $750 listed for the coin in CQR.

8. LOT 321 was another high-grade example of a common 1798 variety - S-174 (R2) in NGC MS62 / EAC 55 and CC#2. The hammer price of $9750 does not seem to reflect the true scarcity of mint-state (or near-MS) 1798 cents - in other words, a bargain.

9. LOT 329 was the rare (R5+) 1798 S-178 (style-2 hair with REV of 1796) in F15, and sharper than any other S-178 I have ever seen. The hammer price was $5250 vs. a pre-sale estimate of $5000. More remarkable is the fact that the very next lot (S-178 in VG8, but with a little better color) was hammered for $7000! For my money that first S-178 represents a nice bargain.

10. LOT 356 was the finest known 1800/1798 NC-6 (an R6+ variety). The hammer price was $8750 vs. a pre-sale estimate of $10K.

11. LOT 415 was the finest known 1801 NC-2 (R7). This problem-free F15 coin with a provenance that included Naftzger and Rasmussen brought a winning bid of only $14,500. Once again a choice "NC" was shunned by bidders.

12. LOT 535 was the finest known 1805 S268 - a choice AU50 coin once owned by Virgil Brand, C. Doug Smith, and Ted Naftzger. The winning bid for this beauty was just $14,500 (vs. pre-sale estimate of $15K). Maybe the bidders were exhausted at this point (or, out of money!).

That wraps up my bargain hunt for the Dan Holmes early date sale. I doubt that everyone who reads this will agree with all my choices of bargains. In many cases only time will tell if the coins were, in fact true bargains. Every winning bid made sense to at least one person at the time! Sadly, I was not the winning bidder for any of the coins I just described. I did, however, take home the 1797 Sheldon-130 from the sale (pictured below), and even though I would not call it a bargain, it has found an appreciative new home right here. THANKS a million, Dan!

EAC Grading

The subject of grading by EAC (Early American Copper) standards has been a recent topic among aficionados of these classic early American coins.

History
The 70-point grading system (widely used today) owes its existence to a founding member of Early American Coppers - Dr. William H. Sheldon. Dr. Sheldon was captivated by early U.S. large copper cents. He studied them extensively, and ultimately published the results of his research in a classic book called "Early American Cents", published in 1949. Later editions of this work were called "Penny Whimsy". In his book, Dr. Sheldon introduced the 70-point grading scale. On this scale, a coin can be graded anywhere between "1" on the low end (Basal State, recognizable as to coin type) and "70" on the high end (Flawless Mint-state, exactly as the coin left the coining press). The novel feature of this scale was that it could (at that time) be used to estimate a coin's value in dollars. A common cent variety dated 1794 with a grade of "12" would thereby have a value of about $12. Cents of higher rarity were assigned a higher Basal-state value (2 or 3, for example), and this factor was used to multiply the grade to arrive at the value for the scarce variety.

Grading by Sheldon's system became so popular that it was soon extended to all the other series of U.S. coinage. Other authors published grading guides that followed the 70-point scale. Most notable among these guides are the work of Brown & Dunn, and the American Numismatic Association (ANA) Grading Standards. The latter text is still widely available, and is considered a classic reference to grading for U.S. coins.

Time passed, and the Sheldon 70-point grading scale endured. During the late 1970's a period of high inflation was endured in the U.S. During this time, coin collectors began to develop a strong preference for coins that were graded on the high end of Sheldon's grading scale (60 and higher). This emphasis on high quality, and the growing awareness of the investment potential of rare coins, led to increasing price premiums for coins in the highest grades (65 and above). Collectors of early copper coins were largely oblivious to these market developments, since virtually all early copper falls into circulated grade categories (ie. grades below 60). However, silver dollars and other popular series experienced unprecedented demand in grades above MS60. Many coin dealers succumbed to the temptation to inflate the grade of coins in their stock by a point or two. At the height of the boom in 1980, a great deal of knowledge and effort was necessary to obtain an accurately graded (by A.N.A. grading standards) mint-state U.S. coin. The coin bubble eventually burst, and the subsequent market contraction was compounded by a concurrent tightening of grading standards. Many coin investors were disappointed, and a large number of people simply left the rare coin market.

The lesson from this debacle was not lost on the rare coin industry. In 1986 one of the industry leaders (a man named David Hall) formed a new grading service called the Professional Coin Grading Service (PCGS for short) with the goal of "solving the rare coin grading problem". PCGS maintained strict grading standards for U.S. coins, and introduced the concept of a sonically sealed clear plastic holder, which encased and protected the coin. A coin inside a PCGS holder received an endorsement that was on par with the "Good Housekeeping Seal"® for consumer products. Demand for PCGS-graded coins soon exploded. The results were predictable: First, prices rose rapidly for graded & encapsulated mint-state coins. Second, other grading services arose to compete with PCGS - most notable among these being Numismatic Guarantee Corp. (NGC) and ANACS (formerly the American Numismatic Assoc. Certification Service). The generic term "slabbed coins", or simply "slabs" came to describe the graded & encapsulated coins. In response to the widening price gap between successive mint-state grades, the grading scale for mint-state coins was further refined. Where numerical levels of MS60, MS63, and MS65 had once been sufficient, the full scale from 60-70, in 1-point increments was now utilized. Unfortunately, this innovation in the assignment of grades implied a precision in grading that was not really consistently achievable. The next rare coin market peak, fueled by strength in slabbed coins, occurred in 1989.

The economic recession in the United States in the early 1990's was accompanied by a crash in the certified rare coin market. There were definitely financial reasons for the market fall, but it was also a period of sobering up from the slab grading "party" of the 1980's. Perceptive people in the rare coin market began to observe that there were subtle but important differences in the grading standards from the various services. Furthermore, because coin grading continued to be more of an art than a science, individual coins might receive different grades from the same service on different days! This created uncertainty in the market (which was not generally desired by market makers). It also created opportunities for knowledgeable people with a "good eye" for slabbed coins with the potential to be cracked out of their existing holder and submitted for a possible higher grade. The "Crack-out" game was on! All of the grading services made adjustments, in an effort to create a stable & predictable rare coin market, and also to win market share. PCGS published a population report, showing how many coins of each denomination, type, date, and mint-mark they had graded in each grade category. This information greatly enhanced the amount of data available to rare coin buyers, and led to several adjustments in the marketplace, as the rarity (or lack of rarity) of each U.S. coin began to become known. The population reports have proven to be very a valuable resource for rare coin collectors and investors, enabling informed decisions to be made about coin acquisitions. A period of rationality began in the rare coin market, and this continues to the present.

EAC Grading
Early American Copper (EAC) grading also follows Sheldon's 70-point scale. The vast majority of copper large cents and half cents are circulated, and grading them involves understanding how much wear they have experienced. The generally recognized circulated grades include: FR2, AG3, G4, G6, VG8, VG10, F12, F15, VF20, VF25, VF30, VF35, EF40, EF45, AU50, AU55, and AU58. From the standpoint of wear alone, a strict adherence to ANACS grading standards for circulated grades will come very close to approximating EAC standards. There are many complicating factors, which are related to the peculiarities of the Large Cent and Half Cent series. These complications make grading the sharpness of early copper a little more difficult than most other coin series. For example, there are many die varieties of early copper with known weaknesses or die flaws in one or more places, which compromise the sharpness of the design. Another cause of weakness involves die failure, which results in early die-state coins having sharp features, while late-state coins appear weak, in spite of being well struck. For this reason, EAC grading involves both the understanding of what each grade on the numerical scale should look like (ideally) and the knowledge of each specific date & variety in the series, and how each of those varieties might deviate from the norm.

What really complicates EAC grading is the concept of "net grading". I will attempt to explain this concept, but I must be candid: EAC grading is an intellectual challenge, and mastery usually involves a lot more than reading & memorization. The most competent EAC graders have been looking at early copper for 10 years or more, and have evaluated many thousands of individual coins. Net grading involves determining the "sharpness grade" of the coin, and then deducting from this grade in order to account for any problems the coin might have. These problems are numerous, and they vary in severity. Problems include (but are not limited to): Cleaning (of a harmful nature), scratches, rim bumps, corrosion spots, porous surfaces, tooling (moving the metal on the coin with a tool), bends, holes, planchet flaws, and non-copper substances on the surface. If a coin has been subjected to only wear, and there are absolutely no problems beyond what is expected from circulation, then the net grade will equal the sharpness grade. The net grade reduction is a function of the number (and severity) of the problems, and the baseline sharpness grade. A lower grade coin (eg. VG) spent a lot more time in circulation, and therefore would be expected to have a lot of wear, and also a number of light ticks & scratches (so-called "circulation marks"). However, these circulation marks should have natural toning, and must not disturb the basic eye appeal of the coin. A higher grade coin (eg. EF or better) should have natural color and essentially flawless surfaces and rims in order for the net grade to be the same as the sharpness grade. A single hairline scratch on an EF coin could result in a 5-point deduction from the sharpness grade (if the scratch is fairly easy to see). On a VG coin, the same scratch would result in only a 1-point deduction. A deep scratch will result in a larger deduction to arrive at the net grade (about -10 points for an EF coin, and -3 points for a VG coin). Problems like rim bums and porous surfaces are treated in a similar manner for net grading purposes - if the problem is minor, the deduction is small (-5 points for EF, and -1 point for VG) and if the problem is severe, the deduction is doubled (at least). Coins with multiple problems receive multiple deductions. One can envision how a coin with excellent sharpness (EF details) can be net graded at only VG or lower! (for example "EF40 sharpness, scratched and having large areas of corrosion on both sides and two large rim bumps on the obverse, net VG10").

The factor that will dictate a particular coin's desirability within its grade designation is the eye appeal. EAC graders have developed a unique set of standards for eye appeal: these standards range from "scudzy" to "average" to "choice". Intermediate levels of "AVG-" and "AVG+" are often utilized to express eye appeal that is between the three basic levels. A coin that is called "average" meets all the criteria (eg. color, surfaces, number of marks, and overall eye appeal) for the designated sharpness grade. A "choice" coin has the eye appeal of a higher sharpness grade. A "scudzy" coin has one or more problems that cause its eye appeal to suffer.

EAC net grading is part science and part art. The old adage "Beauty is in the eye of the beholder" can certainly be applied. One person is likely to deduct more for cleaning than another person. The same can be said for any of the numerous problems that can afflict copper coins. For this reason, legitimate differences of opinion exist about the net grade of any particular coin. However, there is a general consensus among EAC experts about what differentiates a choice coin from an average coin, and there is also general agreement about coins that are scudzy. There is also almost no argument about what constitutes a problem - only how much the grade should be reduced from the sharpness grade to arrive at the net grade.

One advantage to the EAC net grading system is that it works for any genuine copper coin. The major grading services (notably PCGS & NGC) have often returned problem coins as "ungradeable". These two services now offer encapsulation for coins with problems, but a PCGS "Genuine" holder does not tell a potential buyer much about the coin (except that it is a real U.S. mint product). The EAC net grade is intended to indicate the market value of the coin.

A Net Grading Example
So, a natural question at this point would be: "How does one use EAC net grading, in a practical situation (such as trying to make a deal on a coin bourse floor) in order to decide what a coin is worth?". After all, the academic subject of grading can be debated forever, but ultimately coin collectors are interested in acquiring new coins for their collection at reasonable prices. I will describe the net grading process (the way I practice it), but I am not sure how well my words will express the experience. For readers who would like to explore the subject a little further, I suggest that you obtain a copy of Copper Quotes By Robinson (known as CQR within EAC), and read Jack's well-chosen words on this subject, found at the beginning of the book. The contents of CQR will also be extremely valuable as a guide to the value of early copper, by date and variety (and, of course, by grade).

Let us assume that you are standing at a coin dealer's table at a convention, and you spot an early copper coin in a holder that indicates only the date and a price.

You ask the dealer politely if you can take a closer look at the coin, and he hands you the coin.

Your first impression of the coin you are holding is very significant. Your reaction to the overall "look" of this coin can typically be described by one of the following words: "Wow!", "OK", "Yuk!", or "Hmm?". What do these reactions mean, and why are they so significant? Wow! - means you like the coin. OK - means there is nothing obviously wrong, and the coin could be worth consideration at the right price. Yuk! - means there is something wrong with coin, and you should strongly consider NOT trying to buy it. Hmm? - means there could be something wrong with this coin, but it is subtle. This is an important danger signal that you must not ignore - the coin just does not "look right" to you. Is it genuine? Have the surfaces been altered? You might want to seek professional advice before you proceed with your evaluation of the "Hmm?" coin. If your first reaction to the coin is either "Wow" or "OK", then you can move ahead (we will consider the "Yuk!" and the "Hmm?" coins soon).

Now, evaluate the sharpness grade of the coin (from 1 to 60). Take into consideration any knowledge you have about the specific die characteristics and normal wear patterns for this series, this date, and this variety. Now, you have a baseline (sharpness) grade.

Next, account for any problems that the coin may possess: Cleaning, rim bumps, scratches, etc. Use a magnifier, if this enables you to conduct a thorough technical evaluation. The key to this exercise is to remain objective about the coin. You do not own it (yet), and it is emotionally (and financially) much better to see a problem before price is negotiated than after the deal is made.

Determine the Net Grade for the coin. This will depend on the nature of the problem(s), and the sharpness grade. Minor problems will result in a small grade deduction for a mid-grade coin (about 3 to 5 points down, for a F12 to VF25) coin. For a high-grade coin (EF40 or higher), even minor problems can result in a large grade deduction (10 points or more). For a low-grade coin (G4 or VG8), minor problems typically cause only a tiny deduction (1 or 2 points). To-date, there are no expressly written rules for net grade deductions, and even experts will disagree about the net grade impact of certain types of defects. There should be some room for personal interpretation, based on your level of tolerance for certain problems (for example, I have trouble tolerating large rim bumps, but others seem to tolerate them. I have friends in EAC who hate dark color & corroded surfaces). Major problems always result in a lower net grade, and often the net grade will be less than half the sharpness grade (typical example: EF40 sharpness, but net VG10 due to heavy porosity and dark color). Actual experience with real copper coins and conversations with early copper experts provide the best opportunities for learning to net grade. Doug Bird and Steve Carr (both members of EAC) hold periodic EAC grading seminars - these are great fun, and valuable experiences.

At this point, you have a coin that you are interested in acquiring, and you have ascertained (to the best of your ability) its net grade. Now, using the net grade, you must determine the value of the coin. For this step, you will need either an encyclopedic knowledge of early copper, or the help of a price guide. I use a price guide. There are several of these available. The one that works best for me is Copper Quotes by Robinson (CQR). Other guides include the Coin Dealer Newsletter (known as the Greysheet by dealers), the Coin Market guide (published monthly in Numismatic News), and Penny Prices (available from Bill Noyes of EAC). PCGS maintains an on-line price guide - however, this guide is relevant only for coins that have been graded and encapsulated by PCGS, whose standards are not the same as EAC standards.

Remember the initial step, where you noted your first impression of the coin? Now, you can use this information to "adjust" the price you are willing to pay for this particular coin. Is the coin choice for the grade? If it is, then you should be prepared to pay a premium (often a substantial premium) above the price of an average coin. If the coin is average, then the value you have determined should be a good estimate. If this coin is a scarce variety, you may want to consider paying some premium for the "opportunity" to add this coin to your collection (only you can decide how long you would be willing to wait for another chance to own this variety, if you pass on this one). If the coin is below average, and it is a common variety, you should insist on a good deal - if the dealer says "no", you will get other opportunities to own the variety. If the coin is below average, but it is rare, you might still consider buying it, if the price is low enough.

Now, you need to compare the price that the dealer has on the coin with the value that you have just determined. If the coin is not priced, now is the time to ask the dealer how much it will cost. If the price is close to your estimated value, or below it, then you are on your way to a new acquisition for your collection. If the price is higher than your estimate of value, you must decide whether it is worth negotiating to a fair price, or whether you should pass on this one. If the coin is choice, or if the variety is scarce, you should be prepared to "stretch" a little in order to acquire it. The secret to success at this stage is keeping your emotions in check - the dealer is interested in making a sale, and your job is to make sure that if a deal is made, it happens at a fair price.

What about those "Yuk!" and "Hmm?" coins? Earlier, I suggested that you stop considering these coins immediately, and not proceed with the net grade evaluation or price determination. This remains pretty sound advice, but it might be a little harsh. If the particular variety you are considering is rare (R5 or higher), then you might want to consider buying a coin with problems. It all depends on the following: 1. Is the coin being priced fairly to account for the problems? 2. Can you live with the coin, even with the problem(s)? 3. How long is it likely to be before you get a chance to buy this variety in problem-free condition? Personally, I can tolerate a scarce variety with a problem (if the price is really good) until I can find one without a problem.

The Sale of The Naftzer Middle Date Cents

The Goldbergs sold the Middle Date Large Cent collection of Ted Naftzger on Sunday, FEB 1, 2009 in Beverly Hills. To say the least, this was a landmark sale of early copper.
The anticipation had been building for months among the EAC faithful. The catalogue went out a little more than a month before the sale - plenty of time for us to drool over these beauties, and plot a strategy for how to take home a few of them.
The Naftzger middle dates were everything that they were billed to be. Virtually every coin was in the condition census, if not the finest known of the variety. Unlike the Naftzger early date set (which had been beset by legal challenges and decimated by hasty sales in the 1990's), this set was still more-or-less intact when Ted passed away last year.

I traveled to Beverly Hills on the day before the sale, to preview the coins. About 99% of the coins were in PCGS holders, which provided a nice opportunity to calibrate my personal grading scale to both EAC grading (courtesy of McCawley & Grellman) and PCGS standards. I looked at every coin, and lingered a little on the rarities and the particularly choice examples of more common varieties. One thing that became evident was that Ted was an ultimate connoisseur of copper. While the set contained plenty of coins with mint red showing, there were a lot of truly choice coins with dark brown color, and also a number of greenish-gold coins and full green coppers. I think Ted had a soft spot in his heart for "Greenies". These distinctive coins display varying shades of green & brown, often in beautiful iridescent overtones that can hypnotize a collector. The Naftzger collection held many beautiful Greenies. The over-riding theme of the Naftzger collection was quality. Minimal marks, originality, and mint bloom were some of the hallmarks of these cents.

On the day of the sale, there was nothing out of the ordinary about the auction venue or the pre-sale ritual. I looked around the room, and identified a number of "the usual suspects" from the early copper community. In addition to the EAC dealers (out in force for this one), there were a few of the high quality type-coin dealers who are known to cross over to copper from time-to-time. There was even a pretty good cross-section of early copper collectors from the So. Cal. area (I count myself among these). I even spoke to one fellow who had come all the way from Michigan! The room was relatively full, but not overflowing, when the first lot was called.
I want to re-cap some of the highlights from this sale. I will try to be brief, but the list of highlights is fairly long (as you might expect).
LOT 2, an 1816 N2 graded MS64RD by PCGS was hammered down for $13,000 (this is a Randall Hoard coin that books out for around $1550 in MS64 RB).
LOT 12, an 1816 N7 (tied for finest known, and featuring beautiful autumn leaves golden brown color) went for a bid of $12,000 (PCGS MS66BN).
LOT 28, the finest-known 1817 N7 (with prominent mouse top) was hammered for $27,000 (vs. an estimate of $5000-up).
LOT 34, an 1817 N9 called the "King of the Greenies" by C. Doug Smith (graded MS66BN by PCGS) went for an astounding bid of $31,000 after a furious bidding war.
LOT 47, one of the finest 1817 15-star coins (N16) brought a winning bid of $44,000 (PCGS MS65BN). This was indeed a beautiful 15-star cent, in my humble opinion.
LOT 60 was the finest 1818 N4 (graded AU58 by PCGS & an EAC EF40) - it was hammered down for $18,500.
LOT 114, a magnificent proof 1821 N1 (PCGS PF65BN) brought a winning bid of $42,500.
LOT 116, an 1821 N2 graded MS64RD by PCGS went for a bid of $34,000 (this coin tied for finest known).
Both LOT 124 and LOT 125 were 1822 N4, and each coin was graded MS65BN by PCGS. However, one discriminating bidder was willing to bid $21,000 for the first coin, while the 2nd coin went for a bid of just $7000! So much for slab grading!
The two 1823 N2 cents in this sale provided some high drama:
LOT 139, an amazing gem 1823 N2 (PCGS MS65BN) was bid to a high of $110,000 after spirited floor bidding.
LOT 140, also a gem 1823 N2 (PCGS MS66BN) became the object of desire for two phone bidders, who took this coin to a top bid of $260,000!
At this point, Tony Terranova injected an amusing comment, by asking the auctioneer whether he might want to re-open the previous lot!
LOT 152, an 1824 N3 (graded MS65RB by PCGS) brought a winning bid of $26,000.
LOT 153, an 1824 N4 (graded MS66RB by PCGS) was even more popular, bringing a winning bid of $32,000. (Maybe slab grading CAN have an influence on bidders!)
LOT 183, the finest known 1826/5 N8 was hammered for $34,000.
LOT 214, the finest known 1828 N10 (small date) brought a top bid of $24,000 (vs. an estimate of just $3000-up)! That was pretty much how the bidding went through the entire sale - forget the estimates if you want to own these coins!
LOT 229, a gem 1829 N8 (PCGS MS66BN) with an amazing long list of luminary previous owners that reached back to 1900 was bid to $44,000.
LOT 242, the finest 1830 N6 (small letters REV) (PCGS MS67BN) went home for a high bid of $50,000.
A few lots later, LOT 246, an 1830 N10 Proof (PCGS PF65BN) was bid to $160,000. This coin had been discovered in 1986 in London by Jerry Bobbe, who sold it to Ted.
LOT 269, the finest known 1831 N12 in late die-state (aka "The Harpooned Whale" state) (PCGS MS64RB) was hammered down for (a relative bargain) $15,000.
LOT 290 was an incredible full red 1833 N6 (graded MS65RD by PCGS) - the winning bid was $14,500.
One of my personal favorites in the sale was LOT 309, an 1834 N6 (Lg. Date / Lg. Stars / Lg. Lett.) graded MS64RB by PCGS which was hammered for just $6000.
LOT 363, an 1837 N3 in Proof (PCGS PF65BN) with hypnotic violet-brown color brought a winning bid of $60,000.
LOT 437, a fantastic mint-state 1839/6 N1 (PCGS graded MS65BN) went home for a top bid of $230,000.

The Naftzger Middle Date sale was a quality auction for a quality collection. I have nothing but the highest praise for Chris McCawley and Bob Grellman, who catalogued the sale, and for Ira & Larry Goldberg, who conducted the auction. The Naftzger Part-2 auction catalogue is destined to be a "must-have" in the library of every dedicated middle-date cent collector or numismatic bibliophile. It was my privilege to attend.

3rd-Party Coin Grading: The Race to the Bottom

Background:
The grading of coins has always been more of an art than a science. Each coin presents a unique set of attributes (both positive & negative), which together embody its desirability. However, for circulated coins, it should be possible (at least in theory) to derive objective measures of the amount of wear visible on the surfaces. The original idea of coin grading involved making the distinction between uncirculated (eg. no wear) and varying degrees of circulation.
Dr. William Sheldon devised a numerical system of grades, from 1 to 70, which he proposed to use as a shorthand expression for a coin's value. Using Sheldon's system, a higher numerical grade translated literally into a higher value.

Time passed, and the value of uncirculated coins escalated to the point where it became important to distinguish between "typical" uncirculated, "choice" uncirculated, and "gem" uncirculated coins. The factors involved in making the distinction between typical, choice, and gem included: Sharpness of strike, Quality of lustre, Number of marks, and Overall Eye Appeal. A gem uncirculated specimen might be worth 2X, or 5X, or 10X the value of a typical uncirculated coin of the same date & mint. The economic implications of a 1 or 2-point difference in grade became enormous in some cases. Problems arose in the rare coin market when the buyer & seller could not agree upon the appropriate grade for a particular coin.

3rd-party grading services arose recently (about 20 years ago) with the stated goal of "solving the coin grading problem". This seemed theoretically possible: The basic proposition was for the owner of a coin to send it to the grader, who would assign an independent grade (for a fee), and then return the coin in a sonically sealed plastic holder. After that, the coin could be bought & sold with no further arguments about its grade. Presto!

The Evolution of The Slab:
3rd-party grading was immediately successful. The initial success of the pioneering firm led to the creation of other grading services. For some time, there were plenty of “raw” coins to go around, and graded coins began to be called "slabs". A market for slabbed coins developed, and the Coin Dealer Newsletter even created a separate pricing guide (The Certified Coin Dealer Newsletter) to assist market participants. The grading of coins was a strong growth industry. The grading services competed on the basis of price, service, and reputation (ie. the perceived value of the 3rd-party grade).

Savvy market participants began to take note of subtle differences between the way each service graded particular types of coins (since grading is an art more than a science, the assigned grade will depend upon a number of subjective factors, as mentioned above). The art of "cracking" coins out of one service's holder for re-submission to a different service (with hopes of a higher grade) was born. Furthermore, it was observed that although the assigned numerical grades were integer numbers, the distribution of the coins themselves was "analog" in nature, so that within a particular grade, there were average coins, strong coins, and weak coins. Some talented market participants began seeking high-end coins with exceptional profit potential at the next higher grade level. These strong coins could be cracked out and re-submitted with the chance that they would make the next higher grade (the graders were human, and the grading process was subjective). Eventually, the percentage of uncirculated coins in slabs became significant when compared to the entire available population, and the growth in grading submissions began to slow. A few problems began to surface.

The 21st Century and the Race to the Bottom:
I suppose that at this point, I should point out that the perceptions that I am about to share with you are purely my own. I have not mustered any objective data or other proof to support my assertions - therefore, you should take this all with a grain of salt.

The dawn of the 21st century brought a disaster (on Sept. 11, 2001) along with an economic recession (the recession was actually already underway before Sept. 11). The recovery from this recession coincided with the start of one of the great coin booms of our time. This boom began slowly, but gathered strength along with the U.S. economy, and really kicked into high gear with the acceleration in the price of oil and other commodities. Boom coin markets are often associated with the relaxation of grading standards. The reasons are somewhat complex, but I can invoke a simple supply & demand argument to explain the phenomenon. More people are seeking high-grade coins (higher demand). The number of high-grade coins is strictly limited (in an ideal world), but is somewhat "flexible" in the marketplace. Relaxation of grading standards permits an increase in the supply of high-grade coins. Grading services are capable of maintaining tight grading standards (at least, within the inherent limitations of a group of human graders), but they are also for-profit businesses. As such, they need to be responsive to the needs of their customers (the people submitting coins & paying fees). The profit motive works to everyone's benefit during a boom coin cycle. However, there is a dark side to this phenomenon. As the 3rd-party graders compete for submissions, one service could relax their standards (just a little), to encourage business. Market participants (attempting to maximize their own profits) crack coins out of old slabs and pay another fee, in the hope (ie. expectation) of a higher grade. Buyers continue to pay (after all, the coins have been graded, and the grading services are there to maintain the standards, aren't they?). Not only that, but prices have been rising, so any “error” in judgment (ie. grade) will be eclipsed by the error of NOT buying NOW! Pressure mounts on the other grading services to follow the first service to a looser grading standard. I believe that the coin market’s long Bull Run initiated the slide in grading standards, which I call the “Race to the Bottom”.

There is ample evidence that these things are going on. This is why the term "OGH" (old green holder) has crept into so many auction & fixed-price coin listings. The implication is that “new” grading standards are looser than “old” standards, and therefore the OGH coin could be a higher grade today (even from the same service!). Dealer wholesale prices (quoted in the Coin Dealer Newsletter) have lagged the retail market significantly. Some of this lag is natural, since the CDN must (by definition) follow the market, but another factor in the lag is the reluctance on the part of knowledgeable buyers (ie. coin dealers) to pay market rate for coins that simply do not meet their personal grading standards. Now, a group of entrepreneurial individuals have formed a new service that will (for a fee) examine a slabbed coin, and ratify the grade assigned to the coin, if the assigned grade meets their standards. A holographic-style green sticker will then be affixed to the slab, to certify it. In other words, they have created a grading service for the grading services!

Over the past four years I have examined tens of thousands of coins of all types in slabs. All of the major services exhibit variability in their grading standards, although I would say that the top two services maintain the tightest control over variance. All of the services make grading errors (both under-grading & over-grading). However, under-graded coins are quickly absorbed by the crack-out specialists, who re-submit until the higher grade is obtained. The result of this activity is that, the distribution of coins at any particular grade level must (over time) tilt toward average and below-average coins. It is my observation that one of the major services (not #1) began to loosen their standards early in this boom cycle, as a way to increase their market share. Auction after auction, I could examine two coins side-by-side of the same type, date, and mint-mark, but graded by these two services – in more than 90% of the cases, the coin from the service with the looser standards had a grade at least 1 point higher (often more). In spite of this clear visual difference, their strategy succeeded well enough to force the other grading service to also grade more loosely, in defense of their market share.

More recently, I have begun to observe an even more alarming trend in slab grading – coins with obvious problems (like large scratches, corrosion, cleaning, or damage) encased in holders that state the sharpness grade with absolutely NO mention of these problems. A couple of the major services have offered grading & encapsulation (ie. slabbing) for “problem” coins for some time – these slabs state the sharpness grade and then the problem immediately below. Occasionally there is even a “net” grade on the slab, to assist with determination of value. This service (slabbing for problem coins) was not perfect, but it provided some protection to the buyer (by guaranteeing authenticity, and pointing out the problem, which could at times be subtle). One major service typically rejected problem coins (returning them in a “body bag”, to use the parlance of the coin market). Early in the current coin boom, minor problems began to be accepted, with a lower “net” grade assigned in order to account for the lower market value of the coin with a problem. In this bold new world of slab grading it is “Buyer Beware” (which, by the way, is exactly how it has always been when purchasing raw coins).

In conclusion, I would argue that the grading services have enriched themselves at the expense of the very market they intended to serve. Their mission ("solving the coin grading problem") has been an abject failure. It is high time to tell the people purchasing slabbed coins in today’s market that "The Emperor is NOT wearing any Clothes”. The grade on that slab you are considering is probably not the same grade the same coin would have obtained from the same service 10 years ago. Knowledge is the buyer’s only protection. It is imperative to know how to grade the coins that you collect, and approach certified coins with an appropriate sense of skepticism.

The Col. Steve Ellsworth Half Cents

Heritage auctioned the half cents from the Ellsworth collection on May 29, 2008. This auction was the 4th time that Heritage has sold an important collection of Early American Coppers since 2000 (the other sales being the Rasmussen, Reiver, and Husak large cents). I have known "Col. Steve" since he launched his career as a dealer of early coppers in the mid-1990's. His pleasant personality and exceptional story-telling ability make it easy to spend time with Col. Steve. His extensive inventory and marketing style can make it hard to leave his table without at least one new addition to your collection! I was fortunate enough to go along with Col. Steve on a Civil War battlefield tour near Fredericksburg, VA during the 2001 EAC convention, and I can tell you that if you ever get such an opportunity, you must take it - he is an extremely knowledgeable and engaging guide.

The sale of the Ellsworth half cents consisted of only 120 lots, but there were many highlights none-the-less. The undisputed star was the Ellsworth 1796 C2 (with pole) in PCGS AU55. This remarkable coin (LOT 1647) was hammered down for an astounding $120,000. There was not a 1796 C1 (no pole) coin in the set. Also missing was the famous 1802/0 C1 (with REV of 1800). However, the 1802/0 C2 (with REV of 1802) in PCGS VF30 hammered for $8000 (LOT 1653). Some of the notable rarities in the sale included: 1795 C6b (Thick Planchet, R6) in VG8, 1804 C4 (Crosslet 4, w/ stems, R5) in VG8, 1805 C2 (Small 5, stems, High R5) in G6, 1806 C3 (Small 6, stems, R6) in G4, and 1809 C1 (R5) in VG8.

There were also some coins in the Ellsworth collection that were not particularly rare, but which I found to be interesting: The 1794 C5a (R4) in PCGS AU55 was hammered for $9500. The 1795 C1 (Lettered Edge, R2) was PCGS MS62, with a remarkable series of planchet fissures across the OBV - it was hammered for $11,000. The 1795 C5b (plain edge, no pole, R4) had a provenance that went all the way back to Lorin Parmelee in 1890! The Ellsworth 1832 C2 (in AU55) was once in the famous Roger Cohen collection (the Cohen half cents were sold by Superior in 1992, but I did not see any coins from this particular auction in the Ellsworth set). The beautiful Ellsworth 1831 (proof-only issue) in NGC PF65 BN (LOT 1735) brought a winning bid of $14,000. There were other proof-only dates among the Ellsworth set, although he did not complete the proof series (1842, 1845, 1846, and 1847 are missing). The die-state collection of 1804 C6 (Spiked Chin) was also quite fascinating, comprising a total of 16 different coins!

The catalogue from the Ellsworth collection features very nice color photos of most lots, and excellent detailed descriptions. The catalogue should be considered for inclusion in your early copper library.