Coin Portfolio Profits over Years|
December 09, 2013
For many years starting in 1978 and continuing until about the early 1990s, coin collectors and investors used to look forward to the annual release of a tracking report of tangible assets issued by the white shoe investment banking firm, Salomon Brothers, which measured the success of the equities market and other areas.
When the Federal Trade Commission (FTC) finally strong-armed Salomon Brothers into giving up its tangible assets charts and annual ranking of coins as a rarity, a void was left that, for the next 23 years at any rate, this column has tried to fill on an irregular basis.
Some of the categories that Salomon tracked were simply beyond my abilities to accurately provide information. I could not, for example, find a methodology to adequately track the sale or value of old masters – oil paintings done by the greatest of artists – even though for a time my real profession, as a lawyer, saw me do a five-year stint as outside counsel to Phillips Son & Neale, the fine art auctioneers.
Likewise I was baffled by farmland – though I got some help on that several years ago from a university professor in Iowa who has had to do this for a living and as part of teaching American farmers how to value their land, their crop and the amount of financing that can be obtained with that as collateral.
When I discovered the Statistical Abstract of the United States and the website of the Federal Reserve Bank of St. Louis, the comprehensive nature of the survey increased several-fold.
Then I moved coverage back as far as 1888 for some pricing, which is at once humorous for the 1884-S Morgan dollar really had yet to be widely collected (mintmarks did not become fashionable until the 1890s), even as the price was still about $2 a coin.
Around 2001, I had the delightful thought that I needed to update the survey to take into account the third-party grading that did not exist when the Salomon Survey began, but which was very much in vogue. I also needed to take the coin market basket and translate and reprice it as if it were MS-65 or Proof-65.
Serendipity partnered with my friend Dennis Baker, once the editor of the Coin Dealer Newsletter, then and now the founder of “Numismedia,” dedicated to finding and reporting the fair market price of all coins.
Uniquely, Dennis started giving me the MS-63 price and the MS-65 price as well. For most of the time, I reported only the MS-63 price, but now, there’s a track record from 2001 to 2013 – a dozen years – and I now have charts covering all of the numbers. The results, while not startling, show important differences between buying something in MS-63 or Proof-63 and stretching for the -65.
Some reports and conclusions (raw data):
• From June 25, 2001, to Oct 9, 2013, the MS-65 version of the portfolio rose 83.2 percent.
• During the same time period, the MS-63 version increased 4.6 percent.
• In the same time period, the Dow started at 10,504, skipped downward then climbed to 14,818. That compounded return is 2.6 percent.
• Gold went from $273 to $1,317 (14.01 percent compounded return)
• Silver from $4.32 to $21.87 (14.47 percent return).
• Iowa farmland per acre went from $1,926, to $11,437 (Iowa extension), a 16.00 percent return over the dozen years.
• The consumer price index (CPI) rose from 67.36 in 1978 to 233 in December 2013, or 3.61 percent compounded.
• Among the best returns was an 1884-S Morgan dollar, valued at $20 in 1963; a half century later, the MS-63 figures $49,380 (the MS-65 is today $268,500). (The MS-63 has a nice annual rate of return of 16.91 percent compounded.
• A half century ago when John F. Kennedy was President, a 1916 Standing Liberty quarter in MS-63 was a $500 coin; today, it is $18,400; average annual rate of return is 7.48 percent, handsome indeed.
• Another more common, but still a nice return, is the 1834 Bust half dollar (MS-63 in 1963 at $16, and a 2013 price of $2,070 – a nifty 10.21 percent annual compound return on investment.
• One of the “failures” is an 1862 three-cent silver, then (1963) a $15 coin, today affordable at $425. The rate of return, 6.92 percent annually.
The Dow Jones average showed its march toward profits when it started the meteoric rise of from 760 (1963) to 14,808 (2013). That annualizes a rate of 6.12 percent. (The Dow over a 35-year period, 1978-2013, has a compound rate of about 8.4 percent.
Only the 1884-S silver dollar earned higher rate (11.7 percent compounded) over the 35-year period, showing what Wall Street always claimed – over some shortened period of time, tangibles or other assets may outpace stocks, but in the long run, nothing outpaces the equities market.
How did the precious metals do over the 35-year period during which gold’s excitement as having previously been forbidden fruit simply wore off. Gold 5.35 percent, silver 3.96 percent year in, year out.
Of 23 years (1990-2013) considered, the coin portfolio increased in value in 13 of them (went down or stayed equal in 10 of them). (The Dow stayed positive in 18 of those years).
Gold’s stability shows that in 1933, it had just been revalued to $35 an ounce; at $1,317 an ounce in 2013, the compound gain was 4.6 percent.
There are other lessons that can be drawn from all this. I’ll be telling you about them in coming weeks.
More Coin Collecting Resources:
• Strike it rich with this U.S. coins value pack.
• Get the 2012 Coin of the Year – limited quantities remain!
• Build an impressive collection with Coin Collecting 101.
• IT’S HERE! Order the 2014 North American Coins & Prices.
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