Investors Flock to Coins Amid Rising Metal Prices -- A $400,000 Penny

Wall Street Journal ^ | December 1, 2004 | JEFF D. OPDYKE

[OESY]

...The interest in coins comes as sophisticated investors are increasingly looking for assets outside of the U.S. stock market, which many market observers expect to post only modest gains during the coming year. In buying rare coins, individuals not only acquire a collectible asset, but they are also getting exposure to precious metals. The prices of gold and silver, from which many popular U.S. coins are made, are both rising smartly.

The Internet and coin-grading services are playing a part in drawing a new breed of coin investors. The Internet allows collectors to buy and sell rare coins at locations other than their local coin shops. The grading services authenticate coins and grade them based upon how closely they resemble a freshly minted coin, making it easier to certify that the coins being traded are investment grade. And electronic registry services that have sprung up on the Internet during the past few years let investors register their collections online and compete against others in building the highest graded, most valuable sets.

All this has helped make investment-grade coins nearly as liquid as the stock market. The coin market even has its own index -- the CU3000 Rare Coin Index. During the past year, that index of the 3000 most-actively traded coins, has gained about 7.5%....

The coin market presents risks. Novice collectors often get burned, despite the Internet and grading services. Moreover, many smaller shops are popular but can undercut sellers and overcharge buyers, some dealers and collectors say. And the precious-metals market is notoriously volatile.

Also, coin prices have moved substantially, meaning investors aren't buying at bargain levels any more. Still, coin experts say, coins are about two years into a bull-market that, if it mimics history, will last four or five years....

[lowbridge]

A $400,000 Penny

That's absurd.

You've never heard of eBay, have you? :-)

[japaneseghost]

"Or the monthly landscaping bill over at the main office of my bat guano empire."

Please tell me more.

I've heard that bat poop is a very lucrative enterprise, and I know 2 people who want to go into the tree farming business.

[snowman1]

A great place to look is teletrade.com which is an online auction house that deals in some very good coins from individuals.

[Museum Twenty]

bump for later

[BigDaddyTX]

Ping for later

[Jaysun]

You've never heard of eBay, have you? :-)

Actually, I make a decent amount of money on the side by reselling things on ebay that my wife and I find at garage sales on weekends. We started doing it several years ago and liked it so much that we do it nearly every weekend.

[Jaysun]

Please tell me more. I've heard that bat poop is a very lucrative enterprise, and I know 2 people who want to go into the tree farming business.

We actually believe that ingesting small doses of bat poo on a daily basis can ward off cancer. We're going to be rich! Tell your friend to farm small cash crops instead. Something like St. John's Wort, Milkthissle, Marijuana, Poppy, or a similar easily grown and highly demanded plant.

[Fatalis]

I wonder how much an aluminum penny would fetch?

Coin Questions and Answers
Ed Reiter - January 5, 2000

In 1973, the price of copper rose to the point where the cost of producing Lincoln cents, then composed of brass, came dangerously close to one cent apiece. Faced with the prospect of losing money on the coin, plus increased demand for cents and an attendant cent shortage, the U.S. Mint sought authorization from Congress to change the composition of the coin. A resolution was introduced on Dec. 7, 1973, giving the Secretary of the Treasury power to change the alloy, and the Mint took immediate steps to switch from brass to aluminum starting with the cents of 1974.

In fact, it went so far as to actually produce more than 1.5 million aluminum cents during the closing weeks of 1973. These were dated 1974 and apparently were intended for issuance after the start of the new year. But strenuous opposition arose from the vending-machine industry, which claimed the lighter-weight coins would jam its equipment, and also from the medical profession, which said they would pose a health threat if swallowed. In the midst of all this controversy, the price of copper receded -- so the Mint threw in the towel and continued making cents from brass until 1982, when it changed their composition to the present content, which is predominantly zinc with a copper barrel plating. All but a handful of those 1.5 million aluminum cents were melted. At least a few are known to be in private hands, however, since very small numbers were loaned to members of Congress and their staffs during legislative discussions on the proposed change and some -- perhaps a dozen or so -- never were returned, despite the Mint's vigorous efforts to recover them. Columnist Jack Anderson brought this to light in a memorable article in which he castigated the culprits as having "sticky fingers."

One Congressional staffer returned an aluminum cent not to the Mint but to the Smithsonian Institution, where it remains as part of the National Numismatic Collection. I can vouch for the existence of at least one other specimen a few years after the episode, for a Mint official pulled it out of his drawer in the middle of an interview and let me hold and examine it. As you might expect, it was much more sharply struck than other Lincoln cents because aluminum is so malleable. Hobby periodicals covered the story extensively in 1973 and 1974, and you can get more extensive details by seeking back issues of those, or copies of the articles, from the publishers or perhaps from the American Numismatic Association library if you are an ANA member.

Here's a replica:

[dware]

Interesting story (about the aluminum pennies). I didn't know about that. Thanks for posting.

[Jim Noble]

I have collected for years.

Coins are a terrible investment, for several reasons.

The most important is that selling prices vary widely over a minute range of conditions which cannot be verified either by the buyer or by an independent appraiser.

People who buy high-condition (MS 62+) coins are not buying rarity, they are buying an appraiser's certificate, which often does not hold up when they try to sell.

Real rarities, like colonial or pre-1800 coins are what they are.

A chain cent will always have value.

But a "rare" coin which is rare only because of an appraiser's opinion of its condition may very well be a pig in a poke.

Caveat emptor.

[RightWhale]

Babe Ruth's bat that he used to hit his first home run in Yankee Stadium went for $1.25 million last week. My favorite bat is 34 ounces, and coach says that is too much to get good bat speed, but the Babe's is 46 oz.

[durasell]

It has less to do with actual value or investments than with collecting. For some rich guy, $400,000 is the end of a long hunt.

[Jaysun]

Babe Ruth's bat that he used to hit his first home run in Yankee Stadium went for $1.25 million last week. My favorite bat is 34 ounces, and coach says that is too much to get good bat speed, but the Babe's is 46 oz.

I saw that story, I don't know how in the hell anyone could effectively swing a bat that heavy. 46 oz is how much a side of beef weighs - give or take. I've actually used a 28 oz bat from cradle to present. I played with the "Huntsville Stars" for a short time, the Oakland A's used to draft from them. Everyone made fun of my short little bat, but I loved it.

[Jaysun]

It has less to do with actual value or investments than with collecting. For some rich guy, $400,000 is the end of a long hunt.

Understood. I was just trying to give you serious coin collecting guys a little hell. As we've heard it said before, "whatever floats your boat".

[durasell]

I don't collect coins -- I collect mostly books and art. So I understand a little bit about the collector mentality. However, I don't quite get the whole investment area. Anything that's collected would seem like a shakey investment to me.

[staytrue]

Novice collectors often get burned

True of almost any investment class, stocks, real estate, commodities, paintings, etc.

[BIGLOOK]

$400,000 for a penny. After the tax bite ??????

I wonder if the mint operators are finagling double stamps or two faced coins (a few) for future revenue gains.

[Lucky Lyn]

"A $400,000 Penny"

I have a whole jar full you can have for $200,000!!

[Eric in the Ozarks]

He could swing the big bat because his waist was 52...

[lexington minuteman 1775]

Any hope for my stamp collection?