Wednesday, July 28, 2010

My Best Coin Investments: Sunken Treasure Ship Coins

Some of the best coin investments I have ever made involved shipwreck coins.

I am not and never have been a coin dealer, just a collector. So it was with some interest that I read an article by Susan Headley on titled "Before You Buy Sunken Treasure Ship Coins, Consider These Insider Secrets".

Now in fair disclosure, Susan is a friend of mine and I love most of her articles. And while her article on shipwreck coins has some great advice on how not to get ripped off, I do think there is more to the story.

I have been an active collector of shipwreck coins for a number of years, and I’d be surprised if you could count on more than one hand the number of collectors that have bought or sold more certified and graded shipwreck coins than me in the past 5 years. I don't know what it is, but I'm like a moth being drawn to the light when it comes to shipwreck coins.

The Value of a Shipwreck Pedigree

You’ll often hear that the value is all about the coin and not the pedigree. While I agree you should judge a coin by its merits, you cannot dismiss the value of a shipwreck pedigree on reliable 3rd-party graded coins.

I have experienced over the years that two equally graded coins in similar condition and appearance, but one with a shipwreck pedigree from a famous wreck, the shipwreck coin is going to command a premium above the non-shipwreck coin.

However, I must qualify this to say that this premium is on reliable 3rd-party graded coins (i.e. NGC or PCGS) and it does not include the popular "Shipwreck Effect" designation.

SS Brother Jonathan Shipwreck Coin
SS Brother Jonathan Shipwreck
1865-S $20 Double Eagle
Importance of PCGS or NGC Certification

Why is certification so important?

Prior to certification, the shipwreck pedigree was often in doubt. Before certification and the slabbing of coins, it used to be you'd buy a shipwreck coin that came in a nice display case with a certificate of authenticity (COA). But who was to say the coin was really from the shipwreck? Plus, who printed the certificate to begin with?

Would you pay a premium for something pedigreed in this way?

Unfortunately, many people did.

Shipwreck COAs on eBay

A few years ago, I came across an auction on eBay for shipwreck coin "Certificates of Authenticity." There were no coins in the auction, just the certificates. These were what constituted "proof" that a coin was from a shipwreck and here they were being sold on eBay without any coins. Anyone bidding on those certificates was surely going to pair them up with non-shipwreck coins to sell to unsuspecting collectors.

I would never buy a shipwreck coin whose proof lies solely on a COA.

S.S Yankee Blade coin from Q. David Bower's Collection

Four years ago, I came across an auction listing from a much respected dealer in the coin industry for an 1854-S $20 gold double eagle pedigreed to the S.S. Yankee Blade. The coin was being sold by Q. David Bowers from his personal collection. The listing made no reference to the pedigree being in doubt. It was stated in a way that made it sound like an undisputed fact.

And what a pedigree that is . . . the S.S. Yankee Blade shipwreck and Q. David Bowers in one coin!

But my understanding is that very little is known about the 1977 recovery of gold from the SS Yankee Blade and nothing has really been printed as to what exactly was found. So I asked Mr. Bowers, the owner of the coin and clearly an expert on the subject, about the coin and the pedigree.

In his response he stated:

"There are no 1854-S $20 coins that are directly attributed to the S.S. Yankee Blade, but it is presumed that all with slight seawater effect and with myriad tiny die cracks are from this source."

Hmm? He probably is right and all the 1854-S $20 gold coins with seawater effect and myriad tiny die cracks are probably from this shipwreck. But is it certain? Is it evidence enough to pay a significant premium for in essence a “shipwreck effect” coin? Will others in the future agree with this attribution?

Although I really wanted to add a S.S. Yankee Blade coin to my collection, I did not bid on the coin. In the end, I believe the coin went unsold in the auction.

SS Republic Shipwreck Effect Coin
"Shipwreck Effect"
1861-O Seated Liberty
Half Dollar
Buy Graded Coins and not Shipwreck Effect

That brings me to the "shipwreck effect" coins. Many of the certified and slabbed shipwreck coins don't have a grade on them but instead have a "shipwreck effect" designation.

Basically, these are the problem coins – the coins with enough damage to keep them from being graded. Without the shipwreck pedigree, these would be the so-called "body bag" coins that in the past grading companies would return to people without a grade.

These coins tend to be sold by mass marketers at greatly inflated prices to comparable non-shipwreck coins. These are the coins I would only buy for the novelty of owning one. I would never buy one with the expectation of getting all my money back.

In this case, the pedigree is what you are buying, and not the coin. However, there are instances where even damaged coins that are truly great rarities make for good investments, but these are the exceptions and not the rule.

SS Republic Shipwreck
1852-O $20 Double Eagle
Shipwrecks Can Cause Prices to Fall

This is where one has to be careful with 3rd-party certified and graded shipwreck coins. When the S.S. Central America shipwreck was discovered with thousands of mint state 1857-S $20 gold double eagles, prices definitely went down for that coin.

On top of that, many dealers charged premiums of 100% or more for the S.S. Central America pedigree. In this case, it would have been wise to wait until the discovery was priced into the market, and to avoid the initial hype that convinced many people to pay such high premiums.

Some of my best gains have been from S.S. Central America coins that I bought years after the initial release and well after all the hype had died down.

However, more recent shipwrecks such as the S.S. Republic or S.S. New York did not have large hoards of a single date and mint mark. Instead the coins were distributed across many dates, mint marks, and denominations.

If you had waited until after the initial release to get the coin you wanted, you may never have gotten the coin at all. If you were able to get the coin later on the secondary market, there’s a good chance that you paid significantly more for the coin than when it was initially released.

They Don’t Have to be Mint State

One point in Susan’s article that I do specifically disagree with is the following:

“If you are buying treasure ship coins as an investment, keep in mind that only the highest grade coins are recommended. As a general rule, this means buying MS-64 or better specimens that have been graded and slabbed by a reputable grading service.”

I believe Susan’s statement is no longer valid because it focuses on only one shipwreck, that of the S.S Central America. Thousands of similar dated San Francisco mint coins meeting her requirement were recovered from that shipwreck alone.

But since that time, other shipwrecks have been found that now render this statement invalid. Those shipwrecks include the S.S. Brother Jonathan, S.S. Republic, and the S.S. New York.

Out of the many shipwreck coins that I have bought, very few met the MS-64 requirement. In fact, many of my best investments were AU graded coins.

The important thing is to buy a shipwreck coin that is "graded" by NGC or PCGS. It is the grade and the coin’s appearance that will allow you to determine what the shipwreck premium is for that coin versus a similar non-shipwreck coin. If a non-shipwreck coin is considered a good investment, then a shipwreck coin in the same grade and similar in appearance should also be a good investment, provided that the shipwreck premium is not too high.

SS Republic Shipwreck Coin
SS Republic Shipwreck
1858-P $20 Double Eagle
Some of the Best Collections Include Shipwreck Coins

About 4 years ago, I wrote in an article that if you wanted to create one of the finest collections of $20 gold double eagles, you would have no choice but to include shipwreck coins.

With the discoveries of the S.S. Republic and S.S. New York shipwrecks, that now holds true for $2.50 quarter eagles, $5 half eagles, and $10 eagles as well.

So do not automatically rule out shipwreck coins if you are putting together a rare coin collection that is also an investment. Many of my best gains on the sale of my coins came from shipwreck pedigreed coins. I couldn’t imagine my collection without them.

Thursday, July 15, 2010

1815 Large Cent is Still Fooling Collectors

Examples of altered 1845 large cents on Coin 1, Coin 2

For those of you who are not familiar with the large cent, they were produced continuously from 1793 until 1857, with the exception of 1815. There are no legitimate 1815 large cents.

So if they never existed and that fact is well publicized, why do I keep coming across collectors who think they've discovered the real McCoy?

I think the answer lies in the fact that in numismatics, you never know what might be found that was thought not to exist.

How about the ten 1933 $20 gold double eagles that suddenly appeared a few years ago?

Or the missing 1913 Liberty Head nickel that sat in a closet for 40 years until being rediscovered in 2003?

There is always the hope that you have found the one example that has so far eluded everyone else. So it seems only natural that someone possessing a coin altered to look like an 1815 large cent would hope that theirs is the first to be discovered.

So how can you tell if it's an altered coin?

Although some 1815 large cents were created by altering an 1813 or 1816 large cent, it seems most are altered 1845 large cents. So here are some things to look for to see if your 1815 large cent is really an altered 1845:
  • The obvious answer is to look for tool marks around the second 1 in the date. But tool marks are not always present, so fortunately there are a few other things you can look for.
  • Take a look at the curls under the neck truncation. If they end just above the 8, this is a feature of the "mature head" braided hair produced from 1843 until the large cent ended in 1857.
  • Another telling feature is a protruding eyebrow or hair curl on the forehead. Examples dated prior to 1839 didn't have this, and for 1843 through 1857 coins this curl is pretty distinct.
  • Look at the positioning of stars 5 and 6 in relation to the tip of Liberty's tiara. If the tip looks to be smack in the middle between the two stars, this positioning is also only found on the "mature head" braided hair large cents from 1843 until 1857.
  • Finally, if still in doubt, flip the coin over and look at the letters for ONE CENT. The 1843 to 1857 large cent had larger letters for the words ONE CENT than earlier dated large cents.
Since these diagnostics require comparing what a "mature head" braided hair large cent looks like to an earlier large cent, you might not have a coin or image handy to compare to. In this case, just pull out your copy of the Official Red Book. Pretty much every collector has this book and the pictures in it are more than enough to properly identify that your 1815 large cent is really an 1845.

Sunday, July 11, 2010

Paying the Postage in the United States (1776-1921)

I have to share with you a facinating online numismatic (and philatelic) exhibit that I have just seen.  The exhibit was created by Richard Frajola, a professional philatelist in New Mexico, and originally displayed at the Washington 2006 World Philatelic Exhibition.

The exhibit illustrates the relationship between U.S. postal rates and the coins that were commonly used to pay them.  What's facinating is that according to Richard Frajola, prior to July 1851, postal rates didn't correspond to the denominations used in U.S. coins, but rather they were based on the most widely used foreign coins at the time. Also, keep in mind that prior to the Act of February 21, 1857, many foreign coins enjoyed legal tender status in the United States and often were more common than their U.S. counterparts.

So take a few minutes and look at Paying the Postage in the U.S. I hope you enjoy the exhibit as much as I did.

Wednesday, July 07, 2010

Digging Up Ancient Roman Coins in Unexpected Places

Most of us have seen or heard stories about ancient coins or artifacts showing up in places where experts say they just don't belong. Sometimes those discoveries lead experts to change their thinking about how and when ancient societies first interacted with each other.

Recently I received an email from a blogger in England who goes by the moniker Dr. Beachcombing.  He writes a blog called Beachcombing's Bizarre History Blog. It's a blog filled with a lot of unusual and facinating stories, but the one that Beachcombing wrote to me about was a story about a Reverend Halliday who "had a fancy for burying genuine Roman coins in places where it is thought no Romans ever penetrated."

Read about the Mad Coin-burying Halliday and find out why the Reverend did it. It will make you think twice the next time you read or hear about some great discovery of ancient coins being found in unexpected places.