Why it is safe to buy rare coins.

3^rd Party Coin authentication and grading
Rare coins tend to appreciate, particularly in inflationary periods, and collectors and their heirs have realized fortunes on the sale of coins that had been held for decades. Until 20 years ago, however, investing in rare coins would have been a dicey proposition for most people. Investors who were not experienced numismatists would have had a difficult time distinguishing between authentic and counterfeit coins and between valuable specimens of a particular issue and coins that has been cleaned and polished to resemble them. Even among genuine, unaltered coins, they would have been unable to detect the fine distinctions that separate one grade from another - distinctions that can yield price differentials of hundreds, thousands, and even tens of thousands of dollars. Investors would have had to rely entirely on the expertise and integrity of their coin professionals.

The advent of third-party coin grading services in 1986 opened the way to safe investing in coins by non-numismatists. The grading services encapsulate the coins in tamper-evident transparent holders, known among numismatists as "slabs." Also encapsulated in each slab is a certificate of authenticity and a grade, such as "MS65," which means that on a scale of 1-70, with 70 meaning a perfectly minted and preserved coin, the coin rates a grade of 65. ("MS" stands for "Mint State" and designates the upper end of the grading scale, from 60 to 70.) Rare coins could now be bought and sold like shares of stock. One authenticated 1911 $5 U.S. Gold Indian graded MS65 by one of the respected grading services, such as NGC or PCGS, is considered to be the same as any other (although the most finicky collectors and investors hunt in person for "high-end" specimens within a grade). Every day thousands of rare coins are bought and sold "sight-unseen" through Internet auctions sites and television shopping channels. ("Sight-unseen" is the industry term for these sales; in fact retail Internet auction sites show photos of the coins, and TV shoppers see them displayed on their screens.)


Professional Coin Grading Service- PCGS

Industry leaders were deeply concerned that without standardized grading the rare coin industry could face major problems.

Over the course of many months of meetings, the blueprint for the Professional Coin Grading Service evolved. The advent of the third-party appraisal of a coin's physical condition, backed by a guarantee, and a national network of reputable coin dealers could provide an extremely reliable form of protection for rare coin consumers. PCGS would create a climate in which consumers could participate in the coin market with greater confidence. The concept would revolutionize the rare coin industry.

The Professional Coin Grading Service began serving the coin-buying public on February 3, 1986. The firm is responsible for dramatic improvements throughout the rare coin industry which have forever changed the way rare coins are bought and sold. In addition to standardized grading. PCGS offered cash-backed grading guarantee, problem-free coins, safe long-term storage, and sight-unseen trading. Together, these elements have created unprecedented public support for the rare coin industry.

Since 1986, PCGS has graded over 16 million coins with a cumulative declared value of over 17 billion dollars.


Nusmismatic Guarantee Corporation-NGC
Founded in 1987, NGC has graded more than 10 million coins. They have rapidly grown to be the leading third party grading service in the world due to our reputation for consistent and accurate grading, and our affordable and flexible grading tier options. NGC's Customer Service team is recognized as being the industry's best. For these reasons, NGC grades more coins than any other grading service, and more of the world's finest coins.


Physical possession
Safe coin storage and transport
Rare coins do not pay interest or issue dividends. In that respect, they are similar to growth stocks: return on investment comes from buying low and selling high. Between purchase and sale, the coins must be transported and stored safely. Individual investors typically rely for storage on home safes, vaults or bank safe-deposit boxes.

Institutional and large individual investors can obtain greater levels of security, as well as personalized storage services, by availing themselves of the specialized custody services offered by a professional depository company, usually for reasonable fees. Such companies provide insured and highly secure storage of assets, holding them in their owner’s name and the off-balance sheet of the depository company itself. In addition to periodic inventory statements, some of these companies may even provide individual third-party transaction confirmations, which verify directly to the account owner every deposit, transfer, or withdrawal affecting each coin in the account, further enhancing the overall security offered by the depository.


Annonymity
Privacy has always been among our clients top concerns. With all the turmoil in the world, privacy seems more important than ever. Rare gold and silver coins are among the few remaining investments that you can legally accumulate and liquidate privately. Sales of Pre-1933 U.S. rare coins are non-reportable. However, the sale of modern bullion in amounts exceeding 25 ounces requires dealers to file a 1099-B with the I.R.S. reporting your profits at the time of the sale.


Instant Liquidity
Overall, rare U.S. Coins are often more liquid when compared to other investments like real estate, fine art, and other collectibles. Gold and silver coins encased in a holder and certified by one of the industry’s respected independent grading services, allow coins to be sold instantly around the world, via Computerized trading networks either with or without prior inspection.

The 2008 Numismatic Dealer Directory lists over 5,000 coin dealers nationwide. That’s 4,600 small to medium-size dealers in addition to the 400 major dealers addresses, phone & fax numbers, email and websites. Grading Services, Auction Houses, Wholesale Supplies, Gold Specialists, Bullion Dealers and much more are all included in the directory Annual US sales by these 5,000 dealers range from $200,000 to $20 million each, primarily in retail stores and at local conventions. Even after deducting for bullion and non-coin sales and sales on Internet auction sites, an average of $500,000 for each dealer is a conservative estimate.

Rare coins as collateral for loans
An investor with a pressing need for cash (for personal reasons to or to take advantage of an investment opportunity) can use rare coin holdings to meet that need - without selling the coins. That’s an advantage when the coins have not been held long enough to achieve the desired return on investment. Most investors will rarely or never use their coins to raise capital. Nevertheless, the fact that loans on rare coins are categorized as asset-based loans shows that while a financial institution’s investment department may be ignorant about or disparage rare coins (or both), its loan officers may view them as solid collateral.

Using numismatic coins, which have value beyond their metal content, as collateral for loans can generate funds for any legitimate purpose, including acquisition of additional coins. Loans on numismatic coins funded by traditional lenders are generally structured as term loans of six months or as revolving lines of credit. Loans secured by coins are usually viewed as asset-based loans. Most lenders require the borrower to deliver the coins to the lender. Most lenders will advance 50% to 75% of the wholesale value of the numismatic coins.

A borrower should verify where his coins are stored, how they are insured, and if they are stored separately under the borrower’s name. Borrowers should carefully review all charges involved in funding the loan to determine the total cost of borrowing including the interest rate and all fees, including any fees for origination, documentation, storage, service, administration, and/or sales. Before the funding of the loan, the retail borrower is entitled to receive a completed interest-rate disclosure reflecting the total APR including all fees and meeting the requirements of Federal Reserve Regulation Z.


Standardized pricing

The Coin Dealer Newsletter
Since 1963, the Coin Dealer Newsletter has been in the information business, selling current, accurate wholesale information on the Bid and Ask levels of U.S. coins and currency. The senior staff has over 100 years of numismatic experience, which enables proper market information. Dealers know that only in the Coin Dealer Newsletter can they find unbiased, accurate, current price information - information that they know is independent, because the Coin Dealer Newsletter staff neither buys nor sells coins, only information.

The Certified Coin Exchange
Since 1990, The Certified Coin Exchange (CCE) has been a key intermediary in US certified rare coin trading between major coin dealers in the United States. Currently there are over 100,000 bid and ask prices on CCE, and live trading occurs electronically between 12:00 and 5:00 Eastern Time. Bids/Asks are posted for PCGS, NGC, ANACS and ICG certified graded coins. There are over 150 Member Firms who have the capability to place bid/ask prices and to execute trades against these prices. Over 275 more Associate Members subscribe to view CCE prices and either trade based on these prices with other dealers, or propose transactions to the Member Firms who are posting these prices.


Summary
One thing is certain when it comes to the rare coin market, the only constant is change. Any move in the price of gold or in the inflation rate, or the long overdue correction in the stock market, or continued interest in the Statehood quarter program, could move the rare coin market in a big way. The market is a coiled spring. There is substantial potential for energetic growth. Looking at the trend from the mid-1970s, we see that the coin market is where it's supposed to be. We view the risk now as minimal. It does not appear that the rare coin market will be headed any lower, and given any external stimulus whatsoever, could easily make a strong upward move. Those patient investors with the wisdom to purchase near the bottom will be the ones who reap the reward at the top.