LOOKING BACK TO 1992...
THE EXCITEMENT OF PUBLIC COIN AUCTIONS
By SCOTT A. TRAVERS
COPYRIGHT © 1992, 2003, 2007 BY SCOTT A. TRAVERS
ALL RIGHTS RESERVED.
Public auctions represent one of the most important--and
one of the most exciting--methods by which rare coins are
bought and sold. Using this method successfully, though,
requires constant awareness of changing market conditions and
modification of buying and selling strategy.
Over the years, I have been one of the greatest
supporters of selling rare coins through public auction; as a
consumer advocate, I have viewed this as a medium that was
generally pro-consignor. I haven't been as bullish on buying
coins at auction because there are perils and pitfalls that
require more expertise on the part of prospective buyers. But
I have encouraged collectors seeking to sell their coins to
go the auction route, provided they negotiated suitable terms
of sale with the auction house of their choice.
From the mid-1970s through the late 1980s, it was said
with considerable accuracy that where the action was, in the
rare coin market, was where the auction was. Time after time
during that period, the biggest, most valuable, most
glamorous collections were dispersed at public auctions.
Consider these examples:
o In 1977, the John Andrew Beck Collection brought more
than $3.2 million at a public auction conducted by Abner Kreisberg
of Beverly Hills, California.
o In 1982, the gold portion of the fabulous Louis
Eliasberg Collection fetched $11.4 million at a glittering
auction conducted by Bowers and Ruddy Galleries of Los
Angeles under the simple title, The United States Gold Coin
Collection. Two of the 1,074 lots--an 1822 half eagle (or $5
gold piece) and an 1870-S $3 gold piece--were hammered down
for prices of $625,000 apiece.
o In 1983 and 1984, Bowers and Merena Galleries of
Wolfeboro, New Hampshire, successor firm to Bowers and Ruddy,
sold coins from the collection of numismatic legend Virgil
Brand for a total of more than $3.3 million at two public
auctions. In 1983, Virgil Brand's library was sold by George
Frederick Kolbe, a California dealer in numismatic
literature, for $20,500.
o In 1984, coins from the collection of Texas newsman-
numismatist Amon G. Carter Jr.--one of the greatest
collections of all time--realized more than $8 million at a
spectacular auction conducted by Stack's of New York.
Carter's outstanding collection of U.S. paper money was sold
at fixed prices by various dealers.
o In 1986, the Robinson S. Brown Jr. Collection brought
hammer prices totaling nearly $1.3 million at an auction held
by Superior Galleries of Beverly Hills. That same year,
Superior sold the Wayne Miller Collection of U.S. silver
dollars at another memorable auction for more than $1.2
million, including the 10-percent buyer's fee charged on each
lot.
o In 1987 and 1988, the storied Norweb Collection
realized a total of more than $18 million at a three-part
auction sale by Bowers and Merena. The company's marvelous
catalogs contributed significantly to the sale's success.
o In 1988, the Herman Halpern Collection of U.S. large
cents--one of the finest ever assembled--went on the block at
an auction conducted by Stack's and realized nearly $2
million. That same year, Congressman Jimmy Hayes' phenomenal
collection of high-grade U.S. type coins brought nearly $1.2
million--an average of approximately $10,000 per lot. Again,
outstanding cataloging served to enhance the coins' appeal--
and, in all likelihood, the prices they attained.
o From late 1979 through early 1981, in a four-part sale
that remains the greatest coin auction of all time, the
Garrett family collection realized more than $25 million for
Johns Hopkins University of Baltimore, which had received the
coins in a generous bequest from the Garretts. The sale,
conducted by Bowers and Ruddy Galleries, included such
rarities as an 1804 silver dollar, a proof 1795 silver dollar
and two 1787 Brasher doubloons, one of which changed hands
for $725,000--an auction record that stood for nearly a
decade.
All these auctions, and others from that period, as
well, were true "happenings"--dramatic highlights that
stirred great excitement throughout the rare coin market.
However, these auctions occurred in a different kind of
marketplace. The marketplace of yesterday, the marketplace of
the Seventies and the Eighties, had far more stability than
the marketplace of the Nineties and thus was more conducive
to longer-range planning.
During that period, a collector could consign his or her
coins to an auction firm for sale months later--and sometimes
even years later--and the marketplace stability would permit
the firm to plan that sale carefully, in loving detail, over
many weeks without undue concern that market volatility would
jeopardize its success. Thus, it was not only possible but
routine for major auction sales to feature lavish catalogs in
the grand-format style, filled with breathtaking photographs
of the coins. And waiting periods of three or four months,
and sometimes even longer, were normal between the time a
collector consigned the coins and the auction firm sold them.
Even then, to be sure, three- or four-month waits
created some inconveniences and occasional market-related
problems. But in those days, these weren't insurmountable;
they tended to be annoyances, rather than grave concerns.
Those memorable sales of the not-so-distant past
provided opportunities for latter-day hobbyists to build
collections rivaling those that were being dispersed. People
like Harry Bass and Ed Trompeter seized those opportunities
to acquire great rarities. In the process, they engaged in
sometimes fierce but more often friendly bidding competition
which reinforced the mystique of those great auctions. It
created an ambiance of elegant excitement. At the same time,
it reinforced the perception of marketplace stability. And,
of course, it played a key role in pushing price levels to
unprecedented heights in those crowded and exhilarating
auction rooms.
The marketplace today is significantly different--and as
a result, I am no longer as bullish as before on selling rare
coins at public auction. The current marketplace is volatile,
unstable and speculative, and under these conditions there is
markedly greater risk in consigning your coins for sale at
auction.
In the mid- to late 1980s, we witnessed the development
and rapid growth of sight-unseen trading in the coin market.
Coins that had been "slabbed"--that is to say, certified and
encapsulated in sonically sealed, tamper-resistant holders--
came to be treated virtually like commodities because they
were viewed as being interchangeable in many instances. This
commoditization of coins led to large-scale purchases by
limited partnerships and investment funds, and as the scale
increased, so did the market's volatility.
Because of the wide and fast price swings, the risk was
substantially higher that you might consign, say, $1 million
worth of coins for sale at an auction three or four months
down the road--and by the time the sale took place, those
coins' market value might have declined precipitously,
perhaps by half or more. That was a risk--a very significant
risk--that just didn't exist a few years earlier.
As this is written, in early October 1992, the coin
market as a whole remains extremely sluggish. Yet, even now,
volatility is high, and no one can say with any assurance
that prices won't be sharply lower (or, for that matter,
sharply higher) three or four months from now. Stability, in
short, is a thing of the past.
I don't mean to paint an entirely black picture of coin
auctions' potential as a sales vehicle. They do have
important pluses, even today. Those pluses are so important,
in fact, that if you can overcome the very great obstacle of
marketplace risk--the risk that your coins will decline in
value dramatically before the gavel comes down--public
auctions remain one of the very best ways to sell your coins.
The primary advantage is the competition public auctions
stimulate. If you try to sell your coins directly to a
dealer, you're quite likely to get a low offer. Dealers have
a vested interest in the outcome of such a transaction. But
auction houses routinely receive commissions from the sale of
consignors' coins--so if you sell at auction, the auction
firm will have the same interest at heart as you do: It will
want your coins to bring the highest possible prices so that
it can maximize its commissions.
Auctions alleviate half of the sale risk: the risk that
you'll be offered prices far below your coins' actual value.
The other half of the sale risk is that your coins will lose
value between the time you consign them and when they're
sold.
Public auctions maximize the price a coin brings at the
exact time the gavel falls. If the auction firm is reputable
and has brought together a representative cross-section of
bidders, the chances are good that you'll get top dollar for
your coin--top dollar, that is, in terms of the current
market. That's because competition will drive up the price.
Another advantage to selling your coins at auction is
the fact that auction houses generally create beautiful
catalog. These not only help attract bidders, but also serve
as keepsakes and records of the sales. Besides being helpful
to consignors, these catalogs also benefit the marketplace as
a whole by stimulating interest and serving as a stabilizing
force.
Auctions sometimes do well even at times when the market
as a whole is in a slump. The fact is, auctions sometimes
invent buyers and create demand by conjuring up an air of
excitement--by transforming the sale of coins into a real
event. That happened, for example, at the Eliasberg sale; the
market was shaky, but the auction was spectacular. Bowers and
Ruddy and, more recently, Bowers and Merena, have done a
phenomenal job of creating such events over the years.
Unfortunately, public auctions also have disadvantages,
at least from the perspective of the consignor. The big one,
already mentioned, is the risk that your coins may go down in
value before an auction takes place. There are, however,
other negative factors, as well.
One is the fact that you have to wait so long to get
your money. Typically, that wait includes not only the three
or four months before the auction, but also 45 days
afterward. That's the time auction firms normally give
successful bidders to pay for their purchases.
Auction firms to provide cash advances to consignors; as
a rule, they'll advance up to 50 percent of the estimated
value of a coin. But, in such instances, the interest rate is
normally quite high--18 percent, customarily. So unless you
negotiate a low interest rate for such an advance, this won't
be a very attractive alternative.
To guard against excessively low bidding, a consignor
has the option of buying back his or her coins. In that case,
however, the auction firm will usually charge its regular fee
of 10 or 20 percent of the coins' prices realized. So buying
back coins can become an expensive proposition.
Also on the downside, auction sales cannot be canceled
by a consignor except in unusual cases where special
contractual provisions have been made. Thus, the auction
company will proceed with a scheduled sale even if the
marketplace is all but devoid of money.
You can protect yourself against some of these risks,
especially if you are consigning many thousands of dollars--
even millions of dollars--worth of coins. In such cases,
auction firms have the incentive to make accommodations.
For one thing you need to be sure that every coin you're
selling has a reserve on it. That way, if it doesn't bring
this minimum amount, you can buy it back and sell it at a
later, better time.
You can seek an arrangement whereby you will pay a
smaller-than-usual fee--perhaps 5 percent or even less--when
you buy back your coins.
And, if you are a major consignor to a sale, you can
seek a cancellation clause giving you the option to have the
sale postponed, without penalty, if--in your sole discretion-
-market conditions mitigate against putting the coins on the
block on the scheduled date.
Given the market's volatility, it's advisable to cost-
average the coins you consign for sale at auction. In other
words, don't put all your "eggs" in a single sale; sell your
coins at various sales over a period of time to minimize the
risk that they'll all hit the market at precisely the wrong
time.
Selling coins at auction can be a rewarding experience,
in terms of both psychic income and prices realized. But to
maximize your pleasure and profit, and minimize your risk and
potential loss, you need to take steps to protect your
interests.
If you take the necessary precautions, you may very well
find that auctions are the place where the action is for you.
