Thread: Were prices of rare coins super inflated in the 80s or was Heritage lying?

As a fairly new and young collector/seller I was not around the market in the 80s and my interest into past coin values was peaked today upon something an interested potential seller asking for an appraisal/offer sent me regarding some very nice rare coins they had. The something they sent me was a portfolio evaluation from U.S tangible investment corporation regarding coins bought through them the year prior. This company was and still is a direct affiliate with Heritage auctions, with them presently being the headquarters for Heritage's Dallas office.

This is what it said, the date coins were purchased was 12/22/85 and the current values were set one year after that

1914s 20$ St. Gaudens MS63 Purchase price: 2550$ Current Value: 2700$
1885CC Morgan MS 65/63 Prooflike Purchase price: 1650$ Current Value: 2070$
1917 Standing lib quarter type 1 FH Purchase price: 540$ Current value: 600$
1904 MS63 20$ Gold Purchase price: 1440$ Current value: 1650$
1871 PF63 Standing liberty quarter Purchase price: 1050$ Current value: 1050$
1885-O MS63 Morgan Purchase price: 350$ Current value: 360$

Obviously they were pretty disappointed when I gave them the current ngc price guide values, they did note that coins/antiques were gaining great value in the late 80s, but were coins really this inflated compared to current values? I have an extremely hard time believing that an 85-O MS63 Morgan has lost 80%~ of its value with today's money getting you less than it did in the 80s. If the coins weren't worth that much in the late 80s as I am inclined to believe, my love for Heritage auctions integrity and reputability has been kicked down a knotch unfortunately. This person bought these coins as a long term investment and I would hate to hear they were blatantly lied to. If that is not that case and hyper inflation in the coin market was a reality, I apologize for the rant, I just wish to gain proper insight into the past market.

And no, I did not end up buying any of these coins, we both agreed it would be best for them to hold onto the coins for the future market uptick or to hand down to their kin.

I think that there was a coin investment hype in the 80's and that lots of Wall street money was poured into the coin market. I'm not sure if that was 85 or not but that could explain the high prices.

Originally Posted by fishwhacker

.... but were coins really this inflated compared to current values?

Yes.

I have an extremely hard time believing that an 85-O MS63 Morgan has lost 80%~ of its value with today's money getting you less than it did in the 80s.

Look at the chart -



That is what happened to the coin market as a whole in the 1980's.

A common date Morgan that you can buy today for $150, sold for $1500 or more near the peak of the market during that time. That is a cold, hard fact.

Doug got here first but he is absolutely correct the market was going crazy back then. An example I like to use is the 1881-S Morgan dollar in MS-65. This coin pretty much defines the idea of a common MS-65 Morgan. Even back in the early days of the population censuses there were close to 100K of them graded in 65.

In the mid 70's they were a $10 coin. At the height of the 79/80 silver boom they were $35 to $40 and being melted because there weren't enough collectors that wanted them. By 1987 after two years of TPG's and collectibles being touted they were over $100. When the market peaked in Aug of 1989 they were approaching $1000 apiece. $1000 for a MS-65 1881-S Morgan dollar? After the market crashed they dropped as low as $30 to $40. It has only been in the last couple years that they have crawled back over the $100 mark and a large part of that is probably the fact that silver is much higher now than it was then and it has greatly raised the base material price of the coin. To a very large extent the prices of most coins are still well below where they were 23 years ago.

Several of the slabs and certificates in my slab reference collection from back in the mid 80's have the current market value at the time of slabbing printed on them. One of them believe it or not actually guarantees a given rate of return! (Of course the service is out of business so good luck collecting on the guarantee.) The prices of the coins today are a fraction of what they were back when the slabs/certificates were produced.

What happened in the 80s is what happens in any market when "outsiders" start buying/selling/trading for investments or just plain money making. By outsiders I am referring to people who have no interest in the hobby, other than trying to make a few bucks. There have been inflated prices to a much smaller extent in recent years in certain series more recently, but nothing like the Morgan dollars in the 80s. And most of these price bubbles were caused by trends within the hobby, rather than Wall Street type trading.

Very interesting thread, and a good reminder to collect what you like because you enjoy the hobby.

Its also good to remember that these incidents illustrate how thinly traded the coin market really is. At any point in time maybe 1/10th of 1 percent of collectible coins are for sale. Any change in demand, up or down, can have serious effects on the market. Its stable simply because we are the little odd ducks and keep to ourselves buying coins, so supply and demand balance. Have either a new entrant like Wall Street funds, or younger generations simply stop becoming coin collectors, and there could be sizable effects to our hobby.

Just another reason to collecto for the love of coins, not profit like Djaeon said.

I had a few coins laying around that I got when I first came into the hobby back then. Just sent them to PCGS for grading expect they will be worth about 10% of what they cost me when they come back.

As others said elsewhere in the thread, coin values were indeed super-inflated at that time.

As the OP mentioned, the company this person bought these coins from remains affiliated with Heritage, and even they strongly recommend that if you buy coins as an investment (and there are very valid reasons to do so), you do so for both diversification and for the long term, and you limit the amount you invest. I would personally add that doing due diligence to ensure that you're not buying at a market peak is always a good thing; however, buyers will often forget that what goes up is awfully likely to come back down.

Of course, I'm a certifiable coin weenie, so I buy what I want to collect.

Originally Posted by swhuck

As others said elsewhere in the thread, coin values were indeed super-inflated at that time.

As the OP mentioned, the company this person bought these coins from remains affiliated with Heritage, and even they strongly recommend that if you buy coins as an investment (and there are very valid reasons to do so), you do so for both diversification and for the long term, and you limit the amount you invest. I would personally add that doing due diligence to ensure that you're not buying at a market peak is always a good thing; however, buyers will often forget that what goes up is awfully likely to come back down.

Of course, I'm a certifiable coin weenie, so I buy what I want to collect.

Great point. Remember, most assets you buy as diversification can have poor performance during a period. You don't diversify to maximize returns, you diversify for safety. Coins may not have done very well during that period, but they provided some safety to the other returns. Diversifying assets is like buying permanent insurace, if the market drops maybe the coins would have went up, thereby balancing out the total portfolio. This is why I buy bullion. I buy coins for funsies.

There were two major blowoffs with the first being in '80 and the second in '89/ '90. Prices were very strong in '86 but retreated slightly before getting extremely strong.

The '90 catastrophy hit prices of high grade common coins extremely hard. Most of the damage was in Morgans but it also killed other 2oth century silver obsolete types in high grade (especially late date walkers). Some of this damage isn't nearly as extreme as the price guides indicate because of changes in grading standards. "Real" collectors didn't bear the brunt of the drops but is was investors who mostly lost around 70% of their money. Almost all gems were graded as MS-65's up to '90 so nice hand selected coins were often MS-67 or MS-66 by today's standards. Investors got stuck with whatever was available after collectors had purchased what they needed for their collections. This is the way it always works. The rules and conditions change but the results are the same; investors lose in collectibles almost without exception.

By '95 the hobby was a total shambles. Almost nothing was getting sold at any price other than top end coins and even these didn't always bring great prices. Nice key dates were salable as well. The modern market began its recovery first in 1996 with the announcement of states coins and the classics recovered in '97 and went gang busters with the actualintroduction of states coins in '98/ '99. Millions of baby boomers returned to coin collecting and were seeking the coins they couldn't afford as children. They had been chased out of the hobby by clads and their opinion of clad had not changed over the decades in most instances.

I was not a collector at the time (as I was born in 1985)...but what caused this huge coin value boom of the late 1980s and then it's drop. I know in the early 80s there was the Hunt's brothers silver scam which drove bullion prices through the roof...but this seems to be way after that. What happened?

Originally Posted by CamaroDMD

I was not a collector at the time (as I was born in 1985)...but what caused this huge coin value boom of the late 1980s and then it's drop. I know in the early 80s there was the Hunt's brothers silver scam which drove bullion prices through the roof...but this seems to be way after that. What happened?

Merrill Lynch introduced a fund to invest in "investment quality" rare coins. These are 65 and higher. Since its such a thin market, the prices the fund was chasing exploded. When the returns weren't there, they shut down the fund, and the prices collapsed. Before that, in the mid-late 80's, just general over exuberence over the possibility of conis being "investment quality" caused the pre boom.

There were several Wall Street funds created - it caused a "band wagon" syndrome. But it was more than that. Look at that chart I posted, look where it is in '86. PCGS opened it's doors in '86 and NGC opened their's in '87.

What happened on that chart after '86 is not a coincidence, but rather a direct result. The funds didn't come along until after the TPGs started up. More than any other thing, the TPGs caused that huge bubble.

Think back a few weeks ago when that thread with the video of David Hall speaking and telling everybody how great the coin market was and what a good idea it was to buy coins at the current prices. That video was taped about 2 or 3 months before the bottom blew out of the coin market and everything collapsed.

And Hall had been advertising like crazy and talking like that since '86, and even before. It was all the dealers saying what "great investments" coins were now that the TPGs had arrived that contributed to the Wall Street funds even coming into existence. Wall Street merely decided they wanted in on the good thing too. And they were a bit too late. It blew up soon after the funds were created.

Originally Posted by CamaroDMD

I was not a collector at the time (as I was born in 1985)...but what caused this huge coin value boom of the late 1980s and then it's drop. I know in the early 80s there was the Hunt's brothers silver scam which drove bullion prices through the roof...but this seems to be way after that. What happened?

It wasn't what the Hunt brothers were doing that was a "scam". The scam was perpetrated by the COMEX which changed the rules in the middle of the game to destroy the Hunt brothers and protect the monied interests. And lest you think that this was for the greater good nothing could be further from the truth as they've been protecting the monied interests in holding back the price of silver ever since. This does no one any good and in the long run it will mean a massive silver shortage that could be injurious to all markets once again.

But the profits dealers and collectors were making in silver led to a massive "wealth effect". They took their profits and their paper profits and plowed it back into the very coins that were "hot" at the time. This caused escalating prices but the hobby acted as though the collapse in silver prices early in 1980 was an anomaly. Until April there was little impact on the hobby but then it collapsed.

The '89 run-up was mostly irrational exurberance. It was the anticipation of massive fund buying that never materialized. The grading services (especially PCGS) were expected to make coins "fungible". If one '80-S Morgan in MS-65 was just like every other one then they could be traded like stocks and bonds rather than collectibles. But, of course, what outsiders can't comprehend is that no two coins are alike. It's not only that they can't be graded to exact standards but that collector preferences vary. Grading companies have to please collectors first or they'll have no coins to grade so standards are always going to be a moving target until we institute parameter grading. This is not fertile ground for investors at this time any more than it was in 1989.

The irrational exuberance ended when the money didn't materialize.