Thursday, January 26, 2012

Ten Silver Coins Priceless in the Eyes of Aficionados

This morning I was reading a thread on BullionStacker entitled "Interesting Article." There, forum member mtforpar had posted a link to what I presumed was a submission by Adam Doolittle, published in Silver Monthly. That piece, entitled The Ten Worst Silver Coins For Investment, apparently raised the hackles of the BS pack, as mtforpar stated "I stumbled across this article tonight. I love it because I am making money by doing the exact opposite of the articles advice." I replied, taking the stance of devil's advocate, and some interesting points were raised.

Doolittle's offering, upon investigation, represents more than an author submitting an article to a online website that publishes it within an e-zine. It turns out Adam Doolittle himself is the host of Silver Monthly, which bills itself as a venue that attempts to promote intelligent investing in precious metals by connecting reader's with great writers. Their mission statement in part, states "intelligently analyzing the silver market, investments, and policies influencing these topics."

A bit of history: a paraphrased excerpt of which follows. In 2005, Adam Doolittle founded Silver Monthly. He felt that there were too many conspiracy theories being touted in the precious metals arena that were masquerading as professional journalism. So Silver Monthly was begun as an attempt to publish credible content regarding a variety of issues facing silver investors, such as market forces, overall economic conditions, and politics.

Doolittle's piece The 10 Worst Silver Coins for Investment specifies ten different silver rounds, which most are familiar with. If you are an investor new to precious metals, he suggests that purchasing high-premium bullion rounds is a strategy ill-suited to increasing your net worth as rapidly as possible. He lauds the simple tactics of paying the least amount possible for your silver. Don't pay a premium, he recommends, because you'll wind up paying a high price.

The coins he nominates as candidates - primarily Perth Mint choices - are, ironically, among the favorites of collectors at Bullion Stacker. Historical price performance is available for high-grade Morgan Dollars. Similar comprehensive documentation for recently produced Government Mint issued bullion rounds is lacking. Anecdotal evidence as presented by purchase prices and completed sales on ebay could well prove inconclusive of trends due to the nature of the short time frame encompassed.

Therefore, I shall intentionally limit the focus of my rebuttal to his selection of the Morgan Dollar as one of the worst coins that investors could select by which to increase their net worth with its appreciation. The Morgan Dollar is second only to the Lincoln Cent amongst American collectors in popularity. Mr. Doolittle might as well disparage the Greek Gods. He would do well to be wary of lightning bolts in his area. They may well emanate from atop Mt. Olympus, hurled by an angry Zeus.

The Morgan dollar was designed by George T. Morgan, Assistant Chief Engraver under William Barber at that time.
It was produced by the United States Mint from 1878 until 1904 then, following a respite, again for one final year in 1921. The coin, with its large size and intricate designs, is considered by many numismatists as one of the finest ever placed into circulation.

Despite hundreds of millions being melted, many still exist in pristine condition, perhaps accounting for their popularity. Superior grade specimens, covering a range of years and an array of mint marks, may still be obtained at reasonable cost. Slabbed Morgan's performed reasonably well during the Hunt Brothers induced silver spike of 1979 to 1980. I've read that select key-dated coins in gem condition appreciated as much as 800%.

This, however, was during a period when that increase was surpassed more than three-fold by the simple increase in the value of silver bullion itself. Thus, one might consider Morgan Dollars as a means of diversification within a precious metals portfolio, as opposed to their being the centerpiece and sole component of a bullion acquisition investment strategy. As silver rises in price, there will be profits to be captured at either end of the spectrum. And, in any event, those with the means to procure high dollar high dollars are by no means destitute.

Doolittle mentions expensive third party graded and slabbed Morgan dollars, contending that if a hefty premium is paid to purchase the coin, it may not do as well as simple bullion in a scenario of hyperinflation. He asserts "The problem with these coins as investments is that their numismatic premiums are unlikely to keep up with the rise in the price of silver. For example, if silver goes up 177% from $18 to $50, then a one-ounce numismatic collectible coin valued at $100 is likely to go up by only 32% to $132. The collectible coin will go up based on the silver it contains, but there’s no reason to think the numismatic premium will increase too."

Though Doolittle's reasoning appears plausible, it may in fact be specious. As long as a collector base exists, there will be an increasing demand for rare, key-date coins, in superior grade condition. This will cause their prices to increase. It's inevitable. When the hammer falls during the auction of a rare date high-grade Morgan there is often a stunned silence, before the charged atmosphere erupts spontaneously into appreciative cheers. Of course, should "the shit hit the fan," then all bets are off.

Mr. Doolittle, with his attack, has launched a weapon threatenening the very existence of a premium market for Morgan Dollars should too many newcomers with funds in hand, freshly induced into purchasing precious metals, take his tirade as gospel (Yahweh has spoken) and widespread adoption of His Commandment ensue. While collecting Morgan Dollars may not be the most lucrative journey one could embark upon, it represents a goal that is indeed a worthy challenge. The completion of a registry of third-party graded slabbed coins in MS65 or better condition, remains a dream few but the wealthy will realize.

The Morgan cartwheel is held sacrosanct by its many worshippers, and in choosing to target this King of the Coins, Adam, in the eyes of the congregation, has done little more than to compare unfavorably to a hungry Neanderthal, wrapped loosely in animal furs, tracking a gigantic lumbering Wooly Mammoth across snowy wastelands, poking at it with a sharpened pole, hoping to hasten its demise. CaveDude? Bro, unless you get very lucky, you're gonna starve.

Buy Silver. Buy Gold. Save Copper. Start Now.

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