|
Robinson, Mandela Coins Smart Investment Pieces
 | By Chris Woltermann, World Coin News
July 15, 2008 |
The vigorous appreciation of two recently minted coins, one American and the other South African, provides the background for the following discussion of coins as investments. Does the purchase of coins that established or prospective numismatic worth make sense for those seeking a good return on their expenditures? That's the question.
I've not made an arbitrary decision to focus on America's 1997-W Jackie Robinson $5 commemorative and South Africa's 2000 Nelson Mandela R5 (5 rand) regular issue. In their home markets, both coins are top performers among pieces minted in the past dozen years.
The South African issue's rate of appreciation makes it the best such performer globally. Although the American piece is a relative laggard, its absolute appreciation in some grades is greater and was achieved in the world's largest numismatic market.
Americans rightly hesitate to treat coins as investments. I'm old enough to remember the 1960s when hustlers at their ethical nadir foisted much numismatic junk on unsophisticated buyers.
Aggressive promotion distorted the market even for respectable coins, including the 1950-D Jefferson nickel. Uncirculated examples of this piece eventually changed hands at around $1,000 per roll, $998 over face value. Now, some decades later, the same rolls fetch about $600.
The lesson of the 1950-D nickel is hardly unambiguous. Yes, long-term holders who bought near its market peak have fared poorly. Over the years, however, other buyers made money on 1950-D Jeffersons by repeatedly buying and selling them. Successful investors know when to sell as well as buy.
Coins are, to be sure, speculative assets with limited use value. Unlike real estate, they don't yield rental income; unlike stocks and bonds, they cannot pay dividends or interest. Coins are somewhat akin to such commodities as wheat and copper, whose investment potential is a function of anticipated future demand for them.
Agricultural and industrial commodities are arguably more prone to price volatility than are coins. It's a matter of supply in the "supply and demand" equation.
The maximum supply of any coin is fixed once its production has ceased. Supply actually suffers attrition due to losses in circulation and the deliberate destruction of coins. Under the circumstances, a coin tends to appreciate in value rather than depreciate.
There are two implicit conditions here that require explication. One, a coin must be numismatically desirable, which means that it must be coveted as a collectible, preferably by a growing collector base. Two, a coin must be scarce relative to the numbers of its prospective buyers.
A paradoxical qualifier to the scarcity condition is that there must be a sufficient quantity of a coin to permit the functioning of market dynamics. While extremely rare coins attract much attention, their markets operate only sporadically.
So, are there any coins that seem promising as investments? There are, and they are the Robinson $5 in Mint State (not Proof) and the Mandela R5 in both Mint State and Proof.
The 1997-W Robinson $5 is a product of the United States' mint in West Point, N.Y. Struck in .900 gold, it honors Jackie Robinson, the famous African American baseball player, on the 50th anniversary of his entry into the erstwhile all-white baseball establishment.
Robinson's commemorative has several features strongly working in its favor. Appealing to Americans' obsessions with race and sports, it is a tangible reminder of a socially transformative event that presaged the Civil Rights revolution of the 1960s.
It is also tantalizingly scarce. West Point minted only 5,174 pieces in MS versus about 24,546 (published figures vary) examples in proof.
The Robinson commemorative in MS has undergone a meteoritic rise in value. Offered at a pre-issue price of $180, its current estimate in MS-65 is $6,000 (Coin Values, March 2008). That's an increase of 3,233 percent.
Think whatever you will about coins as investments - there's no denying the astounding record of the Robinson $5. Then there's South Africa's Mandela R5.
It entered circulation at face value and now sells in South Africa for about R25,500 in MS-65, an increase of 509,900 percent. (As I write in late March, the rand is worth approximately one-eighth of a U.S. dollar.)
The proportionately far sharper appreciation of the Mandela R5 versus that of the Robinson coin is partly due to the much lower starting price of the former. Put simply, it's easier to realize an extraordinary percentage increase if the beginning point is R5 instead of $180. But the Mandela piece has other considerations behind its stellar performance.
It's a regular issue, albeit a one-year type, and it appeals to collectors who disdain commemoratives as pseudo-coins. Indeed, regular issues intended for circulation often outperform commemoratives in the market.
This is notably true for the Mandela R5 because of its theme. It honors Nelson Mandela, the first South African president elected in multiracial elections. He and his coin are tremendously popular among South Africans.
Numismatic rarity in the conventional sense hardly enters the picture. The Pretoria mint of South Africa produced about 6.2 million business strikes. Specimens grading MS-65, however, are rare both because production standards for business strikes were lax and because most of the coins either circulated briefly or suffered mishandling. Numismatic Guaranty Corporation and Professional Coin Grading Service together have graded a mere 412 pieces as MS-65.
The Mandela R5 and the Robinson $5 seem poised for additional appreciation of the sort sought by investors. Several relevant indicators apply to both coins, while others pertain only to the Mandela.
In favor of both are: 1) past performance, 2) persistent collector interest, 3) scarcity of high-end coins relative to demand, and 4) inflationary pressures that spur the purchase of hard assets. Inflation is especially troublesome in South Africa, where the rand has fallen about 16 percent against the U.S. dollar since the turn of the year.
The Mandela coin will almost certainly benefit from two other factors. One is the dramatic growth of South Africa's numismatic community as blacks join its ranks. According to Mark Andersen, the CEO of S A Coin, about 40 percent of his firm's customers for high-end Mandelas are black. The second factor is South African tax law that levies no capital gains tax on profits from the sale of numismatic coins.
There exists no better sign of market health for the Mandela R5 than the price trend of its best proof specimens. Only three examples are known in PF-69, with none higher. One piece sold for R100,000 in early 2006, when it was the only such piece known, while another recently sold for R200,000.
The fairly common PF-66s, which currently retail for about R19,400, seem less exciting than their MS-65 counterparts. Given the record-breaking sale of a PF-69, potential buyers should perhaps consider PF-67s and 68s.
Investing in both the Robinson $5 and the Mandela R5 makes the most sense for buyers who savor the romance of these wonderful coins. We collectors have somehow managed to have our numismatic passions temper our hopes. We're alert to the prudence of sometimes making a profitable sale.
Add to: del.icio.us digg
With this article: Email to friend Print
Something to add? Notice an error? Comment on this article. | |