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August 17, 2015
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One-on-One: Jeff Garrett, top U.S. numismatic-elect

Rare coins are not a commodity like precious metal, Garrett explains

By Ed Lane

Jeff Garrett is considered one of the nation’s top experts in U.S. coinage. In addition to owning and operating Mid-American Rare Coin Galleries in Lexington, Garrett is a major shareholder in Sarasota Rare Coin Galleries in Florida, and his combined annual sales in rare coins and precious metals total more than $10 million. Garrett has authored many of today’s most popular numismatic books, including “Encyclopedia of U.S. Gold Coins 1795–1933: Circulating, Proof, Commemorative, and Pattern Issues” and “United States Coinage: A Study By Type.” He is also the price editor for “The Official Redbook: A Guide Book of United States Coins.” Garrett is currently vice president of the American Numismatic Association, serves as a consultant to Numismatic Guaranty Corp., the world’s largest coin grading company, and plays an important role at the Smithsonian Institution’s National Numismatic Department, serving as consultant to the museum on funding, exhibits, conservation and research.

Jeff Garrett is considered one of the nation’s top experts in U.S. coinage. In addition to owning and operating Mid-American Rare Coin Galleries in Lexington, Garrett is a major shareholder in Sarasota Rare Coin Galleries in Florida, and his combined annual sales in rare coins and precious metals total more than $10 million. Garrett has authored many of today’s most popular numismatic books, including “Encyclopedia of U.S. Gold Coins 1795–1933: Circulating, Proof, Commemorative, and Pattern Issues” and “United States Coinage: A Study By Type.” He is also the price editor for “The Official Redbook: A Guide Book of United States Coins.” Garrett is currently vice president of the American Numismatic Association, serves as a consultant to Numismatic Guaranty Corp., the world’s largest coin grading company, and plays an important role at the Smithsonian Institution’s National Numismatic Department, serving as consultant to the museum on funding, exhibits, conservation and research.

Ed Lane: You have had a numismatic career for more than 35 years and have been called “the expert’s expert.” You are the author of several books on American coins and were recently elected president of the American Numismatic Association (ANA). How did you initially get involved in buying, selling and collecting coins?

Jeff Garrett: When I was 10 or 12, a family friend gave me a Lincoln-head penny album to collect change. The goal was to fill all the slots in a Whitman album, which are still made. I started finding those coins in circulation and filling the album. What was a hobby as a boy became an obsession. I was hooked.

I grew up in the Tampa, Fla., area, and back in the ’70s there were six or seven coin clubs. I was lucky that some mentors saw my interest, and they would pick me up and take me to the coin club meetings. Today I’m a big believer in mentorship for young people, because when I was young, mentorships really helped me get started.

EL: What are some of the key factors that continue to attract you to coins and precious metals?

JG: The thing I like about rare coins is that every day can be a new discovery. I usually can’t wait to go to work in the morning, because the next phone call could be a coin someone discovered or something I’ve never heard of before. I tell people every day is like “Antiques Roadshow” for me because people call me and ask for advice. I really try to help people when something new is discovered, to help them research and figure out what it is. That’s why I get a lot of phone calls like that.

EL: How do you generally promote your business?

JG: I attribute most of my business to networking. I’ve been in the business for 30-plus years as a serious professional, and I advertise in trade journals, but most of my business is networking with people. I’ve got clients and other coin dealers whom I’ve been working with for 35 years.

EL: Sounds like reputation is very important.

JG: Yes. I take my reputation extremely seriously because a lot of times when I tell somebody what something’s worth, there’s a level of trust they have to have. People know I want to make a fair profit, and that’s OK as long as they think I’m being honest with them. The coin business is a very close-knit community. Everyone knows everyone. If you do something considered unsavory, word gets around very fast. Reputation is hard to gain but easy to lose, so you have to be really careful about that.

EL: How long have you operated Mid-American Rare Coin Galleries?

JG: I’ve been in Lexington since 1984.

This rare nickel, which sold at auction for $3.1 million, is considered one of the top coins in the U.S.

This rare nickel, which sold at auction for $3.1 million, is considered one of the top coins in the U.S.

EL: Would you be able to give me some idea of how big the business is?

JG: The coin business in general is a multibillion-dollar industry. Our business here and my coin shop in Sarasota, Fla., together sell over $10 million worth of rare coins annually.

EL: When you buy a rare coin at one price and sell it at another, what’s a range of profit margin? You were saying people know what is fair and equitable.

JG: Margins vary because a lot of coins are wholesale. When I buy a coin wholesale, there isn’t a fixed buy-sell margin. Sometimes I lose money on coins; sometimes I make money on coins. At the end of the year, it’s a pretty tight margin, but it varies. Some coins I lose 20 percent on; some I make 50 percent. Rare coins are not like stocks and bonds. They’re like pieces of art. If I show you a piece of art, it’s only worth what the next guy will pay for it. Rare coins are not a commodity by any means. Their value is an educated guess.

Six months later, previously valuable coins may be out of fashion. There are a lot of parallels between rare coins and the art market. The same coin can look different based on the toning and luster of the metal, and how people interpret that varies. So the buying and selling of rare coins is in itself an art, because there are a lot of subtleties to it.

EL: Recently there have been a number of political and economic events that have negatively influenced the global financial markets – Russia in Crimea, ISIS in the Middle East, Greece and its EU debt, decline in the Chinese stock markets, financial defaults by Puerto Rico, and the growing deficits of the U.S. government. How have precious metals and coins been affected by investors’ concerns?

JG: I’m not an economist, so I’ll just give my opinion based on observation. What I see going on right now is that the world is a mess, but the United States is viewed as the least messy so people are considering the dollar now to be a safe haven where in the past they had considered gold to be a safe haven. That’s why gold values have not gone up a lot, in spite of all the uncertainties you mentioned.

All governments have made promises that can’t be kept. That’s why people who invest in gold as insurance do it, because they don’t think the United States is that much better off than other countries. Currently, people see the dollar as the nicest house in a bad neighborhood.

The price of gold has gone up in terms of the euro, probably like 20 or 30 percent in recent months. Because the dollar now is much stronger than the euro, people are fleeing to the safety of the dollar. Like I said, I’m not an economist, but that’s my observation.

EL: How are the values of precious metals and coins determined and to whom can an investor sell precious metal investments?

JG: Rare coins and precious metals have two completely different pricing mechanisms; rare coins can go up at the same time bullion is going down. Rare coins are based on supply and demand. The supply factor depends on how many collectors are collecting something. The demand factor can change if a really fantastic coin collection comes to market.

Right now, the Pogue collection is being sold by a company called Stack’s Bowers Gallery in California. They just had the first installment sale of $25 million, but when it’s all said and done the total sale will be over $200 million. Supply factors change depending on whose big collection gets offered into the market. That can sometimes stimulate demand because some of these coins have been off the market for two generations. There are a couple of (Pogue) coins that they may be selling that haven’t been sold in 30 years.

Bullion prices, on the other hand, go up and down on the international markets, usually because of a headline event like a banking crisis.

EL: Do you sell bullion? 

JG: I do not sell bullion in Lexington. I refer customers to my coin shop in Sarasota. Bullion sales are more attractive there because in Florida there’s no sales tax on bullion, and in Kentucky there is.

EL: Would you recommend that an investor choose coins over bullion, because not only do they have the value of the weight of the coin but the numismatic value may go up?

JG: I tell people not to buy rare coins as an investment. You shouldn’t invest in something unless you are an experienced investor. If you want to invest in rare coins, start as a collector on a smaller scale and work your way up. It’s like me buying horses: I’ve done it a couple of times, and it usually doesn’t work out because I don’t know anything about the equine industry.

I’ve never had a collector who at the end of the day, when they decide to sell their coins, says it wasn’t a good investment. But I don’t recommend that a novice invest $100,000 in rare coins because it’s a nuanced field. You need to learn about it before you jump in with both feet.

Now, I don’t consider bullion to be an investment either. I consider it to be more like insurance. Most people who buy bullion don’t do it because they think it’s a great investment; they mostly buy it because they want insurance in case our country or the world economy has a financial collapse.

EL: Is bullion a protection against hyperinflation?

JG: Yes, hyperinflation or any kind of banking crisis – look at Greece, some people can’t get their money out of the bank. If they had bullion, they would have real money. That’s a really clear illustration of why bullion can be attractive. It’s more like insurance against losing control of all of your money.

EL: And that’s more straightforward, because gold has a daily quoted market price.

JG: Bullion, unlike coins, is a strict commodity and you can expect very close margins. Generally, on bullion, you’re talking about 3 to 5 percent between buy and sell. The biggest thing about bullion is you need to deal with somebody you know and trust, because bullion transactions are often larger sums of money. So it’s important to make sure you’re dealing with a well-established firm that’s been around for a long time. You can find people on the Internet easily who will sell you bullion, but you don’t know who they are.

EL: If you were buying bullion, what’s a good procedure?

JG: If you go into a coin shop like my store in Florida, you can go in, pay for it and walk out with it. If you want to do it by mail, you have to send a certified check, and then they can send it to you.

Most bullion houses – that’s what I would recommend, if you’ve known (them) for a long time; because if you have to send money in advance and then they send the bullion to you, you’re at risk. That’s why it’s important to deal with a well-established firm.

EL: Who pays the fees or commissions to buy and sell precious metals?

JG: Generally, bullion has a buy-sell spread. If you wanted to buy a one-ounce gold coin, for instance, you would probably have to pay about 5 percent over the bullion price. Then when you go to sell it, you’d probably get about 2 percent over the bullion price. So there’s about a 3 percent buy-sell spread if you were to do that in quantity, as a general rule.

EL: What is the minimum investment in precious metals you recommend to a client? Percentage of all investments?

JG: That’s one thing that’s beautiful about bullion or even rare coins; it’s a very democratic sort of investment. I’ve known people to go into coin shops and spend $100 a month on a rare coin or a piece of bullion, and they save them for years – or I’ve known people to spend $1 million at one time. You can do any increment, any level, that you like.

EL: What are the best storage options for precious metals?

JG: Put everything in safety deposit boxes. I wouldn’t leave anything at home. There are companies that advertise that they’ll hold your bullion for you, but I highly recommend against that because that defeats the purpose: If there’s a crisis, you might not be able to retrieve that bullion.

EL: Can precious metals be insured against loss from casualty or burglary?

JG: The American Numismatic Association, of which I’m about to become president, offers insurance benefits. Insurance for objects in a safety deposit box is pretty inexpensive because it’s such a safe place to put it.

EL: In a worst-case economic downturn, how will a person with precious metal investments be able to use them to conduct business transactions?

JG: There’s always been a market. Gold and silver have about a 2,500-year history of liquidity. In World War II, American pilots were given a little kit that had a gold ring and some gold coins in it, so if they got shot down behind enemy lines, they could use precious metal to get around in a foreign country. It illustrates that gold and silver have a 2,500-year history of liquidity.

EL: What are some bad experiences you have had in the precious metals business?

JG: One thing people have to be careful about these days is that the Chinese make a lot of counterfeit gold-plated bullion coins. If you go on the Internet and see bullion that seems like it’s too good to be true, it probably is. That’s why you’ve really got to make sure you buy from somebody reputable.

Several times I’ve had transactions where it ended up being scams. Any time there’s a lot of money involved, there’s the risk of someone making you a target.

EL: International organizations rate the quality of coins based on “wear and tear.” How can a buyer be assured the quality is as represented?

JG: It’s called third-party grading. There are two companies in particular – one in California and one in Florida – and for a fee they will certify the authenticity and condition of your coin. Condition is very important in coins; it’s just as important as it is in diamonds. Quality is a really big thing: The coin that’s nice, and the coin that’s really nice and the coin that’s unbelievably nice all trade for different values.

Prior to the 1980s, you had to take the word of the person selling it to you or be highly knowledgeable about coins. Now there are companies doing third-party certification. The coins are sealed for protection, with the grade on the coin and exactly what it is and describing it, which has added a liquidity factor. There are businesses that are so good at what they do that people trust it to a level that you can actually call up and sell one of these coins on the telephone without anyone looking at them. Grading has been a gigantic advance in the coin business.

EL: Since I am not an expert in this area, what questions should I have asked you?

JG: There are a lot of advantages in coin collecting, but one that people don’t often think about is that it teaches history. Almost everything that happens in coins has some sort of historical event tied to it. Like when they stopped making gold coins and recalled gold from citizens, it was during the Depression. It also teaches people about art – the coins are very beautiful – and money management.

When you buy coins, you kind of buy them one at a time, you can accumulate them, and it’s a good way for kids to understand value. If you were to buy a video game, a year later that video game is probably worthless. If you buy a rare coin, and you accumulate them, over time you can accumulate some wealth.

EL: Do you have a closing comment?

JG: The highlight of my numismatic career was an interesting event that made news a couple of years ago. I bought a nickel for a client at auction for $3.1 million. It’s considered one of the top 10 coins in the United States. I call it my Mount Everest coin, like the peak of my career. n

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