Coin-Gallery Online - The Battle of the Century: Grade vs. Rarity

by James Halperin

Let's pretend it's your birthday. I'd like to give you a gift. Assuming I'd spend the same on either, would you rather have a fairly common coin in uncommonly nice condition, or a recognized rarity in average grade? For decades now, in the mainstream coin market, condition has been king. Among uncirculated coins, tiny differences in condition can sometimes result in huge differences in value. Some otherwise common coins apparently become desirable when their numerical grade approaches the magic 70 mark. I've bought and sold thousands of them, yet I still enjoy the opportunity to examine "wonder coins", i.e. pieces that are extraordinary because of their condition.
Like many others, I would generally encourage collectors to buy the finest quality they can afford, but I also must caution against the danger of getting caught up in the "numbers game". Comparing recent grading service population reports can be sobering. Within some series, especially the post-WWII issues, coins receiving grades of MS-67 or higher are astonishingly common.
I'm not suggesting that these coins aren't beautiful, but I cringe when I hear dealers and collectors refer to them as scarce. In applying that label to a coin, the number of existing specimens in all grades seems a fairly solid method that you can sink your teeth into (there's comfort and satisfaction to be gained when your collection includes one of ten, twenty, two hundred, or even five hundred known examples of a particular coin), while paying huge premiums for condition alone seems dangerous.
Once again, I would encourage you to review grading service population reports before selling your early type coins and moving the money into MS-68 War Nickels or another comparable modern issue. Compare the latest statistics to the population figures from five years ago. With a few, well scattered exceptions, the populations of common coins in uncommonly nice condition has mushroomed. I predict this will continue. At one time, you may have been the only person who owned Coin X in an MS-69 grading service holder. Now you probably have some company. Maybe a lot of company.
One of my responsibilities at Heritage is to manage an inventory valued at over $20 million. I must be able to predict supply and demand on a daily, weekly, and monthly, basis. The experience of others may vary, but I've found that I make fewer mistakes by buying the proven performers, those being scarce and rare coins.
The demand for coins follows fairly predictable cycles as interest ebbs and flows. I find this lack of permanence fascinating. Grading standards have fluctuated as well. I once overheard an extremely knowledgeable, veteran numismatist, refer to such change as the evolution of grading. Perhaps I'm being old fashioned, but I'm not convinced that all evolution is good. Killer Bees come to mind as another example.
If you're looking for stability, and lasting value, think about the coins your grandfather would have most wanted in his collection. Were it my birthday, and you were giving me a coin, my choice would be to receive something legitimately scarce in better than normally encountered condition. The owner of a coin of both rarity and quality can enjoy the best that numismatics has to offer.
James Halperin is co-chairman of Heritage Rare Coin Galleries and Heritage Numismatic Auctions, of Dallas, Texas, the world's largest rare coin dealer and auctioneer. Jim has been one of the top coin traders in the world for the past 25 years. He is also the author of two best-selling futurism novels, The Truth Machine and The First Immortal.