Nov. 12-14, 1982
For Numismatic News
By James U. Blanchard, III
The year was 1968. It was an exciting year, which in some ways seems a very long time ago and in some ways seems not so long ago.
It was generally a year of bad news for the United States, and, as such, it is fitting that it was the year when gold and silver began their bull market which would carry into the 1980’s.
The Viet Cong and North Vietnamese had launched their Tet offensive in January. North Korean vessels had seized the Pueblo, and Senator Robert F. Kennedy was assassinated in Los Angeles after winning the California primary. The decades of general loose money policies which began after World War II were beginning to have their effect on the economy. The gold reserve requirement of 25% of outstanding Federal Reserve notes was eliminated by Congress. Congress also approved Special Drawing Rights (paper gold).
It was the year that Richard Nixon was elected President. But what I remember most about 1968 is that it was the first year that I started buying gold and silver coins.
Since 1961 I had read free market economics and by 1967 had started to study monetary issues such as gold standard. I became convinced that the long-term outlook was for more and more U.S. dollar inflation and that the only answer as a private investor was to invest in gold and silver.
I read everything I could lay my hands on, subscribed to Numismatic News and started subscribing to such early hard money newsletters as the International Harry Schultz Letter and Verne Myer’s Finance & Energy.
Although I was still in my last year of college, for several years I had been involved in various entrepreneurial “spare time” activities and has saved a little investment capital.
By the end of 1968 I was not only convinced that the price of gold and silver were heading a lot higher, but that silver dollars would probably be an even better investment than bullion.
I was still somewhat of a novice, but I knew it was time to get my feet wet. In January of that year, I purchased two bags of silver dollars from Chattanooga Coin & Stamp Company. One bag was an XF/AU bag (with many better dates) for $2150, and one bag was a beautiful original bag of 1882-O dollars for $3,000.
Several years ago I took out the bag of 1882 O’s and, to my delight, discovered that there were over one hundred MS-65 dollars – it was an exceptional bag!
It’s interesting to note that the January 5, 1968, Gray Sheet listed the following ask prices for brilliant uncirculated U.S. silver dollar rolls (20 coins):
Beginning in early 1969, I decided I should become a part-time coin dealer. I irritated local coin dealers by placing an ad in the Sunday paper, upping the buying price for any silver dollar (gem, unc, or circ) from $1.75 to the outrageous price of $2.00 per coin.
Since that time our company has grown to the point where we sell tens of thousands of silver dollars per year, but I’ll always look back fondly on the years 1968 to 1969 as my real start in the whole area of gold, silver, U.S. coins, and, particularly, U.S. silver dollars.
There are a lot of fun memories. In order to get a little edge on local coin dealers, I offered a pickup service for those who responded to my Sunday buy ads for silver dollars. My wife and I would drive all over New Orleans on Sunday and Monday afternoons, picking up anything from one circ dollar to a roll of nice BU’s. I remember one particular instance where an old gentleman sold me six original rolls (still in paper bank wrappers) of early S dollars for a total of $240 for 120 blazing coins.
Those days are gone forever, but, if anything, I’m even more bullish on the prospects for silver dollars as an investment than I was in the late 1960’s and early 1970’s. I think we’re going to have an incredible bull market in uncirculated U.S. silver dollars over the next several years. At the peak of the next cycle, rolls of common date, uncirculated U.S. silver dollars will easily sell for several thousand dollars each, and the performance in selected undervalued dates will be even more dramatic. Here’s a quick summary of several of the reasons I think the bull market in U.S. silver dollars will be so dramatic.
1. Huge buildup of government debt and inflation will inevitably explode into Latin American-style inflation rates 25-30% by 1985 to 1986.
2. The price of precious metals will explode on the upside, with gold reaching a minimum of $1500 an ounce and silver $40 an ounce. Those prices could well be much higher.
3. Silver Dollars Better than Silver Bullion – More and more sophisticated investors will learn that brilliant, uncirculated U.S. silver dollars offer at least as much profit potential (and probably more) than silver bullion with much less downside risk. Toward the end of the cycle, the public will discover silver dollars and there will, literally, be a price stampede.
4. Strictly Limited Supply – The fundamental reason U.S. silver dollars offer such a major buying opportunity is simply supply and demand. No one knows exactly how many U.S. silver dollars are left in uncirculated condition, but even if we use a rough guesstimate of 30 million coins, the fact is, in response to an ever-increasing demand, the supply of silver dollars can never grow and, in fact, is slowly shrinking (for example, coins which are damaged, lost, etc).
5. Float is even Smaller – For the sake of argument, if we use a rough guesstimate of 30,000 bags of uncirculated U.S. silver dollars left in existence, the actual float or available supply via dealers at any given time is a tiny percentage of this total. Most U.S. silver dollars are already salted away by tens of thousands of new U.S. silver dollar collectors and investors will be bidding for a tiny supply.
6. Still Available in Quantity – Ironically, the fact that U.S. silver dollars in relation to demand are scarce but not rare is another major reason for a huge bull market in U.S. silver dollars.
U.S. silver dollars are the only coin in the United States, and one of the only coins in the world, where a long series of 122 different basic coins minted in the 19th and early 20th century, are available in quantity. This encourages and allows a large and liquid market. Every small coin dealer in the United States sells U.S. silver dollars because they are available and they know they can get them. Many large U.S. coin dealers specialize in U.S. silver dollars because they are available in a quantity which enables them to sell enough coins to justify a large marketing/advertising budget. It’s also important that many U.S. silver dollars are still priced at very reasonable levels so that a typical new collector can have quite an extensive collection, say, 30 to 50 different U.S. silver dollars for several thousand dollars. In other words, most U.S. dealers don’t specialize nor advertise Seated Liberty dollars, for example, and early bust dollars because they simply aren’t available in any quantity. The small investor who is spending and is going to specialize in uncirculated and proof Seated Liberty dollars could very well blow his entire investment budget on a single coin:
7. Liquidity – Because there are thousands of U.S. coin dealers who actively sell and buy U.S. silver dollars, BU U.S. dollars are the most liquid coin in the world. Quantities of silver dollars from one roll to several bags can be bought and sold by a simple phone call.
If, at the top of the last peak, an investor had purchased a proof Seated Liberty quarter, the coin would have been almost unsaleable at any realistic value by the bottom of the numismatic market. It could well have taken months to dispose of; yet, if that same investor had bought common date rolls of U.S. silver dollars, they not only could be sold to almost any dealer in the country but also relative prices were much higher and stronger. This “fast liquidity factor” is going to be major encouragement to investors as opposed to collectors.
Summary – I’m convinced that over the next several years, we’re going to experience an incredible bull market in all hard assets, (gold, silver, coins, etc). Fortunes are going to be made on all hard assets, but I’m more convinced than ever that the number one investment for the next several years will be uncirculated U.S. silver dollars. It’s going to be an exciting and extremely profitable several years for U.S. dollar collectors and investors!