Gerardo Del Real Interviews Van Simmons of David Hall Rare Coins

Van Simmons is partner and president of David Hall Rare Coins, one of the largest and most respected rare coin companies in the country. Van specializes in portfolio construction, set building, and helping clients acquire the world's finest rare coins and collectibles.

Gerardo Del Real: This is Gerardo Del Real with Outsider Club. Joining me today is Van Simmons, partner and president of David Hall Rare Coins, one of the largest and most respected rare coin companies in the country. Van specializes in portfolio construction, set building, and helping clients acquire the world's finest rare coins and collectibles. Van has been a rare coin collector since age twelve, and a rare coin dealer since 1979. As one of the founders of Professional Coin Grading Service, PCGS, the largest rare coin grading service in the world, he has helped revolutionize the rare coin market. Van has over 1,350 dealers that sell his product. PCGS has graded and certified over 30 million coins over the last 30 years.

Van has also won acclaim as a collectibles dealer in sports cards and memorabilia, rare firearms, western memorabilia, and collectible knives. In addition, Van was also a co-founder and holds a seat on the board of directors of Collectors Universe, (NASDAQ: CLCT), a publicly traded company which trades on the NASDAQ Exchange. Collectors Universe has several different companies that it owns along with PCGS. They also own PSA, Professional Sports Authority. PSA grades and authenticates sports cards and currently has over 1,200 authorized dealers within its network. I could go on but hopefully you get the picture. The bottom line is, there is nobody in the coin and collectibles universe that I trust more than Van Simmons and David Hall Rare Coins. Van, thanks for bearing with me through that. I'm excited to have you on, and thank you for joining me today.

Van Simmons: Thank you.

Gerardo Del Real: Now, Van, in the intro, I mentioned that you've been a rare coin collector since age twelve. Can you share with us how you got involved with rare coins and why coins resonate with you the way that they do?

Van Simmons: You know, when I was a kid, one of my friends handed me a Standing Liberty quarter, and it was all worn out and beat up and everything, but I thought it was so great, I had taken it to a coin store and I sold it for forty-five cents, and I thought, man- This is back on the late '50s, early '60s. It started making sense to me that these things had value. Then I started looking into designs of the Walking Liberty half-dollars and things like that, and even as a kid, I looked at them and thought, "Man, these are great pieces of art."

The honest truth is, when president Roosevelt came into office, he wanted the most beautiful coins on Earth to be designed for our country. So, starting in 1907, they came up with the $20 St. Gaudens and the $10 Indian and stuff like that. It's always been, coins are sort of the supreme act of sovereignty, sitting there saying, "We're our own free nation, making our own gold coins and silver coins." The first gold coin was made in 1795, the 1795 small, legal $5 gold piece. That's one of the reasons I liked them; there was so much history attached to them. Every coin design and every change in a coin pretty much resonates with some change in American policy or something that was going on in the United States. Just a lot of history built into each coin.

Gerardo Del Real: Very interesting. Now, I also mentioned you were one of the founders of PCGS, the largest coin grading service in the world. How did that come about?

Van Simmons: My business partner and I, David Hall, would have breakfast every once in awhile and one morning, we were over here at a restaurant having bacon and eggs or something, and I complained to him. I said, "It's ridiculous. I can buy coins from J.D. and Gordy and a couple of these guys-" This is back in the mid-80s, "And when I get them, we agree with the grade of the coin. They're MS-65 or MS-66 or something like that, but most of these coins, 95% of them, we have to return back to the dealers. How can we stop that?"

The next day, David calls and says, "Why don't we meet for breakfast?" He says, "Why don't we start a grading service?" I said, "Well, how do we do that?" He goes, "We get all the people we agree with on the grade and we'll form a grading standard," or a standard of grading, and that's what we did, and it took about a year and a half. We had Bruce Amspacher, Gordon Wrubel, John Danreuther, myself, David, and a couple other guys, and met once or twice a month in different hotel rooms around the country because we were at coin shows, setting up standards and what we were going to do.

Gerardo Del Real: That's fascinating, and a few years later, here you are. You're the standard bearer.

Van Simmons: Yeah, we basically just said, "Here's the standard," and the industry couldn't argue because you had the top experts in the world saying, "Here's what we call the standard," and within thirty days, it was almost impossible to sell a coin unless it was graded by us, and then there was a fear of people trying to buy coins graded by us, but we hadn't graded enough of them. So, the prices started to go up on coins that were graded by us and pretty soon, there was a six months backlog in the availability of coins that were graded by us. Or, if you wanted to go get a coin graded, it was going to take six or seven months just to get graded.

Gerardo Del Real: Right.

Van Simmons: It created quite an upheaval in the coin business at the time. Cash flow problems and everything else.

Gerardo Del Real: Very, very interesting. Now, Van, you structured and you continue to structure coin portfolios for some of the wealthiest families in the world, but you also help people that are just getting started in the coins and collectibles universe, and I've heard you say several times that from $50 to $50,000,000, you're happy to help. How does someone who has never bought a coin, let alone a collection, get started?

Van Simmons: The easiest way, I think, is to call me and just ask me, let me know what they're looking for. I just got off the phone with a retired electrician who wanted to start collecting coins and didn't know what exactly to do and wanted to start with a $1,000. That being said, I have a retired school teacher, a lady from the south, who usually likes to spend $50 to $75 a month on old Buffalo nickels and mercury dimes, and I can't be everything to everybody, but I am trying to be everything to everybody who's seriously interested and wants to do certain things.

If somebody wanted to start a collection of coins, they can call and say, "What's the best area to invest in? What's the best value? What's the most fun? What do you think is the most under-priced?" Or a lot of people call and say, "I only want gold coins," or, "I love silver dollars. I only want silver dollars." Everybody has different tastes. It's more a matter of, if you can explain to me what you're trying to accomplish. A lot of people are trying to accomplish things to build collections to pass from one generation to the next. A lot of people, with our confiscatory tax system that we're in right now and getting worse, are looking to place money in things that they can just hand to their grandkids or hand to their kids.

Gerardo Del Real: Absolutely.

Van Simmons: Did that answer that question?

Gerardo Del Real: Absolutely, Van. That answers it perfectly. With that being said, here at Outsider Club, we pride ourselves on being contrarians. Where do you see the most compelling opportunities in the coin market today?

Van Simmons: The coin market, there's a couple of different areas. There's gold commemoratives, which are one of the most under-priced areas in the rare coin market. There's also a rare coin which everybody's pretty much familiar with. They're the only $20 gold pieces that were struck prior to 1933. I think if you're looking to make a gold bullion investment or a gold investment, that by far is one of the best values right now.

Gerardo Del Real: And why do you think that's one of the best values? Can you share? You mentioned the history of the coins, and I know you have this part down, so could you share a little bit of the history behind those?

Van Simmons: The $20 liberties were struck from 1849 to 1907. Then Roosevelt wanted them redesigned to the most beautiful coins in the world, and they designed the $20 St. Gaudens, the $10 Indian, the $5 Indian from 1907 to 1933. Coins like that. If you just take the $20 gold pieces from 1849 to 1907 and then from 1907 to 1933, a lot of people don't realize those are the most widely traded gold bullion coins around the world for the last hundred, hundred and fifty years.

Gerardo Del Real: Right.

Van Simmons: What's happened on those is traditionally since about the late 60s, early 70s, the premium started increasing on them where just circulated, beat-up coins were trading for 50% to 100% over the spot price of gold. Pretty soon, they were pretty much all 75% to 125% over the spot price of gold. I have a couple of families on the east coast that own streets in downtown Manhattan. They, during the 90s, were buying these. They were buying $20 liberties in circulated condition, and this is all through the 90s for ten of eleven years.

Gold was $265 to $285 an ounce during that ten or eleven year period, and they were paying $575 to $625 per coin, because that's where the premium was. It was about 100% over the spot price of gold, and today, when gold hit $1900 an ounce several years ago, so many of these came on the market, it diluted the premium and the collector demand, so the premium dropped down and right now, it's about between 5% and 6%.

So, a lot of people will go out and pay 4% for a gold eagle or they could pay 5% or 6% for an old $20 gold piece and be in a much better position. One, a much better position because if the premium increases ... I don't think the premium's going to decrease anymore, but if the premium does increase, you have upside there. The other thing is, a lot of your readers, I'm sure, and a lot of my clients have a fear of confiscation or windfall profits tax.

Gerardo Del Real: Absolutely.

Van Simmons: And in 1933 when gold was outlawed, president Roosevelt classified these as collector coins and they were never confiscated. The American public didn't know this. Almost all of them were turned in and melted and everything else. What you have is a case law according to the lawyers I've talked to and the judges I've talked to. You have a case law in place that makes them non-confiscatable, and as I told you, this isn't a case law by some judge in Burbank, California that was done five years ago. It's by the president of the United States that was done over eighty years ago.

Gerardo Del Real: Right.

Van Simmons: So, you have a lot of protection there. You have a lot more upside potential with extremely limited downside. It's just a win-win situation. One, you're paying a very modest premium based on a new gold eagle or based on past history of these things. Like I say, it's the most widely-traded gold bullion coin around the world. All through the German occupation of France and everything else. They were marching up and down the streets and the people were underneath ground in cellars trading gold and they were trading $20 gold pieces, and the Nazis up on top stomping their boots, they weren't shy about enforcing the laws. They'd kill you.

Gerardo Del Real: Right.

Van Simmons: But this was one of the most widely-traded coins. In fact, I would say over 95% of the $20 gold pieces I buy today come out of Europe and South America. My grading company has an office in Paris. We go over there once a month just to grade $20 gold pieces and we'll grade eight to twelve thousand $20 gold pieces in a four or five day period and then come back.

Gerardo Del Real: That's fascinating, Van. You mentioned historically, you've seen premiums over 100%. What are those premiums at now?

Van Simmons: Around 5 to 6%.

Gerardo Del Real: Wow, okay, so a lot of upside potential.

Van Simmons: For circulated $20 gold pieces, you can buy bullion uncirculated gold pieces for a 6% premium, maybe. In that range. It varies a little bit day to day. It could be $20 one way or the other, but it's a very, very modest premium. You and I have a mutual friend and I told him, I said, "If you were my brother and you owned gold eagles, I'd tell you to trade them for the only $20 gold pieces right now. It's just a much safer bet."

Gerardo Del Real: Absolutely. Van, as always, it's been great having you on. It's been educational. Is there anything else that you'd like to add that maybe I missed?

Van Simmons: No, I'm fine. I appreciate you calling and asking. If I can be of any help, by all means, have anybody give me a call.

Gerardo Del Real: Absolutely, Van. Thank you so much. You have yourself a great morning.

Van Simmons: All right, Gerardo. Thank you very much.

Gerardo Del Real: Bye.

Van Simmons: Bye-bye.

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