Scarcity of Unc Nationals - Investment Opportunity?

[Houston Investor]

I like to pick up nice scarce unc Nationals usually in PMG or PCGS. Compared to coins of similar rarity these are so cheap right now.

 

These are so scarce in unc, especially high grade. A well known paper money dealer in Nationals told me: "Any of these under $1000 are a must buy right now."

 

Any thoughts? I am finding them tougher to find.

[Cassius King-migration]

Many are from larger banks and were held as vault cash. You need to check the census.

If the note has less than 20 known and only one or two are uncirculated you had better consider the opportunity. Many notes are not known uncirculated so collectors usually have a fairly well used assortment. An uncirculated note or two in the collection would not enhance the overall group by much, so a lower grade fits in quite nicely, without needing to overpay for high grade notes. The pressure is definitely off.

 

[Houston Investor]

My reason for this thread is in analyzing and calculating values for Nationals in Unc because I have done quite an amount of research. I am also a serious buyer of nice Nationals in VF or better where it floats my boat as many of my clients collect this material. I have handled many really nice Nationals and once sold (example a Gem CU $10 Brownback) probably gone for good. These aren't like some 1924 $20 Saint you can just walk over to the next table and buy near bid.

 

In examining valuation criteria for Nationals I look first at a couple of things:

 

A - Kelly Value (Which is for Fine), B - Greensheet (Common) in Fine, C - Greensheet in Grade of the Note in Question.

 

In Developing a Formula to Estimate the Value of a National:

 

A / B = Rarity Factor ®

R x C = Bid (I call it this just for defining a value in my equation).

Bid x 1.35 = Sell

 

I arrived at this factor based on Analysis of Various Dealer Pricelists from BNR plugged into my excel model. The 1.35 factor is an overall calculation yielded by my spreadsheet model and can vary widely based on note / bank / state. As I have added more data to the model this factor has held relatively constant. The purpose of the analysis was to arrive at an estimate as to what the major National Banknote dealers would sell a National for if certain base data were known and could be plugged into a mathematical model.

 

Another method would be to take the values in the Paper Money Market Section of BNR (common notes) x R in arriving at a Market Retail Estimate which generally yields a higher number.

 

I would never give away a high grade national at a price based solely on Kelly Value as that value is for notes in fine condition and as time goes may lose relevance as the market advances. National Banknote pricing is not an exact science and one has to also consider the population (number reported) for specific denominations / types and then how many uncs for that denomination. Pricing Nationals takes some homework. In addition esoteric factors like SN, colorful sigs, famous name bank, state capitol etc. can add to value. Beautiful Gem CU Nationals (Especially Large Size) are scarce any way you slice it. Many have been taken by the collecting public leaving very few out there.