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Stock and bond certificates: the value is in the story

A 1940 war bond issued festooned with Disney’s most recognizable characters to date sold for $200 plus the buyer’s premium in April 2005. Image courtesy of Early American History Auctions and LiveAuctioneers

Your net worth can comprise more than money. It can be artistic, historic, and emotional, and it can showcase famous signatures. Scripophily – the collecting of vintage stock and bond certificates for their own sake – covers all those bases. These documents no longer pay out on their face values, but they deliver other riches, some tangible, some not.

Stocks

The earliest known paper stock was issued by the East India Company in 1606, but stocks have existed in one form or another since Roman times. A stock certificate states you have invested in an enterprise and you expect a share of the profits, knowing they might never materialize. Local inns often served as loosely regulated stock exchanges.

A United States stock certificate from March 1792, issued during the week of the stock market crash that caused the country’s first financial crisis, achieved $35,000 plus the buyer’s premium in October 2021. Image courtesy of Freeman’s and LiveAuctioneers

Things changed in 1792 when a group of New Yorkers who traded stocks under a buttonwood tree on Wall Street signed the Buttonwood Agreement, a document for governing the transactions. It laid the groundwork for what would ultimately become the New York Stock Exchange, realizing Alexander Hamilton’s idea for a regulated national stock exchange. Today, nearly 1.5 billion stocks representing about 2,800 companies are traded every day via Hamilton’s creation.

Electronic trading has rendered printed stock certificates obsolete. In 2013, the Disney company, which knows a thing or two about shifting from analog to digital, became the last major entity to issue paper stock certificates.

A Pullman’s Palace Car Company stock certificate signed by company founder George Pullman and investor Andrew Carnegie achieved $12,000 in February 2020. Image courtesy of University Archives and LiveAuctioneers

America is an entrepreneurial nation, and stock certificates illustrate the story of its growth and expansion. Collectors can assemble portfolios of vintage certificates from companies that mined gold, silver or minerals; those that built railroads, automobiles and airlines; utilities, including providers of oil and gas; and companies for wireless or telephone services, to name a few. 

A North American Phonograph Company stock certificate signed by Thomas Edison sold for $8,000 in January 2020. Image courtesy of Freeman’s and LiveAuctioneers

Before the rise of logos and branding, the stock certificate fulfilled many of the needs that corporate graphics address, giving investors the sense that the issuer was a serious, upstanding, well-run concern that would not abscond with their money. And, before the age of the automatic pen, titans of industry signed these documents themselves. Proof of having been touched by a famous, historic hand imbues these documents – which are really just fancy-looking I.O.U.s – with value strong enough to outlast the projects for which they were issued. 

A Standard Oil stock certificate signed three times by John D. Rockefeller and cosigned by Henry M. Flagler sold for $8,000 in February 2020. Image courtesy of University Archives and LiveAuctioneers

“If you have a stock certificate signed by Rockefeller or Morgan, it’s worth money … It doesn’t matter how good looking it is or isn’t. That’s the first component for value. The second is the aesthetics, combined with the condition. If it’s in bad condition, it doesn’t really matter how good looking it is. If you can’t display it, it’s just not as interesting,’ Gary Rose of certificatecollector.com said in a 2008 interview with Collectors Weekly.

A stock certificate for Bugsy Siegel’s Las Vegas casino achieved $37,000 plus the buyer’s premium in September 2012. Image courtesy of RR Auction and LiveAuctioneers

Other factors affecting the desirability of a stock certificate include the type and color of the paper on which it is issued; whether it is printed or written; its date of issue; the images on the certificate, with special attention given to the vignette (aka the largest central image); the company that issued it; the type of stock it represents; who owned it; its rarity; and, of course, its historical significance. All these seemingly small details can add up to serious sums at auction.

Bonds

Bonds are typically issued by an authority such as a national government, an agency, a state or a municipality to raise funds for schools, roads, utilities and other improvements to infrastructure. But initially, bonds provided governmental bodies a tool for underwriting wars and conflicts.

A Revolutionary War-era bond issued by the state of Maryland sold for $2,200 in December 2011. Image courtesy of Early American History Auctions and LiveAuctioneers

The City of Amsterdam issued the first municipal bond in 1517 to help finance its debts. England paid for its continuous wars against France with bonds beginning with William III in 1694, and other European monarchs followed his lead. The American colonies issued bonds and loan certificates to fund its revolution against George III. America’s efforts in World War II likely would have suffered without sales of savings bonds.

The holder of a bond lends money to the issuing authority for a specific amount of time, expecting only interest on the loan until the bond matures, and nothing more. Unlike those who own stocks, bondholders do not gain any form of ownership in the authority offering the bonds.

Early bond certificates came with a feature that most stock certificates lack: coupons. To receive the allotted interest payment, the bondholder tore off a coupon and redeemed it with the issuing authority. The presence or absence of coupons affects how well a bond certificate performs at auction. Collectors also care whether the coupons are still attached to the bond and how many there are, in addition to wanting to know if the bond is signed, and by who, and wanting to know the overall condition of the document. 

A bond issued by the Republic of Texas in 1840 – five years before it became a state – with all its coupons intact sold for $325 plus the buyer’s premium in February 2021. Image courtesy of Michaan’s Auctions and LiveAuctioneers

As with stock certificates, collectors of bonds enjoy a range of targets, from zero coupon bonds (which are redeemed whole at maturity); long term; short term; municipal; utility; money market; savings; perpetual; and even war bonds that are still being paid out.

This Spanish trading stock issued to Elizabeth Farnese, Queen of Spain by marriage to King Philip V, sold for $9,000 plus the buyer’s premium in June 2019. Image courtesy of Early American History Auctions and LiveAuctioneers

The practice of collecting stocks and bonds for their historic and cultural significance is relatively new, dating back to 1970 or so. Coins and stamps, two other collectibles issued with face values, have more than a century’s head start. Nonetheless, the pursuit of vintage and antique stock and bond certificates boasts a large and devoted following. Nascent collectors can look to associations such as the American Stock and Bond Collectors Association, which maintains an open group on Facebook. Also, the International Bond and Share Society (scripophilyusa.org) provides members with helpful resources and guides.

Possibly the most notorious stock certificate ever printed was issued by Playboy Enterprises. A lot containing eight such certificates, including two specimens, sold for $425 in December 2020. Image courtesy of Holabird Western Americana Collections and LiveAuctioneers

“Stocks [and bonds] are … interesting historically. Just about every stock in my collection, I’ve researched the company. A single stock can actually keep me busy for days. You try and research the company and see when it existed. Did they make anything important, was there anything special about them? They’re almost artifacts of history … ,’ said Rose.

A Houdini Picture Corporation stock certificate, signed by Houdini, realized $4,500 plus the buyer’s premium in March 2012. Image courtesy of Early American History Auctions and LiveAuctioneers

Stock and bond certificates for companies long since shuttered and projects finished ages ago still have value – it’s just different from the numbers printed upon them. The best examples tell a rousing tale with colors, graphics and design. ‘If you have a great-looking stock certificate,’ Rose continued, ‘even if it’s inexpensive, you can frame it, put it on a wall and it makes a very good work of art.’ Try doing that with a stamp or a coin. 

A History of U.S. Paper Money

Liza Minnelli famously sang about the role of money in the award-winning Broadway play Cabaret, saying “Money makes the world go round.” Oscar Wilde cleverly wrote about it, as well, stating “When I was young, I used to think that money was the most important thing in life. Now that I am old, I know it is.”

Whether or not you wholeheartedly agree with these theories about money, at some level there is an element of truth to them. While the American monetary system was by no means the first, it’s an interesting and compact case study because the United States is such a relatively young nation.

The first forms of paper currency used by British colonials in the New World were issued by the province of Massachusetts, beginning in 1690, explained Peter Treglia, Director of Currency at Stack’s Bowers. At the time, the colonies issued their own paper money as a matter of convenience when paying for goods and services..

“(It was) essentially a form of fiat money, as it was not backed by any precious metals,” explained Treglia. That would change over time, with the decision to print a federal form of paper currency.

Fewer than 10 examples of the 1861 $20 Demand Note are recorded in the census, and most are in the Very Good to Fine range. This example’s grade is PCGS Very Fine 25. At the center of the specimen is a vignette of Liberty, with sword and shield in hand. It sold for $93,000 during Stack’s Bower’s March 2018 auction of the John R. Anderson Collection of United States Paper Money. The 64-lot auction realized more than $8 million. Image courtesy Stack’s Bowers

“The first form of paper currency, in 1861, was demand notes. They were designed to help finance the Civil War,” Treglia explained. “It did so by Congress authorizing demand notes; because the cost of the war exceeded the government’s limited income from tariffs and excises, and it was the only way to fund it.”

The forms of federally-issued paper currency quickly expanded beyond demand notes to include many different types including Silver Certificates, Gold Certificates, Legal Tender Notes, and Federal Reserve Notes. Both Silver Certificates and Gold Certificates were backed by gold, beginning in 1863.

“It was the most secure form of currency in the eyes of the government and the people of the United States,” added Treglia. “It allowed one to deposit physical gold and silver for paper currency. It was easier to carry as it was much lighter than say $50 worth of gold or silver.”

The last Gold Certificates were printed in 1928, and on June 5, 1933 President Roosevelt suspended the gold standard. The first Federal Reserve Note issue was the series of 1914, and it remains the sole form of paper currency in the U.S. today.

Example of the first federally-issued $2 note. This 1862 $2 Legal Tender Note appears in grade PCGS Gem New 65 PPQ and was part of the “greenback” currency issue that began in 1862. Alexander Hamilton appears at the center of the note, which sold for $20,400 during the March 2018 auction of the John R. Anderson Collection through Stack’s Bowers. Image courtesy of Stacks’ Bowers

“Because of the Great Depression, the government found it could do little to stimulate the economy, and in order to deter people from depleting the gold supply, President Roosevelt decided to remove the nation away from the gold standard,” said Treglia. “By doing this, it allowed for lower interest rates and for the government to pump money into the economy via fiat currency…This proved to be successful.”

As explained in detail on Wikipedia, “Federal Reserve Notes are authorized by Section 16 of the Federal Reserve Act of 1913 and are issued to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System. The notes are then put into circulation by the Federal Reserve Banks, at which point they become liabilities of the Federal Reserve Banks and obligations of the United States.”

Federal Reserve Notes are printed at the United States Bureau of Printing and Engraving, located in Washington, D.C. Tours of the BPE are offered to the public during specific months of the year. Admission is free, but anyone interested in taking the 40-minute tour is required to obtain tickets. If you are considering a tour of the BPE while visiting Washington, be sure to check the  HYPERLINK “https://www.moneyfactory.gov/washingtondctours.html” BEP site, as renovations to the area are slated for the latter part of 2018.

With such an involved history, selecting one particularly significant moment in the evolution of U.S. paper currency may seem like a tall order. However, Treglia offers his take without hesitation.

“Hands down, the National Banking Act,” he said. “Prior to the Civil War, state banks could issue their own currency backed by financial securities held by the bank. Because it was so lax, many of these private banks went bankrupt rather quickly, and it encouraged lots of fraudulent institutions to issue worthless bank notes.”

Treglia further explained, “In 1863, President Lincoln created the National Banking Act, which allowed National Bank Notes to be issued by private banks with the government’s oversight and backing. The act allowed banks to issue local currency with standard government-provided designs. This prompted great confidence in the currency and allowed tremendous growth in the economy, and security in business and commerce. That was arguably the most important time in United States paper-money history.”

One of only four known examples of the 1862 and 1863-dated $1,000 Legal Tender Note, with this being the finest graded (PCGS Choice About New 58) in private hands. At the center is a portrait of founding father and Superintendent of Finance Robert Morris. Notes of this denomination were typically used in bank-to-bank transactions and were not used by the public. It sold for $960,000 during a March 2018 auction through Stack’s Bowers. Image courtesy Stack’s Bowers.

Regarding who and what has appeared and continues to appear on U.S. currency, there’s been a lot of change within a framework of consistency.

“It was common early on to use powerful figures on currency, not just presidents,

Treglia said. “Female allegorical designs, important historical individual such as Lewis and Clark, and Ben Franklin have appeared on currency.”

Furthermore, the Eye of Providence was decided upon by a design committee and was first used in 1776.

Adding to the excitement of its rich history, the current market for collecting U.S. paper currency is robust.

“Today’s paper money-collecting market is very strong, especially in very rare material,” said Treglia. “(Stack’s Bowers) is currently selling one of the greatest pre-1923 U.S paper money collections of all time. It consists of only 240 notes and will sell over two years with a total estimated value of $30,000,000.”

The Origin of Money: From Cowrie Shells to Bitcoin

Before there were organized monetary systems, there was barter and trade. Some sources report evidence of compensation exchange in cultures dating back as far as 10,000 years ago. People with the ability to fish would connect with those who cultivated and harvested crops to exchange commodities. While this form of trade was useful for many societies, it wasn’t without challenges. One of those challenges was finding a consistent party with whom to barter and trade the materials a person was capable of bringing to the table. Another challenge was the amount of time it could take to complete an exchange of goods – especially if one side of the exchange was dependent on crops that required many months to reach the point of harvest. Also, there was the question of how to value the commodities on both sides so there could be a fair exchange.

Long strand of chain link probably used as a form of currency, Roman Empire, circa 2nd-4th century AD. Measures 36 inches long x 1 inch wide. Sold by Artemis Gallery for $450 in September 2017. LiveAuctioneers.com Archive and Artemis Gallery image

People living near the sea – the Pacific and Indian Oceans, primarily – took a different approach, implementing cowrie shells from sea snails as an accepted form of currency. It’s believed that the brightly patterned cowrie shell is one of the longest-tenured forms of currency anywhere. The first indication of its use dates to 1,200 BC. Even after the introduction of gold coins as a form of currency, some civilizations opted to continue using cowrie shells.

Restrung Viking necklace of assorted green glass beads with two cowrie-shell pendants and three silver coins on loops, circa 9th-12th century AD, sold for $237 at TimeLine Auctions’ September 2016 sale. TimeLine Auctions, Ltd. image

The leap from cowrie shells to metal monies first took place in China. Archeological discoveries have uncovered various specimens of primitive coins. This evolution within early Chinese culture is said to have been inspired by people initially exchanging tools and weapons. This led to the inventive idea of creating small replicas of these items for a safer and easier method of exchange. Ultimately, the small replicas, some with sharp edges, were cast aside in favor of circular discs, often made of copper and bronze. Sometimes a hole was bored into the coins, to allow them to be placed together on a chain. This was the earliest identifiable example of what is considered early coinage. However, it was in Lydia (modern-day Turkey) that the gold-and-silver allow electrum, along with a process of stamping, turned out the first batch of precious metal coins.

Ancient copper sestertius (Roman coin) of Emperor Antoninus Pius, scarce and occasionally issued during the Roman Empire. Offered with $200-$350 estimate in Jasper52 Sept. 30 Ancient Roman Coins Auction. LiveAuctioneers.com and Jasper52 image

Although it was at King Alyattes of Lydia’s direction that such coins were produced in the late 7th century, it was Greece that capitalized on the innovation. As Wayne G. Sayles states in the book Ancient Coin Collecting, “… the rise of Greek culture and the development of coinage as a form of artistic and political expression go hand in hand. The study of numismatics, from the 7th to the 3rd centuries BC, is really an exploration of Greek civilization.”

Two plaques containing examples of shell wampum and trade beads; part of a 5-piece lot of Native American beadwork objects that was sold by Cordier Auctions for $100 in February 2016. Cordier Auctions & Appraisals image

While the Greeks, followed by the Romans, were focusing their attention on producing coins made of silver, bronze, and gold, 7th-century China was changing things by developing paper money. Early on, these notes would be exchanged for coins. A trusted source would issue the person transferring the coins a note indication the amount of coins that were deposited, and at a later date, the holder of the note could redeem their currency. While paper banknotes were used within the Chinese culture for more than 500 years, the excess production of notes prompted a decline in value and a rise in inflation. This led to the beginning of the end of paper-money use in China, in 1455. It would be another three centuries before paper currency would return to the Chinese market. As is often the case, everything old becomes new again if you wait long enough. Such was the case with shell currency. Wampum – strings of beads made from clamshells and used as both a form of adornment and a form of currency – was used by Native American peoples. There is evidence of wampum’s use in the mid-16th century, and perhaps earlier.

Another unique example of currency could be found in late 17th-century French colonies in Canada. French soldiers were presented with playing cards bearing various denominations and the signature of a governor to be used as currency in lieu of coins.

1815 $20 TN-12 Remainder note, PCGS New 62PPQ, rarer than similar $5 and $10 notes, sold for $18,800 in a Heritage auction held in April 2015. Heritage Auctions image

Money continues its evolution today, with governments around the world minting and printing coins and currency daily. In addition, the 21st century has also seen increasing use of electronic transactions and digital currency. And at the same time, the cycle seems to have come full circle, as there are examples of a new generation utilizing the ancient principles of barter and trade.