Rare coins' stock is rising on Wall Street, and the implications are enormous --- and tremendously exciting --- for the coin market.

More and more Wall Street firms are lending their names and resources to ventures involving coins, demonstrating conclusively that these are far more than nickel-and-dime investments. In the process, they're giving the numismatic marketplace major new infusions of money, credibility and exposure.

The trend began in 1986, when Merrill Lynch, the nation's largest brokerage firm, joined forces with Numismatic Fine Arts of Beverly Hills, California, to establish the Athena Fund, a limited-partnership fund based upon managed investments in ancient coins and antiquities.

The project was so successful that in August 1988, the same two principals launched a second fund --- Athena Fund II --- involving even bigger investments in ancient coins. The first Athena Fund started with a stake of $7.3 million; the second has an upper limit of $40 million.

Earlier this year, a second large Wall Street firm, Kidder, Peabody & Co. Inc., also got into the act. Working in conjunction with West Coast coin dealers Hugh J. Sconyers and Kevin Lipton, Kidder, Peabody began offering shares of a new limited-partnership fund --- this time pegged primarily to rare U.S. coins. As with Athena Fund II, this one could be as large as $40 million.

In April, there was more exciting news: Coin World, the hobby's largest weekly newspaper, announced that yet another big Wall Street firm --- Shearson Lehman Hutton --- "is in the rare coin business." In a splashy front-page story, the newspaper reported that Shearson is offering certified coins --- those that are graded and encapsulated by third-party grading services --- to 3 million customers through 11,000 brokers nationwide.

The impact of these events has been electrifying. They have helped trigger a surge of dramatic buying and selling in the coin market, fueled not only by Wall Street's involvement to date but also by expectations that the trend will continue and accelerate. And, with activity zooming, prices have soared, as well --- especially those of the most widely traded certified coins.

Reliable third-party grading and sight-unseen trading have played key roles in capturing Wall Street's attention and luring big investment firms to try their hand --- at least on a limited basis --- at buying and selling coins. They have done so by removing the confusion and controversy from the grading process and transforming rare coins into highly liquid assets not unlike the stocks and bonds that Wall Streeters handle routinely.

John H. Sack, first vice president in Shearson's futures division, said unequivocally that these were major factors in his firm's decision to enter the field.

"The plastic holders did it; that's it in a nutshell," Sack declared. "When you buy and sell coins in the holders, you can call 300 coin dealers across the country and get a fair price for something they haven't even seen. It's a whole new world out there for rare coins.

"There's faith in the marketplace now. If you can get a bunch of people to buy and sell something sight-unseen, that means they have faith in the product. They're willing to put their wallets where their mouths are."

Shearson was already buying and selling bullion coins; in fact, it was --- and still is --- one of the nation's largest distributors of gold bullion coins such as the American Eagle, Canadian Maple Leaf and British Britannia.

Sack had been managing that segment of its business and decided to start dealing in certified coins, as well, on a limited basis, "basically just testing the liquidity of the market and finding out who's who and what goes on."

What he found was most encouraging, he reported.

"These," he said, "are products that people want --- products with good liquidity for which there is strong demand. We feel they have a very good future, and we feel that there's a niche where we can get involved."

Shearson doesn't handle uncertified numismatic coins. And at this point, it's limiting its numismatic activities to coins that have been certified by the Professional Coin Grading Service (PCGS) and the Numismatic Guaranty Corporation of America (NGC), the two most widely accepted of the coin grading services.

According to Sack, Shearson is dealing only in "generic, fungible types of coins" --- primarily U.S. gold coins (from quarter eagles through double eagles) and Morgan and Peace silver dollars. A fungible coin is one that can be traded as a unit interchangeably with other coins of similar kind and value.

"I am confident that our involvement will grow into other areas of the market," Sack said, "but that we will remain absolutely at the sight-unseen end of the market.

"I don't see Shearson being involved in rare dates and very esoteric coins. Those are more appropriate for the specialist or advanced collector."

Sack said certified coins are appealing to people on Wall Street not only because of their liquidity but also because they enable a company such as Shearson to handle them without a staff of numismatic experts.

"We can take somebody right off the floor of the New York Stock Exchange --- someone who never even heard of rare coins --- and show them how the game is played," he said. "We can say, `Look, the Blue Sheet posts prices and the products can be bought and sold sight-unseen. Here you go! Pick up the phone!' So anyone can understand the marketplace now.

"I don't mean to suggest that the whole coin industry is easy," he quickly added. "Sure, there's a knack to buying rare dates, for example. But for generic, fungible types of coins, the marketplace is coming to Wall Street. I really don't think it's the other way around --- that Wall Street is coming to the marketplace. I think guys like John Albanese (president of NGC) and David Hall (head of PCGS) have brought the market to US."

Shearson's coin and bullion trading desk in New York is coordinating the firm's new activities. Sack said prices are based "on the current marketplace."

"We feel that we'll have order flow in both directions --- both buying and selling," he said. "And we'll have enough flow that we'll be able to offer narrow spreads --- tighter spreads than the market has been used to.

"We will definitely be the principal on everything we handle," he added.

The company is maintaining an inventory of numismatic gold coins and silver dollars, replenishing its stock as necessary through purchases from coin dealers. According to Sack, it uses depositories in New York, Los Angeles and Delaware for both its bullion coins and its numismatic items.

"We have hundreds of wholesale accounts and we have a gigantic retail base in our bullion coin business and we service both," he said.

Many clients, he said, prefer not to take physical delivery of their coins, so Shearson gives them the option of having their holdings stored for a nominal fee in depositories such as the Bank of Delaware.

The rare coin market has been the target of critical articles lately in several periodicals that cater to traditional investors. Sack said these articles only reinforced Shearson's decision to enter the market in certified coins.

"I find all those articles very positive," he said. "If you read them carefully, the negative things they say are never about the product itself; they're always about the people you bought the product from --- that they overcharged you or they underpaid you or they overgraded or they undergraded or this, that and the other thing. You almost never see articles saying there's a problem with the product itself.

"We consider this a perfect opening for us here at Shearson --- one of the big reasons why we should get into this market.

"We know that the product is fine; people have been buying and selling it for years and there have been no complaints. We know that the price performance of the product has been very favorable to people who have owned coins. And we don't have a problem with the grading any more. It's the person you're buying it from who potentially represents a problem; that's what the negative articles are always written about. And with Shearson, that's not going to be a problem."

Sack said it's unlikely that Shearson will follow the lead of Merrill Lynch and Kidder, Peabody in sponsoring limited partnership investment funds linked to coins. He suggested, however, that Shearson's day-in, day-out activities are likely to have greater impact on the coin market as a whole.

"A fund is one thing," he commented. "What we're doing here is something else: We're actually entering the marketplace to buy and sell coins."

Independent coin grading also figures prominently in the plan of operation for the Kidder, Peabody fund. In this case, however, many coins will be certified AFTER being purchased for the fund.

The sponsors plan to purchase large numbers of ungraded --- or "raw" --- coins and then submit them to one of the major services for grading. They're counting on the expertise of Sconyers and Lipton to choose coins that will merit advantageous grades and thus bring healthy profits when they're sold.

According to its prospectus, the fund is intended as a five- to seven-year investment. It plans to adopt a "buy and hold" strategy with part of its resources, purchasing certain coins with an eye to appreciation over time, and also to maintain a stock of other coins with which it can act in a "market-making capacity," buying and selling as market conditions warrant.

The prospectus points out that because of its strong cash position, the fund will be able "to make large purchases without having to delay in order to raise the necessary sums and will have financial resources of a magnitude to attract numerous proposals for major transactions." This, it says, will give the fund a substantial competitive advantage.

It was obvious from the outset that nickel-and-dime investors needn't apply. The prospectus stipulated that qualified buyers must invest at least $50,000. And to qualify as a buyer, a would-be subscriber would need a net worth of $1 million, exclusive of residence and automobiles; an annual income of $200,000 in each of the last two years; and anticipated income of $200,000 this year.

Kidder, Peabody will be happy if this new fund can duplicate the track record to date of Merrill Lynch's first Athena Fund. By the end of last year, some 30 months after the establishment of the fund, its managers were reporting a 36-percent net gain.

Both Athena funds are pursuing seven-year strategies. Each got under way with a three-year "trading period" emphasizing short-term assets --- items intended for sale within two years of their acquisition. The purpose of this is to generate profits from which cash distributions can be made to those investing in the funds.

In each case, the fourth year is planned as a "transition period," when all of the remaining "trading assets" will be sold. After that, the concentration will shift to longer-term holdings and the last three years will be treated as a "liquidation period." At that time, the managers of the funds will sell the remaining assets through "major public auctions, direct public sales and private transactions."

Limited partnerships such as these are attractive to many investors who like rare coins' investment potential but don't have in-depth knowledge of the field. By placing the portfolios in the hands of experienced coin dealers, they minimize the pricing risk investors would otherwise face --- much as independent grading services have all but removed the grading risk.

John Albanese, president of NGC, sees Wall Street's growing involvement as a big boost for the coin market. And he's hopeful that in time, the enthusiasm and growth will filter down to the hobby's grass roots.

"Clearly, the coin market as a whole --- and many individual coin dealers --- will benefit greatly because of this infusion of new investment money," Albanese said. "The favorable exposure will benefit our marketplace, as well.

"What really excites me, though, is the prospect that coins will be sold by traditional Wall Street firms to traditional investors --- many of whom have never purchased rare coins in their lives. I feel confident that many of these investors will end up becoming collectors --- and that, of course, will benefit all of us."