CAGR is better

Census count is a good measure of rarity – CAGR is better

© DBR Currency 2007

Collectors appreciate the large-size census, which is a snapshot of the number of known notes by Friedberg number. The recognized keeper is Martin Gengerke, who most people look to for the latest updates.

While using the number of known notes to gauge rarity is a prudent exercise, an even better analysis is to look at the CAGR (Compound Annual Growth Rate, pronounced KAY-ger) of the census and its Friedberg number populations. CAGR is really a more accurate measure of what drives rarity and to a great extent, value.

Consider a Dallas $10 Burke-Glass FRN, aka Fr. # 945. Only one note was known in the census in 2002! Rare, right? But by 2006, nine were known. The Fr. 945’s CAGR is thus 73%. This suggests that there probably are more out there.

So taking Gengerke data for each of the past 4 years (and most recently May 7, 2006), I have generated the following useful data for collectors and dealers alike.

To illustrate what CAGR means, let’s say you double your money in 4 years. You might think that means you enjoyed a 25% return per year. But in fact, when annual compounding is factored in, it only took a return of 18.9% to double in 4 years. This is because (1+.189)^4 = 2.

So taking available census data from years 2002 through 2006, I applied the same mathematics to all Friedberg census numbers. First, I separated star notes from non-star notes.

Here is a summary of selected cuts of the data for large size non-star notes.

So for example, all large non-star census notes grew at a CAGR of 7.12% over the 4-year period. FRBNs grew just under 7% per year, a slower rate than the 12.9% for FRN red seals and 18.2% for blue seals. By contrast, FRN high denoms grew only about 1.3% per year.

The following chart ranks FRBN and FRN denominations and seal types, from slowest growth to fastest growth.

$500 FRNs show the lowest CAGR, and $20 blue seals the highest CAGR. 

Another useful tool is to use this data to project future census numbers. I picked 2010 for this analysis. (I could have picked 2015 or 2020 or any year you prefer, subject to the limitations of forecasting error). Here are the results for non-stars.

So for example, the number of high denoms is projected to grow from 260 in 2006, to 289 in 2010.

Next we’ll compare 1914 FRN blue seals for 3 signature types in $5, $10 and $20 denominations. In particular, it has been long assumed that Burke-Glass notes are the most desirable. Here is the data:

Sure enough, Burke-Glass is the rarest of the 3 types analyzed. But it also shows the highest CAGR, meaning that relative to McAdoo and Houston signatures, the Glass notes are entering the census at a higher rate. 

The axiom from the financial world applies to this CAGR analysis:  "Past results are not necessarily an indicator of future performance."  The census in 2010 could be higher or lower than these projections.  In my opinion, if the currency market stays hot, the numbers in 2010 will be higher because the market will draw out sellers.  If the market turns cold, the census may grow at a lower rate.  And the rate at which people report notes to the census could change.  For example, 1914 FRNs didn't become more common from 2005 to 2006 - it's just that more lower-grade FRNs than normal were reported to the census.  The same goes for Fr. 229a black eagles.

Now turning our attention to star notes, here are the tabulated results.

So you see that in total, large stars are growing at almost the same rate as non-stars overall – 7.14% vs. 7.12%. Of course, there are way fewer stars to begin with, but their census numbers are growing at a rate similar to non-stars.

And next we have the projected 2010 populations of large star notes.

So the total census of large stars is projected to grow from 6,201 in 2006, to 8,171 in 2010. Again, market forces probably will dictate whether this is a high or low projection.

The data also shows that FRBN stars are growing at almost 8.2% per year, while Chiefs (Fr. 274-281) are growing only 3.2% per year. FRN $50s and $100s also enjoy slow growth rates, which probably ensures their continued marketability.

You can slice and dice the Gengerke census in many more ways. I have only considered a select cut of the Friedberg catalog.

By doing this, you can deduce the growth rates of individual Friedberg numbers, or entire types, and thus get a more accurate sense of true rarity.

For more information on Census CAGRs, or to order a complete spreadsheet of all large-size Fr #s with forecast ability, email us: info@dbrcurrency.com.