Pricing philosophy: “am I wrong?”

Ppp

Over the years I had philosophical differences with dealers, customers, and friends regarding pricing/trading/valuing of coins when it comes to the issue “am I replacing the item or not”.

Let’s use the following example:

A friend of mine wants to trade a 1881 $5- gold liberty plus cash for a 2023 (he needs this date) $10- AGE

Issue: how much cash would be fair?
I say it depends if I am replacing the item or not.

A:
2023 $10- AGE (raw)
Gold spot for his exercise is $2,500-
Melt for this coin is $625-
Greysheet bid is $656-
Greysheet cpg $850-
Price to local dealers spot plus 7.5% or $672-
Sd bullion price approximately $715-

Assume my original cost is $550- for the 2023 $10- AGE

B:
1881 $5- liberty (raw) assume au grade
Melt $603-
His cost $600- (he just picked it up)
Greysheet bid $605-
Greysheet cpg $775-

C:
Cash ???
he offered $20-
I replied $72-

Please note it’s not about the money, difference of $52-, as it is about the philosophy because this type of issue continually comes up.

If I am not replacing the item, since he is a friend, then I would accept his offer of $20- however in this case since I will be replacing the item (any date) I said $72- that way all the dealing is at our current cost/replacement. He feels I am taking advantage of him because I am making profit because my cost is $550- which I think is a moot point since I am replacing the item and I have to pay $52- more than what he offered.

Note: To sweeten this deal for him I would include a one gram sealed Candian maple leaf, that he wants, at my cost.
Melt $81-
Assume my cost $80-

I think I am being very fair.

How do you answer these questions:
1- how much cash is fair if you “do not” plan to replace the coin?
2-how much cash is fair if you “do” plan to replace the coin?

DocBenjamin

If it is a friend, I do an even trade.

david3142

What you paid for the coins, and especially for bullion, is irrelevant. All that matters is what they are worth today. The cash piece should be somewhere between:
the fair ask for your coin - the fair buy for his
and
the fair ask for yours - the fair ask for his.

Basically, it should be the difference in value between the two coins plus some dealer spread for enabling the transaction. If he is a friend, I think moving that spread to 0 is reasonable.

I don’t think the replacement part factors into it but if it does to you, then it just moves the spread.

davewesen

Ideas probably different between collectors and dealers that rely on coin dealing to live.

oldabeintx

Agree with your position. And I would observe that friendship works both ways.

logger7

I don't do trades, never made out well especially with savvy dealers. Value things in the real market, and if someone has a more accurate assessment, listen to them and adjust it. If I paid $1000 for a $2000 market coin, when I go to sell it I will look to get real market for it, not depreciate it based on some flawed idea. With some people it is fair to give them a good deal for a lot of reasons.

coinbuf

The real lesson here is not to disclose your cost to your friends.

TomB

I don't care if someone is going to replace it, forget about it, bury it in their backyard or leave it in a sack of potatoes. Each piece has a current market value and that is what it is worth.

NeophyteNumismatist

Is this a friend that you would buy lunch for if you were out? If so, give your find the deal and tell them they owe you lunch next time. This would likely be much better received than trying to review a complicated algorithm to justify why you are charging an additional $52. In the end, you need to evaluate if its worth causing this kind of abrasion over your deal.

Ppp

Thank you for your interesting comments. My friend and I often sell stuff we just pick up to each other at our cost. In this case I had to take the coin out of my personal collection and I will replace it immediately. Therefore, for some reason he and others don’t see the fact I have to pay more to get the coin back than what they pay me. In this case about an extra $52- out of my pocket.

Again, the money isn’t the issue as much as the philosophy and mind set. If my friend needed money I would (and have in the past) give it to him. This is the only thing where my friend and I don’t see things the same way. I wouldn’t expect him or anyone else to sell me a coin they plan to replace immediately for less than what is their replacement cost. Unfortunately, many people (including dealers) I meet and deal with in my mind don’t get it which is fine because who am I to question someone else’s business/philosophy and practice.

The conclusion for this example is he agreed to go buy any date tenth ounce age and I will trade him even up so he gets a 2023. Which means he will pay more to someone else than what he was willing to pay me. I am so confused however, I am smart enough to know maybe it’s me. 🙂

jedm

If I didn't need the 1881 $5 and didn't care about which year $10 gold he trades to me for the 2023, then what he spends to get one to trade with me would mean nothing. Friends are hard to come by and if this is all it takes to keep the friendship alive, no problem.

telephoto1

Small AGEs are bringing better premiums and right now finding specific dates can sometimes be a pain unless you want to pay up. The $5 Lib on the other hand is a widget that is not currently trading at a significant premium. If you just want to give the guy a gift that's one thing; do the trade... but for it to be fair to you I'd say $50 anyhow, which is still fair. Either that or just have him go sell his piece elsewhere for as much as possible and then do an all cash deal to forego a convoluted trade.

Edit to add, I just read the resolution. Odd, but whatever floats his boat.

Cougar1978

I don’t do trades. I buy or sell coins / banknotes. What some other player thinks what I should sell for (like give it away at bid) does not matter to me.

I keep a spreadsheet tracking, Cost, Bullion wt, , CDN Bid, TPG price, CPG, cost plus, pop, etc. for reference, known parameters. Then analyze the big picture on one page.

Things like graded world coins and banknotes can be more subjective, especially low pop, top pop items especially if not covered in CDN, TPG price guide, etc. Many develop a matrix structure for these based on research in a particular area. Or simply a subjective price based on what they want for the item.

Any numismatic business has to recover inventory cost plus Opex plus have enough left over for a positive margin to even have a chance to survive. A show dealer has to recover the cost of a table fee plus the other show expenses. There is no free ride in numismatics. We don’t do this for free.

Now sometimes numismatic items may be given out as gifts like Jimmy giving his GF a MS69 ASE for her bd in which case he deducts its cost as advertising expense. Dr Adv exp Cr Inventory. Or a dealer may be lower on items for cash needs early in the show and maybe ramp it back up later. Frank wholesaled an item at $500 cash offer at bid from another dealer at a show bc he needed to pay an attorney due to credit card lawsuit. Later it was settled for 60c on the dollar. Being occupied at a recent show by a large currency deal with a big spender repeat customer - I instructed Monique sell at bid plus 10 pct (US material under 1000, anything over that ask me as I needed cash buy some material from a wholesaler setup who was at bid plus 5 pct. On Walkers, Commems, Gold I wanted. Once mission accomplished we ramped back up to CPG range for that material. Strategy is what wins the game.

Pricing is a very subjective area. Plus what one asks can vary due to market and individual needs / outlook.