What would the coin market be like without speculators?

shirohniichan

How many of us have looked through auction catalogs and seen the same coins that sold at a different auction less than 6 months before?

The same coins are going from dealer to dealer, speculator to speculator, dealer to speculator and vice versa so many times that it's ridiculous. Not everyone jacks up prices, of course. Some people lose their shirts trying to upgrade, cross, or just plain resell coins shortly after they buy them. It wouldn't puzzle me so much if there was some sort of value added (e.g. identification of a variety or taking it from a small venue to a large one), but buying a coin from one national auction and trying to sell it at the next national auction doesn't make much sense to me.

So what would happen to prices if coins went from dealer to collector, then stayed with the collector for at least a few years? Would the market dry up and prices shoot through the roof, or would they stay more reasonable since there would be fewer middle men?

Clankeye

I don't know, Shiro. I find myself wondering sometimes how many real "end" buyers are out there. On the face of it there does seem to be a tremendous amount of churning out there. I often read the term "fresh" material used by dealers, and have always kind of marveled about that, since we are talking about items that can be over 100 years old. But, I understand what they mean, and can well imagine how tired they get seeing the same material you are commenting on offered over and over and over again.

Obviously it seems to me, if more collectors bought and held coins, that a certain amount of pressure would be put on the prices to try to pry them out of their hands. Maybe part of the reason the coin market stays where it is, is because of the great blood letting in the early 90's. If prices start going up for pieces, people actually step forward and sell them now, trying to re-coup old losses. And since the coins become available it keeps an effective lid on the prices?

Just thinking out loud. Pure speculation on my part.

Clankeye

dorkkarl

absolutely agree w/ shiro.

six months nothing! i attend many heritage , b&m, goldberg auctions, & the same freakin' coins show up time & again, sometimes in different slabs. how do i know? i look for varieties, & when the same danged r6 pops up 3 times in 4 months, something's amiss. what's worse is to see teletrade coins pop up time & again. i have actually seen a coin in a dealer's case, seen in later on teletrade, then again 2 weeks later back in the same dealer's case - with the teletrade sticker still on the back!!! that is why i do not trust any pricing based on electronic auctions. at least at a live auction, unless it goes back to the house, i can see who bought what, & once you get to know who the players are, you can evaluate whether the hammer price reflects reality or wishful thinking.

great topic, very insightful.

K S

DCAMFranklin

Not NEARLY as liquid!

Clankeye

Here is a question I would ask you, Shiro (and others):

Without speculators, could the prices of "rare" coins really ever move in a dramatic way?
If I have learned one thing about "rare" coins it is that so very few of them are infact geniunely rare, and the truly more rare a coin is, the smaller the collector base.
I remember being at one point overly amazed by the low mintage figures of certain classic commems, and I have now come to believe that even given these small mintages, there will always be enough around to fill current collector needs.
Which I guess is a round about way of me asking again, without speculators, would you ever see dramatic jumps in coin prices? I think it is rare that collectors spur those increases.

Carl

CalGold

Speculators/investors often work at cross currents with true collectors. A collector whose primary goal is to assemble a collection for purposes other than resale at a profit would prefer to see coin prices remain low, so that he can acquire coins at affordable prices, or at least stable so that he can plan to save to purchase coins to fill holes in his collection. Speculators drive prices up and down. Up when they are in the buying frenzy and down when they bail out. Yes, speculators provide some liquidity, at the expense of volatility. Sure, every true collector would like to see speculators jump into his series just at the time he wants to sell, but when you're buying you don't want them around.

And as Clankeye said, a lot of the coins offered in the market are not truly rare. They appear regularly in dealer inventories, at shows and at auction. That goes for high price key issues in high grade like the '09-s vdb Lincoln, '93-s Morgan, '77 IHC. They bring big bucks because there is a much larger collector base in those series, and probably more speculators/investors as well since investors tend to want liquidity.

When dealers complain about certain series being in the doldrums or being undervalued, I suspect it means that the only buying interest is from collectors. And the market for a lot of issues is very thin, with price support from type collectors being important. When the collector base is relatively stable there will be little or no price volatility. However, when a scarce high grade piece in a long series comes to market there may be a large enough collector base to cause spirited bidding, so an MS65 might generate a lot of interest, whereas an MS62 or 63 might not sell.

CG

shirohniichan

I find the grade inflation that attends the rapid back and forth trading of coins to be equally amazing. A nicely toned coin in an ANACS holder sells for $1,100. It gets into an NGC slab in a higher grade after a few failed attempts to get it into a PCGS holder, then it sells for $5,000. It finally crosses into a PCGS holder and sells for over $7,000, but it's still the same coin!

If speculators stayed out of the market, I think truly rare coins would go up in value if it took strong financial incentives to pry the coins out of collections. The common stuff would fall in price. Does anyone really think there are 20,000 collectors out there willing to spend strong money for a 1995-W SAE and keep it in their collections? If it weren't for dealers selling them to each other, I think the price would fall dramatically.

MrKelso

<< <i>Here is a question I would ask you, Shiro (and others):

Without speculators, could the prices of "rare" coins really ever move in a dramatic way?
If I have learned one thing about "rare" coins it is that so very few of them are infact geniunely rare, and the truly more rare a coin is, the smaller the collector base.
I remember being at one point overly amazed by the low mintage figures of certain classic commems, and I have now come to believe that even given these small mintages, there will always be enough around to fill current collector needs.
Which I guess is a round about way of me asking again, without speculators, would you ever see dramatic jumps in coin prices? I think it is rare that collectors spur those increases.

Carl >>



I have noticed that over the last few months a lot of big houses Like (Goldline International As an example) are making calls to there customer base and doing there sales call routines to sell the balance of collections like the Binion Hoard, The nevada Silver collection and so on. There call gives the potential buyer information such as well this coin in the last big move traded at $1400.00 at it's highest price and if the market takes off like we think it will you are buying this MS67 Walking liberty half for only $450.00 so your potential profit margin is this much and so forth and so on. So it is the big boys that are causing more and more speculators to enter the market driving the prices for all of us way up. But do not fear because as in 1980 History will repeat the bubble will pop prices will come down and everything will go back to bed for another 15 years or so.
Who wins?
PS Goldline International was just an example and i happen to like this company as i buy bullion from them.

CalGold

Shiro,

We always need to bear in mind that the coin market is "thin" even in popluar series and can be manipulated by dealers/promoters who hold inventory of a particular issue. They can bid up the price on the inter-dealer quotes or now by pre-arranged sales in Teletrade, ebay or other public means.

CG

CLASSICS

much of the market today, as it was a few years ago, is like a poker game, the higher the stakes the fewer the players. coins being cracked out from one service, resumitted to another service, over and over again, passed around from one auction house to another, ebay, teletrade, this dealer to that dealer, after a while it becomes like the crap tables at vegas. i saw what happened in the 1960s with the bu roll boom, the proof set craze, the 1980s was full of these kind of folks, coins that could be had by the bag, all of a sudden where broken up, slabbed with claims of gee, only 10 known, 6 months later there where only 5000 known. there just seems to be more sheep than there are shepards in the feild, and it still seems to be that way today, 19,000 dollars plus for a 1948s quarter at teletrade only one known...sure...untill they start grading some of the other ones that start showing up of which only...15,960,000 where minted. musical chairs, yep, i can here the music playing now.

cladking

I've got to ask myself how many high grade '48-S quarters there can be. They've been grading
all The Washingtons that aren't nailed down for a few years now. High grades have had a large
premium for more than a decade. While I believe there may well be some gems in the old time
collections it should be remembered there were not large numbers of people collecting Washington
quarters until recently. Quality wasn't as important to collectors back in the old days as it is now,
(as evidenced by these record prices). It doesn't seem likely there will be hundreds or thousands
more of these graded (or in existence). Even if the pop goes up to 20 or 30 is this really a huge num-
ber. It isn't difficult to picture much more demand for the best. While some of the purchasing of this
kind could be speculative one shouldn't underestimate the ability of the collector to obtain what is
needed for his collection.

shirohniichan

Does anyone know what happened to that 1856 large cent in NGC PF-66RD that was making the rounds last year or the year before? I saw it at 3 dealers, and I wonder if it's still going on the dealer to dealer circuit.