Coin economics 101?

epruyne

Professor Numismatic - Any questions

Newbie eric- <raising hand and shouting oh oh me me!!>

Professor Numismatic - Alright this should be entertaining, I love rookie questions...go ahead

Newbie eric- Ok I have two actually, first since the coin market it volatile when the market is bearish do collectible coin retail prices
decrease, stay the same or increase?

and with the influx of new ms70 gradings decreasing the price of ms70 coins will this also decrease the prices of ms69s?

Professor Numismatic - I think we should go to the PCGS forum members for that one!

cladking

<< <i>

Newbie eric- Ok I have two actually, first since the coin market it volatile when the market is bearish do collectible coin retail prices
decrease, stay the same or increase? >>



A market's being bullish or bearish is a determination after the fact. ...An effect not a cause.



<< <i> and with the influx of new ms70 gradings decreasing the price of ms70 coins will this also decrease the prices of ms69s?
>>



The price of MS-70's is determined by an interplay between supply and demand. The relative
price of MS-69's and MS-70's is also to some degree on the supply/demand for the MS-70. With collectables it sometimes happens that prices will actually increase as more of an item become available. Many moderns
have never been graded MS-70 and this will never change. Many don't exist over MS-66.

epruyne

The price of MS-70's is determined by an interplay between supply and demand. The relative
price of MS-69's and MS-70's is also to some degree on the supply/demand for the MS-70. With collectables it sometimes happens that prices will actually increase as more of an item become available. Many moderns
have never been graded MS-70 and this will never change. Many don't exist over MS-66. >>



Thanks for the reply...Yeah I realize that I made a mistake there I was referring to pr70 not ms...sorry about that

gemtone65

Retail prices will decline with a lag as general wholesale market prices decline. This occurs because until existing inventory is cleared, dealers are reluctant o lower their retail prices.

Of course, the prices of lower graded coins will tend to decline as higher graded pieces decline in price. The closer are the grades, the more correspondence there will be in price adjustments. After all, who's going to pay more for an MS69 than a 70?

BillJones

I can't help with pricing, buying or selling PR or MS-70 coins because I don't collect or deal in them. I can try to help you with pricing in bear markets.

When the coin market goes south it can REALLY go south. During collapses, especially after a big boom, you can’t sell your coins to dealers except at very depressed prices. The coin market is not like the stock markets where there are trading rules in effect that can cushion price drops or suspend trading on hard hit issues. There is no organized system that will support falling markets When things drop, they can drop badly and sometimes it’s impossible to bail out at in an interim price while things are on the way down. Sometimes you can only get “rock bottom” money, especially for material that exists in quantity.

Yes, retail prices do reflect bear market pricing, but it does take a while for them to reflect. Some dealers are reluctant to take their hits on depreciated merchandise. Others sell out and move on to keep their money moving.

The biggest problem in bear coin markets is that the supply of available “good stuff” gets really short. Collectors and those who have “strong hands” (strong financial resources) often are willing to hold on to their good material rather that sell it at depressed prices. This is evident both in bourse activity and major auctions.

epruyne

Good explaination thanks that helped me out alot. I know I could probably find answers to these questions reading books but none of the bookstores around carry any that people have listed here and the two local dealers I have been to don't have any either.

How often to the trends make drastic moves in either direction. I have read that the late eighties were a stong bull market but what followed? Compared with the stock market I am guessing that shifts are seen more in coins, am I correct?

fantasiize

The coin markets have cycled in 8 to 10 year increments over the past 30 years (anything before that is tough to judge as I only look a the last 30 years).

The last bear market (depending on who you ask) was 11 to 13 years ago (does that mean you are starting to hear the slight "hissing" sound of the bubble or that we have 5 more years to go given eBay, internet, new Mint programs etc.). Not 100% sure but I mostly collect (and slightly invest/speculate) so it does not matter to me either way.

The series that I specialize in and have had a strong focus in (look at my icon) I have been on the bench for over a year now on new high grade or high volume "stuff". I think that series has substantially increased in price so I am personally waiting for a bear market to splurge again, though I know other folks continue to buy and buy strong. Should a bear market occur, will I find any bargains or am I making a mistake by waiting, only time will tell.

Reaching back to high school/collegiate economics (also applies in the coin market) there are both inelastic (will pay a given price regardless of the supply/demand, i.e. the premium coins) and elastic demand (as price increases, demand falls or substitutes are purchased which before would not be). That rule/law of economics is very distinct, given the series, grades, scarcity etc.

Finally, don't forget opportunity cost either (i.e. those estate sales, 5 gallons of unsearched wheat cents or just some slabs that you bought cheap and are not interested in now, could be sold to break even or lose some $ BUT it will give you some $ so you can purchase what you really want to purchase now). This can occur either in bull or bear markets (buying them in bear markets and selling them in bull markets does minimize the pain).

EDITED for poor grammar

supercoin

The coin market is not like the stock markets where there are trading rules in effect that can cushion price drops or suspend trading on hard hit issues.

I'm not sure what you are referring to here... there are some general trading limits, but they are intraday and only for program trading. Also, there are no trading halts (that I am aware of) on individual stocks simply because of price movement. There are restrictions on short-selling a rapidly declining stock, but that doesn't apply to the coin market anyway.

I think the difference is that the stock market is 1,000,000,000 (approximately ) times bigger than the coin market. There are far more buyers at various levels, and the ability to sell directly to them is readily available, and so there are far more opportunities to get out at interim prices.

A drastic and rapid change in prices requires a lot more people to get on board buying or selling. Consequently a 10% short-term movement in the stock market is a big deal, whereas that amount of movement in PR70s is a yawner.

BillJones

<Also, there are no trading halts (that I am aware of) on individual stocks simply because of price movement.>

I believe that there were trading suspension rules that were put in place after computerized trading caused some stocks and the market has whole to take rapid declines. The suspensions are very brief, but at least they do provide a breathing period.

crito

Market curbs were implemented after Black Monday (Oct. 19, 1987) and the exchanges frequently suspend trading of individual securities for things as stupid as "pending news". Only reason they do either is to protect the large institutional investors and screw all us little guys. When trading resumes, it frequently takes hours for individual investor's orders to be executed, while the specialists take care of their insider friends.