The value of the coin
tradedollarnut
Posts: 20,162 ✭✭✭✭✭
Some say the value of a coin is whatever a willing seller and a willing buyer are willing to settle on. Is that really true? Parrino used to work that way. He'd pay top dollar for classic rarities and then double their price. I fell into that trap and paid a 70% markup for my 1885. I figured that when I drove it off the lot I lost 20% in value - in reality, it was even more. Even today I don't think its value has reached what I paid for it. But.... I've got the coin. Of course, Jay also advertised a two way market in his items. He promised to be a buyer near his selling levels. Liquidity is important.
So... do you think a coin is worth any price that is agreed between a seller and buyer? Does it matter that the coin may be illiquid at even 50% of the sales price? Would it be true if the seller made a market in his coins near his selling price?
So... do you think a coin is worth any price that is agreed between a seller and buyer? Does it matter that the coin may be illiquid at even 50% of the sales price? Would it be true if the seller made a market in his coins near his selling price?
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A coin, or any collectible for that matter, is worth whatever it can consistently be bought and sold for.
Over the past year, I've had the pleasure of advising a friend of mine on how to acquire an excellent set of TD's at a fair price. He views it as a graduate-level course in TD's -- especially how quality and price inter-relate. One thing I've tried to teach him is that he shouldn't confuse paying strong money for a coin because it is PQ with paying strong money for a coin because you have your own sense of the market that likely no one else will follow.
I recently bought a very rare key date Seated dollar in a condition that might make it the 2nd finest specimen extant. I waited 4 years and two previous auction appearances before jumping at that coin. I also own an 1851 (original) dollar that I waited over a year to acquire. In both cases, I was willing to pay more. But, why should I? These coins are very rare and already very expensive; why should I make a market against myself?
I have another friend who is contemplating a major purchase in an area in which I've developed some expertise. On the matter of pricing, I've almost been begging him not to make a market against himself.
If you're willing to pay more than the vast majority of your serious competition, then chances are that you're wrong and your competition is correct.
EVP
How does one get a hater to stop hating?
I can be reached at evillageprowler@gmail.com
In the concept of "value" as posted by TDN, I think we're really speaking of the "selling price", which is not always indicative of a fair or true value. Many of us here, could give numerous examples where a buyer has paid a price for a coin, that is far in excess of what any reasonably well informed person would pay. Just because such a person might have paid $1000, in such a case, does not necessarily mean the "value" of the coin is $1000.
Ditto for uninformed sellers not always getting true "value" for their coins. If a seller has a "buy it now" on Ebay, someone buys it and 20 other people would have gladly paid 30% more, I believe that the "value" of that item is more than the willing buyer and seller ended up "agreeing" to. The same can often be said for non Ebay transactions too.
I realize this is at least partly about semantics but that is my take on it.
The problem is that people assume that they can get a realized value that matches their perceived value. That is, if their perceived value is very high. The sane part of this is that many people share a relatively even level of perceived value. And because realized value is generally dependent on perceived value, the realized prices generally are in line with the perception.
The problem you talked about, the illiquidity, is due (I think) largely to dealers. The nature of the market is high margin, low turnover. Because of this, the dealer's job is to lower the perceived value in the person's mind when buying and raise it up when selling. If they do it well, the realized value is out of proportion (an outlier) to the norms and the coin becomes more illiquid. But as long as high margins are the norm in the industry, coins will always have a large portion of illiquidity. In this, I think there is some comparison to other high margin industries with low inventory turnover. No perfect comparisons come to mind, but similar situations.
Neil
Wouldn't it be more appropriate to state the coin is worth $10 and the holder $38,000?
In an auction setting, you do in fact pay the second high valuation. You may value the item much more highly, but you only need to pay one increment above the second highest bid. In contrast, in one on one bargaining, you may be forced to pay closer to your full valuation, without knowledge of what the second high valuation is. Therefore, the true value of an item is not necessarily what you pay for the item, but rather what you would have paid if the market were structured so the final selling price reflected the second high valuation.
If TDN had paid the second high valuation for his 1885 piece, i.e., if he won the item in auction, then he would have paid a fair market price and he wouldn't have been left holding an item at a potentially significant loss. Of course, this assumes that the second high bid wasn't the reserve price.
Understanding this concept is crucial when considering purchase of a very rare or unusual item, where there is scant trading information to be had. In these situations, the seller may be at a significant advantage to the buyer, because the seller probably has convassed the market to determine how much he can sell the item for. The buyer typically doesn't have anywhere near this same level of information or the means to acquire it.
I just want a good coin. I don't plan on selling for 50 years, unless unfortunate things happen.
Who are you to tell me the value of a coin when I might be willing to pay more?
<< <i>Ewwww - that means the infamous 1963 PF70 DCAM cent is worth over $38k!!!!!! >>
Maybe my theory doesn't hold any water.
In this case a coin is worth whatever someone with a fist full of cash and a few too many Red Bull's in him is willing to pay for a coin.
The price for the infamous 1963 PR70 cent I think you could chalk up to an unknowledgeable buyer. And if he bought it at that price for the primary reason of being king of the registry hill, I would define that as ill-informed.
I think that liquidity is a slightly different matter. Liquidity = capability of ready conversion into cash. In the market that TDN refers to, such as his 1885 trade dollar, it is so thin with buyers and sellers. I think it is safe to assume that TDN is a knowledgeable buyer. But the 1885 trade dollar may not readily be converted into cash because there may be very few buyers for it at any point in time. That does not necessarily mean that what he paid for it is not indicitave of its value. It might mean that he takes a hit on it if he has to sell it tomorrow. But if he waits for the right buyer... well it only takes one buyer and one seller.
And if he waits until after I win the lottery, I'm sure he'd be convinced that his trade dollar is worth every cent he paid for it!
If a buyer wants a beautiful coin, and the ability to re-sell it for the same price then they must be astute, and know the market. If a collector has been searching for a decade for that perfect coin, and finally finds it, will he/she let it go because the seller wants double retail. Who determined the retail price in the first place? What is the price of a decade of searching?
All factors are relative, because coins are unique, and have myriad characteristics that pricing guides cannot fully determine, the demand fluctuates, as does the collector base. Is there a supercomputer in some goverment building that tracks all that and spits out a fair price?
There is a 1897-O F15 Barber half on an internet site, that started me into coin collecting. It retails in the $400 range. I would pay double because it represents something special to me and because it is the key date of the series, and because they are hard as hell to find. I want that coin, but cannot have it, because the owner values it more than my $800.00.
I guess it boils down to ones approach to collecting. I rarely buy a coin that I cannot move the next day for the same amount or more than I paid. However there are coins that are so scarce to find in original condition that I don't really care what any retail, or wholesale price guide says...I want it!!
Tyler
and it sets us apart from practitioners and consultants. Gregor
You also have to get to whether you are creating the world's finest collection of a certain coin type. That is far different from the Mercs I collect that are in the 100s range.
If you are buying to resell in the near future for a profit, you have different motives than an individual putting together the world's finest collection. Thus, you will have different thresholds of acquisition.
Going over the top for the crown jewel of a collection makes good collecting sense, but perhaps not good investing sense. For me this is a hobby, not a business. If I could afford a collection like TDN has, I would certainly be proud of it and hopefully the amount it would bring at sale would not be a consideration.
No one wants to overpay, but then what is the value of the best? Only the individual can measure that, not any of us for another collector as we have different value systems.
As for the other stuff that Perrino had, when he had an usually nice coin for the grade, he wanted big premiums for it. In those cases I could find the same thing for a lot less money if I did enought digging. That might for a collector who has only a limited amount of time to look for coins, but for a dealer like me, it's got to be a pass.
For instance, the Pittman 1838 proof half I have was purchased at auction. There were three underbidders on the book at $500 less than my winning bid. Another bidder actually bid more than me, but was disqualified for having exceeded his financial limit. To me, that solidifies the value of the coin. There is no price guide for that coin, it's simply too rare. But to know that there were 4 other bidders willing to pay as much or more than the price realized is validation.
But take a coin such as the Starr 1884 PF67 trade dollar on Parrino's site at $950,000. Even if I agreed to that price [I do NOT want the coin, I have both the Eliasberg coins], does that really validate it's worth? Isn't a coin only truly worth an amount at which it is somewhat liquid? Jay's had that coin for sale for years now, no nibbles. It is not liquid at anything near that price, therefore I postulate that it's value is not at that level - even if someone agreed to purchase it at that price. Does this make sense?
In order to get the price for the 1838 Pittman coin, there had to be a lot of marketing up front. It had to cataloged, the catalogs had to be distributed, the auction had to have time to developed (viewings, Publicity etc.) and then the sale had be held. At that period of time there were three to four bidders that were supporting the selling price. At another time there could be less bidders and the price might come out lower.
Super rarities like this are always speculative because it takes certain conditions to the make the prices work. More common coins that could be sold at a one day show have lower transaction costs to result in a sale.
I’m not putting you or your coin down. I’m just saying that rarities like this have different marketing requirements.
supply and demand by price. Coins within this population will vary in price due
to individual differences with the coins, buyers, and sellers. Regardless of mintage
or population if a coin is thinly traded then prices will vary more widely. With low
population items like 1885 trade dollars or MS-70 '63 Lincolns then other factors
gain greatly in importance. Historical pricing comes into play with a classic rarity
and this will be compared to the health of the overall market and the specific mar-
ket in the minds of the auction participants. With many rare coins there will be a
complex interplay of speculation, fear, and the percieved chances of being able to
acquire the item at a later date. With the '63 cent it is likely the bidders also keen-
ly felt a sense of competition.
Generally collectables will bring a price between 50% and 200% of their recognized
value or the recognized value will start to change.
a knowledgable seller and a knowledgable buyer with a meeting of the minds as to price at the then current market
i guess for me coins are a thinly traded undercapitalized market based lots on marketing and demand and the all time kicker lots of discretionary$$$$$$$$$$$$$$$$$$$$$ an example was hetty greens son Col. green
and on the other end of the scale with many uninformed/unknowledgable so called dealers 10% back of bluesheet
sincerely michael
Also other dealers, like it or not, finally caught onto Jay's preaching of trying to buy and also sell finest known coins if one could afford them. This was a concept he preached over 7 years ago...... long before the PCGS registry came into being. He spoke of this concept quite eloquently in one of the Forecaster magazine issues which I still have. It was a masterpiece interview.
With other dealers catching on, Jay could no longer have single access to the top coins as now he kept getting outbid weakening his ability to get them all.
He also had the misfortune of getting arrested for trying to buy the 1933 double eagle from Fenton in 1995 and had untold legal fees to fight in court and ultimately had to throw in the towel. This certainly hurt him a lot more than we will ever know. Now, Parrino has been vindicated two years ago but did he get the benefit of the 50% of the profit? No.
In my view, I think the US govenrmnent stole his fair share of the profits from him.
Now as far as his prices............... sure they were high. I paid some of them, after some negotiation. Did he take advantage of me? In a word, no as my eyes were quite open.
Sure, I paid the highest price ever for a 1945-P MS-67FB dime at the time ($9000) in 1997 but in reality it was a stupendous bargain.
Now when selling finest known there are no or at the least, very limited comparables.
Jay did preach one thing back in the 1990's that when buying the finest known, try to not pay more than 3 times the next lower MAJOR grade (meaning 63, 65 or 67). Minor grades increments were supposed to be less.
That is one of the most important rules I have learned from Jay and still try to follow it religiously.
Now as for TDN....I think he will do quite well in the long term. The 1885 trade dollar is NOT a short term coin. The publicity it will garner and continue to garner and the fame it rightly has will reward TDN quite handsomely down the road while our stock market tanks and bank accounts pay 2% per year.
JMHO.
One thing that I have always been impressed with in the history of the hobby is the length of time that some collectors of old held on to their coins. If you follow the movement of certain coins through older auction catalogs it is not unusual to see notable pieces remain in collections for decades. Value was built over time and besides, who can put a price on our type of enjoyment?
The late 1990s was an exceptional time for coins as it was for many things. Spectrum and Parrino were burning up the auction circuit. Fantastic multi-generational collections hit the market. Now those two are not such big factors in auctions and of course, offerings like Garrett, Norweb or Eliasberg can never be matched.
All in all, considering all of that activity, I am not surprised that coins like your 1885 Trade Dollar are still in their "drive-off" phase. It takes a while to rebuild the mystique. Personally I have no doubt you'll do all right over the long term.
I remember his quote quite differently: he told me that he believed there would never be a legitimate MS-66 Red PCGS red 1955 DDO red cent. So far he has been right.
Now as far as 1909-S VDB in MS-68 red, I never asked him and never cared about them so I can't argue with you on that comment.
But boy........... who ever bought his 1909-S VDB red cent in PCGS MS67red from him 6 years ago has done quite well for himself.
<< <i>but rather the concept that there must be some basis for the value of a coin beyond simply what the buyer and seller agree. >>
But that is the value. You are confusing value and price.
The value of something is what you are willing to give up in exchange for it. Price is just a numeric quantifier used to measure it.
How you value something is your choice of how you will trade your resources for that good.
Say I have $2,000. I can either make my mortgage payment or I can buy a $2000 coin. Since I value my house more than a coin, that coin doesn't have a $2,000 value to me and I would not be willing to give up my house for the coin.
Everyone, including Bill Gates, has finite resources and even with luxury goods the same applies. Say you have $100k to buy coins. There are 3 coins you want priced at $70k, $25k and $10k. Since you can't buy them all with your $100k you have to give up one of the coins or inform the seller that you only value the $70k coin at $65 because you have to give up too much other goods.
And the value of the good to the seller works the same way. Say he is selling his coin because wants a $70k car, but to sell his coin to you for $65k means he has to give up his $70k car and get a $65k car instead.
So we value goods based on what we are willing to give up in order to have those goods.
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Collectors need to build their collections that suit them. They should not be concerned about selling the coin. No one can predict the future. They need to be comfortable with the purchase. True collectors are not concerned with the eventual sale of their coins. They should be aware of all pertinent information at the time of sale and they should be given a period to return it if they should develop a case of buyer's remorse.
TDN can build his collection that fits his taste and is probably not concerned with how much it is worth next month. All the great collectors have had that quality. Coins cannot normally be sold for a profit quickly or easily by a collector or anyone else for that matter, without having some idea of what to do with it.
Do not become involved with coins if profit is your focus. It is hard enough for full time professionals to do that.
Enjoy coins. Add to your collection and when you no longer enjoy it, then begin thinking about disposing of it. Do not think of disposing of the coin when you purchase it. It just does not make any sense.
I firmly believe in numismatics as the world's greatest hobby, but recognize that this is a luxury and without collectors, we can all spend/melt our collections/inventories.
myurl