question about 1980 and 1989 price crashes
CaptainRon
Posts: 1,189 ✭✭
I've read a few posts lately that touched the subject of why coin prices skyrocketed and then fell in 1989, and find it very interesting. But as I went back and looked at the CU3000 from 1970 to current, it looks as if this happened in 1980 as well. Can any of you veterns please give us a newbies a history lesson in what happened in both of these cases. And if you don't mind can you give another history lesson on what happened when someone tried to corner the market in silver years ago (how bad did they lose or win), and what impact did it have on the coin world. Thanks everyone.
Ron
Ron
0
Comments
The culprit was named Hunt.
It led to lots of generic silver being melted--even unc. rolls of common date coins in most denominations.
This is what happens when some one (or two) has more dollars than sense.
Dealers bragged about nice, but not great Proof and Mint State coins for "only 3 times bid." People who knew nothing about coins were throwing money at the market. Real collectors, who were working with ordinary hobby bugets, were on the sidelines.
As an example of the foolishness, some dealer friends of mine paid $21,000 for a 1912 choice original Proof set (cent though half dollar) in the February. A couple of months later, they sold the set for $14,000. By the end of the year they would have benn lucky to have gotten $6,000 for it.
Then the bubble on everything from coins to silver and gold bullion broke, and those who were holding the stuff lost their butts.
Could this happen today? Sure, but right now most sectors of the market are not as inflated as they were in 1980. There are a few areas that I think are volnerable to a melt down. If you have read my posts, you know what I think they are, but I've taken enough abuse already and won't name them again.
<< <i>
Could this happen today? Sure, but right now most sectors of the market are not as inflated as they were in 1980. There are a few areas that I think are volnerable to a melt down. If you have read my posts, you know what I think they are, but I've taken enough abuse already and won't name them again. >>
Very considerate. Thank you. But by now even your icon is associated with modern bashing.
This thread was about the '80 and '89 crashes.
Fraud and overvaluations in a thinly traded market left many people holding worthless accounts. I was very young back then, but I do remember it seemed to come and go rather quickly with the hobby taking a huge black eye and a lot of people being prosecuted for fraud.
I have since been told by some on these boards that there were a few big dealers manipulating pricing that played a much larger role than people realize.
I've always thought the basic problem was too many people investing in something they didn't understand. This of course, is the first rule of investing.
When we are planning for posterity, we ought to remember that virtue is not hereditary.
Thomas Paine
Of course there's always the guy that walks into the coin shop and asks the dealer "Which coin is going to go up in price the most, Kennedy halves or state quarters?"
2 Cam-Slams!
1 Russ POTD!
time. It was much more caused by the drop in silver and gold prices. Many
people saw the drop in January and were just waiting for coin prices to fall.
They didn't have to wait too long because the market crashed at Central States
in the spring. A lot of dealer money evaporated in the metals markets and
dealers were already inventory rich.
There really weren't a lot of outsiders buying up coins in the '89 run-up. Sure
it was the first time there was much outside influence but it wasn't outside
money driving prices up. It was hobby insiders speculating about the huge a-
mounts that would be flowing in from Wall street. This money never showed
up and the market tanked. Dealers were very inventory rich.
Today dealers are very inventory poor. They have lots of cash to spend but
stock flies out the door about as fast as they can get it. While some may be-
lieve that there are huge quantities of moderns just lying around the coin shops
waiting to be slabbed and foisted on the ignorant states quarter collectors,
it is these coins for which most dealers have the least inventory. Many, many
coin shops won't even stock a coin made after 1965. They aren't sitting in a
back room waiting for someone with more money than brains, they simply aren't
in the store at all. Shops which do deal sell moderns have low inventory. Few
shops will buy and sell slabbed moderns.
If moderns do drop there will be a few people now who will use it as a buying
opportunity. Little would please them more. They are unlikely to get very
happy anytime soon.
98% of my Morgans went for $40 each just for the silver content. Buyers were setting up in hotels and advertising on TV and radio, lines of people carrying all of their silver were several blocks long. Dinnerware, candlesticks, jewelry, coins, you name it. It was a very crazy time.
I was just starting a new family, two infants, a mortgage, etc. and it was a Godsend to us at the time.
The economy was very different then, Carter had run this country into financial ruin and speculators were running wild in several areas.
I don't see anything like that happening again anytime soon, though I do see silver and gold increasing by at least 50% in the next 18 months. I doubt very much there will be a corresponding crash.
I stayed away from coins and precious metals for 20 years, now I'm back and not at all worried about a massive deflation.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
K S
June 1989 PCGS pops:
MS63-43 / MS64-56/ MS65-15/ MS66-0
Jan 2003 PCGS pops:
MS63-137 / MS64-148 / MS65-59 / MS66-26 / MS67 - 1
In general the numbers have about tripled in 63-65 grades. Plain and simple, there were still very FEW nice coins graded even after PCGS had been in business 3 years. Unlimited dollars were chasing after too few coins. Sort of like the pop tops of today. What appeared to be sort of rare back in 1989 may not be so rare in 2003.
Of course those "unlimited" dollars went away and there ended up being too many coins for too few dealers/collectors/investors.
It's also quite obvious that gradeflation has filled the ranks of MS66 and above coins. However it's hard to determine how many of the new coins are just resubmissions.
roadrunner
<< <i>One way to look at the 1989-90 crash is to a look at the pops of a typical type coin.....I picked an 1837 no stars half dime.
June 1989 PCGS pops:
MS63-43 / MS64-56/ MS65-15/ MS66-0
Jan 2003 PCGS pops:
MS63-137 / MS64-148 / MS65-59 / MS66-26 / MS67 - 1
In general the numbers have about tripled in 63-65 grades. Plain and simple, there were still very FEW nice coins graded even after PCGS had been in business 3 years. Unlimited dollars were chasing after too few coins. Sort of like the pop tops of today. What appeared to be sort of rare back in 1989 may not be so rare in 2003.
Of course those "unlimited" dollars went away and there ended up being too many coins for too few dealers/collectors/investors.
.
>>
Thank you. It's so refreshing to see a rational, well thought out "bashing"
of moderns. There are so very few of them. Most of the bashers seem to
only be able to come up with baseless opinions and one or two word retorts.
While there is a great deal of truth to your observation there is a huge difference
between conditions now and the conditions in 1989. In '89 the hobby was in the
middle of a long term downward trend in the number of collectors. Hobby leaders
had been suggesting for many years to buy the best you could afford. Many coll-
ectors and dealers were looking at the pop reports and speculating about what huge
amounts of Wall Street money was going to do for the hobby. There were new buzz
words like portfolio and fungible. The point being that many thought coins would be-
gin trading much like stocks and there would even be many mutual funds of coins
which had now become as interchangeable as shares of stocks. Speculation centered
around the coins which had always been most valuable to coin collectors for the last
couple generations in the highest grades. These were Morgans, WL halfs, and gold.
To a lesser extent they were also buying some of the older coins.
It soon started to become clear that this money from outside was not going to be
forthcoming. The one mutual fund was doing quite poorly and the market collapsed
under it's own weight.
Today things are much different. The primary driver of the current bull market is the
huge numbers of baby boomers returning to the hobby. These people are mostly buy-
ing EARLY 20th century coins. They are buying the key dates and the sets they couldn't
afford as children or young adults. Another VERY large driver of the current bull market
is the newbies (the next generation of collectors). Many of these people are children and
younger adults. They are interested in coins for their first time and many got started with
the states quarters. These collectors are emerging from the enormous number of states
quarter collectors and those noticing the money for the first time by the numerous changes
in the coins and currency. These collectors are primarily interested in various moderns but
some have branched out to include the older coins. Certainly the number of these collectors
who have very advanced modern collections is quite small, but the rapidly increasing prices
for some of these coins is an indication of just how scarce they truly are.
Will populations continue upward. You better believe it! For some the increases will be sur-
prisingly small, but for the bulk of the moderns there will be substantial increases in pops.
Indeed we haven't even hit the peak rate at which these will be graded yet. The peak will
come shortly after the raw coins have been removed from the market and the prices of the
raw coins starts increasing. This will probably occur within the next 8 to 10 months. After the
peak in pop top submissions occurs there will be a significant increase in the values of the just
missed coins and their submission rates will explode.
Where the insiders were all touting high grade coins and buying them personally in 1989, there
proved to just be too many coins for the number of collectors to keep the prices at the high levels
they had attained. Today there is an exploding number of collectors for moderns (and some other
pop tops). There may still be only a few thousand serious collectors of a coin like a clad Roosevelt,
but this number is and has been doubling frequently for years. With the huge pool of potential
Roosy collectors, one must ask himself how long this might continue and if several hundred or a
few thousand can push prices so high what will the situation look like in a few years when there
can be many times as many collectors.
The real modern bashers might want to also ask themselves, "What if I'm wrong?" What if large
numbers of people avidly pursue the best coins they can find in circulation"? "What if many of the
hobby leaders of the future started by saving circulated 1965 quarters from circulation?"
They might also ask themselves, "What if these newbies leave the hobby for any reason whether
it's a matter of an exotic lack of encouragement or a plummeting market in the coins they treasure?"
"Who will be around to buy the fantastic collections of the old timers in ten or fifteen years?"
This isn't to say that all of our fates are tied to the people collecting states quarters. This is to say
that if people don't start collecting coins now then when are they going to.
typos, grammar
The post if anything, was a "bash" at the classics and how they have proliferated over the past 16+ years, especially in the upper grades. But then again how is the truth "bashing" of anything.
I also didn't know that "pop-top" is ONLY used to associated with modern coins. Maybe it is in your book but in my mind pop-tops are often associated with Morgans, Early Commems, Indian cents, Lincolns, Mercs, Walkers, Buffs, Standing quarters, etc, etc, etc. Pop tops are now often quoted with 19th century classic type coins like DCAM trade dollars. I am amazed that you can misconstrue a analysis of a no stars half dime tripling in population as an attack on Ike Dollars. I think you read a bit too much into things.
For your sake I promise never to use the words "pop top" again when speaking of classics since it has clearly become a "politically sensitive" saying with negative connotation when used in such a manner. I apologize for my insensitivity.
roadrunner
I think that most of us would agree that the fool who paid $39,100 of the 1963 cent in PCGS Cameo PR-70, red paid too much. That point has really been driven home by the fact that the coin appears to "going bad" in the slab from the way it looks in the photos that I have seen. Still if anyone makes a comment about it, you can bet that Cladking will label you are "modern basher."
Give it a rest Clad. Sometimes protesting too much weakens your case.
And yes the 1980 meltdown did include a few modern coins like the 1973-S Silver Proof Ike, but most of those who took their lumps did so in "classic coinage."
But I certainly didn't mean to imply you were in any way bashing moderns.
This is why I put "bashing" in quotations. Any well reasoned intelligent post
can hardly be considered bashing no matter which side of the issue it comes
down on.
While you may consider my defense of these coins paranoia, please remember
that your perspective might be much different if a significant minority were at-
tacking the coins you love in many different threads whether it was relevant to
the subject or not.
If you reread the thread in this light, it will be easier to understand how I could
make such an error. To the degree I contributed to getting this thread off topic,
I apologize.
Jacob
http://www.SouthGaCoins.com/
Generally I would say that you agree with the grade that paying up to 10 or 20 percent over "ask" is not out of line for a collector if the coin is really PQ. Paying multiples of "bid" is a mistake most every time. Also I would be mindful of the prices that rise geometrically for very small increases in quality. If I could buy an MS-67 for $100, I'd rather do that than pay $2,000 for an MS-68. That's my opinion. Of course if you are looking at a coin that is head and shoulders above the nearest rivels, like MS-63 to MS-66, then it's whole new game.
In general I would say that the current price guides like Trends and the Gray Sheet are pretty decent, but they are just that, GUIDES. Still paying multiples of the prices that are listed in them is not wise IMO.
We have any number of "bubble" signs in various segments of the coin market today. Just like in 1980 and 1989. Be careful when saying that this market is collector driven, the base is widely expanding, etc. These are the exact things I said (and everyone else too) in 1988. The average stock investor was coming into numismatics via rare coin funds. It was a can't miss opportunity.
It was a once in a generation type event. Big business merging with coins. It was David Hall's 100:1 "moon shot" finally come true.
At same point we can't see the forest for the trees.
roadrunner
Collectors are well advised to learn about any coins they are going to put money into and
this does apply doubly to moderns.
Otherwise we'll be talking about another market crash like '80 and '89 again in a few years.
2nd paragraph added
> Paying multiples of "bid" is a mistake most every time
If grey sheet price is reasonable, I agree this statement. There are always many exceptions.
In the last Superior May auction, there is a PCGS MS60BN 1808 half cent (I mentioned the date several times in different threads), the final price is 17.25X of the bid. Check it out here Lot 261.
I was looking for an 1808 mint state half cent for years, I placed my bid 10X of grey sheet bid and I am far away from the hammered price. What else I could say.
1989 crash - Well was explained fully in multiple threads recently - but bottom line Greed from sellers and investors trying to use coins as a quick way to turn a dollar. Almost like buying tons of penny stocks from a company that just went belly up. Is that anology even remotely close :-)
1980 crash - Two peoples greed, that were outside of the coin collecting world caused the crash by trying to corner silver.
Well I guess I have three questions regarding 1980:
1. The two stated people, in what they did, was it illegal or just immoral. If illegal then what happened to them
2. How high did they get the price of silver before it fell.
3. The most important question, is if some outside force from outside of the coin collecting world, could damage the coin market so quickly and unexpectedly what is to say some other outside force could not do it again. I mean it sounds like 1980 was not caused by dealer or collectors greed, so I guess it did not matter how many collectors we had at the time it still hosed the market. Could this happen again.
Cladking and everyone else thank you very much I look forward to learning more.
Ron
Eastern investor. In the early days the activities of these people were probably
not unethical or illegal just highly unorthodox. They were buying up all the phys-
ical silver they could lay hands on. Then they started buying futures contracts.
When the contracts came due they would demand settlement in silver which was
most unusual. Huge amounts of silver were being sucked out of the market by
the short sellers of these contracts who were now required to settle in metal.
There was an imploding quantity of silver available on the market and the mono-
polists had plenty of money. Several changes were made by the exchanges in
early January to break this scheme. They were successfull and it collapsed. At
least one of the principles was prosecuted. He lost several billion dollars, and one
of the brothers lost a couple billion.
To a large extent the coin market was just along for the ride during this time. Coin
collectors and dealers suddenly found themselves with greatly increased value in
their collections and stock. Collectors sold off anything with what they thought was
only nominal numismatic value and used the proceeds to buy higher priced coins.
Dealers were making large profits moving greatly increased amounts of coins (mostly
from the public and collectors straight to the refiners or shorts). These profits were
largely plowed right back into more numismatic coins. Most knew the silver run up
would end eventually with much lower prices but even after the fact many believed the
coin market could retain it's recent advances. It did... for about three months and then
fell rapidly if not extremely dramatically.
The coin market has never operated in a vacuum and has always been at the mercy of
outside influences. There is a tendency for the market to move opposite to the stock
markets, but this doesn't have to occur. There is also a tendency to move up and down
with the overall economy, but here too it doesn't always. The biggest spur to the modern
mass coin collecting market occured during the great depression. People had a lot of time
on their hands since many were unemployed or under employed and some used their time
to pursue coin collecting.
Silver reached $50 on the spot market and $64 on the futures market in mid Jan. 1980.
1. Does this still happen today. Say I have $1000.00 worth of face value coins, stuff unsellable for it's numistic value because they are in that poor of condition and to modern. Is there a market out there of people that would buy them just for the silver content and melt them done. Is this rare, or do most coin dealer or jewelers do this.
2. Do you think it during this time that any hoards of a specific year melted away, like a large chunk of uncirc 62 quarters or 63 dimes, since these at that time were less then 20 years old. I just used these two as generic date and denominations.
The reason I ask, is at the height $50. an once would that make a roll of quarters worth approx $450.00 or so.
Thanks again
Ron
(2) yes
K S
The 1808 (normal date) half cent is a bear to find in ANY grade higher than VF. Some poeple think of the 1808 as a "common date," that is not the case in the higher grades. The overdate is an even bigger bear. Any piece that could be called Mint State or even with some claim to it is a rare find, and specialist collectors will pay high prices for them.
In general the entire early copper section of the Gray Sheet is much to low for properly graded coins. The key here words here are "properly graded." Many early coppers that I have seen in slabs were grossly overgraded, especially some the NGC coins. That is the reason why the prices on the Gray Sheet are too low IMO. The bids reflect the overall (poor) quality many certified copper pieces.
I worked in a fairly large coin shop during the 1979-80 gold and silver boom/crash. The metals prices were rising steadily during the last half of 1979. It was an insane situation to have dozens of people waiting outside our doors when we opened for business in the morning, and it continued all day long. Many non-collectors went through everything they owned, trying to trying to make a killing in the hot market. People sometimes waited for a couple of hours to sell their gold, silver, platinum, or anything that even resembled those metals. Many were disappointed to find that their "treasures" were gold plated, or not silver. Most were unaware that the bases of sterling teapots, creamers, and sugar bowls, and the handles of knives were not solid silver, but weighted with plaster, and thousands of heirlooms were destroyed. We bought and sold hundreds of bags of 90% silver coins ($1000 face value), being careful to be sitting on as little as possible that wasn't already sold. For a short time, we paid over 30 times face value for junk silver coins. Any substantial quantities that were not sold retail were sent to a local refiner. I personally broke open hundreds of rolls of "common" BU rolls of silver coins to fill out orders for bags of $1000 face. Practically every coin listed on the Greysheet rose dramatically until late January of 1980, when the bubble burst. Prices continued to fall for a long time after that before reaching bottom. I still have the Greysheets from this period, and they make for very interesting reading. I'd post a scan here, but it might be an infringement of a copyright.
A lot of collectors cashed in their common 90% silver coins so they could upgrade to Unc's, or buy other truly "nice" coins, mostly type coins. Not many were buying the later date silver coins whose prices were driven up by the high price of silver, and back then there was virtually no market for modern coins, other than Kennedy's and Ike's - we sold lots of those. (Cladking: I'm not bashing moderns, just stating a fact.)
I've often wondered how many of those 90% silver coins went to the melting pot, and how many people are still holding bags of them. As I was running coins through the sorting and counting machines back in '79-'80, I would occasionally pull out a coin that stood out. I still have a 1929-D Walker in AU that I saved that way, and yet other salvaged coins became store stock for resale, but how many are still stashed away or were melted? If you consider that there were probably hundreds of other shops doing the same volume, or more, the extent of the possible loss of coins becomes mind-boggling.
Jim