The Ethics of Buying and Selling....

JoshL

I have been reading a number of posts within the forum by people who are on both sides of this discussion topic.

Some forum members believe that if you purchase a coin for a reasonable price and then turn around and sell it for big bucks that there is something wrong with that. Or at least that is how I am taking it? Perhaps their main argument is selling coins for WAY over book price to people who don't realize they are way over book price? But who decides what a coin should cost if it is a PL or DMPL or TONED Morgan (or other coin for that matter)? There is not a book that tells us what they are worth (to my knowledge).

If someone has a toned coin that sells for $200 untoned...but they sell it for $2000 (because of the toning) is that unethical? Is there something wrong with that? If so...why?

At one point does a profit become excess? If someone wants a coin and will pay more than book value for that coin then what is wrong with that? People pay obscene amounts for PR70 coins for the registry sets...is there something wrong with that?

If I purchase a coin on Heritage Auctions for $200 and then sell it for $350 is there anything wrong with that? The amount of time it takes to track and bid on auctions is considerable...and then the time it takes to run everything through Ebay (if you are selling that coin). What is a fair markup on a coin that you want to flip? Is there such a thing as a standard markup?

I guess I sincerely would like to understand why some good and honest posters have a real beef with flipping coins for extreme profits.

I am not asking this just because I am curious...I am asking because I truly want to understand the reasons behind their arguments.

I guess this is an evolving thought process for me. I am reading a lot of posts and still seem to missing some of the points or concerns. I want to buy some coins on the auction sites and then sell them on ebay. So I have a greater interest in this debate than just for myself.

Thanks for those who take the time to reply.

RYK

You are asking a lot of questions in a very gray area. I am not sure how to respond. It might be best to start with a single hypothetical situation and ask people to respond to it.

Unlike stocks, rare coins or common coins with rare characteristics (ie. high grade or unusual toning) are not an efficient market. People will try to capitalize on this inefficiency of the market to make a buck. There is nothing inherently wrong about this as long as someone is not treated unfairly or misled.

Robert

MrEureka

There's nothing wrong with making a big profit. There IS something wrong with trying to trick someone into paying a price. In some circumstances, the mere act of quoting a price can be considered trickery. For example, if I quoted my mother 28K for an AT 81-S dollar, it would be unethical because I know she would assume that I was being fair with her. But if I quoted the same coin to Jim Halperin at 28K, there would be nothing unethical about it. It would just be stupid.

RYK

For example, if I quoted my mother 28K for an AT 81-S dollar, it would be unethical because I know she would assume that I was being fair with her. But if I quoted the same coin to Jim Halperin at 28K, there would be nothing unethical about it. It would just be stupid.

Where it becomes a gray area is when you quote me the $28K for the 81-S dollar.

JoshL

Hmmm

I realize these are some gray areas.

I guess some of my main questions (and there are a bunch) would be:

1. is there a normal standard markup on coins that dealers purchase from auctions? If I purchase a DMPL Morgan dollar for $200 and the recent auction history shows that coin selling for 150-300 dollars...then what is a fair markup when you turn around and are trying to see the coin? Is there such a thing as a "fair" markup?

I know a lot of dealers purchase coins through the auctions and then take them to shows and sell them for considerable more. Which I don't have a problem with because someone else did a lot of the work to obtain the coin.

2. How does one figure a markup if DMPL Coins or Toned Coins are not listed anywhere? If yuo look at the auction history then you can only determine what dealers (or whoever is bidding) paid for the coin. That doesn't really tell you what a dealer will turn around and sell that coin for.

3. Why is there so much hostility towards the extreme markups on certain coins (such as toned coins).

I want to make it clear that I am trying to see both sides on all of this (as far as the hostility end of it).

Ok well those are a few more direct questions...as you asked for.

There is a whole discussion though in the first post. Hopefully some people will chime in with their thoughts.

MrEureka

Where it becomes a gray area is when you quote me the $28K for the 81-S dollar.

Robert - I wouldn't do that. For you, it's 25K.

JoshL

<< <i>There's nothing wrong with making a big profit. There IS something wrong with trying to trick someone into paying a price. In some circumstances, the mere act of quoting a price can be considered trickery. For example, if I quoted my mother 28K for an AT 81-S dollar, it would be unethical because I know she would assume that I was being fair with her. But if I quoted the same coin to Jim Halperin at 28K, there would be nothing unethical about it. It would just be stupid. >>



And that is part of my question Who decides what a fair price is? If I take what you say literally then it can't be the buyer that decides what a fair price is. It has to be the seller. But what is a fair markup on coins...and how does one know that? I realize this is semi-gray but there has to be some standards in the community? No?

Thanks

RYK

Robert - I wouldn't do that. For you, it's 25K.

I will take that as a compliment. You offered me a better price than you offered your mother.

Josh,

You ask questions that cannot be definitively answered. Some dealers would say that the standard mark-up is 15% or so. I have heard one dealer say explicitly that he offers coins for 20% more than he would expect to be able to buy them back.

The key to your answer is knowledge, experience, and working with trustworthy sellers. I cannot help you with #1 and #2, but I can help you with #3.

The answer to the ultimate question of life, the universe, and everything is, of course, 42.

MrEureka

If I take what you say literally then it can't be the buyer that decides what a fair price is. It has to be the seller.

Actually, they both get to decide what is fair. Doesn't mean they care.

MrEureka

The answer to the ultimate question of life, the universe, and everything is, of course, 42.

It was, before gradeflation.

MrEureka

there has to be some standards in the community? No?

Not even close.

alergar

A coin is worth as much as smoeone is willing to pay for it.
If you sell a coin at a profit to yourself, good for you !!
If you sell a coin at a loss to yourself, beter luck next time !!

MrEureka

A coin is worth as much as smoeone is willing to pay for it.

Tell that to Eliot Spitzer. Or to an ACG collector.

In other words, you can never overpay. Right?

K6AZ

Hey Andy, if you keep this BS up you are going to get the major flamewar you seem to be wanting.

michael

so far i agree with everything that andy has said as this has been my experiences in the coin game

michael


michael

K6AZ

<< <i>so far i agree with everything that andy has said as this has been my experiences in the coin game

michael


michael >>



Thank you, dealer suckup.

itsnotjustme

I bought a clad Ike dollar for under $2, paid $12 to grade it MS67, and sold it for a handsome 4 figure price. I find nothing wrong with that. makes up for the others that sold for under cost!

solid

I'm not addressing your specific points, but here are some thoughts...

For a common coin, that is average for the grade and routinely sells
for $100, it would be unethical to represent it as worth $300 to an
uneducated person and charge them accordingly.

If that same common coin is worth $1000 in the next grade up, then
it could be ok to sell a PQ example for $300 or $500 or more.

The same coin, average for the grade but spectacularly toned, is more
like an individual work of art and can reasonably command a healthy
premium. While some people may never be willing to pay more than say,
2x bid for such a coin, there may well be collectors who actively seek such
coins out, find truly nice examples to be very elusive, and are willing to
pay 10x or 20x bid for the right coin.

As long as a seller is making accurate claims as to the merits of the coin,
and their asking price is roughly the same no matter who the potential
buyer is (noting that there are different levels for wholesale/retail), I think
that their profit is irrelevant.

One ethical seller may routinely make 20% profit, while another may make
100% or more based on their ability to locate and purchase the right coins
and match them with their clientele's desires.

Ken

JoshL

<< <i>I'm not addressing your specific points, but here are some thoughts...

For a common coin, that is average for the grade and routinely sells
for $100, it would be unethical to represent it as worth $300 to an
uneducated person and charge them accordingly.

If that same common coin is worth $1000 in the next grade up, then
it could be ok to sell a PQ example for $300 or $500 or more.

The same coin, average for the grade but spectacularly toned, is more
like an individual work of art and can reasonably command a healthy
premium. While some people may never be willing to pay more than say,
2x bid for such a coin, there may well be collectors who actively seek such
coins out, find truly nice examples to be very elusive, and are willing to
pay 10x or 20x bid for the right coin.

As long as a seller is making accurate claims as to the merits of the coin,
and their asking price is roughly the same no matter who the potential
buyer is (noting that there are different levels for wholesale/retail), I think
that their profit is irrelevant.

One ethical seller may routinely make 20% profit, while another may make
100% or more based on their ability to locate and purchase the right coins
and match them with their clientele's desires.

Ken >>



Thanks for the responses so far...

I see and understand what you are saying. Certain coins should bring a premium because they are more of a rarity...such as Toned or DMPL coins. All of that makes sense.

Outhaul

Simple, by not making an obscene profit on a coin you wouldn't be able to get into the "YOU SUCK" club.

eagle7

<< <i>A coin is worth as much as smoeone is willing to pay for it.
If you sell a coin at a profit to yourself, good for you !!
If you sell a coin at a loss to yourself, beter luck next time !! >>



The top line is the reason why this business is such a dangerous undertaking for the uninitiated, the "newbie". Because what someone is willing to pay for the same coin often changes, and dramatically so. Therefore, if you buy a coin based on misleading or false information, and you pay too much, then the next person will not pay what you paid. The difference is how much you lose on the deal. Sometimes you pay too much because everyone pays too much, and then the market for the particular aspect of the coin that you paid so much extra for drops out of favor. Then you get left holding the bag. Even savy coin people can and do get caught up in this at times. So there is no easy answer to your questions. I guess the best ethical guide is simply this. Put yourself in the buyers shoes and ask yourself, am I as a seller being fair? Yes, there are times when a large markup on a coin is ethical. Such as buying a 1955 flat pack proof set and finding the franklin is a deep cameo and PCGS grades it as a 68DCAM. You just made 5000 or more dollars on 175.00 plus grading fee. But to sell the coin at auction for the large amout would be fair. Because that is what that coin is worth to the buyer. But if you take a common date ms65 morgan and sell it to someone as an investment and charge them 500 for it, that is not fair and it is robbery. Pure and simple. You do that and you are a common thief. JMHO.

DHeath

TPG's in the most cynical view are the Rumplestiltskin's of numismatics. No one would argue that premium coins deserve a premium price. There are some however, who feel the theoretically specific grading of the TPG's have created an artificial market for common coins which have little value outside the holder. They believe the holdered coin's value should parallel the raw coin's value, and in many cases it does not. They see collectors and dealers who should "know better" as opportunists, harming the hobby and exploiting those too inexperienced to understand the real market. They cringe every time someone posts a link to a common date Morgan in MS67 doing huge money, or a modern coin, or a marginal coin for the grade. The truth is in the middle, but the holdered coin market is not always rational, and values are not always based on the raw coin market. JMO

Fairlaneman

Geez a long answer would seem correct for this thread. A condensed version would be. Past history within the coin market has shown in the past what a common as dirt (Toned or White) coin eventually could sell for. Maybe some people just show tooooo much caution. Then again maybe they do not.

Ken

bengals

have you noticed that some of the snakes here never try to sell their coins in a "true" auction format (no reserve and low starting bid price)? i remember few years back, some snake tried that with a coin that he was asking thousands for it via BIN which brought ~$350 in a true auction format....probably the hens were not online at the time...

cladking

Many people accept price guides as the be-all, end-all of the coin market. In actuality this
simply isn't always the case. Even where the guides do extremely accurately reflect the
market like with a solid no question AU 1909-S vdb there will be some individuals willing
to pay a little more or wish to acquire it for a little less. With other coins there are much
wider amounts for which buyers are interested. This can be caused by the specific coin
itself such as monster toning on a gem Morgan or a '69 Washington with satiny surfaces,
or it can be caused by a host of other reasons. The guides are more an average price
that coins sell at rather than a price list.

All of us wish to pay as little as possible and sell for as much. So long as we don't misrepre-
sent a coin when it is purchased or sold then no amount of profit is too much. And yes,
this misrepresentation can be a grey area too. If you tell a little old lady who walks into
your shop that her original roll of 1877 indians is worth the going wholesale rate of $80
then you're on the dishonest side of the line, but if you offer her ask for a small lot of
choice proof and mint sets then you're probably not over the line. We each have to deal
with our own conscience and make our own decisions.

JoshL

Thanks for the answers up to this point...

There are some forum members with extremely strong opinions on this subject that have not chimed in

Perhaps they will and perhaps they won't. It is an interesting conversation...for me at least.

JoshL

I subscribed to NumisMedia Online to see what kind of prices they have for DMPL Morgans and PR and MS70 Kennedy Half Dollars. LOL If you go by those prices then everyone who collects coins graded in the 70 ranged are being ROBBED and SLAUGHTERED Which they may very well be...including me lol

I did find that very interesting. The prices there are WAY WAY WAY WAY WAY WAY under what dealers are charging (speaking of the coins graded in the 69 and 70 range).

Anyway...NumisMedia Online wasn't much help for figuring out prices.

Regulated

Interesting thread. I think a problem originates when you attempt to analyze a given transaction assuming that the price paid for an item at auction has anything to do with that item's value. The item's value is the price a knowledgeable buyer will pay for it.

UncleJoe

The prices there are WAY WAY WAY WAY WAY WAY under what dealers are charging (speaking of the coins graded in the 69 and 70 range).

I will assume that most of the 69 and 70's that you have seen are NTC or other third-tier TPG's.

Remember, while the price GUIDES may be out of line, the prices are for PROPERLY graded coins only!!!

Third-tier TPG coins are discounted (usually heavily) because their grading is well below market standards.

Joe.

mrearlygold

<< <i>Where it becomes a gray area is when you quote me the $28K for the 81-S dollar.

Robert - I wouldn't do that. For you, it's 25K. >>





Robert will you pay 24K?


Tom


Kidding, gotta watch these forums

RYK

Robert will you pay 24K?

No offense to the Morgan collectors, the naturally toned coin collectors, and the AT coin collectors.

I would not pay $24.00 for it, but you might get me interested at $2.40 delivered.

mrearlygold

How about 2.38?


Tom

JoshL

<< <i>The prices there are WAY WAY WAY WAY WAY WAY under what dealers are charging (speaking of the coins graded in the 69 and 70 range).

I will assume that most of the 69 and 70's that you have seen are NTC or other third-tier TPG's.

Remember, while the price GUIDES may be out of line, the prices are for PROPERLY graded coins only!!!

Third-tier TPG coins are discounted (usually heavily) because their grading is well below market standards.

Joe. >>



No I was talking about PCGS Graded Coins!!!! If you go by the prices on that web-site then they are a steal!

JoshL

According to their guide a Kennedy Proof 1964 in 70 condition would sell for $328.

Show me that price on that coin please...somewhere - anywhere? That is the Fair Market PCGS Value (according to them).

Russ

I've sold quite a few coins for many, many times my cost. As a matter of fact, it is my primary mission in life to make obscene profits every chance I get. The more obscene the better.

Russ, NCNE

kieferscoins

At least Russ doesn't BS us

Cameron Kiefer

JoshL

<< <i>I've sold quite a few coins for many, many times my cost. As a matter of fact, it is my primary mission in life to make obscene profits every chance I get. The more obscene the better.

Russ, NCNE >>



Well there is an answer Hey I have bought enough of those PRETTY Kennedy Half Dollars to know that someone is making a profit!!!

paigowjohnny

<< <i>I bought a clad Ike dollar for under $2, paid $12 to grade it MS67, and sold it for a handsome 4 figure price. >>



Anybody paying 4 figures for a clad Ike deserves what's coming to them

dthigpen

<< <i>

<< <i>I bought a clad Ike dollar for under $2, paid $12 to grade it MS67, and sold it for a handsome 4 figure price. >>



Anybody paying 4 figures for a clad Ike deserves what's coming to them >>

bengals

what happened to the other thread? off topic and it got removed? probably...

cladking

<< <i>

<< <i>I bought a clad Ike dollar for under $2, paid $12 to grade it MS67, and sold it for a handsome 4 figure price. >>



Anybody paying 4 figures for a clad Ike deserves what's coming to them >>



Indeed. And what's coming to them is a rare coin that the market says is worth four figures despite the fact that there is very little demand and tens of thousands of old timers who recognize it for the horrible deal it really is and aren't afraid to tell it whether everyone's tired of hearing it or not.

It's gotta be far better to spend far more on a recognized rarity that everyone will still demand even if its price falls through the floor. This demand will support it at some new lower level. When all the newbies are driven off it will be the old timers who are still buying coins.

orie

I’ll share this story that happened at a show about 15 years ago in Cincinnati. I was standing around and this lady walks up to a table with a coin magazine in hand. In those days coin magazine values were at least 50% to a 100% over market. Immediately the dealer recognize the lady had no clue. In about an hour he laid her in to about $10,000 worth of coins for close to $20,000. This dealer was really a nice guy. He told the lady that a dealer across the hall had a coin that was really nice. They made about a 200% mark up on that one. It was interesting watching the dealers around this table watching while acting like they weren’t.

I don’t condone or accept it. Really didn’t know what to think.

JoshL

<< <i>what happened to the other thread? off topic and it got removed? probably... >>



Which thread was that?

JoshL

<< <i>I’ll share this story that happened at a show about 15 years ago in Cincinnati. I was standing around and this lady walks up to a table with a coin magazine in hand. In those days coin magazine values were at least 50% to a 100% over market. Immediately the dealer recognize the lady had no clue. In about an hour he laid her in to about $10,000 worth of coins for close to $20,000. This dealer was really a nice guy. He told the lady that a dealer across the hall had a coin that was really nice. They made about a 200% mark up on that one. It was interesting watching the dealers around this table watching while acting like they weren’t.

I don’t condone or accept it. Really didn’t know what to think. >>



If someone is OBVIOUSLY taking advantage of another person then that to me is wrong and unethical. If I want to spend $1,000 for a Monster-Toned Morgan that is really only worth about $200 normally (un-toned) then I don't (obviously) have a problem with that. The difference is that I know there is a huge markup on Monster-Toned Morgans. The lady that you speak of was obviously a sheep in a den of wolves (or at least two wolves).

Coinhusker1

<< <i>I've sold quite a few coins for many, many times my cost. As a matter of fact, it is my primary mission in life to make obscene profits every chance I get. The more obscene the better.

Russ, NCNE >>



Yes, but you still sell your coins for fair market value. So you make your "obscene profits" honestly via "numismatic arbitrage" and not dishonestly from fraud.

mr1931S

Is there such a thing as a "fair" markup?

That little old lady would have fared much better if those dealers had their prices right out front, on the holders for all to see, like it used to be in the olden days at shows.

Dealers:
Spend a couple of bucks for some sticky labels. You can even buy different colors of these and put some kind of coding system in place. Put your various asking prices on the labels. Nobody interested in your coin(s) at the price you have indicated on the label(s) that you want for your coin(s)? Remove the label(s), throw them away and put new one(s), with new price(s), on the holder(s).

The point is: EVERYONE who happens by and sees your coins, until they're sold of course, sees the same prices.

I've asked this question at shows, "Dealer, where are your prices?" I've been told that "the market fluctuates too much. We would constantly be repricing our coins so we don't do it. Too much work."

JoshL

<< <i>

I've asked this question at shows, "Dealer, where are your prices?" I've been told that "the market fluctuates too much. We would constantly be repricing our coins so we don't do it. Too much work." >>



lol - I really don't believe that.

mr1931S

"If someone has a toned coin that sells for $200 untoned...but they sell it for $2000 (because of the toning) is that unethical? Is there something wrong with that?"

Nothing wrong with that and not unethical, in my opinion. Who should care what someone else pays for a coin? Price guides are not the final word with me. It's my coin until someone gives me enough money for it.

Unhappy with me because I won't sell my rarity for a few bucks over "bid," for example? Tough. Get off (don't fall off) the turnip truck and do some real numismatic research. Find out for yourself how rare or scarce some of these coins really are.

Regulated

I think this thread is dealing with two situations:

A) Dealers who take advantage of uninformed buyers and make an obscene profit by asking well over market value for an item.

Dealers who see something in a coin that other people do not see - an upgrade, deep cameo surfaces on a coin that doesn't usually come that way, a variety, etc. Profit is made on these items when they are purchased.

Situation A is unethical and situation B is admirable. The issue of profit is beside the point. Lets say a dealer of the first variety makes a mistake and buys a coin for 150% of its market value; there is a very good chance that he or she will pass this mistake on to a customer. No profit was made in the transaction, but I would still suggest that it is in essence the same sort of transaction that I described in situation A.

kranky

<< <i>Dealers:
Spend a couple of bucks for some sticky labels. You can even buy different colors of these and put some kind of coding system in place. Put your various asking prices on the labels. Nobody interested in your coin(s) at the price you have indicated on the label(s) that you want for your coin(s)? Remove the label(s), throw them away and put new one(s), with new price(s), on the holder(s).

The point is: EVERYONE who happens by and sees your coins, until they're sold of course, sees the same prices.

I've asked this question at shows, "Dealer, where are your prices?" I've been told that "the market fluctuates too much. We would constantly be repricing our coins so we don't do it. Too much work." >>



One reason this isn't done is because often the price depends on who is asking about the coin.

Well-liked dealer
Known dealer
Good customer
Existing customer
Knowledgeable collector
Run-of-the-mill collector
Irritating collector
Guy with expensive clothes, Oakleys, and a shrink-wrapped Red Book
Guy holding cash who says, "I'll take $500 worth, please."

As you move down the list the price goes up. (Of course, I'm exaggerating to make a point.)

Myqqy

have you noticed that some of the snakes here never try to sell their coins in a "true" auction format (no reserve and low starting bid price)?

I'm curious who this is referring to?