Dealers: Fess up, how often do you lose money on a coin?

RYK

I have seen coins linger in even the best and most successful dealers' inventories, get marked down, then disappear. Some of these coins are surely on memo, none are necessarily dogs, but perhaps the price is high, the demand is low, or the audience is wrong. Dealers make buying mistakes, too, no doubt, but how often?

I do not want to humiliate anyone, so I do not care to see written replies to the thread from dealers. But I am curious to know, be it full time national dealers, one-man vest-pocket guys, ebay only dealers, or collectors who buy coins to sell as a hobby, honestly, what percentage of coins get sold for a loss?

airplanenut

You forgot, "I lose on each one, but make up for that with volume"

MrEureka

I answered 5% or fewer, but I lose money on 10-15% of the coins that need to be slabbed.

mrearlygold

<< <i>I answered 5% or fewer, but I lose money on 10-15% of the coins that need to be slabbed. >>





50 Lashes for Mr Eureka Mr Christian!

I ain't saying. No way, Jose'


Tom

RYK

I answered 5% or fewer, but I lose money on 10-15% of the coins that need to be slabbed.

Andy,

Thank you for your candor and interesting reply. I read into your response that your grade disagrees (the wrong way) with the TPG by about 10%, and that is the reason for the higher rate of loss on raw coins. Is that correct?

MrEureka

I read into your response that your grade disagrees (the wrong way) with the TPG by about 10%, and that is the reason for the higher rate of loss on raw coins. Is that correct?

More or less.

coinguy1

I'd guess my % is approximately 7.691% (in other words, somewhere between 5% and 10%).

That said, I wouldn't necessarily equate an extremely low % with how "good" or successful a dealer is.

Dealer #1 might be extremely conservative and rarely lose $ on his purchases, but not make much on his frequent "winners" either.

Dealer #2 might be extremely aggressive and lose $ a much higher percentage of the time. However, large potential rewards might more than offset the frequency with which he loses $.

It's also not necessarily about how OFTEN the dealer loses $ but rather, how MUCH he loses when he does so.

RYK

Mark, I agree with your points. There is probably a lot more to net making money than one's loss rate on a per coin basis. BUT...Warren Buffett is credited with the following statement (re: investments, which is admittedly a different ballgame):

"The first rule of making money is not to lose money."

Paraphrased, no doubt, but probably still has some relevance here.

Then, of course, there is the

"No guts, not glory" and "Nothing ventured, nothing gained" schools.

I would probably be too chicken to make money as a coin dealer.

mrearlygold

Long as you win more than lose, you win.


Tom

Wolf359

Dealer #2 might be extremely aggressive and lose $ a much higher percentage of the time. However, large potential rewards might more than offset the frequency with which he loses $.

Right on.

MrEureka

If a coin bids for $1000 in one grade and $5000 in the next grade, and if an aggressive dealer figures the coin has a 50% chance of making the higher grade if he's willing to submit it 5-10 times, he'll probably pay up to $2500 for the coin. A less aggressive dealer might figure the same odds and not be willing to pay more than $1500. All other things being equal, guess which dealer buys more coins and makes more money in the long run?

Craton

While I don't consider myself a "dealer", I consider myself more of a "hobbyist", check out these most recent losses:
OUCH!

Ouchier!

Coinhusker1

<< <i>While I don't consider myself a "dealer", I consider myself more of a "hobbyist", check out these most recent losses:
OUCH!

Ouchier! >>



Gives a whole new meaning to "error-coins"!

PTVETTER

It's truly a mixed bag, I do OK with slabs and take the biggest hits on gold (raw)

Elcontador

I picked up a PQ Trade $ like this. The dealer, who apparently did not have expertise in this series, thought the coin would upgrade, and from what I could gather, didn't "buy the coin right." He tried to upgrade it (don't know how many times) and it didn't go. I happened to be at the right place at the right time. He didn't want to dump the coin, but wanted to get rid of it.

I didn't get it cheaply, but I "bought it right."

coinguy1

<< <i>If a coin bids for $1000 in one grade and $5000 in the next grade, and if an aggressive dealer figures the coin has a 50% chance of making the higher grade if he's willing to submit it 5-10 times, he'll probably pay up to $2500 for the coin. A less aggressive dealer might figure the same odds and not be willing to pay more than $1500. All other things being equal, guess which dealer buys more coins and makes more money in the long run? >>

My answer is.... the one who is (overall) more correct in his "figuring" and percentage plays. Andy, you said all "other things being equal" but you shouldn't/can't leave out of your equation how "sharp" the two dealers are.

nwcs

Of course, it can be misleading. You can lose money on a $100 coin and gain lots of money on a $1000 coin. Your miss rate was 50% but you still made money.

RYK

Wow! I never expected 45 dealer respondents.

At first I was shocked...SHOCKED at the number who chose the 50% or more option. Assuming that they are not pulling my leg-horn, this might be a reasonable percentage for a crackout dealer. Overpay a little bit for 10 highend coins at the inflection point grade where the price rises sharply. If you can get three coins to upgrade to the next level and you make a big score on each one while seven coins stay the same and you dump them for a small loss, you can probably net a tidy profit.

Frankly, this kind of thinking, and the contemporary Coinguy1 thread on coin doctors, makes me glad that I am not collecting near this inflection point of escalating prices. Too many games to play.

njcoincrank

An old saying goes something like this: If you don't lose money on some coins, your not buying enough coins.

2-4 coins out of ten I sell for less than I pay for them or break even. The other 6-8 more than make up for the losers.

njcc