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What is it like during a market crash?
coldcicle
Posts: 137
I haven't been around long enough to see one and I am wondering what it is like.Are there any coins that do good during a crash?Also are there a lot of dealers that default?
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Ken
Apropos of the coin posse/aka caca: "The longer he spoke of his honor, the tighter I held to my purse."
First you will see the major buying dry up. This will happen rather fast. Oh, you will hear this is a great "buying opportunity" a small "correction" but the major holders will see it for what it is, everyone is stocked to the hilt and start dumping fast. All within a month. If you are buying you will quickly run out of money and still find bargains galore.
Coins you go to sell to dealers will be met with " not on my list this month", or "check back next week" while they ask if you if need anything.
You won't hear all the negative quite like you see the current hype, no talk of collapse because everyone wants to remain positive while they sell fast. Correction or slow period will be the labels. In 3 months most coins will be selling at 20% below sheet before the sheet even starts to show the downtrend. The idea that the "nicer" coins will still sell is bull as most dealers will be scrambling for cash to pay debts and bills. Remember most are in debt with adjustable mortgages to finance thier inventories and they will be looking to liquidate. No one wants to be holding the "Old Maid"
(Month 3-6)When the "speculators" see whats happening they will begin to dump coins faster than dot-com stock. A little bargain hunting will find coins available at 50% of thier old highs. AS dealers and coin shops dump much more inventory will pour on the market but there will be few buyers. Sales will still take place mainly in the coins less than a grand with few buyers for anything but the ultra rare over that. Coins that were thought to be rare will be available by bulk in the 5 figure range and dropping. You won't believe that all those "major rairities" existed. Then the hi end stuff will level at about 30% of current values and stay there fro 3-7 years in so. All in less than 8 months.
<< <i>I'm sure you are all concerned about the future of the major auction houses or the price of a 1913 nickel. I'm not. So let's ask how this will affect the average collector. Since I've been through more than one I'll give you some of my memories.
First you will see the major buying dry up. This will happen rather fast. Oh, you will hear this is a great "buying opportunity" a small "correction" but the major holders will see it for what it is, everyone is stocked to the hilt and start dumping fast. All within a month. If you are buying you will quickly run out of money and still find bargains galore.
Coins you go to sell to dealers will be met with " not on my list this month", or "check back next week" while they ask if you if need anything.
You won't hear all the negative quite like you see the current hype, no talk of collapse because everyone wants to remain positive while they sell fast. Correction or slow period will be the labels. In 3 months most coins will be selling at 20% below sheet before the sheet even starts to show the downtrend. The idea that the "nicer" coins will still sell is bull as most dealers will be scrambling for cash to pay debts and bills. Remember most are in debt with adjustable mortgages to finance thier inventories and they will be looking to liquidate. No one wants to be holding the "Old Maid"
(Month 3-6)When the "speculators" see whats happening they will begin to dump coins faster than dot-com stock. A little bargain hunting will find coins available at 50% of thier old highs. AS dealers and coin shops dump much more inventory will pour on the market but there will be few buyers. Sales will still take place mainly in the coins less than a grand with few buyers for anything but the ultra rare over that. Coins that were thought to be rare will be available by bulk in the 5 figure range and dropping. You won't believe that all those "major rairities" existed. Then the hi end stuff will level at about 30% of current values and stay there fro 3-7 years in so. All in less than 8 months. >>
I do not subscribe to this scenario, not that I can claim to predict the future.
"Good" material will disappear from the market as dealers and collectors alike try to dump their second-rate coins.
Even "trading" becomes difficult as dealers only want cash. Pricing guides will be way behind the market in reporting changes.
The worst declines in my collecting memory were:
1964-5 - The end of the greatest "general public" collecting boom ever. This is sometimes called the "roll and bag" bust but it actually affected even key dates.
1982 - Wild speculation in "investment" grade coins came to a screeching halt. The rampant overgrading that characterized the preceeding boom eventually led to the creation of the third party graders.
1989 - The Reagan years boom went bust with a bang as others have commented on. Huge declines in coin values...many have never recovered even to this day.
200? - It's coming soon. If you think dealers are your friends you are going to get a rude awakening. Stay active in the market selling coins for cash so you don't get blindsided. If you are actively selling you will be able to quickly sense when liquidity drops though by the time you notice this it will probably be too late. (It will be interesting to see how eBay affects this decline since it was not around during the previous drops.) My own prediction is that problems in the mortgage market will be what sets off the decline as big money housing speculators in markets such as Florida go "upside down" in their loans and are forced to sell assets.
<< <i>I'm sure you are all concerned about the future of the major auction houses or the price of a 1913 nickel. I'm not. So let's ask how this will affect the average collector. Since I've been through more than one I'll give you some of my memories.
First you will see the major buying dry up. This will happen rather fast. Oh, you will hear this is a great "buying opportunity" a small "correction" but the major holders will see it for what it is, everyone is stocked to the hilt and start dumping fast. All within a month. If you are buying you will quickly run out of money and still find bargains galore.
Coins you go to sell to dealers will be met with " not on my list this month", or "check back next week" while they ask if you if need anything.
You won't hear all the negative quite like you see the current hype, no talk of collapse because everyone wants to remain positive while they sell fast. Correction or slow period will be the labels. In 3 months most coins will be selling at 20% below sheet before the sheet even starts to show the downtrend. The idea that the "nicer" coins will still sell is bull as most dealers will be scrambling for cash to pay debts and bills. Remember most are in debt with adjustable mortgages to finance thier inventories and they will be looking to liquidate. No one wants to be holding the "Old Maid"
(Month 3-6)When the "speculators" see whats happening they will begin to dump coins faster than dot-com stock. A little bargain hunting will find coins available at 50% of thier old highs. AS dealers and coin shops dump much more inventory will pour on the market but there will be few buyers. Sales will still take place mainly in the coins less than a grand with few buyers for anything but the ultra rare over that. Coins that were thought to be rare will be available by bulk in the 5 figure range and dropping. You won't believe that all those "major rairities" existed. Then the hi end stuff will level at about 30% of current values and stay there fro 3-7 years in so. All in less than 8 months. >>
Much of the move is quite rapid when the air is taken out of a speculative market.
It can be weeks later before everyone is aware that the market has "soured" and
then selling can persist for a protracted period. One of the worst things about the
'89 crash was that it was very difficult to get any offers at all. Those who needed
cash on coins which had plummeted had little choice but sell at give away pricing.
These crashes usually snowball at least a little and will even affect coins that hadn't
been run-up. This is caused by many dealers needing to raise cash and selling any-
thing not nailed down.
These crashes and spikes are caused by many factors and would occur even without
speculation but it is largely caused by coin investors and their tendency to move in
uniform. Of course, most all of us speculate to at least a small degree such as when
a part of the reson we buy that key date on the high side of the price jump is that we
think it will sell more readily in the future.
There doesn't appear to be enough air in the market at this time to have much of a
crash. There aren't large numbers of people throwing their money at anything be-
cause prices are skyrocketing. Rare series, key dates, and high grades appear to be
getting the lion's share of the interest and price increases but to a large extent it ap-
pears to be collectors pushing these areas. Toned coins have also seen huge in-
creases but this is a relatively small market segment. These do not especially appeal
to all collectors and it's improbable that there is much speculation in this area.
So long as there are increasing numbers of newbies working on their collections and
buying coins then the market will likely continue to climb a wall of worry.
But keep your eyes open and always be cynical when you see lots of people doing
anything. There are always new things that come along and change the world forever
but one thing that won't change is the nature of man.
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>A year ago there were like 100,000 registered collectors on Heritage and now it's pushing what, 150,000? The dome and gloom guys can't really base predictions on the past. Why? There is a whole new market mechanism with the internet. And more important, many new collectors really don't care or even know what prices were 5 years ago. They do know gold, silver and coins have been going up, more than can be said for the Dow Jones. We have no idea what a crash will look like, or even if there will ever be more than a tempory correction, that allow prices to firm up at a less frothy level. >>
They were saying the same thing about the Dow Jones about a decade ago (No end to the current bull market), and now it is treading water. And the thing about stocks is that they represent ownership in productive assets.
Coins are antiques that people enjoy to collect. Beyond private pleasure, they don't produce anything.
Yes, a correction is possible, more like probable, and in the long run healthy if it gets the nutty element out of the market.
<< <i>
<< <i>
Yes, a correction is possible, more like probable, and in the long run healthy if it gets the nutty element out of the market. >>
And which part would be the *nutty* element? $10,000 MS68 lincoln cents? $1200 PR70DCAM halves? $2500 MS65 1935S walkers? Anyone care to add to the list?
"This time it will be different"
The only affect the Internet will have will be the accelleration of the selling phase. You will see the coins available for sale on Ebay in the 1000 plus range double/triple.
Any idea how many gold coins in MS holders are currently held by speculators????
<< <i>Any idea how many gold coins in MS holders are currently held by speculators???? >>
I'm thinking of the over 400,000 PR69DCAM modern commemoratives that have been certified by PCGS alone. Speculators treating these and other modern ubergrade coins as rare are in for the rudest awakening. Unfortunately for the future of the hobby, these people probably tend to be relative newcomers and a downturn there could chase many out of the hobby for good.
Keeper of the VAM Catalog • Professional Coin Imaging • Prime Number Set • World Coins in Early America • British Trade Dollars
<< <i>
<< <i>Any idea how many gold coins in MS holders are currently held by speculators???? >>
I'm thinking of the over 400,000 PR69DCAM modern commemoratives that have been certified by PCGS alone. Speculators treating these and other modern ubergrade coins as rare are in for the rudest awakening. Unfortunately for the future of the hobby, these people probably tend to be relative newcomers and a downturn there could chase many out of the hobby for good. >>
Again, there simply doesn't seem to be a lot of speculation in the hobby but
there is less in the moderns than in the classics. The newbies are not out
spending large amounts on modern coins. There are a large number of them
and in aggregate they spend a great deal on ultramoderns but these people
are simply not buying high priced coins to a large degree. Most of these col-
lectors are still learning the basics.
Go over to Sleepy Hollow™. That's what these boards will be like at the tail end of a market crash.
If you are buying you will quickly run out of money and still find bargains galore.
Those waiting on a crash to buy into would be wise to heed these words.
Imagine it being 2008 and the mint STILL hasn't sold 75000 of the 2005 Westward journey sets (with Ebay about 20% back of mint issue).
Evidence of the bubble:
1.)
Lots of sepculative money being infused into the market, i.e. prices being driven up by buyers who are more purely motivated to make a profit than to own a coin for their own enjoyment.
2.)
Towards turning a profit, the opinions of individual coins themselves may be inflated, (i.e. having their grades maxed out by TPGSs.)
3.)
Other forms of market manipulation, both seen and unseen.
*
Evidence of current prices being a correction of the market of sorts:
1.)
While certain areas of the market have certainly accelerated, many seem to merely be climbing with inflation, and as someone else here pointed out, many have still not surpassed their historic highs of 15 years ago.
2.)
The infrastructure by which coins are traded has changed dramatically with the internet and especially Ebay.
3.)
While I was not paying too much attention in 1989, TPGSs were still relatively new then - I believe for all their drama, in large part they have succeeded in their goal of standardizing the market and in turn have made it more stable.
4.)
Another thing the TPGSs have done, is expanded the ways people enjoy and collect coins; i.e. sets are no longer defined by primarily by Whitman Folders or The Red Book, but by the Registry programs.
5.)
Thanks in large put to the efforts of the Mint, there are many new collectors whose tastes are only likely to become more sophisticated as they age, move into different economic brackets, and graduate from the modern issues that first attracted them to the hobby.
**
So what's going on? Seems to me to be a little of everything. What is for sure? That whatever happens tomorrow is likely to be as unprecedented as the circumstances we have found ourselves in today.
- Artist
>>>My Collection
<< <i>Again, there simply doesn't seem to be a lot of speculation in the hobby >>
Most investors are full to the gills. In 2003 and 2004 an unbelievable number of mint state gold coins disappeared into the hands of investors. $20 gold in 63-65 were bought up by the boxes lifting prices like 64Libs from 550 to over 1000 and st gaudens were sold by the 100s. Look at the pop reports and ask yourself where these coins are at now. They will return to the market by the truckload when the market turns.
True that some key dates (barbers etc)will hold better than generics but I wouldn't want to be sitting on the "ever so common" MS65 09-SVDB at these price levels.
While that may be true, most hobbyists are not interested in Saints in MS-63 to 65, other than to have a coin or two around. These coins are the de facto currency of the coin/gold investor and have nothing to do with colonials, early half dimes, patterns, SLQ's, AH Kennedy's, commems, or even rare date gold.
Oops, did I say that?
Tom
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>I am wondering what it is like >>
Imagine going to a coin show with a box of decent coins for sale, and NOT being able to sell ANY of them for prices that are even close to the previous levels.
YEP. Those of us who have been around for 20+ years have seen it. AND it could happen again.
Watch your:
Rarirty
Quality
Eye Appeal
And track records as collectors' items.
If you buy common, trendy, fad stuff, you have a much better chance of getting buried. If you buy scarcer coins with long track records as collector favorites, you will have a bettter chance of weathering the storm if the storm comes.
-J.M. Keynes
The hangover will be proportional to the binge
-W. Buffett
Go over to Sleepy Hollow™. That's what these boards will be like at the tail end of a market crash.
God, I hope not- hopefully, collectors will still want to talk about coins, even if they're not worth as much.....
<< <i>Imagine going to a coin show with a box of decent coins for sale, and NOT being able to sell ANY of them for prices that are even close to the previous levels >>
Glad to hear from others who have felt it.
Nothing quite as depressing as going to the show with a box of coins..................and coming back with the same box of coins.
"If you buy common, trendy, fad stuff, you have a much better chance of getting buried. If you buy scarcer coins with long track records as collector favorites, you will have a bettter chance of weathering the storm if the storm comes."
NOT if, but WHEN
I've sold off a few coins and banked the cash, and maybe I'll have a chance to pounce on some good deals in the near future (maybe my dream 3C silver at long last).
In the meantime, over the last few months I've developed an interest in modern proof gold and silver coins from the UK, simply because they have beautiful and imaginative designs. The fact that they are available for very reasonable prices (well below issue in many cases) and the mintages are sometimes hilariously low (eg, 438 for the 1996 Gold Britannia Proof Set) just add to the very enjoyable and worry-free collecting.
"It is possible to keep a mind so open that it is perpetually empty."
--Peter Huber, "Galileo's Revenge"
Camelot