Are coins with the least amount of downside risk the ones that are a notch below the highest obtaina
dan1ecu
Posts: 1,573
Let's say that a collector with $5000 to spend can get an MS68, while an MS67 piece would cost only $1000.
I would think that there is more downside risk with the $5000 coin, because as the spread widens, fewer collectors would be willing (or able) to pay for the top-notch coin.
Additionally, it's possible even for two experts to disagree on a grade. What if my $5000 MS68 is really no nicer than the $1000 MS67? What if the MS68 IS nicer, but by such a small amount, that no-one can tell the difference?
It's good to buy "the best," but would it be wiser in some (or most) cases to go a notch lower?
What do you think?
Dan
I would think that there is more downside risk with the $5000 coin, because as the spread widens, fewer collectors would be willing (or able) to pay for the top-notch coin.
Additionally, it's possible even for two experts to disagree on a grade. What if my $5000 MS68 is really no nicer than the $1000 MS67? What if the MS68 IS nicer, but by such a small amount, that no-one can tell the difference?
It's good to buy "the best," but would it be wiser in some (or most) cases to go a notch lower?
What do you think?
Dan
0
Comments
just look for a coin in a lower graded holder that has superior eye appeal compared
to the higher graded ms68.
in other words, patience.
... just based on that outstanding answer from Ziggy, I think this thread needs to stay near the top!
I love it when a simple statement like his captures the answer so well
“We are only their care-takers,” he posed, “if we take good care of them, then centuries from now they may still be here … ”
Todd - BHNC #242
correlation between the highest rade and the degree to which there is speculation in it.
It does not necessarily follow that the just missed coins always have less risk though.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
i just know with patience, one can find an AU58 that looks like an MS62.
which do you buy? the "slider" or the slab?
as an exmaple: two coins. one au58 the other ms62. now i know the spread is not huge,
and they are not the same year... but look at the diff in grade and how much coin you get.
or
choice is rather easy once you know what to look for, in the sense of a good deal.
so let me get other people's thoughts about these two coins in your thread ;-)
<< <i>
I would think that there is more downside risk with the $5000 coin, because as the spread widens, fewer collectors would be willing (or able) to pay for the top-notch coin.
>>
I agree that the air is thinner (i.e. the number of collectors who can afford the play) at the higher prices, but anyone selling a single coin needs but one buyer.
<< <i> Here at ANR we feature Morgan dollars in “OCG” condition, or Optimal Collecting Grade. Simply put, an “OCG” coin is the finest grade available for any given date that is still lovely to behold yet highly affordable for the mainstream collector. Let’s say that a certain date is valued at $350 in choice MS-64, but at gem MS-65, the very next grade up the scale, the value jumps to $1,750. In our opinion, the MS-64 coin is the “OCG” coin, as many collectors can afford that grade without “breaking the bank,” while many would have to “stretch” the budget to afford the MS-65 gem coin. Simply put in today’s terms, the “OCG” coins give today’s collectors the most “bang for the buck!” >>
<< <i>as an exmaple: two coins. one au58 the other ms62. now i know the spread is not huge,
and they are not the same year... but look at the diff in grade and how much coin you get.
or
choice is rather easy once you know what to look for, in the sense of a good deal.
so let me get other people's thoughts about these two coins in your thread ;-) >>
First glance the AU looks nicer from the picture, but I'll bet there are other noticeable differences in favor of the MS62 in person. Were these 1884-S dollars, I'd pull out my money for the AU58. Another term I've heard used to describe the grade at which higher grade specimens jump dramatically in price is "pivotal grade."
Keeper of the VAM Catalog • Professional Coin Imaging • Prime Number Set • World Coins in Early America • British Trade Dollars • Variety Attribution
Many collectors speak of the benefits of buying the highest grade before which the price jump is great. In theory, that seems like a sound strategy. However, if anywhere near as many collectors actually do it as say it, I would think that it eventually creates price distortions which partially offset the benefits of that very strategy.
For example, let's say that the biggest price jump for a given coin is from the MS66 to MS67 grade. So, collectors set out to snap up the 66's, while ignoring the 67's. Eventually, the price pressure on the 66's might be great enough so as to do away with much of the spread between 66's and 67's which enticed buyers of the 66's in the first place. I can't prove that it happens, but it sure seems like a logical possibility, if not probability.
<< <i>For example, let's say that the biggest price jump for a given coin is from the MS66 to MS67 grade. So, collectors set out to snap up the 66's, while ignoring the 67's. Eventually, the price pressure on the 66's might be great enough so as to do away with much of the spread between 66's and 67's which enticed buyers of the 66's in the first place. I can't prove that it happens, but it sure seems like a logical possibility, if not probability. >>
Or demand for MS67 and higher pieces falls since the demand isn't there for them. Either way, relative to the MS66 coins, the MS67 realized its bigger downside risk. In one case, its value dropped more than the MS66, in the other, it didn't realize the gain of the MS66.
Keeper of the VAM Catalog • Professional Coin Imaging • Prime Number Set • World Coins in Early America • British Trade Dollars • Variety Attribution
<< <i>Let's say that a collector with $5000 to spend can get an MS68, while an MS67 piece would cost only $1000.
I would think that there is more downside risk with the $5000 coin >>
That will vary widely from coin to coin and situation to situation. Say, for example, the MS68 is a world class drool inducing orgasm producing knock your dick in the dirt example, and the MS67 is dull and barely made the grade. The cheaper one is likely to have more downside in the long run.
On the other hand if the MS67 is upper end for the grade and the MS68 just squeaked in to the holder, then the MS67 would likely be the better buy.
Russ, NCNE
and it sets us apart from practitioners and consultants. Gregor
16 dollars for a modern quarter??? are you mad?
;-)
Russ, NCNE
and it sets us apart from practitioners and consultants. Gregor
<< <i>The coins with the least downside risk are very high grade moderns purchased for raw coin prices and holdered. In another thread today, I posted an 81-D Washington I expect to grade MS-67. I'll own it for $16 holdered. PCGS price guide puts the coin over $500. I can't imagine it ever being worth less than $16 >>
Don, I disagree and here's why: Once the coin is graded and re-valued (based upon the assigned grade), the downside changes. If the coin is worth $500 after being graded, the downside must then be calculated based on the then-current $500 value, not the $16 cost.
If you buy a stock for $100, your downside at that time is $100. If the stock triples to $300, however, your downside is then $300, even though the first $200 of that downside represents profit to that point.
Bruce Scher
<< <i>drool inducing orgasm producing knock your dick in the dirt example >>
Been awhile since you got any Russ?
I agree.
and it sets us apart from practitioners and consultants. Gregor
<< <i>Mark,
I agree.
Don, how dreadfully boring of you.
And my MS66 that I bought for $14.00 and is at $40.00 in the price guide will be the optimal collecter coin.
It can only come back holdered MS65, not really a MS65.
and it sets us apart from practitioners and consultants. Gregor
My number three Washington Quarter set is built on the premiss that collecting should be fun not just money.
and it sets us apart from practitioners and consultants. Gregor
Most sellers will say his/her coin is nice for the grade. A few actually sell the steak with the sizzle. For most collectors it takes several years of looking at lots of coins to be able to grade consistently. After a collector has put in time, and gained some ability and knowledge, there is not that much downside in buying the next grade up, and often times considerable upside. Unfortunately, the new collector often ends up as "shark-food" often times paying full retail for a "dog" coin in a TPG holder with considerable downside when he/she goes to sell.
BTW - RedTiger, I agree.
and it sets us apart from practitioners and consultants. Gregor
<< <i>]Don, I disagree and here's why: Once the coin is graded and re-valued (based upon the assigned grade), the downside changes. If the coin is worth $500 after being graded, the downside must then be calculated based on the then-current $500 value, not the $16 cost.
If you buy a stock for $100, your downside at that time is $100. If the stock triples to $300, however, your downside is then $300, even though the first $200 of that downside represents profit to that point. >>
Of course you're right, but a $300 price tag absolutely does not confer on it any
special risk either. Just because it was a 75c coin seven years ago does not mean
it must be overvalued now or that there must be a lot of speculative demand. The
most logical explanation for the huge increase is that it was ridiculously undervalued
in the past. Whatever happens in the future, now that there is a little demand, it will
never be a 75c coin again.
As you hinted in an earlier post, it is speculation that causes drops, not price spreads.
and it sets us apart from practitioners and consultants. Gregor
<< <i>I always try to buy the highest grade before the big price jump. These coins seem to be the best value for the collector's dollar. >>
So, what's the coin of the day?
Jerry
<< <i>Just because a coin appreciates in value doesn't mean there's more downside risk IMHO >>
Sure it does - your downside risk is the difference between current vaue (at any given point in time) and zero. So, in theory, the higher the price is/goes, the greater the downside risk. That doesn't change, just because in actuality, a particular coin doesn't end up losing a little, some, or a lot of its value.
<< <i>
<< <i>Just because a coin appreciates in value doesn't mean there's more downside risk IMHO >>
Sure it does - your downside risk is the difference between current vaue (at any given point in time) and zero. So, in theory, the higher the price is/goes, the greater the downside risk. That doesn't change, just because in actuality, a particular coin doesn't end up losing a little, some, or a lot of its value. >>
Percentage gain or loss is more important to most buyers than absolute gain
and loss. Ten $100 coins going to $1,000 each is pretty much equivalent to
a single $1,000 coin going to $10,000.
Though, of course, 25c should hold for the '81-D.
also there are many exceptions to this rule as it is possible the next notch up grade could be better in all ways and paramerters and also a better value also
but i guess again in general the least downside risk in general and most often yes there is the least amount of downside risk in the notch down from the highest obtainable grade but again many highest obtainable grades are again actually better values
the only way to know for sure is to show me the two coins highest grade obtainable and then the notch down graded coin that are both within my speciality and i can tell you
sometimes the notch down is better and also a few times the highest obtainable is better
That's the real truth. Smart post.
and it sets us apart from practitioners and consultants. Gregor
<< <i><< drool inducing orgasm producing knock your dick in the dirt example >>
Been awhile since you got any Russ? >>
Well, it has been a while since I got any coins like that.
<< <i>Don, I disagree and here's why: Once the coin is graded and re-valued (based upon the assigned grade), the downside changes. If the coin is worth $500 after being graded, the downside must then be calculated based on the then-current $500 value, not the $16 cost. >>
Mark,
True, but what you're referring to is "opportunity" loss downside risk, rather than actual dollar loss downside risk. One doesn't hurt quite as much as the other.
Russ, NCNE
<< <i>In a bull market, you buy the highest grade as it gets priced to speculative excess. In a normal or bear market, you buy the coin with the best eye appeal in the next grade down. >>
HMM...I think I'd rather do the opposite.
Russ, NCNE