Coin Investment returns from the 1989 crash and burn cycle.
keets
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Considering how much the overall market has rallied since 1989, if an interested speculator/investor had gotten into an one of the programs very early into the run-up of Silver/Gold in 1989, and had held onto things till now, how would they be doing?? If they aren't solvent yet, at what time in the future might they be solvent or profitable?? Please give something to back up your claim either way while remembering that I'm curious about those who got in early, not those who clamored for the big payoff just as things were crumbling down. Thanks.
Al H.
Al H.
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If you bought type seated material in gem condition (not better dates), you are probably in a losing position still. And that probably goes for Barbers, and commoner later-dated gem bust material as well. Early dollars and draped bust material have done fairly well.
Key dates in all series have done very well since 1989...they were as popular back then. Back then it was the high grade that mattered (64, 65, 66, 67). Moderns were at give away prices still.
Ex. a MS65 1890 PCGS 25c I sold in 1990 for $4000 is now a MS66 but worth only about $2500. It has still not recovered it's orig price.
I bought the coin for my brother in early 1989 for $3000 or so.
That is fairly typical of the type coin market. Without factoring in the gradeflation it would seem that a $4000 coin has dropped to $1500 today which is not the case. Most (not all) silver type now brings about 65-75% of what it did at the peak in 1989-90.
I bought some MS64 Saints in March 1990 for $1000 each. If those make 65 today, they are worth a little more. They had been as high as $1500 in early 1989.
Type coins really have not yet rallied in this market since there is no effective registry set competition for them. They have been sort of left behind since 1990 (while key dates, moderns, and 20th cent. sets have exploded).
roadrunner
Three-dollar gold pieces graded Mint State-66 - $85,000 sight-unseen
- now $35000 cu price guide
Saint-Gaudens double eagles Mint State-65 by either PCGS or NGC-- $4,000
- now $1650 in CU price guide
Type 3 Liberty double eagles Mint State-65 - 13,000
- now $6200 in CU price guide
Capped Bust dimes, small size, in Proof-66 - $150,000
- now $47,500 in CU price guide
Indian Head eagles graded Mint State-66 - $30,000
- now $9250 in CU price guide
1936 proof Lincoln cents Proof-65 - $3,000
- now $2600 in CU price guide
edited to add - my post is just numbers, I expect Roadrunners observation about gradeflation is very significant.
and it sets us apart from practitioners and consultants. Gregor
my wonder is based on the fact that whenever the topic is discussed, it generally assumes the high water mark for prices during the 1989 surge. to that end, i find certain similarities between then and now, particularly in the way that prices have outpaced the hobby's ability to keep track of them. it's a constant drone that the price sheets are useless yet there's really no way to make them usefull with things constantly on the move. also, though it would seem to bear some relevance to the discussion to mention the stock market, i would figure that everyone who kept their collection intact through the late 90's instead of switching to stocks could be grouped in with the losers from 1989. basing my thoughts on collectors/investors who bought early on back then and held was the main thought. from your posts, it seems there were certain areas that never caught everyones attention back then, or at least didn't rise with the same fury as the market is perceievd to have risen.
would it be a good generalization to say that high grade top pop stuff bought in early 1989 and held till now would be close to a break even proposition??
Bid was 350-360 then for 65's
Gem seated dimes were buyable for $500 in mid-1982. By the peak in 1989/90 they were $2000-$2500. Those same coins today, accounting for grading changes are probably around $1200-$1500.
If you bought quality stuff before 1988 you are likely still a decent position, though things were somewhat pricey in 1985.
roadrunner
From The Economist -
All countries agreed to intervene in currency markets as necessary to get the dollar down. Perhaps not surprisingly, not all the promises were kept (least of all the American one on deficit cutting), but even so the plan turned out to be spectacularly successful. By the end of 1987, the dollar had fallen by 54% against both the D-mark and the yen from its peak in February 1985. This sharp drop led to a new fear: of an uncontrolled dollar plunge.
and it sets us apart from practitioners and consultants. Gregor
<< <i>Gem seated dimes were buyable for $500 in mid-1982. By the peak in 1989/90 they were $2000-$2500. Those same coins today, accounting for grading changes are probably around $1200-$1500 >>
And that is still only a 4% rate of return. (Probably less than the declining value of the dollar during the same period) Considering what you could have gotten with the interest rates during the 80's and then the stock markets in the 90's, coins were not a great investment. You would have come out ahead just putting the money into CD's the whole time, even with the lousy rates they were at in the 2000 - period.
I have two thoughts about 1988/1989 versus today.
First, the 1988/89 peak was more about "investment" and hype (maybe too strong a word, but you know what I mean) than a real solid economic reason for buying coins. In today's world, the dollar is depriciating in a more noticeable way. Most collectibles and other tangible assets...real estate, gold, oil, etc....are appreciating in value versus the dollar. The stock market is in the same place (approximately) as it was 4 years ago and will probably be in the same place (approximately) 4 years from now. There are good economic reasons to buy quality rare coins and other tangible assets. It's certainly what I'm doing.
Second, while many coins are way up in value in the past three years (some at 100% to 200% over what they were in 1989), there are many great rare coins that are very undervalued...all things considered. I believe Gem Type, bot MS and PR, are underpriced. i believe Proof gold is way underpriced. I believe silver commems are ridiculously underpriced, and I believe this market has tremendous momentum and could run for another three to five years with across-the-board gains that will make the last three years look like a minor preview.
I don't know what's gotten into me this morning but I'm feeling pretty good about the rare coin market.
David Hall
David - When was the last time you were bearish?
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
never break even. At that time this mostly meant MS-65 common date Morgans and walkers.
Anything special like PL's and sharp strikes would have been picked off before the "investors"
even saw the coins. There were some people cherry picking stuff and, no doubt, many have
significant profits. Most of these individuals were collectors and knowledgeable dealers. Ot-
her areas were also run up but investors had a little better chance since they didn't get as high
and often involved scarcer coins which are more likely to have rebounded.
There were still a lot of raw coins trading in those days and some investors got a double whammy
by having overgraded coins that crashed.
Generally prices are higher now except for relatively common coins in about the 90th to 95th %ile
of condition. Whatever you call these there isn't enough specific demand to cause large premiums
to the MS-63 or choice examples.
If a person is investing his or her future in rare coins, they are flirting witn disaster. If the coin market is such a good investment, then why on earth would a dealer ever sell them?
I like coins. I like imagining what the world was like when they were minted. Who held them, what story would they be able to tell me. I can't do that with stocks and cd's. I've said it before and I'll say it again, keep your hobbies and investments separate.
Thats my take on it anyway.
You just gotta buy the right coins!
live and learn, i just need to ask the right questions.
7% per annum? Sounds like a marginal investment to me.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I would suppose the strength from 1982-1986 was really due to monetary expansion and interest rates coming down. Money was being made available, just as it has been made very available from 1996-2005.
Coins did very well from 1977-1980 (3X to 6X) and from
1982-1986 (2X-3X) and then again from 1987-1990 (2X-3X).
The net gain on many superb coins from 1977 to 1990 was about 20X to 25X. Type coins lead this market. Average gems may have increased 10X to 20X. Factoring in the 1990-1997 only confuses things as that would have been the time to be out of the gem type coin market....and start to assemble key dates and REG sets.
The coin market did fabulously well in short spurts, and that's the lesson to take away. Same for gold, stocks and anything else.
If you are in it for the long haul, your gains may become very mediocre as you go through extended down cycles, unless your name is Pittman, Elisaberg, Norweb, Stack, etc. They bought their coins for peanuts, so when they sold was of little consequence.
roadrunner
<< <i>In the 1980's, as an investment, I purchased 25 BU rolls of 1955-D Washington quarters from Robert Hughes (he was a high-flying young dealer at that time) for $5000.00 cash. Needless to say, it was/is a horrible investment. I still have them all. A few years ago, I looked thru some of the rolls, and there are VERY FEW quality coins in there, as is common for this date. One of these days, I'll go thru the whole bunch-maybe I'll find a nice one.
Curiously $5000 "invested" in 1983-P quarters in 1985 would be worth about $375,000 now.
But, of course, no one did this.
But, of course, no one did this.
If someone had, then it probably wouldn't have been a very good investment since the price wouldn't hold with that much supply.
Not true. The trading system only made it easier to see what was happening to the market, especially with respect to sight-unseen quality coins.
In fact, 1987-89 saw the creation of a coin bubble driven by investors betting on Wall Street's further interest in rare coins. Wall Street retreated from the coin market in 89 and the real estate market turned south in 90, a one-two punch that floored the coin market for several years.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Ultimately the recession of 1990-1993 took down coins as well as real estate and other investments. If you look at the charts the down turn should have warned the coin market that things were going to come to an end in 1990.
The new slabbing network did make coin prices shoot up higher (and fall harder) than they should have otherwise. But the economy ultimately took out the coin market.
roadrunner
TorinoCobra71
Most sensible people would have sold off the Gold and Silver and gotten into the Stock Market...........
Most savvy investors would not be buying the general stock market in a recession. Look back to 1966-1982 when the economy was generally in a recessionary climate. Stocks did nothing. They probably did much the same from 1990-1993/1995, until the money supply was strongly goosed to break the holds of the recession. Then the real fireworks began. It's tough to find a winning investment in recessionary times unless you start shorting traditional markets. During a depression the process may be different as most stocks got hammered so badly in the early 30's that you could buy them for a song. Homestake Mining (later renamed to Newmont) stock increased by 6X during the 1930's.
roadrunner
<< <i> Ellesmere is notorious for that. >>
I agree. While they sell good coins, they seem to market primarily to investors who don't know much about the coin market. I will say however, that they sold my dad a handsome gem cc morgan at FUN for a GREAT price and the dealer was awesome to work with. I just HATE that they quote the 1989 price levels all the time!
<< <i>Curiously $5000 "invested" in 1983-P quarters in 1985 would be worth about $375,000 now.
But, of course, no one did this.
If someone had, then it probably wouldn't have been a very good investment since the price wouldn't hold with that much supply. >>
This is true. 375 rolls of the coin would saturate the market at the current time and make
it the most commonly traded eagle reverse clad quarter roll. Price would be severely impacted.
But this market is still growing and new collections are being started every day. I have to
believe that this sort of quantity can be easily absorbed at some point in the future.
<< <i>If the coin market is such a good investment, then why on earth would a dealer ever sell them? >>
The same thing can be said for stocks DUH!! Why would anyone EVER sell a stock whose price has appreciated? Who would want to buy something that no one is willing to sell. The active trading of stocks or coins is what keeps the market alive.
And with all the liquidity pumped into our system over the past 25 years, there are lots of dips occurring for that exact reason.
Coin dealers say the same thing as a rule. Gotta be in coins for
5-10 years or longer. Another way of saying that is that the high initial markup cannot be erased over just a few years unless a market is really booming. Bottom line is to buy at the low dips and sell when things are crazy.
The overall coin market has not "rallied" itself from 1989. Except for specific REG sets, key and semi-key dates, early dollars and early bust material, post-1930 moderns, common circ type coins (like good Indian cents and G-AU bust halves), toned dollars and commens,
CC dollars, Gem MS seated dollars, proof sets, rolls (including BU morgans/peace), and later mint products, the market as a whole is much lower than in 1989. Most of the market is still lagging those high levels. The overall market HAS rallied itself from 1997, but that's not saying a whole lot when it fell 65-75% to begin with.
roadrunner
<< <i>would it be better to try and compare what's going on today price wise with a look at the 1994-95 spike?? >>
'95 was the depths of almost all the various coin markets. It was just about impossible
to sell anything at more than a large fraction of catalog. There might have been some
very high end coins that were strong but these weren't coins found at the corner shop.
Moderns started waking up in late '95 and most of the rest of the market joined a little
later. Now days the whole low end of the market is doing better than ever. Buffalo nic-
kel rolls are bringing $40 and indians are $75!! The strenght in the market is very broad
based but all of the darlings of 1989 have yet to recover. Remember that coins being
promoted have to be common enough that large numbers can be acquired. These coins
were then touted as being excessively rare because of their high grade and sold at ever
increasing prices. When large amounts of Wall Street money failed to materialize to ab-
sorb all these coins the prices began to tank. Lower and higher quality coins than those
being promoted are mostly higher priced now because of the huge run up in the highest
grades and the relative stability of the lower grades.
<< <i>Good post. The thing that kind of irks me is when a dealer brings up the 1989 price in comparison to the price today. They try to make the coin look like a bargain when they quote the high-water mark $ for a high-end coin--that makes me run away from them. Ellesmere is notorious for that. >>
Yep. That would be like saying that if JDSU were selling at $50 a share today, it would be a bargain compared to its $150ish price at its early 2000 peak. Never mind that it would still be riciculously overvalued at that share price.
In fact, most dealers never cash out of the coin market. They just keep on turning their inventory to boost their overall return.
BTW, I'm not suggesting that this means coins are a great investment. In fact, I'm sure there are better things to buy and hold for long term appreciation.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Look at it as if it were an auction. Would the dealer sell for the first bid? Heck no! He'll wait until the very last bid is in. If the price of rare coins constantly go up (as some would have us believe), then why not hold on to them.
I just bought an MS 66 two cent piece for several hundred dollars. I wonder how many people before me have owned this very coin? I doubt that the dealer had it very long. Dealers make their money by constant turnover of the same pieces, (buy wholesale-sell retail).
Coin collecting is just what it is. A hobby. Don't confuse it with investing.
Thats my take on it anyway.
The next boomlet will start in 2007 with the new coins, and in 2009 with the new Lincolns.
Start buying now.
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