Question: Why are there no market makers in the modern coin market?
mgoodm3
Posts: 17,497 ✭✭✭
All this talk about moderns and market makers got me thinking. what is different about the modern coin market that would seem to preclude "market makers" from existing as is seen in the classic coin world? Or has the "market maker" for moderns just taken a different form which has precluded dealer involvement?
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Russ, NCNE
a "market maker" is necessary when there is no secondary market to make one's goods liquid
the omnibus market maker is now ebay, throw it up and the market will tell you what it's worth.
Liberty: Parent of Science & Industry
<< <i>It is still mostly a one-way market in which the players "make" their own but never buy coins that have been "made" by someone else. It is a reflection of the huge mintages of modern coins and the large potential supply from rolls, bags, proof and mint sets. >>
Do you read the other posts?
<< <i>It is not complicated, all a firm has to do is post a bid and an ask on a coin or a series of coins on the CCE and that firm is a market maker for that coin or series. Yes, everyone involved understands that the bids will be lowered or even pulled in a downturn. However, even one dealer doing this much on moderns during normal times would be a benefit for everyone involved in the segment. >>
You are, of course, right.
However, two points that might not be truly relevant in the "other thread" but are here: One, that
there are effectively bid and ask prices for some moderns. There are few, but most modern dealers
are often in need of some specific coins. Second, while there are real market makers in classics, there
aren't so many as is apparent. Some of the advertised bids are not really honored because they want
to heavily cherry pick anything they buy and some of what they sell are upgrades. Even if their stock
isn't upgraded it can end up being sold at premiums.
You're right that market makers in moderns would strenghten and legitimize these market in many
peoples' eyes, but it will probably be a few more years before the market is of sufficient size to sup-
port even one market-maker. There is a lot of money in these coins now days and there are market
makers of sorts in the types of moderns which sell in sufficient volume. Look at AZ Coin and Jewel
and several other large outfits that do a lot of business in this area at small markups.
The simple fact is that this is still a small niche market that probably gets a lot more attention than is
really warranted because so many people despise the coins. It also gets a lot of attention because
there are so many newbies dabbling in it. Most of the newbies are in ultramoderns but moderns are
attracting a lot of spillover. (as are classics).
From a collector standpoint "we don't need no stinkin' dalers" seems to be the consensus view while
from the financial standpoint "Who needs dealers while the market is growing?" seems to work well.
<< <i>What about Wondercoin ? >>
Indeed! He has a sterling reputation and is known to pay-up for coins he needs. Of course he'd get
torn to shreads in the wrong thread.
I thought Baley's answer was interesting. Could it be that the fact that when the classic market dveleoped, there was no other venue to sell coins other than B&M shops and a few national firms. The modern market evolved only recently and it already had a secondary market available to the end-consumer - EBay.
I have bought and sold numerous hundreds of secondary coins for people that have bought them from me and others listed above.
I just think the term "market maker" has such a different turn in the contemporary realm...and certainly the ultra modern realm. For the most part it is hard to come out with a buy/sell sheet on this kind of coin since the value is based so heavily on current population condition and that can change very frequently on ultra modern coins as well as less, but still frequently in the contemporary market.
When I purchase a collection of these secondarily offered coins I provide an up to date buy sell price for the seller. Providing one from 3 or 6 months ago would just not be accurate and thus accurate for myself and the seller.
There is so much more I can go into on this, but most everything else has been touched upon.
morris <><
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Russ: You've enlightened the baby boomers with your knowledge of the new Classics (kennedy halfs) You can certainly take that roll as a MARKET MAKER with Moderns, even working another job.
Larry: He's put out some awesome Sacagaweas and has that eye for spotting the 68s (dabigkahuna, thanks for your help) (He makes em then sells em and that is a MARKET MAKER, too
Lucy: She's had an impact on those collecting Frankies.... as an example. We all play an integral part in our own success or failure in the marketplace.
Our world is ever changing. The "kids" watching and learning and reading and never saying a word are taking notes. They see the bashing, the joking, the laughing, and the money making that goes on around these halls (no pun intended, david).....
We are the market makers in moderns, really..... and since the new coinage is "COMMON", the current dealers are not messing with most of it. It is left to us (Collectors forced to be MarketMakers). But hey, since it rests squarely on us, we can take the credit or the blame, but it is OURS for the taking. You'll see some smart YNs capitalizing cuz that's what we do in America, huh ?
Remember: The cream rises to the top. (ask laura... look at her accomplishments with classics) She didn't do this overnight, it took many years to position herself. ( I may not like the way she struts, but it's earned)
And in many years, imagine the value of some of you people's holdings, NOW.
Because YOU will be the Market Maker THEN
Here is a simple (and true) story to illustrate the different dynamics of the modern market for top pop coins:
A couple months ago, a collector contacted me and told me he wanted to sell off a complete 5 pc. set of 1999 Silver State Quarters in PCGS-PR70DCAM. I had hardly done any business with him at all in the past. The collector told me he wanted to net "around $6,000" for the coins. Rather than simply writing him the check on the spot and buying the coins (which I could have sold in one or two phone calls for a sizeable profit), I suggested that I simply auction the coins. I explained to the collector that I thought he would do quite well as there was a strong market for the early date PCGS-PR70DC State quarters. The long and the short of it is that the (5) coins fetched $10,752 (including buyers fee) and the collector received a few thousand dollars more for the coins than he originally desired and expected.
Also, Registrycoin just sold off much of his modern Gold Eagle collection at auction and did quite well. Some coins, like classics, got multiple bidders resulting in record prices - and auction was certainly the way to go as opposed to selling to a dealer and losing the opportunity for a "runaway price" on some of the coins I believe.
This illustrates that there is an easy "two way" market for moderns. Indeed, just take a few minutes and perform a search on what some of the finest known moderns are commanding at auction these days at Teletrade, Heritage and ebay.
While dealers are buying moderns, the modern market is now simply TOO BIG for any single dealer to "make a market" in ALL of it IMHO. For example, I am actively buying and selling modern Platinum Eagles ("Plat Commems"). Three board members in the past 60 days have contacted me (unsolicited) to sell their entire MS collections of Plat Eagles (well into 5 figures of coins in each deal). I purchased all (3) deals. And, I have purchased a number of Gold Eagle deals as well recently. But, could anyone I know buy ALL the modern deals out there in every field of modern coin collecting on a daily basis - I think not. Available modern bullion coins alone might account for hundreds of millions of dollars of available coins each month to buy and sell. Indeed, only the largest and strongest modern coin dealer in the world could handle the sale of such a quantity of modern coins - tha being the UNITED STATES MINT.
In short, the "modern market" (whatever that means) has been doing quite well over these past few years and I see collectors having little trouble disposing of their prize modern coins. In many cases, the "runaway auction prices" for these coins have led me to simply suggest auctioning off these great coins when collectors ask me and from everything I have seen, these modern coins are performing as strong as nearly any facet of the classic coin arena.
And, just for the fun of it - I joined the World Series of Pricing to participate with a portfolio of ultra modern and modern coins. After the first week, I think I rank 5th overall out of around 300+ total collector and dealer "players". I am hoping to stay very competitive with the scores of classic coin players in that contest with my basket of modern coins
Wondercoin
We could be at 500 by now......
hi, i'm tom.
i do not doctor coins like some who post in here.
1) Moderns are a thin market. Someone else said there are 100 PCGS MS67 Ikes total, all dates. That isn't a lot of coins. Hard to make a market for coins that rarely trade. How many of these 100 coins go dealer-to-dealer in a given year? 10? 5? None?
2) The next grade lower on moderns is often worth 10% of the top tier grades. This big drop means that buying one or two mistake coins is going to cause a great deal of angst for a market maker. Market makers don't want to spend precious, time, energy and capital messing with grading guarantees and the like. That is more like playing craps than being a market maker.
3) Only a small percentage of dealers can consistently grade moderns. Only someone looking to lose money and lots of it, would even consider making a market in coins they can not grade.
4) By definition market makers have to carry inventory, so if another dealer wants a coin at "ask" the coin can be provided. Most modern dealers prefer to be like stock market day traders and carry no inventory and buy a coin when there is already a seller lined up and flip for a quick profit. One reason for this is that it is too easy to be blindsided by new "makes."
5) Corollary to #1, there isn't that much profit in it. The prices for the top pops get a lot of press, but even a hundred $3k coins traded a year at 20% margin, isn't a lot of money considering the capital that has to be put up, the knowledge required and the risks involved. Compare this to a dealer who makes a market on generic Saints, that might move a hundred $600 coins every week at 3%. Or in generic Morgans that might move a thousand $110 coins at 3% every week. Again, the market maker is looking to stay flat, equal number of buyers to sellers.
6) Market maker margins tend to be thinner than typical wholesale/retail markups. So most dealers with the expertise would rather make that percentage than dealer-to-dealer margins and avoid the extra risk and tieing up capital.
Again, to summarize, the modern segment would benefit from one or more market makers. The benefits would include more places to buy and sell. Smaller spreads between the buy price and sell price. More dealer support which would translate into more collector interest. However, it will take one or more firms with the expertise, the capital, and the desire to make it work.
The quip about the grey sheet is chicken-and-egg stuff. They aren't on the grey sheet because there are no market makers. Most of the time, the big guys and gals set the market prices and the grey sheet prints them, not the other way around. If coins don't move equally buy-and-sell at the set prices, the prices change. If too many people hit the bid and are selling the bid goes down. If too many people are buying at the ask, the ask goes up.
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add this to the modern mix ------------responsibility for all your actions.
i hear lots of spin and clever talk of why the sellers on this thread who make a killing msking selling so called trading ga ga grade modern coins cant justify why THEY DO NOT MAKE ANY KIND OF MARKET IN WHAT THEY PROMOTE ON THESE BOARDS
i see lots of fancy double speak and spin but no responsibility think about it
As has been said many, many times, although some very smart classic coin people haven't the ability and/or the desire to listen and learn, there aren't market-makers in this area, because saavy modern collectors don't need them, don't want them, and wouldn't receive the greatest money possible upon sale, if they were available and used.
As long as dealers show up on Wednesdays at shows and sell, but and trade with each other then hide their purhases in their sacred place for only certain customers then that market will exist. How many dealers do that on moderns?
The problem I see is that there isn't a lot of middle ground in moderns. You go from ultra high-end to pocket change in a matter of a grade or two. The profit margins in this area are small and don't encourage dealer involvement, especially when somebody can go to EBay and get a better deal without the middleman.
<< <i>
The problem I see is that there isn't a lot of middle ground in moderns. You go from ultra high-end to pocket change in a matter of a grade or two. >>
This is true in many cases but it's not only a reflection of the fact that the coins can
be common in slightly lower grade but also of the fact that these markets are so
small. Take a coin like a '71 quarter in MS-64. Only about 10% of the few hundred
thousand remaining mint sets have coins of this quality and the number from rolls
would be nearly inconsequential because there are few rolls and nice coins are tough
in rolls. This supply simply overwhelms the demand. Even in MS-65 this coin isn't
slabbable because there isn't the level of demand yet that one sees in the more high
powered coins like 1938 Jefferson nickels.
There are some coins where this would remain true with much higher demand.