What triggered the 1989 coin market collapse?

291fifth

Just when did the market peak and start downward?

What was it like to be active in coins at that time?

(I was involved in collecting paper money at the time and wasn't paying a lot of attention to coins. I recently thought about how little I actually know about this coin market downturn.)

rays

Same as everything else in 1989 (Real estate, modern impressionist paintings, vintage Ferraris, etc):

market ahead of itself
recession
job losses

Deadhorse

It started a bit earlier in the Houston area.

I lived on a short street that ended in a cul-de-sac. Out of 21 homes that were filled with families and children in early 1986, by late 1987, 19 of them were boarded up with HUD foreclosure signs on them. People just walked away from their mortages.

Pretty sad times around here that lasted till around '90-'91.

Those that had money were litterally buying up real estate at pennies on the dollar through the foreclosure auctions.

Even though I had to change jobs and take a large cut in pay, I felt lucky to just keep my home through it and keep the car and truck running.

BillJones

Prices exceeded the amountsthe collectors were willing to pay, and the speculators stopped trading among themselves. If the metals markets calm down, we in getting in the position for a repeat performance.

Artist

I was just a kid at the time, but I was pretty serious into coins in my own way, and what I saw was this:

A lot of money came into the market that did not really belong there - speculators, and more than one investment firm, drove common date Morgans in MS-65 to over $1,000.00.

Worse, is that TPGs were still relatively new and did not have the marker acceptance that they do now. Dealers were very quick to recognize an MS-65 when you wanted to buy one, but the same coin was usually an MS-63 when you went to sell it - and that's if you were lucky! One time, as kid, I bought an 1898-O Morgan in MS-63 condition, and when I went to trade it at the same dealer's shop, he refused my offer insisting that I had cleaned the coin - which it had been, but not by me!!!

It was a bubble in every sense of the word. When the recession hit, there was a lot of bogus money tied up in bogus coins, and it all just completely dissappeared.

The good news, is that the situation left such a bad taste in the mouths of so money, that no-one wanted coins for a while. When I got back into the hobby five years ago, I could hardly beleive the things I was able to afford - alas, it seems those days, for better or for worse, are behind us once again.

keets

well, Artist, your impression of 1989 leads me to believe that things haven't really changed much in the intervening years.

roadrunner

Rays had it right. It was a recession: higher interest rates, the economy faultering, etc. It had little really to do with the coin market itself. Dont' blame the Wall Street coin funds or the Iranian gold guy (Sajah?). The economy was headed into recession and it caught up to the coin market, and it went pop. Simple as that.
If you look at the charts it is plain as day that it was coming. Of course hindsight is 20-20. I got my butt whacked good as well as I knew little about charts or trading in any reasonable sense back then. Now that today everyone knows charting and is an "expert" it will be interesting to see everyone runs from one side of the ship to the other almost simultaneously...and the ship will still sink those with "knowledge" since they all do the same thing. The internet is a powerful tool if used correctly. 90% will use it incorrectly and sink the ship. 90% of those here will have the same results. To be one of the chosen 10% takes much skill. If any one (self included) thinks they are one of the chosen group be design, look again.

The ship is currently to one side with all those still into stocks, bonds, and real estate. The other side of the ship has a few stragglers into PM's and other hard assets. It is still early in game of crossing over the bow. Just my 2 cents.

roadrunner

CaptHenway

<< <i>Just when did the market peak and start downward?

What was it like to be active in coins at that time?

(I was involved in collecting paper money at the time and wasn't paying a lot of attention to coins. I recently thought about how little I actually know about this coin market downturn.) >>



The coin market collapsed during the ANA convention in Pittsburgh. For several months prior to it, the word was that some big brokerage firm was organizing a mutual fund that would buy and hold slabbed coins. In anticipation of this huge surge in demand, people were buying up everything. On the plane down to the show, I ended up sitting next to another dealer. I pulled out my briefcase and sold him $35,000 worth of stuff in midair.
On the second or third day of the show, the word came through that the brokerage was officially out. The market collapsed.
Tom D.

michael

greed and ego

Coindexter

I know that if the bubble bursts again I'll be happy enough to aquire some of the pieces that I've wanted since I caught this disease. Frankly, if the bubble doesn't burst I never will buy those coins. I'm okay with that. What I wonder about is what dealers do during the historically nasty times in the coin market.

rmoss

In the early 80's, after the emergence of the TPG's, I got away from coins because they had gotten too expensive for my blood. I got into sports cards, mainly baseball, until 91. Greed of the dealers ran me out of sports cards. As long as the dealers had cards they were worth something. If you had the cards and the dealers didn't, they were basically worthless. By this time the coin market had settled down and I got back into coins. At the moment I am buying coins for my set that aren't affected by the surging market. I collect the early commems. Less than 2 years ago an MS-65 Lafayette could be had for around $4500 to $5000, now you can't touch one for less than $8000 and that would be a bargain. Might be time to take a break again.

Steve27

I heard MadMarty was responsible, but Russ was the one who told me.

AgMe

Feels a lot like now, doesn't it?

I've been out of the market for a couple of months now (although I will buy an item that catches my eye from time to time)...

~g

Tyrock

In 1986 PCGS was formed and in 1987 NGC was formed. Collectors thought that they had found the "magic bullet" that would solve numismatic buying and selling problems that ANACS wasn't solving (they were wrong). The U.S. dollar was very weak by 1987. The sharks saw an opportunity and telemarketers started selling "numismatic invetsments" by telephone to the ignorant buyer with money. Slabbed coins were available in quantity by the end of the 80s and high quality was emphasized. As a result MS-65 coins suddenly became very expensive and desirable ( investment grade ?). People thought that you could invest in coins by just reading the label on the slab and coins suddenly became an "investment". Merrill Lynch even set up a rare coin fund. It seemed that the smart "Wall Street" money was now in the game. You couldn't lose! Prices rose to unrealistic levels and finally the bubble burst as coin collectors wouldn't pay the unrealistic prices that "investment grade coins" were selling for. Simple as that. By the way, I started collecting in 1978 and I was part of the 79-80 silver and gold runup. I'm watching history repeat itself again with silver and gold prices and "grade rarity" modern coins. So today it's not a $1,000 MS-65 common date Morgan dollar that people are investing in, it's a PR 70 DCAM one ounce gold American Eagle! Good luck...........

Whitby

<< <i>In 1986 PCGS was formed and in 1987 NGC was formed. Collectors thought that they had found the "magic bullet" that would solve numismatic buying and selling problems that ANACS wasn't solving (they were wrong). The U.S. dollar was very weak by 1987. The sharks saw an opportunity and telemarketers started selling "numismatic invetsments" by telephone to the ignorant buyer with money. Slabbed coins were available in quantity by the end of the 80s and high quality was emphasized. As a result MS-65 coins suddenly became very expensive and desirable ( investment grade ?). People thought that you could invest in coins by just reading the label on the slab and coins suddenly became an "investment". Merrill Lynch even set up a rare coin fund. It seemed that the smart "Wall Street" money was now in the game. You couldn't lose! Prices rose to unrealistic levels and finally the bubble burst as coin collectors wouldn't pay the unrealistic prices that "investment grade coins" were selling for. Simple as that. By the way, I started collecting in 1978 and I was part of the 79-80 silver and gold runup. I'm watching history repeat itself again with silver and gold prices and "grade rarity" modern coins. So today it's not a $1,000 MS-65 common date Morgan dollar that people are investing in, it's a PR 70 DCAM one ounce gold American Eagle! Good luck........... >>



I believe that was the magic year for all collectibles. IMO, and I stress, IMO, it was a buubble that was driven up by unrealistic expectaions...so, the solution was to create the "real deal" in the form of entities that were supposed to clear away all the smoke and mirrors etc etc . Well, they cleared up the smoke, the just started blowing it up our collective a55es. IMO.

Personally, a collapse keeps it all a bit more real anyway. Bring them on!

Outhaul

<< <i>What triggered the 1989 coin market collapse? >>


The truth surfaced over the hype of the previous years.

cladking

<< <i> I'm watching history repeat itself again with silver and gold prices and "grade rarity" modern coins. So today it's not a $1,000 MS-65 common date Morgan dollar that people are investing in, it's a PR 70 DCAM one ounce gold American Eagle! Good luck........... >>



There's a big difference. In 1989 there were very common Morgan and walking liberty half dollars
going through the roof. There are no common moderns going for the kind of prices that were being
paid for coins in 1989.