<< <i>Studies of this type are always written after the fact. If you bought a coin at random from a coin shop in 1940 it has not done remarkably well. If you take a large number of such coins the average hasn't done so well either. Certainly if you stuck to higher grade coins at higher prices you'll have done far better but how was one to know that in 1940? Surely many investors in those days thought the key was to buy rare ancients or less expensive coins. How many people would have loaded up on low grade or cull large cents? I don't think the abstract is speaking to your examples.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
Bond funds survive and prosper with less return. Why did the coin mutual funds crater?
In 1986, Merrill Lynch set up the Athena Fund and then Kidder Peabody set up a limited partnership just like it. The funds were aimed sophisticated investors: those with a net worth of $1 million or more or annual incomes of $200,000 or more
Bruce McNall even put a famous face on the sector. As the owner of the Los Angeles Kings hockey team, he was high-profile testament to the profits rare coin and collectible investing could bring. He then put an infamous face on the sector when he was convicted of fraud and was sent to jail. The Merrill and Kidder funds since have been shuttered. Merrill agreed to pay investors $20 million in settlements related to the McNall case.
<< <i>As both a securities analyst and a coin collector, I was amused by this "analysis" when I first saw it. I think it's pretty clear that the author isn't really familiar with the coin market.
As any analyst can tell you, you can build as fancy a pricing model as you want to, but the key point is the data you put into it.
Can you explain what's wrong with this part of his "methodology"?
All rare coin pricing data was provided by the following two sources: Handbook of United States Coins with Premium List (the Blue Book) for the annual copyrights 1942 through 1951, and A Guide Book Of United States Coins (Red Book) for 1950 through 2004.2
edited to add: The other thing that almost all investment professionals know is that "private asset class" investment firms almost always do very, very well for the managers of the firms, but they don't necessarily do that well for their investors. Private asset investments are expensive: you need professionals to manage them and they usually require a fair amount of "care and feeding" (storage costs, insurance costs, taxes [for real estate], transaction costs, etc.) All of these costs subtract from any eventual capital gain. (The other issue, of course, is that many, if not most, private asset investments don't produce any income, only capital gains at the time of sale.)
Also, a major Red Flag in this sort of analysis is when the author mentions a couple of coin investment funds and then, in the next paragraph, mentions the outsize returns that some truly rare coins generated. The proximity of the two paragraphs might lead a casual reader to conclude that the investment funds owned some or all of these coins. An alert collector, however, would recognize that the funds mentioned owned few, if any, of the coins mentioned. Nowhere does the author indicate what the returns to the investors of the coin funds were. >>
Even if his "methodolgy" was incomplete the abstract does give good points for rare coin diversification and does mention numerous caveats including not producing income. One of the lessons learned from the previous private coin funds is that they do not need as much expenses and fees as other private investments like real estate you mentioned. Therefore I believe the article has plenty of merit as an eye opener, or as a read for follow-up discussion to discuss the merits of rare coin investing to a beginner.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i>Because the vast majority have no clue as to what they are doing.
What they like is the commission spread. >>
You never did tell us why you call your company US RARE COIN INVESTMENTS, ...I do not understand your logic relative to the posted abstract.
>>
Excuse me? Who is "us"? What's your name?
You'll have to do a lot better trolling than that . >>
The letter you write on you website at the end suggests how fun and profitable rare coin investing can be. Do you think others can share in and develop that knowledge, even newer investors? "Us" is us collectors, the people that give you business!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i>Bond funds survive and prosper with less return. Why did the coin mutual funds crater?
In 1986, Merrill Lynch set up the Athena Fund and then Kidder Peabody set up a limited partnership just like it. The funds were aimed sophisticated investors: those with a net worth of $1 million or more or annual incomes of $200,000 or more
Bruce McNall even put a famous face on the sector. As the owner of the Los Angeles Kings hockey team, he was high-profile testament to the profits rare coin and collectible investing could bring. He then put an infamous face on the sector when he was convicted of fraud and was sent to jail. The Merrill and Kidder funds since have been shuttered. Merrill agreed to pay investors $20 million in settlements related to the McNall case. >>
Fees were to high and promoted to publicly. Also not sure about the knowledge of the pros hired to make the investments.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i>Rare coins are not a good investment because, as said by others, of the dealer spread which in my experience is between 10-20%. I think dealers spreads should come down, what do you think?
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
Even if his "methodolgy" was incomplete the abstract does give good points for rare coin diversification and does mention numerous caveats including not producing income. One of the lessons learned from the previous private coin funds is that they do no need as much expenses and fees as other private investments like real estate you mentioned. Therefore I believe the article has plenty of merit as an eye opener, or as a read for follow-up discussion to discuss the merits of rare coin investing to a beginner.
bidask,
His methodology is more than incomplete. Unfortunately, you seem determined to learn only from experience. I don't think you'll find investing in coins to be profitable.
For an additional viewpoint, you may want to read Dave Bowers' column in this week's Coin World (issue date 8/14).
Again, any beginners reading this thread run as fast as you can from anyone quoting stuff like the article in the original post. Odds are that you are about to embark on a long journey to the cleaners.
<< <i>Even if his "methodolgy" was incomplete the abstract does give good points for rare coin diversification and does mention numerous caveats including not producing income. One of the lessons learned from the previous private coin funds is that they do no need as much expenses and fees as other private investments like real estate you mentioned. Therefore I believe the article has plenty of merit as an eye opener, or as a read for follow-up discussion to discuss the merits of rare coin investing to a beginner.
bidask,
His methodology is more than incomplete. Unfortunately, you seem determined to learn only from experience. I don't think you'll find investing in coins to be profitable. Dave G, its the premise that stands out here that rare coins have a place for the diversified portfolio. Pretty simple. Each to his own methodolgy to accomplish that but although I still make mistakes, I have found rare coins to be very profitable over longer holding periods. I believe if presented as a sort of private equity holding ( by definition a longer term hold, subject to illiquidity) it could have a place in portfolio diversification. No question in my mine.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i>Again, any beginners reading this thread run as fast as you can from anyone quoting stuff like the article in the original post. Odds are that you are about to embark on a long journey to the cleaners. >>
The article discusses the merits of rare coin investing and gives plenty of caveats. What is the big deal here?
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
Usually when people who know nothing about coins want to invest in coins, usually that is a sign the market will soon crash. Beware when metals and rare coins are touted as "investments" to the general public.
Those companies who are now encouraging Joe Q. Public to invest in gold- where were they in 1998 when gold was under $300 an ounce?
<< <i>Usually when people who know nothing about coins want to invest in coins, usually that is a sign the market will soon crash. Beware when metals and rare coins are touted as "investments" to the general public. They already are touted as investments by coin dealers! Take a look at how many dealers use the "I" word in their company title and even more so on their websites and literature.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i>Aren't you the same person on the ( Coin Dealer Sales to Collectors vs. Dealers) post who just got done telling me that one of the reasons why you charge more to a collector vs. dealer is that you spend time with them and educate them etc.?! >>
Most investors don't want to spend the time listening to me. They almost always pose only two questions: (1) How much do I have to pay for it now? (2) When am I going to make a killing on this coin in the future?
They have no interest in history or any of the stories surrounding coins. All they are interested in is making money, and if that's your only motivation to get into coins, chances are you will lose money for sure.
Retired dealer and avid collector of U.S. type coins, 19th century presidential campaign medalets and selected medals. In recent years I have been working on a set of British coins - at least one coin from each king or queen who issued pieces that are collectible. I am also collecting at least one coin for each Roman emperor from Julius Caesar to ... ?
<< <i>Aren't you the same person on the ( Coin Dealer Sales to Collectors vs. Dealers) post who just got done telling me that one of the reasons why you charge more to a collector vs. dealer is that you spend time with them and educate them etc.?! >>
Most investors don't want to spend the time listening to me. They almost always pose only two questions: (1) How much do I have to pay for it now? (2) When am I going to make a killing on this coin in the future?
They have no interest in history or any of the stories surrounding coins. All they are interested in is making money, and if that's your only motivation to get into coins, chances are you will lose money for sure. >>
If you are a dealer and you are being asked those two questions by investors then you have a unique opportunity to educate and enlighten them with history, nuances of the business of coins, direct them to books, etc. but you or any other dealer should never, never, hold in contempt and hostility toward the very people who may be your bread and butter . I have made a little money in coins over time.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
As to why high-end coin dealers put "Investments" in their company name, I'll repeat a couple of old jokes:
1. If it costs over $100, it's not a "vase", it's a "vahze"
2. Husband has just paid $1,000 for a (pick one: autographed baseball, "limited edition" baseball card, etc.). Says he to his wife: "Honey, it's not a toy, it's an investment.
Finally:
I, too, can write a seemingly scholarly article for a financial planning journal and I expect I can construct a flawed (i.e., wrong) calculation of the rate of return and I further expect that some idiot will use it as justification to purchase an investment.
I'm glad you've had some success "investing" in rare coins. I hope you're talking about "after expenses, after tax, realized gains", not just unrealized (paper) gains.
I also hope you're keeping in mind one of the most important investing maxims: "Don't confuse brains with a bull market."
edited to add: Actually, I'm not too sure that many high-end dealers would agree with you that "investors" make good clients.
I, too, can write a seemingly scholarly article for a financial planning journal and I expect I can construct a flawed (i.e., wrong) calculation of the rate of return and I further expect that some idiot will use it as justification to purchase an investment.
I'm glad you've had some success "investing" in rare coins. I hope you're talking about "after expenses, after tax, realized gains", not just unrealized (paper) gains.
I also hope you're keeping in mind one of the most important investing maxims: "Don't confuse brains with a bull market."
The coins I buy I typically hold 3 to 5 year minimum. Read the abstract closely. He is looking at rare coins over a 62 year period. He also looks at time periods within the 62 years. He comments on dangers. He comments on spreads and what you should expect back from a dealer to quote a spread. He is spot on in his observations of the growth of the industry volume wise and the legitimacy of TGP's that has helped create markets. He stresses that this should be considered as a part of an overall asset allocation stategy and gives some telling statistics relative to volitility. Read the abstract carefully. I also do not understand your comment about investors .
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
As Yogi Berra didn't say: "You can tell a lot about a person by how they don't answer direct questions."
If you stay around on these boards long enough, you may begin to appreciate why the long-term collectors mock this "investment" article. I know you don't understand my comment about investors, but let me just end by saying that three to five years isn't a long-term holding in the numismatic world.
<< <i>As Yogi Berra didn't say: "You can tell a lot about a person by how they don't answer direct questions."
I don't know what you mean by this comment Dave but I did not see a direct question posed to me by you other than what I thought about the methodolgy which I answered. To respond more to this I think his methodolgy is fine. You miss the gist of the abstact. And frankly I don't think you have the ability to write a scholarly article about coins like you claim you could. Also I have made good money in coins with a 3 to 5 year holding period.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
All rare coin pricing data was provided by the following two sources: Handbook of United States Coins with Premium List (the Blue Book) for the annual copyrights 1942 through 1951, and A Guide Book Of United States Coins (Red Book) for 1950 through 2004.2
bidask, if you think his "methodology is fine", here is a direct question (OK, really two questions):
Can you explain, for the enlightenment of the "studio audience", the primary difference between the Handbook of United States Coins and the Guidebook of United States Coins?
Once you've done that, can you please explain why you believe that the use of prices from the two books is appropriate in the construction of a series of rate of return estimates?
There is a subtle but important distinction that it sometimes made between assets and investments - which applies here. At most, rare coins are an asset, like the house you live in. They are not an "investment" like stocks, rental properties, etc. There is no underlying income-producing asset with coins. Coins don't send you a dividend check; the market can be very thin and very illiquid and there is absolutely no guarantee about where prices will go. At the end of the day, a lot of people who are smart will make some money when they sell their coins, but a lot won't.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
All rare coin pricing data was provided by the following two sources: Handbook of United States Coins with Premium List (the Blue Book)Coins (Red Book) for 1950 through 2004.2
bidask, if you think his "methodology is fine", here is a direct question (OK, really two questions):
Can you explain, for the enlightenment of the "studio audience", the primary difference between the Handbook of United States Coins and the Guidebook of United States Coins?
Once you've done that, can you please explain why you believe that the use of prices from the two books is appropriate in the construction of a series of rate of return estimates? >>
I guess you make an astute observation Dave; he could have added the use of dealer to dealer records, Coin Dealer Newsletter data, public internet records , public coin auction records, as well as Coin Values and Coin World, and Numismatic News and perhaps others in assembling data to cover the 64 year period you just cited. YOU STILL MISSED THE GIST OF THE ABSTRACT! ( which is rare coins is a viable asset allocation investment for diversification purposes especially when held over longer time frames). I will look forward to reading your scholarly paper when you publish one now that you have shared with everyone your prowness as a securities analyst! And like Forrest Gump says, " thats all I got to say about that"!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
I think DaveG's point is that the Bluebook lists dealer buy prices (wholesale) and the Redbook lists retail prices. There are huge differences in pricing between the two guides, and therefore calculating rates of return based on Bluebook for some years and Redbook for other years is not valid. DaveG, correct me if I've misstated this.
An authorized PCGS dealer, and a contributor to the Red Book.
Bid/Ask -- In their own (sometimes hostile) way, the members of this board are trying to give you good advice.
Investors in the coin market normally lose money (often LOTS of money) because they don't think like collectors. Not always, but most of the time.
They make poor choices in the coins they buy. They buy things like scarce date Seated quarters in MS-66 for huge money because they are "pop. 4 with only 1 higher", without realizing that the underlying collector demand for such items at high price levels is nearly nonexistent. But yet, it fits perfectly with the "Investors Checklist" of what makes a desirable investment coin: Top grade, good looking design, PCGS or NGC graded, extremely rare (at that grade level, anyway). They don't realize that most collectors would prefer such an item in AU-58 or MS-62 or VF-20, because it would be impossible to complete such a set in high grade and it would be cost prohibitive for almost every collector to even try.
Collectors can and do lose money too, but they have a big advantage over investors when it comes to picking items that will be in high demand when it comes to selling their treasures: they chose them because they were desirable to collectors.
Therefore, the coins are more likely to be desired by collectors when they sell.
Please remember that the ONLY real basis for paying over face value or bullion value for any coin is because a collector thinks it is worth more than those values.
At our firm we sell a lot of expensive coins. We'd be kidding ourselves if at least some of our customers weren't buying some of them for investment reasons. It is a free country, after all. If asked, we really do discourage the purchase of rare coins (ours or anyone else's) for investment. Coins go up; coins can go down. If one really loves a coin, it matters less if it goes down (though it still hurts, of course!).
The Kidder Peabody fund was a limited life fund. Not only does the fund not exist anymore, but neither does Kidder Peabody.
(They were crippled by a financial scandal in the early '90s [I think], then shut down by GE, who had acquired them.) >>
A disaster, I might add, that continues to this day...
Always took candy from strangers Didn't wanna get me no trade Never want to be like papa Working for the boss every night and day --"Happy", by the Rolling Stones (1972)
Coins are a totally appropriate tangible asset investment diversifier, where tangible assets are part of ones overall long-term portofio. You don't judge the validity of such a thing by it's track record over some specific period of time - if we did that, most investments that are legitimate diversifiers to all could be made to look bad. Bullion is one example. Collectible coins and bullion are both legitimate tangible assets to throw into your tangible asset mix, which when combined with the non-tangibles (stocks, bonds, etc.) constitutes a well-diversified long-term investment portfolio. Coins are just like the other legitimate collectibles that serve as diversifiers of tangible assets.
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<< <i>Coins are a totally appropriate tangible asset investment diversifier, where tangible assets are part of ones overall long-term portofio. You don't judge the validity of such a thing by it's track record over some specific period of time - if we did that, most investments that are legitimate diversifiers to all could be made to look bad. Bullion is one example. Collectible coins and bullion are both legitimate tangible assets to throw into your tangible asset mix, which when combined with the non-tangibles (stocks, bonds, etc.) constitutes a well-diversified long-term investment portfolio. Coins are just like the other legitimate collectibles that serve as diversifiers of tangible assets. >>
Yes, I think that is what the abstract concludes!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
The Kidder Peabody fund was a limited life fund. Not only does the fund not exist anymore, but neither does Kidder Peabody.
(They were crippled by a financial scandal in the early '90s [I think], then shut down by GE, who had acquired them.) >>
A disaster, I might add, that continues to this day... >>
I do not know why the Kidder fund failed. Maybe it failed because it was to limited a life as you suggest. Maybe their fees were to high. Maybe the experts chosen to put the portfolio together weren't very good. But let me ask you, wouldn't you like to be able to buy some coins from 1990? Again, read it closely. It is not about coin funds!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i> Yes, I think that is what the abstract concludes! >>
This is an erroneous conclusion however. There are numerous pitfalls as so many have tried to point out but the greatest is perhaps in one tiny little sentence from the article;
<< <i>Minimum coin condition was generally held to the highest available as reported in the then-current Whitman publications. >>
So not only have they picked the coins that performed well after the fact, but they're also comparing apples and oranges since the highest grade in the past is not equivalent with the highest grade now.
While moderns from all over the world have been experiencing incredible gains that are often nearly unprece- dented the simple fact is that if someone were to try to "invest" in these coins he would end up with what is available rather than what's scarce or rare. He'd end up with millions of Indonesian Rupiah and mountains of Yugoslavian 50p. And it would be the same no matter what collectible field one enterred.
Certainly you can make a lot of money in collectibles but you have to do it as a collector or dealer, not as an investor.
<< <i>Bid/Ask -- In their own (sometimes hostile) way, the members of this board are trying to give you good advice.
I appreciate your post. My question to you is have you read this abstract carefully. It is written by someone with very good credentials. In his methodology there were 2 portfolios created. One for 600 coins and one for 650 coins. The abstract states that the portfolios " were uniquely tailored in order to most evenly distribute holdings across the entire available domestic universe at that time. Selections were evenly spread across all copper-based and silver based US coins". ( suggesting his study may not have included US GOLD!) Grades ranged from fine to MS 65. His study showed that overtime, US rare coins were actually less volatile than the SP 500 over a 62 year period but showed an equal return after inflation adjustment! This abstract may not apply to collectors per se, but I believe has huge merit for the investor wannabe. The abstract clearly points out the importance of dealing with reputable dealers who are true market makers ( reread the section on investability). You, as a dealer should make 25 copies of this thing and show it to the right clients and have a discussion! By the way, speaking of liberty seated quarters, have you seen the 1864 S NGC 68 coming up in Denver auction? I was thinking of bidding on that!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i> Yes, I think that is what the abstract concludes! >>
This is an erroneous conclusion however. There are numerous pitfalls as so many have tried to point out but the greatest is perhaps in one tiny little sentence from the article;
<< <i>Minimum coin condition was generally held to the highest available as reported in the then-current Whitman publications. >>
So not only have they picked the coins that performed well after the fact, but they're also comparing apples and oranges since the highest grade in the past is not equivalent with the highest grade now.
While moderns from all over the world have been experiencing incredible gains that are often nearly unprece- dented the simple fact is that if someone were to try to "invest" in these coins he would end up with what is available rather than what's scarce or rare. He'd end up with millions of Indonesian Rupiah and mountains of Yugoslavian 50p. And it would be the same no matter what collectible field one enterred.
Certainly you can make a lot of money in collectibles but you have to do it as a collector or dealer, not as an investor. >>
There is an argument that many of the highest available pieces are off the market. If the coins cannot be found then the money should not be invested. Again, his methodology showed a wide spectrum of US coins and they were not rebalanced. (that is bought and sold to keep up with trends) I don't know what your talking about relative to foreign coins, the abstract's study focus was exclusively US!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i> There is an argument that many of the highest available pieces are off the market. If the coins cannot be found then the money should not be invested. Again, his methodology showed a wide spectrum of US coins and they were not rebalanced. (that is bought and sold to keep up with trends) I don't know what your talking about relative to foreign coins, the abstract's study focus was exclusively US! >>
It simply isn't known what collectible will gain in demand. If it's player pianos that do best over the next fifty years then it's safe to predict someone will ex- trapolate the gains made in player pianos over the entire musical instument collectibles field (or maybe even all collectibles) and make the claim that these all return the largest gains.
If you invested in high grade scarce US coins of popular series over the last half century then, yes, you've done well. But if you just bought uncs (like every- one did) or got lots of more common coins (like everyone did) or also chased after the fads along the way (like all investors did) then you will not have the huge profits ascribed by this author.
Making money in coins requires a great deal of knowledge. One must know what coins are scarce relative to current demand but far more importantly one must know the cost relative to future demand. Some things are gimme's like nice '82-P quarters or 1957 Greek 2D's but most others are not so obvious. Do high grade classic US coins have to continue to lead the market? Who knows? If they do then all you have to do is buy a few 5 and 6 figure gems and sit tight, and this is what some are doing. But what happens if you're supposed to be in player pianos and instead you're buying modern coins? What happens if you acquire every single good quality player piano but no one wants them?
Without luck you'll not succeed in this field and I believe "luck" is not a good thing to invest in.
<< <i> There is an argument that many of the highest available pieces are off the market. If the coins cannot be found then the money should not be invested. Again, his methodology showed a wide spectrum of US coins and they were not rebalanced. (that is bought and sold to keep up with trends) I don't know what your talking about relative to foreign coins, the abstract's study focus was exclusively US! >>
It simply isn't known what collectible will gain in demand. If it's player pianos that do best over the next fifty years then it's safe to predict someone will ex- trapolate the gains made in player pianos over the entire musical instument collectibles field (or maybe even all collectibles) and make the claim that these all return the largest gains.
If you invested in high grade scarce US coins of popular series over the last half century then, yes, you've done well. But if you just bought uncs (like every- one did) or got lots of more common coins (like everyone did) or also chased after the fads along the way (like all investors did) then you will not have the huge profits ascribed by this author.
Making money in coins requires a great deal of knowledge. One must know what coins are scarce relative to current demand but far more importantly one must know the cost relative to future demand. Some things are gimme's like nice '82-P quarters or 1957 Greek 2D's but most others are not so obvious. Do high grade classic US coins have to continue to lead the market? Who knows? If they do then all you have to do is buy a few 5 and 6 figure gems and sit tight, and this is what some are doing. But what happens if you're supposed to be in player pianos and instead you're buying modern coins? What happens if you acquire every single good quality player piano but no one wants them?
Without luck you'll not succeed in this field and I believe "luck" is not a good thing to invest in. >>
The abstract is on coins not other collectibles. Read the section on Investability.
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i> You, as a dealer should make 25 copies of this thing and show it to the right clients and have a discussion! By the way, speaking of liberty seated quarters, have you seen the 1864 S NGC 68 coming up in Denver auction? I was thinking of bidding on that! >>
Re the 25 copies -- I disagree with the basic premise about investing in coins. This is from my experience, and the experience of others. I cannot promote something I do not believe in my heart to be the right thing.
Re the 1864-S 25c in MS-68 -- well, it is a free country, and a person can bid on whatever they want and can pay for. I would wonder who the eventual "end user" of such a coin might be. Coins like that go for alot of money in hot markets such as this. However, they are very hard to sell in down markets (except at greatly discounted levels).
(If the consignor of that coin is reading this -- my apologies. I am only giving my opinion. I'm sure the coin will sell for a lot of $$, since we are now in a hot market.)
<< <i>Bidask, I think a number of posters are saying that even if in theory/on paper, one believes coins might make for a good investment, the practical reality is that it usually doesn't work out that way. That is because there are a number of real-world variables/factors/influences which are likley to erase or at least reduce any potential gains. >>
Could you have put together a nice portfolio of rare coins 7 to 10 years ago that would have appreciated to overcome the factors and variables you mentioned ? If someone came to you WITH ALOT OF MONEY and asked you to use your professional experience to put together a portfolio today that they would be willing to hold for investment purposes to sell opportunistically over the next 7 to 10 years and it represented a small portion of their overall asset allocation would you discourage them by saying rare coins are not a good investment? I am talking about wealthy people who do not have to sell in down markets. Sure the market for rare coins can go down but who is to say the market may not get hotter? Do you believe in long term rare coin investment?
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
<< <i> You, as a dealer should make 25 copies of this thing and show it to the right clients and have a discussion! By the way, speaking of liberty seated quarters, have you seen the 1864 S NGC 68 coming up in Denver auction? I was thinking of bidding on that! >>
Re the 25 copies -- I disagree with the basic premise about investing in coins. This is from my experience, and the experience of others. I cannot promote something I do not believe in my heart to be the right thing.
I am sure you and Coin Guy 1 are very reputable, knowledgeable and respected dealers. But what I hear both of you telling me is that the high end coins you both sell really have very little investment potential and most likely the buyer will eventually lose money. Is that so? Seriously, if you really believe that, do you disclose that to your more affluent customers who can afford some of the items you advertise for sale and buy from you? You really do not believe in long term rare coin investing? I find that pretty incredible!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
You've hit the nail (partially) on the head: the mixing of wholesale and retail prices bothers me a lot.
The author of the article doesn't explain what the Blue Book and the Red Book are - something that any ten-year old coin collector should know. Personally, I think the author of this article not only isn't a coin collector, but doesn't know the first thing about buying and selling coins.
Why would anyone who knew anything about numismatics use wholesale prices for the first few years and retail prices thereafter? Answer: No one who knows anything about numismatics would, but an unknowing person looking for published prices would (the Blue Book has been around longer than the Red Book).
The second thing the author doesn't mention is that neither the Red Book nor the Blue Book represent actual prices - they're simply guides. As we experienced collectors know, sometimes the Red Book lists prices for coins that probably don't exist (that is, a specific coin in a specific grade) and, in any event, prices for rare (or just infrequently traded) coins are simply a "best guess" by the contributors, not necessarily related to any actual transaction. We've all seen many, many posts on these boards complaining about the inaccuracy of published price guides - the guides can't help it, it takes time to compile a guide and publish it. By the time you've published your guide, the coin market has changed. Any price guide is always either behind or ahead of the coin market - and experienced coin collectors know that.
Furthermore, this statement about transaction costs bothers me:
At the high end, bid/ask spreads can approach 40 percent. But the rapid growth of both the electronic and physical auction market and the robust development of authentication and grading of rare coins are serving to reduce these spreads across the numismatic spectrum. The best-developed, commonly traded, and standardized (through third-party authentication) coins may trade at bid/ask spreads approaching 10 percent.
So the author says spreads are very wide, and then constructs his index to completely ignore them! He suggests that I buy coins at Retail, then measure the "annual appreciation" by seeing what the Retail price is a year later. But, the then-current retail price is meaningless to me! I have to sell my coins at the wholesale price.
Therefore, if the spread is 40% (admittedly, a worst case in today's world - I hope) and I've spent $10,000 on coins, then when I go to sell them, I'll only receive $6,000. I have to wait for the wholesale price to appreciate 66% (from $6,000) before I break even! If the wholesale market appreciates 15% per year, I have to wait four years just to break even. If the spread is "only" 15%, then I have to wait about a year and a quarter to break even - and that's with the coin market appreciating 15% a year, which is the author's "best case." If the coin market appreciates at 5% annually, then I have to wait about four years just to break even. (Even the author admits that the median annual return on coins is 6.26% annually.)
(Try real hard not to think about the 18-year period [1981-1999] when the coin market didn't appreciate at all, according to the author.)
I think that a much better way to estimate the annual return of a portfolio of coins would have been to use the retail prices in the Red Book as a purchase price and the wholesale prices in the year-later Blue Book as a sales price. The "problem" (for the author of the article, that is), is that, most likely, that method wouldn't have produced anything approaching the attractive results that he portrays in his article.
Alternately, he could have used actual auction prices, as at least one of the art indexes he mentions did, but collecting all those prices would have taken a huge amount of work (which he obviously wasn't willing to do).
It's one thing to mindlessly repeat, like a trained parrot: "Read the article, read the article,", but it's not enough to read it, you also have to understand it!
<< <i>Bidask, I think a number of posters are saying that even if in theory/on paper, one believes coins might make for a good investment, the practical reality is that it usually doesn't work out that way. That is because there are a number of real-world variables/factors/influences which are likley to erase or at least reduce any potential gains. >>
Could you have put together a nice portfolio of rare coins 7 to 10 years ago that would have appreciated to overcome the factors and variables you mentioned ? >>
If I had "put together a nice portfolio of rare coins 7 to 10 years ago", I believe it would have appreciated nicely, due to the generally strong market of the past several years. If, on the other hand, I had put one together in 1989 before the market suffered a large drop, many of the coins would probably be worth substantially less today, some 17 years later - that would have been a very bad investment.
<< If someone came to you WITH ALOT OF MONEY and asked you to use your professional experience to put together a portfolio today that they would be willing to hold for investment purposes to sell opportunistically over the next 7 to 10 years and it represented a small portion of their overall asset allocation would you discourage them by saying rare coins are not a good investment? I am talking about wealthy people who do not have to sell in down markets. Sure the market for rare coins can go down but who is to say the market may not get hotter? Do you believe in long term rare coin investment?>>
I would tell that person that I discourage people from buying rare coins as investments, and mention a number of the reasons that I have in this thread. If they still wanted to invest, I would ask them to think about it some more, and if they didn't change their mind, would do the best I could to make them money. >>
OK! Apparently you feel pretty strong about this!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
"Therefore, if the spread is 40% (admittedly, a worst case in today's world - I hope) and I've spent $10,000 on coins, then when I go to sell them, I'll only receive $6,000. I have to wait for the wholesale price to appreciate 66% (from $6,000) before I break even! If the wholesale market appreciates 15% per year, I have to wait seven years just to break even. If the spread is "only" 15%, then I have to wait about a year and a quarter to break even - and that's with the coin market appreciating 15% a year, which is the author's "best case." If the coin market appreciates at 5% annually, then I have to wait about four years just to break even. (Even the author admits that the median annual return on coins is 6.26% annually.)"
No, I am not trained like a parrot. I just think the article needs to be read closely because of its technical nature. Actually Dave I think I understand the article alot better than you! I hope nobody on the board, including you buys with the knowledge of a 40% spread. Also I do not know what kind of securities analysis you do but to use your example $6000 does not take 7 years to breakeven at 15% per year. $6000 will double at 15% per year in five years. You forgot the power of compounding. Do the math!
I manage money. I earn money. I save money . I give away money. I collect money. I don’t love money . I do love the Lord God.
DaveG, you are correct, it would have been more valid to use retail (Redbook) prices as the "buy" prices and wholesale (Bluebook) prices as the "sell" prices. Also, there exists what I would have called a "mix variance" in my former career as a financial planning manager. The mix variance refers to the fact that many of these studies pick winners in a way most collectors don't. I've found as I've bought collections that no one seems to own a BU set of Mercury dimes, but a lot of collectors own circulated sets that are complete except for the 1916-D. Also, several collectors saved every Mercury dime they ever saw, so they have hundreds or thousands of Mercury dimes but no 1916-D. And guess which Mercury dime had the highest return over the years - - the 1916-D that no one seems to have put into their collection!
An authorized PCGS dealer, and a contributor to the Red Book.
Comments
<< <i>
<< <i>
<< <i>
<< <i>Because the vast majority have no clue as to what they are doing.
What they like is the commission spread. >>
You never did tell us why you call your company US RARE COIN INVESTMENTS, ...I do not understand your logic relative to the posted abstract.
Excuse me? Who is "us"? What's your name?
You'll have to do a lot better trolling than that .
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Studies of this type are always written after the fact. If you bought a coin at random
from a coin shop in 1940 it has not done remarkably well. If you take a large number
of such coins the average hasn't done so well either. Certainly if you stuck to higher
grade coins at higher prices you'll have done far better but how was one to know that
in 1940? Surely many investors in those days thought the key was to buy rare ancients
or less expensive coins. How many people would have loaded up on low grade or cull
large cents?
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I'm ready to invest, and I love the sound of a mutual fund. What is the ticker symbol of the Kidder Peabody fund? I don't much care for Merrill.
Buy the coins as a collector and love them - if they do turn out to be an investment, consider it a bonus.
Bond funds survive and prosper with less return. Why did the coin mutual funds crater?
In 1986, Merrill Lynch set up the Athena Fund and then Kidder Peabody set up a limited partnership just like it. The funds were aimed sophisticated investors: those with a net worth of $1 million or more or annual incomes of $200,000 or more
Bruce McNall even put a famous face on the sector. As the owner of the Los Angeles Kings hockey team, he was high-profile testament to the profits rare coin and collectible investing could bring. He then put an infamous face on the sector when he was convicted of fraud and was sent to jail. The Merrill and Kidder funds since have been shuttered. Merrill agreed to pay investors $20 million in settlements related to the McNall case.
<< <i>As both a securities analyst and a coin collector, I was amused by this "analysis" when I first saw it. I think it's pretty clear that the author isn't really familiar with the coin market.
As any analyst can tell you, you can build as fancy a pricing model as you want to, but the key point is the data you put into it.
Can you explain what's wrong with this part of his "methodology"?
All rare coin pricing data was provided by the following two sources: Handbook of United States Coins with Premium List (the Blue Book) for the annual copyrights 1942 through 1951, and A Guide Book Of United States Coins (Red Book) for 1950 through 2004.2
edited to add: The other thing that almost all investment professionals know is that "private asset class" investment firms almost always do very, very well for the managers of the firms, but they don't necessarily do that well for their investors. Private asset investments are expensive: you need professionals to manage them and they usually require a fair amount of "care and feeding" (storage costs, insurance costs, taxes [for real estate], transaction costs, etc.) All of these costs subtract from any eventual capital gain. (The other issue, of course, is that many, if not most, private asset investments don't produce any income, only capital gains at the time of sale.)
Also, a major Red Flag in this sort of analysis is when the author mentions a couple of coin investment funds and then, in the next paragraph, mentions the outsize returns that some truly rare coins generated. The proximity of the two paragraphs might lead a casual reader to conclude that the investment funds owned some or all of these coins. An alert collector, however, would recognize that the funds mentioned owned few, if any, of the coins mentioned. Nowhere does the author indicate what the returns to the investors of the coin funds were. >>
Even if his "methodolgy" was incomplete the abstract does give good points for rare coin diversification and does mention numerous caveats including not producing income. One of the lessons learned from the previous private coin funds is that they do not need as much expenses and fees as other private investments like real estate you mentioned. Therefore I believe the article has plenty of merit as an eye opener, or as a read for follow-up discussion to discuss the merits of rare coin investing to a beginner.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>
<< <i>
<< <i>
<< <i>
<< <i>Because the vast majority have no clue as to what they are doing.
What they like is the commission spread. >>
You never did tell us why you call your company US RARE COIN INVESTMENTS, ...I do not understand your logic relative to the posted abstract.
Excuse me? Who is "us"? What's your name?
You'll have to do a lot better trolling than that . >>
The letter you write on you website at the end suggests how fun and profitable rare coin investing can be. Do you think others can share in and develop that knowledge, even newer investors? "Us" is us collectors, the people that give you business!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>Bond funds survive and prosper with less return. Why did the coin mutual funds crater?
In 1986, Merrill Lynch set up the Athena Fund and then Kidder Peabody set up a limited partnership just like it. The funds were aimed sophisticated investors: those with a net worth of $1 million or more or annual incomes of $200,000 or more
Bruce McNall even put a famous face on the sector. As the owner of the Los Angeles Kings hockey team, he was high-profile testament to the profits rare coin and collectible investing could bring. He then put an infamous face on the sector when he was convicted of fraud and was sent to jail. The Merrill and Kidder funds since have been shuttered. Merrill agreed to pay investors $20 million in settlements related to the McNall case. >>
Fees were to high and promoted to publicly. Also not sure about the knowledge of the pros hired to make the investments.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>Rare coins are not a good investment because, as said by others, of the dealer spread which in my experience is between 10-20%. I think dealers spreads should come down, what do you think?
I give away money. I collect money.
I don’t love money . I do love the Lord God.
bidask,
His methodology is more than incomplete. Unfortunately, you seem determined to learn only from experience. I don't think you'll find investing in coins to be profitable.
For an additional viewpoint, you may want to read Dave Bowers' column in this week's Coin World (issue date 8/14).
Check out the Southern Gold Society
I presume you're being sardonic.
The Kidder Peabody fund was a limited life fund. Not only does the fund not exist anymore, but neither does Kidder Peabody.
(They were crippled by a financial scandal in the early '90s [I think], then shut down by GE, who had acquired them.)
Check out the Southern Gold Society
<< <i>Even if his "methodolgy" was incomplete the abstract does give good points for rare coin diversification and does mention numerous caveats including not producing income. One of the lessons learned from the previous private coin funds is that they do no need as much expenses and fees as other private investments like real estate you mentioned. Therefore I believe the article has plenty of merit as an eye opener, or as a read for follow-up discussion to discuss the merits of rare coin investing to a beginner.
bidask,
His methodology is more than incomplete. Unfortunately, you seem determined to learn only from experience. I don't think you'll find investing in coins to be profitable.
Dave G, its the premise that stands out here that rare coins have a place for the diversified portfolio. Pretty simple. Each to his own methodolgy to accomplish that but although I still make mistakes, I have found rare coins to be very profitable over longer holding periods. I believe if presented as a sort of private equity holding ( by definition a longer term hold, subject to illiquidity) it could have a place in portfolio diversification. No question in my mine.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>Again, any beginners reading this thread run as fast as you can from anyone quoting stuff like the article in the original post. Odds are that you are about to embark on a long journey to the cleaners. >>
The article discusses the merits of rare coin investing and gives plenty of caveats. What is the big deal here?
I give away money. I collect money.
I don’t love money . I do love the Lord God.
Those companies who are now encouraging Joe Q. Public to invest in gold- where were they in 1998 when gold was under $300 an ounce?
<< <i>Usually when people who know nothing about coins want to invest in coins, usually that is a sign the market will soon crash. Beware when metals and rare coins are touted as "investments" to the general public. They already are touted as investments by coin dealers! Take a look at how many dealers use the "I" word in their company title and even more so on their websites and literature.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>Aren't you the same person on the ( Coin Dealer Sales to Collectors vs. Dealers) post who just got done telling me that one of the reasons why you charge more to a collector vs. dealer is that you spend time with them and educate them etc.?! >>
Most investors don't want to spend the time listening to me. They almost always pose only two questions: (1) How much do I have to pay for it now? (2) When am I going to make a killing on this coin in the future?
They have no interest in history or any of the stories surrounding coins. All they are interested in is making money, and if that's your only motivation to get into coins, chances are you will lose money for sure.
<< <i>
<< <i>Aren't you the same person on the ( Coin Dealer Sales to Collectors vs. Dealers) post who just got done telling me that one of the reasons why you charge more to a collector vs. dealer is that you spend time with them and educate them etc.?! >>
Most investors don't want to spend the time listening to me. They almost always pose only two questions: (1) How much do I have to pay for it now? (2) When am I going to make a killing on this coin in the future?
They have no interest in history or any of the stories surrounding coins. All they are interested in is making money, and if that's your only motivation to get into coins, chances are you will lose money for sure. >>
If you are a dealer and you are being asked those two questions by investors then you have a unique opportunity to educate and enlighten them with history, nuances of the business of coins, direct them to books, etc. but you or any other dealer should never, never, hold in contempt and hostility toward the very people who may be your bread and butter . I have made a little money in coins over time.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
As to why high-end coin dealers put "Investments" in their company name, I'll repeat a couple of old jokes:
1. If it costs over $100, it's not a "vase", it's a "vahze"
2. Husband has just paid $1,000 for a (pick one: autographed baseball, "limited edition" baseball card, etc.). Says he to his wife: "Honey, it's not a toy, it's an investment.
Finally:
I, too, can write a seemingly scholarly article for a financial planning journal and I expect I can construct a flawed (i.e., wrong) calculation of the rate of return and I further expect that some idiot will use it as justification to purchase an investment.
I'm glad you've had some success "investing" in rare coins. I hope you're talking about "after expenses, after tax, realized gains", not just unrealized (paper) gains.
I also hope you're keeping in mind one of the most important investing maxims: "Don't confuse brains with a bull market."
edited to add: Actually, I'm not too sure that many high-end dealers would agree with you that "investors" make good clients.
Check out the Southern Gold Society
<< <i>bidask,
I, too, can write a seemingly scholarly article for a financial planning journal and I expect I can construct a flawed (i.e., wrong) calculation of the rate of return and I further expect that some idiot will use it as justification to purchase an investment.
I'm glad you've had some success "investing" in rare coins. I hope you're talking about "after expenses, after tax, realized gains", not just unrealized (paper) gains.
I also hope you're keeping in mind one of the most important investing maxims: "Don't confuse brains with a bull market."
The coins I buy I typically hold 3 to 5 year minimum. Read the abstract closely. He is looking at rare coins over a 62 year period. He also looks at time periods within the 62 years. He comments on dangers. He comments on spreads and what you should expect back from a dealer to quote a spread. He is spot on in his observations of the growth of the industry volume wise and the legitimacy of TGP's that has helped create markets. He stresses that this should be considered as a part of an overall asset allocation stategy and gives some telling statistics relative to volitility. Read the abstract carefully. I also do not understand your comment about investors .
I give away money. I collect money.
I don’t love money . I do love the Lord God.
If you stay around on these boards long enough, you may begin to appreciate why the long-term collectors mock this "investment" article. I know you don't understand my comment about investors, but let me just end by saying that three to five years isn't a long-term holding in the numismatic world.
Check out the Southern Gold Society
<< <i>As Yogi Berra didn't say: "You can tell a lot about a person by how they don't answer direct questions."
I don't know what you mean by this comment Dave but I did not see a direct question posed to me by you other than what I thought about the methodolgy which I answered. To respond more to this I think his methodolgy is fine. You miss the gist of the abstact. And frankly I don't think you have the ability to write a scholarly article about coins like you claim you could. Also I have made good money in coins with a 3 to 5 year holding period.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I can see that subtlety just won't work.
Here's a quote from the article:
All rare coin pricing data was provided by the following two sources: Handbook of United States Coins with Premium List (the Blue Book) for the annual copyrights 1942 through 1951, and A Guide Book Of United States Coins (Red Book) for 1950 through 2004.2
bidask, if you think his "methodology is fine", here is a direct question (OK, really two questions):
Can you explain, for the enlightenment of the "studio audience", the primary difference between the Handbook of United States Coins and the Guidebook of United States Coins?
Once you've done that, can you please explain why you believe that the use of prices from the two books is appropriate in the construction of a series of rate of return estimates?
Check out the Southern Gold Society
All rare coin pricing data was provided by the following two sources: Handbook of United States Coins with Premium List (the Blue Book)Coins (Red Book) for 1950 through 2004.2
bidask, if you think his "methodology is fine", here is a direct question (OK, really two questions):
Can you explain, for the enlightenment of the "studio audience", the primary difference between the Handbook of United States Coins and the Guidebook of United States Coins?
Once you've done that, can you please explain why you believe that the use of prices from the two books is appropriate in the construction of a series of rate of return estimates? >>
I guess you make an astute observation Dave; he could have added the use of dealer to dealer records, Coin Dealer Newsletter data, public internet records , public coin auction records, as well as Coin Values and Coin World, and Numismatic News and perhaps others in assembling data to cover the 64 year period you just cited. YOU STILL MISSED THE GIST OF THE ABSTRACT! ( which is rare coins is a viable asset allocation investment for diversification purposes especially when held over longer time frames). I will look forward to reading your scholarly paper when you publish one now that you have shared with everyone your prowness as a securities analyst! And like Forrest Gump says, " thats all I got to say about that"!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
An authorized PCGS dealer, and a contributor to the Red Book.
Investors in the coin market normally lose money (often LOTS of money) because they don't think like collectors. Not always, but most of the time.
They make poor choices in the coins they buy. They buy things like scarce date Seated quarters in MS-66 for huge money because they are "pop. 4 with only 1 higher", without realizing that the underlying collector demand for such items at high price levels is nearly nonexistent. But yet, it fits perfectly with the "Investors Checklist" of what makes a desirable investment coin: Top grade, good looking design, PCGS or NGC graded, extremely rare (at that grade level, anyway). They don't realize that most collectors would prefer such an item in AU-58 or MS-62 or VF-20, because it would be impossible to complete such a set in high grade and it would be cost prohibitive for almost every collector to even try.
Collectors can and do lose money too, but they have a big advantage over investors when it comes to picking items that will be in high demand when it comes to selling their treasures: they chose them because they were desirable to collectors.
Therefore, the coins are more likely to be desired by collectors when they sell.
Please remember that the ONLY real basis for paying over face value or bullion value for any coin is because a collector thinks it is worth more than those values.
At our firm we sell a lot of expensive coins. We'd be kidding ourselves if at least some of our customers weren't buying some of them for investment reasons. It is a free country, after all. If asked, we really do discourage the purchase of rare coins (ours or anyone else's) for investment. Coins go up; coins can go down. If one really loves a coin, it matters less if it goes down (though it still hurts, of course!).
Coin Rarities Online
<< <i>fishcooker,
I presume you're being sardonic.
The Kidder Peabody fund was a limited life fund. Not only does the fund not exist anymore, but neither does Kidder Peabody.
(They were crippled by a financial scandal in the early '90s [I think], then shut down by GE, who had acquired them.) >>
A disaster, I might add, that continues to this day...
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
<< <i>Coins are a totally appropriate tangible asset investment diversifier, where tangible assets are part of ones overall long-term portofio. You don't judge the validity of such a thing by it's track record over some specific period of time - if we did that, most investments that are legitimate diversifiers to all could be made to look bad. Bullion is one example. Collectible coins and bullion are both legitimate tangible assets to throw into your tangible asset mix, which when combined with the non-tangibles (stocks, bonds, etc.) constitutes a well-diversified long-term investment portfolio. Coins are just like the other legitimate collectibles that serve as diversifiers of tangible assets. >>
Yes, I think that is what the abstract concludes!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>
<< <i>fishcooker,
I presume you're being sardonic.
The Kidder Peabody fund was a limited life fund. Not only does the fund not exist anymore, but neither does Kidder Peabody.
(They were crippled by a financial scandal in the early '90s [I think], then shut down by GE, who had acquired them.) >>
A disaster, I might add, that continues to this day... >>
I do not know why the Kidder fund failed. Maybe it failed because it was to limited a life as you suggest. Maybe their fees were to high. Maybe the experts chosen to put the portfolio together weren't very good. But let me ask you, wouldn't you like to be able to buy some coins from 1990? Again, read it closely. It is not about coin funds!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i> Yes, I think that is what the abstract concludes! >>
This is an erroneous conclusion however. There are numerous pitfalls as so many have tried to point out
but the greatest is perhaps in one tiny little sentence from the article;
<< <i>Minimum coin condition was generally held to the highest available as reported in the then-current Whitman publications. >>
So not only have they picked the coins that performed well after the fact, but they're also comparing apples
and oranges since the highest grade in the past is not equivalent with the highest grade now.
While moderns from all over the world have been experiencing incredible gains that are often nearly unprece-
dented the simple fact is that if someone were to try to "invest" in these coins he would end up with what is
available rather than what's scarce or rare. He'd end up with millions of Indonesian Rupiah and mountains of
Yugoslavian 50p. And it would be the same no matter what collectible field one enterred.
Certainly you can make a lot of money in collectibles but you have to do it as a collector or dealer, not as an
investor.
<< <i>Bid/Ask -- In their own (sometimes hostile) way, the members of this board are trying to give you good advice.
I appreciate your post. My question to you is have you read this abstract carefully. It is written by someone with very good credentials. In his methodology there were 2 portfolios created. One for 600 coins and one for 650 coins. The abstract states that the portfolios " were uniquely tailored in order to most evenly distribute holdings across the entire available domestic universe at that time. Selections were evenly spread across all copper-based and silver based US coins". ( suggesting his study may not have included US GOLD!) Grades ranged from fine to MS 65. His study showed that overtime, US rare coins were actually less volatile than the SP 500 over a 62 year period but showed an equal return after inflation adjustment! This abstract may not apply to collectors per se, but I believe has huge merit for the investor wannabe. The abstract clearly points out the importance of dealing with reputable dealers who are true market makers ( reread the section on investability). You, as a dealer should make 25 copies of this thing and show it to the right clients and have a discussion! By the way, speaking of liberty seated quarters, have you seen the 1864 S NGC 68 coming up in Denver auction? I was thinking of bidding on that!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>
<< <i> Yes, I think that is what the abstract concludes! >>
This is an erroneous conclusion however. There are numerous pitfalls as so many have tried to point out
but the greatest is perhaps in one tiny little sentence from the article;
<< <i>Minimum coin condition was generally held to the highest available as reported in the then-current Whitman publications. >>
So not only have they picked the coins that performed well after the fact, but they're also comparing apples
and oranges since the highest grade in the past is not equivalent with the highest grade now.
While moderns from all over the world have been experiencing incredible gains that are often nearly unprece-
dented the simple fact is that if someone were to try to "invest" in these coins he would end up with what is
available rather than what's scarce or rare. He'd end up with millions of Indonesian Rupiah and mountains of
Yugoslavian 50p. And it would be the same no matter what collectible field one enterred.
Certainly you can make a lot of money in collectibles but you have to do it as a collector or dealer, not as an
investor. >>
There is an argument that many of the highest available pieces are off the market. If the coins cannot be found then the money should not be invested. Again, his methodology showed a wide spectrum of US coins and they were not rebalanced. (that is bought and sold to keep up with trends) I don't know what your talking about relative to foreign coins, the abstract's study focus was exclusively US!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i> There is an argument that many of the highest available pieces are off the market. If the coins cannot be found then the money should not be invested. Again, his methodology showed a wide spectrum of US coins and they were not rebalanced. (that is bought and sold to keep up with trends) I don't know what your talking about relative to foreign coins, the abstract's study focus was exclusively US! >>
It simply isn't known what collectible will gain in demand. If it's player pianos
that do best over the next fifty years then it's safe to predict someone will ex-
trapolate the gains made in player pianos over the entire musical instument
collectibles field (or maybe even all collectibles) and make the claim that these
all return the largest gains.
If you invested in high grade scarce US coins of popular series over the last
half century then, yes, you've done well. But if you just bought uncs (like every-
one did) or got lots of more common coins (like everyone did) or also chased
after the fads along the way (like all investors did) then you will not have the
huge profits ascribed by this author.
Making money in coins requires a great deal of knowledge. One must know
what coins are scarce relative to current demand but far more importantly one
must know the cost relative to future demand. Some things are gimme's like
nice '82-P quarters or 1957 Greek 2D's but most others are not so obvious.
Do high grade classic US coins have to continue to lead the market? Who knows?
If they do then all you have to do is buy a few 5 and 6 figure gems and sit tight,
and this is what some are doing. But what happens if you're supposed to be in
player pianos and instead you're buying modern coins? What happens if you
acquire every single good quality player piano but no one wants them?
Without luck you'll not succeed in this field and I believe "luck" is not a good
thing to invest in.
<< <i>
<< <i> There is an argument that many of the highest available pieces are off the market. If the coins cannot be found then the money should not be invested. Again, his methodology showed a wide spectrum of US coins and they were not rebalanced. (that is bought and sold to keep up with trends) I don't know what your talking about relative to foreign coins, the abstract's study focus was exclusively US! >>
It simply isn't known what collectible will gain in demand. If it's player pianos
that do best over the next fifty years then it's safe to predict someone will ex-
trapolate the gains made in player pianos over the entire musical instument
collectibles field (or maybe even all collectibles) and make the claim that these
all return the largest gains.
If you invested in high grade scarce US coins of popular series over the last
half century then, yes, you've done well. But if you just bought uncs (like every-
one did) or got lots of more common coins (like everyone did) or also chased
after the fads along the way (like all investors did) then you will not have the
huge profits ascribed by this author.
Making money in coins requires a great deal of knowledge. One must know
what coins are scarce relative to current demand but far more importantly one
must know the cost relative to future demand. Some things are gimme's like
nice '82-P quarters or 1957 Greek 2D's but most others are not so obvious.
Do high grade classic US coins have to continue to lead the market? Who knows?
If they do then all you have to do is buy a few 5 and 6 figure gems and sit tight,
and this is what some are doing. But what happens if you're supposed to be in
player pianos and instead you're buying modern coins? What happens if you
acquire every single good quality player piano but no one wants them?
Without luck you'll not succeed in this field and I believe "luck" is not a good
thing to invest in. >>
The abstract is on coins not other collectibles. Read the section on Investability.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i> You, as a dealer should make 25 copies of this thing and show it to the right clients and have a discussion! By the way, speaking of liberty seated quarters, have you seen the 1864 S NGC 68 coming up in Denver auction? I was thinking of bidding on that! >>
Re the 25 copies -- I disagree with the basic premise about investing in coins. This is from my experience, and the experience of others. I cannot promote something I do not believe in my heart to be the right thing.
Re the 1864-S 25c in MS-68 -- well, it is a free country, and a person can bid on whatever they want and can pay for. I would wonder who the eventual "end user" of such a coin might be. Coins like that go for alot of money in hot markets such as this. However, they are very hard to sell in down markets (except at greatly discounted levels).
(If the consignor of that coin is reading this -- my apologies. I am only giving my opinion. I'm sure the coin will sell for a lot of $$, since we are now in a hot market.)
(edited for spelling)
Coin Rarities Online
they are a collectible for someone who likes coins for fun and as a long term collecting endevor
if anything coins are a spectulation short term for profit
and there aint nothing wrong with that
BUT COINS ARE DEFINATELY NOT AN INVESTMENT
a highly illliquid undercpaitalized market that you should buy and collect long term as a hobby with diuscretionary money only
Like has been said before.
I'm a collector not an investor.
I buy em cause there purty.
<< <i>Bidask, I think a number of posters are saying that even if in theory/on paper, one believes coins might make for a good investment, the practical reality is that it usually doesn't work out that way. That is because there are a number of real-world variables/factors/influences which are likley to erase or at least reduce any potential gains. >>
Could you have put together a nice portfolio of rare coins 7 to 10 years ago that would have appreciated to overcome the factors and variables you mentioned ? If someone came to you WITH ALOT OF MONEY and asked you to use your professional experience to put together a portfolio today that they would be willing to hold for investment purposes to sell opportunistically over the next 7 to 10 years and it represented a small portion of their overall asset allocation would you discourage them by saying rare coins are not a good investment? I am talking about wealthy people who do not have to sell in down markets. Sure the market for rare coins can go down but who is to say the market may not get hotter? Do you believe in long term rare coin investment?
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>
<< <i> You, as a dealer should make 25 copies of this thing and show it to the right clients and have a discussion! By the way, speaking of liberty seated quarters, have you seen the 1864 S NGC 68 coming up in Denver auction? I was thinking of bidding on that! >>
Re the 25 copies -- I disagree with the basic premise about investing in coins. This is from my experience, and the experience of others. I cannot promote something I do not believe in my heart to be the right thing.
I am sure you and Coin Guy 1 are very reputable, knowledgeable and respected dealers. But what I hear both of you telling me is that the high end coins you both sell really have very little investment potential and most likely the buyer will eventually lose money. Is that so? Seriously, if you really believe that, do you disclose that to your more affluent customers who can afford some of the items you advertise for sale and buy from you? You really do not believe in long term rare coin investing? I find that pretty incredible!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
You've hit the nail (partially) on the head: the mixing of wholesale and retail prices bothers me a lot.
The author of the article doesn't explain what the Blue Book and the Red Book are - something that any ten-year old coin collector should know. Personally, I think the author of this article not only isn't a coin collector, but doesn't know the first thing about buying and selling coins.
Why would anyone who knew anything about numismatics use wholesale prices for the first few years and retail prices thereafter? Answer: No one who knows anything about numismatics would, but an unknowing person looking for published prices would (the Blue Book has been around longer than the Red Book).
The second thing the author doesn't mention is that neither the Red Book nor the Blue Book represent actual prices - they're simply guides. As we experienced collectors know, sometimes the Red Book lists prices for coins that probably don't exist (that is, a specific coin in a specific grade) and, in any event, prices for rare (or just infrequently traded) coins are simply a "best guess" by the contributors, not necessarily related to any actual transaction. We've all seen many, many posts on these boards complaining about the inaccuracy of published price guides - the guides can't help it, it takes time to compile a guide and publish it. By the time you've published your guide, the coin market has changed. Any price guide is always either behind or ahead of the coin market - and experienced coin collectors know that.
Furthermore, this statement about transaction costs bothers me:
At the high end, bid/ask spreads can approach 40 percent. But the rapid growth of both the electronic and physical auction market and the robust development of authentication and grading of rare coins are serving to reduce these spreads across the numismatic spectrum. The best-developed, commonly traded, and standardized (through third-party authentication) coins may trade at bid/ask spreads approaching 10 percent.
So the author says spreads are very wide, and then constructs his index to completely ignore them! He suggests that I buy coins at Retail, then measure the "annual appreciation" by seeing what the Retail price is a year later. But, the then-current retail price is meaningless to me! I have to sell my coins at the wholesale price.
Therefore, if the spread is 40% (admittedly, a worst case in today's world - I hope) and I've spent $10,000 on coins, then when I go to sell them, I'll only receive $6,000. I have to wait for the wholesale price to appreciate 66% (from $6,000) before I break even! If the wholesale market appreciates 15% per year, I have to wait four years just to break even. If the spread is "only" 15%, then I have to wait about a year and a quarter to break even - and that's with the coin market appreciating 15% a year, which is the author's "best case." If the coin market appreciates at 5% annually, then I have to wait about four years just to break even. (Even the author admits that the median annual return on coins is 6.26% annually.)
(Try real hard not to think about the 18-year period [1981-1999] when the coin market didn't appreciate at all, according to the author.)
I think that a much better way to estimate the annual return of a portfolio of coins would have been to use the retail prices in the Red Book as a purchase price and the wholesale prices in the year-later Blue Book as a sales price. The "problem" (for the author of the article, that is), is that, most likely, that method wouldn't have produced anything approaching the attractive results that he portrays in his article.
Alternately, he could have used actual auction prices, as at least one of the art indexes he mentions did, but collecting all those prices would have taken a huge amount of work (which he obviously wasn't willing to do).
It's one thing to mindlessly repeat, like a trained parrot: "Read the article, read the article,", but it's not enough to read it, you also have to understand it!
edited to correct my math
Check out the Southern Gold Society
<< <i>
<< <i>
<< <i>Bidask, I think a number of posters are saying that even if in theory/on paper, one believes coins might make for a good investment, the practical reality is that it usually doesn't work out that way. That is because there are a number of real-world variables/factors/influences which are likley to erase or at least reduce any potential gains. >>
Could you have put together a nice portfolio of rare coins 7 to 10 years ago that would have appreciated to overcome the factors and variables you mentioned ? >>
If I had "put together a nice portfolio of rare coins 7 to 10 years ago", I believe it would have appreciated nicely, due to the generally strong market of the past several years. If, on the other hand, I had put one together in 1989 before the market suffered a large drop, many of the coins would probably be worth substantially less today, some 17 years later - that would have been a very bad investment.
<< If someone came to you WITH ALOT OF MONEY and asked you to use your professional experience to put together a portfolio today that they would be willing to hold for investment purposes to sell opportunistically over the next 7 to 10 years and it represented a small portion of their overall asset allocation would you discourage them by saying rare coins are not a good investment? I am talking about wealthy people who do not have to sell in down markets. Sure the market for rare coins can go down but who is to say the market may not get hotter? Do you believe in long term rare coin investment?>>
I would tell that person that I discourage people from buying rare coins as investments, and mention a number of the reasons that I have in this thread. If they still wanted to invest, I would ask them to think about it some more, and if they didn't change their mind, would do the best I could to make them money. >>
OK! Apparently you feel pretty strong about this!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
No, I am not trained like a parrot. I just think the article needs to be read closely because of its technical nature. Actually Dave I think I understand the article alot better than you! I hope nobody on the board, including you buys with the knowledge of a 40% spread. Also I do not know what kind of securities analysis you do but to use your example $6000 does not take 7 years to breakeven at 15% per year. $6000 will double at 15% per year in five years. You forgot the power of compounding. Do the math!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
An authorized PCGS dealer, and a contributor to the Red Book.
You're right - I've corrected my post to change "seven years" to "four years".
(That's what happens when I punch the wrong number into the calculator!
Check out the Southern Gold Society