Explain what happens during a "coin market correction"
Prethen
Posts: 3,454 ✭✭✭
...other than the obvious..."coin prices go down"....
I don't recall (as I've only been extremely active in the hobby in the last several years) a correction in the overall coin market.
My guess is that the general collector stops buying or is unable to afford generic/type coins at current levels and dealers start to take losses to simply get revenue. Is it likely that dealers will have to take some sort of losses across the board (unless they sell based on very large margins)?
Does the Graysheet look like a bunch of minuses from week to week in many/most categories?
Is this really a bad time for the collector? Will dealers still want to sell their "good" stuff or will they hold out for a better market? Are there "bargains" all over in that type of market?
I don't recall (as I've only been extremely active in the hobby in the last several years) a correction in the overall coin market.
My guess is that the general collector stops buying or is unable to afford generic/type coins at current levels and dealers start to take losses to simply get revenue. Is it likely that dealers will have to take some sort of losses across the board (unless they sell based on very large margins)?
Does the Graysheet look like a bunch of minuses from week to week in many/most categories?
Is this really a bad time for the collector? Will dealers still want to sell their "good" stuff or will they hold out for a better market? Are there "bargains" all over in that type of market?
0
Comments
rainbowroosie April 1, 2003
Russ, NCNE
What IS a
<< <i> fdelaers >>
??????????
Best!
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
This correction is once again in the form of a "rolling segmented market" that we had seen from 1997 through 2002. It is most healthy.
Generally they are brought on by speculation. People start socking away coins in anticipation
of future demand but something comes along to cause a big speculator to sell or many small
ones need to sell. Suddenly the coins are everywhere and buyers become extremely picky or
stop buying altogether to see how things shake out. This selling tends to snowball but only
those who keep up with markets or are insiders will even be aware of it. Price guides will take
some time to reflect the new reality. Where 50% premiums had been the rule there might now
be 10% discounts.
In major corrections or where the inciting event is broad based this decrease in sales and prices
will spread to less related areas. Even coins that were barely involved in the run-up might have
substantial losses. By the time the average collector becomes aware of the situation it can be
largely resolved. The '89/ '90 crash was very broad based and very long lasting because much of
the cause was demographic.
After reading this week's Numismatic News report on the Denver ANA show it may be time to test the waters and see just how strong the demand for your coins really is. Long Beach will be a major test of the market.
because much of
the cause was demographic. >>
Can you please explain what you mean by this?
I give away money. I collect money.
I don’t love money . I do love the Lord God.
The way most collectors find out that the market is in serious decline is when they offer coins for sale and find that few dealers are buying at the published prices. The real prices are actually lower. Quite often the supply of nice to great coins dries up, and there is not much to buy in bear markets. It takes a while for collectors who want to sell and dealers to “bite the bullet” and that their losses.
In the worst corrections, many collectors have stopped buying anything of significance long ago. The people who finally start the correction are the speculators who suddenly find that they are at the end of the daisy chain. When those guys stop trading among themselves with some “major” dealers acting as intermediates, the party is over.
I've never been through one other than a slight blip after 911.
From what I hear from some vets is that in the early 90's that many coins were unsaleable. I mean without taking a complete bath.
If I remember correctly they were talking about Gobrechts and a person couldn't give them away. No demand.
<< <i>I've never been through one other than a slight blip after 911.
From what I hear from some vets is that many coins are unsaleable. I mean without taking a complete bath.
If I remember correctly they were talking about Gobrechts and a person couldn't give them away. No demand. >>
In hinesight, wouldn't you have liked to have bought a Gobrecht soon after 9/11.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>.
because much of
the cause was demographic. >>
Can you please explain what you mean by this? >>
Simply that there was a declining collector base. The selling was going on largely by
speculators and those new to the hobby. The buying was from a declining number of
existing collectors. It was mid-'95 before there was any significant recovery and this
was caused by a small trickle of new collectors entering the hobby.
This downtrend during these years was very bleak. While high end dealers might have
been doing OK and making ends meet, the rest of the dealers were carving up a shrinking
pie into ever smaller pieces. It seemed that the market would never recover and coin
prices were locked in a downward spiral that was forever enveloping more and more coins.
<< <i>
<< <i>.
because much of
the cause was demographic. >>
Can you please explain what you mean by this? >>
Simply that there was a declining collector base. The selling was going on largely by
speculators and those new to the hobby. The buying was from a declining number of
existing collectors. It was mid-'95 before there was any significant recovery and this
was caused by a small trickle of new collectors entering the hobby.
This downtrend during these years was very bleak. While high end dealers might have
been doing OK and making ends meet, the rest of the dealers were carving up a shrinking
pie into ever smaller pieces. It seemed that the market would never recover and coin
prices were locked in a downward spiral that was forever enveloping more and more coins. >>
OK!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
The demographics at play were relatively insignificant.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
High quality material, drops later on, and recovers the earliest.
Camelot
<< <i>IMHO, the correction of 1989-90 was caused by the bursting of a speculative bubble, the bubble being the result of an unrealized dream that Wall Street money would flood into slabs. >>
<< <i>In the worst corrections, many collectors have stopped buying anything of significance long ago. The people who finally start the correction are the speculators who suddenly find that they are at the end of the daisy chain. When those guys stop trading among themselves with some “major” dealers acting as intermediates, the party is over. >>
Percisely. "Wall Street" should stay where it belongs, on Wall Street. They bring nothing positive to the table except some big profits for mostly large dealers who are about to tap into that market while it lasts. In the end the collectors get squeezed out by the high, speculative prices, the stage is set for those speculators to lose a bundle.
The true prices for coins are set by collector demand and supply.
<< <i>Sorry, this is one of the extremely rare times when I have to disagree with CladKing. IMHO, the correction of 1989-90 was caused by the bursting of a speculative bubble, the bubble being the result of an unrealized dream that Wall Street money would flood into slabs.
The demographics at play were relatively insignificant. >>
That was certainly a big cause but an even bigger cause that speaks to CladKings point was the horrible recession the USA was entering in if not already in that remained with us a few years. Anybody remember the Resoluton Trust Corp that had to be established by Uncle Sam that had to buy in all the bad savings and loan debt from overpriced/non bonafide real estate deals that the IRS clamped down on? How about all the savings and loans that bellied up and related industries that tanked ? How about when you could buy major money center banks for under $10 a share? Much less many people losing their jobs and unemployment rate went up dramatically. Coins went down too because the USA was in a major recession.
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.
<< <i>I've never been through one other than a slight blip after 911.
From what I hear from some vets is that in the early 90's that many coins were unsaleable. I mean without taking a complete bath.
If I remember correctly they were talking about Gobrechts and a person couldn't give them away. No demand. >>
If we do have a coin market correction, anyone wanting to give away Gobrecht dollars, even damaged and/or repaired ones, I'll be happy to accept them!
An authorized PCGS dealer, and a contributor to the Red Book.
<< <i>Sorry, this is one of the extremely rare times when I have to disagree with CladKing. IMHO, the correction of 1989-90 was caused by the bursting of a speculative bubble, the bubble being the result of an unrealized dream that Wall Street money would flood into slabs.
The demographics at play were relatively insignificant. >>
Perhaps I stated it poorly because we don't seem to be in much disagreement. It was speculative excesses
that brought on the correction moreso than anything. Everyone thought Wallstreet money would flow into
the hobby in tidal waves but instead it was barely a trickle. While demographics were related to the cause
they were far more related to the correction being long lasting.
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>This ones going to hit areas that haven't seen such a sharp correction before. >>
Yes, you are right. The prices for many classic early coins have gone much too high IMO. If I didn't like my coins so much, I'd be selling them and buying them back when the prices went down, but there are two problems with that plan.
#1 Uncle Sam would hit me hard with income taxes from the gains I would realize. Therefore a lot of the money from the sales would go down the government poop chute.
#2. A lot of these coins hard to find with the look that I like. It's taken me over 30 years to get where I am now. I probably don't have 30 years left to do it over again.
The best way to figure out how much downside exists in a given coin is to see how low prices have been in the past 15 years. With few exceptions, things would have to get awfully bad to test those lows.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i> While demographics were related to the cause they were far more related to the correction being long lasting. >>
Hmm, I would restate that again to:
While demographics was a minor factor to the initial cause it was a most significant factor as to why the correction was so long lasting.
Most of us seem to agree that the Statehood quarter program just a few short years later did more to revitalize the demographics of the coin hobby than any other single event of the past decade or more.
<< <i>cladking:
<< <i> While demographics were related to the cause they were far more related to the correction being long lasting. >>
Hmm, I would restate that again to:
While demographics was a minor factor to the initial cause it was a most significant factor as to why the correction was so long lasting.
Most of us seem to agree that the Statehood quarter program just a few short years later did more to revitalize the demographics of the coin hobby than any other single event of the past decade or more. >>
That's probably the way I should have said it in the first place.
This can be where its important for a dealer to have a lot of collector coins and currency in inventory that trade for less than $50 that can be retailed double bouble (cost x 2). I remember setting up at a show during this period retailing $500 of mainly world and US collector coins in the $20 range and less at a show and having $260 profit from these sales then buying a nice slabbed MS 65 commem at $500 that would have been $1500 the year before - sweet. At the same time it was a dogfight to make $10 selling a nice slab at shows because of other dealers wholesaling to the public (this made me furious). You have to adjust your selling strategy to the most profitable area to survive. I mainly retailed my nicer slabbed coins to clients in their homes thereby eliminating competetion from other show dealers who were wholesaling to the public - this proved key in survival (and expansion) of the business. At this time too, knowing that no one was going to pay above bid at shows I started offering walkup traffic 50 - 65% of CDN (Buying Right = Instant Profit) for coins they brought to my table and when successful flipping this material to other dealers at 90-95% of CDN. Many of these people (walkups selling coins) had unrealistic ideas of what they could receive for their coins at a show as they were going by out of date price guides reflecting the higher prices. In surviving the 1990 bear market I greatly improved my buy / sell skills as a dealer - 10 cents on the dollar ain't gonna cut it in the coins business!
<< <i>Explain what happens during a "coin market correction" >>
Ya lose money!!
<< <i>
<< <i>Explain what happens during a "coin market correction" >>
Ya lose money!! >>
And the low budget dealers thin out.....
no one good early pre 1915 scarce to rare low mintage coins sionce many prices on thsse sheets are already laughable low they do not change in a correction
Is this really a bad time for the collector? no!! a better time as you can get some great coins at fair prices
Will dealers still want to sell their "good" stuff ? of course as they ket top dealrs making money is turnover
Are there "bargains" all over in that type of market? well i would not say some much as bargains but great opportunity and values as cash is king but you got to be able to hold as a long term collector using discretionary funds only monry you can hold for a long time in these coins then you will be okie if you buy the right items
and with many other coins where the holder is most all important for demand and value then you got dealers who will just tell yopu if you want to sell them oh i am overstocked or the grading has changed on these high ga-ga grade coins or we are just not buying them now then you qare stuck holding the bag
the pricing structure will be the same on them you just cant get anyone to make you any offers at all not even a low one
A coin market correction means that YOUR coins are going down in value.
When MY coins go down in value, then it's a market collapse.
Corrections hurt dealers with big inventories and collectors/investors who require quick liquidity. For the rest of us who are buying, each market represents different opportunities. The big key is recognising them. When the market was dead for several years in the 1990s, I built a great part of my present prooflike Morgan set. I could not only locate and buy at rock botom prices semikey after semikey, but I had the luxury of selecting the right ones for the set with little regard for competitive premiums. Some dealers were even saying that the prooflike qualification was a flash in the pan and would never return with premiums over brilliant cartwheels. But it didn't end when the market cooked back up to a boil. That is when the tough ones, the keys that were locked away in stable collections, were rattled loose. Yes, they were costly, but they were also available. That is when opportunity knocks and you must listen. There is really no way to build a quality set without throwing mad money around (and that might not even work) without being patient and learning to work with every market condition. Don't sweat a change one way or the other unless you have an auction consignment outstanding.
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<< <i>
and with many other coins where the holder is most all important for demand and value then you got dealers who will just tell yopu if you want to sell them oh i am overstocked or the grading has changed on these high ga-ga grade coins or we are just not buying them now then you qare stuck holding the bag
>>
I wonder what color the sky is in this guys world.
I remember the one major correction we've had since "these high ga-ga grade coins" have
come into existence. While MS-65 Morgans and walkers were heavily hit in the downdraft
and many other such coins also had drops, the highest grades were not so heavily impacted.
Some market insiders were even claiming "these high ga-ga grade coins" were actually
increasing in value right through it all.
Of course we all know he meant to be claiming that this applies only to moderns but there were
very few moderns that had been slabbed yet in 1990. People simply didn't send them in for
grading.
It's hardly surprising which coins dropped. There were slick brochures everywhere suggesting
the road to riches was paved by common date Morgans in gem condition. No one was push-
ing the stunning or superb gems because these just weren't available in promotable quantities.
They weren't pushing coins that were scarce date or anything that couldn't be found by the roll
or in small lots.