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Coin Dealer Borrowing

bidaskbidask Posts: 13,834 ✭✭✭✭✭
I have always wondered about this. I get flyers ( I am not a dealer) from a company in California advertising lending cash for coins. Speaking in general how many dealers borrow to produce inventory? How widespread is the practice? 15% of dealers....30% ......50%...higher? What is it? Is it known among dealers what the other guy is doing relative to borrowing? Just curious.
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.




Comments

  • pharmerpharmer Posts: 8,355
    Always assumed all of them, and that their greatest talent was creative finance. I could be wrong.
    Quis custodiet ipsos custodes?

    Apropos of the coin posse/aka caca: "The longer he spoke of his honor, the tighter I held to my purse."

    image
  • ColonialCoinUnionColonialCoinUnion Posts: 10,087 ✭✭✭
    I can definitively say - with absolute certainty - that it is not ALL dealers.
  • bidaskbidask Posts: 13,834 ✭✭✭✭✭


    << <i>I can definitively say - with absolute certainty - that it is not ALL dealers. >>

    Colonial Coin Union, you always struck me as reasonable minded dealers. Slow steady, and deliberate. But do you know any inside industry practices relative to borrowing by dealers. Any estimte statistically?
    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.




  • tradedollarnuttradedollarnut Posts: 20,145 ✭✭✭✭✭
    I forget - is there a number greater than 100%? image

    For dealers above a certain level, I'd say it's the vast majority that borrow in one form or another.
  • bidaskbidask Posts: 13,834 ✭✭✭✭✭


    << <i>I forget - is there a number greater than 100%? image

    For dealers above a certain level, I'd say it's the vast majority that borrow in one form or another. >>

    TDN, if the vast majority borrow in one form or another, rather than pay as you go with no margin, do you believe there is incremental demand out there by real collectors for coins to balance off the borrowing or are dealers mostly flipping to each other?

    In other words are dealers creating there own markets ( price) by the amount of trading they do amongst themselves on margin?! ( versus bonafide demand from collectors)
    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.




  • tradedollarnuttradedollarnut Posts: 20,145 ✭✭✭✭✭
    From what I see, there is tremendous collector demand. The market slowed for about 6 months, but its back. I've never seen Legend's newps sell as fast as they did - either there's pent up demand from collectors or Laura all of a sudden replaced her whammy eye.... image

  • bidaskbidask Posts: 13,834 ✭✭✭✭✭


    << <i>From what I see, there is tremendous collector demand. The market slowed for about 6 months, but its back. I've never seen Legend's newps sell as fast as they did - either there's pent up demand from collectors or Laura all of a sudden replaced her whammy eye.... image >>

    Well that is good news, and she surely has an irreplaceable eye for coins. Picky is good!
    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.




  • RYKRYK Posts: 35,772 ✭✭✭✭✭


    << <i>From what I see, there is tremendous collector demand. The market slowed for about 6 months, but its back. I've never seen Legend's newps sell as fast as they did - either there's pent up demand from collectors or Laura all of a sudden replaced her whammy eye.... image >>



    I am not sure about the "whammy eye" thingy, but I agree with your statement about Legend's inventory selling quickly. Even those I do not buy those widgets image , I do browse the listed inventory, and things looked like they were put on hold and sold at an unusually rapid clip.

    I also noticed the same with Doug Winter's inventory. He bought a larger, more diverse group of coins for inventory than I have ever seen, and the coins have been selling ridiculously quickly.

    There is no question in my mind that the end user demand for nice coins is as high as ever in the last few years.
  • bidaskbidask Posts: 13,834 ✭✭✭✭✭


    << <i>

    << <i>From what I see, there is tremendous collector demand. The market slowed for about 6 months, but its back. I've never seen Legend's newps sell as fast as they did - either there's pent up demand from collectors or Laura all of a sudden replaced her whammy eye.... image >>



    I am not sure about the "whammy eye" thingy, but I agree with your statement about Legend's inventory selling quickly. Even those I do not buy those widgets image , I do browse the listed inventory, and things looked like they were put on hold and sold at an unusually rapid clip.

    I also noticed the same with Doug Winter's inventory. He bought a larger, more diverse group of coins for inventory than I have ever seen, and the coins have been selling ridiculously quickly.

    There is no question in my mind that the end user demand for nice coins is as high as ever in the last few years. >>

    I would tend to agree with the operative word "nice coins".

    But are there that many nice coins around ( with commensurate demand) to account for the seemingly large practice of borrowing to buy those coins? You said it earlier about bifurcation....I hope dealers aren't borrowing for below average coins.
    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.




  • ElcontadorElcontador Posts: 7,412 ✭✭✭✭✭
    I believe that certain segments of the market have small pops and a few people with available funds can buy / bid them up amongst themselves, and then collude and put them on the market at the same time. Borrowing leverages this process and makes it easier to do.

    Look what happened awile back re AU Bust Dollars and Liberty Nickels in PC 6 holders.

    For the longest time, you just could not find these coins. All of the sudden, they came out of the woodwork, but at double the prior prices. I don't follow pops closely, but I think the pops of the type Liberty Nickels in PC 6 holders (9 or 10 of them) is around 300 to 400.

    I remember at a Superior auction I think it was 4 or 5 years ago, something like 25 or 30 Liberty Nickels in PC 6 holders were auctioned off, in addition to others of this grade in NGC holders. This was unheard of, as before, you wouldn't see anywhere near this amount being available all year.

    Predictably, people went ape****, and paid obscene prices for these coins. A beautifully toned type coin in a PC 6 holder brought $2,400 including the juice. I don't know what % of this activity was wholesale, versus retail.

    People who borrow bank on this kind of phenomenon to happen. If it doesn't, well, they can go BK and go to work for someone else until they want to try to try it again. Apparently this practice is widely accepted in this business.

    "Vou invadir o Nordeste,
    "Seu cabra da peste,
    "Sou Mangueira......."
  • bidaskbidask Posts: 13,834 ✭✭✭✭✭


    << <i>I believe that certain segments of the market have small pops and a few people with available funds can buy / bid them up amongst themselves, and then collude and put them on the market at the same time. Borrowing leverages this process and makes it easier to do.

    Look what happened awile back re AU Bust Dollars and Liberty Nickels in PC 6 holders.

    For the longest time, you just could not find these coins. All of the sudden, they came out of the woodwork, but at double the prior prices. I don't follow pops closely, but I think the pops of the type Liberty Nickels in PC 6 holders (9 or 10 of them) is around 300 to 400.

    I remember at a Superior auction I think it was 4 or 5 years ago, something like 25 or 30 Liberty Nickels in PC 6 holders were auctioned off, in addition to others of this grade in NGC holders. This was unheard of, as before, you wouldn't see anywhere near this amount being available all year.

    Predictably, people went ape****, and paid obscene prices for these coins. A beautifully toned type coin in a PC 6 holder brought $2,400 including the juice. I don't know what % of this activity was wholesale, versus retail.

    People who borrow bank on this kind of phenomenon to happen. If it doesn't, well, they can go BK and go to work for someone else until they want to try to try it again. Apparently this practice is widely accepted in this business. >>

    I got alot to learn on how all this borrowing impacts prices and it makes me wonder what the real values are.
    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.




  • tradedollarnuttradedollarnut Posts: 20,145 ✭✭✭✭✭
    As I walked around the bourse at FUN, it struck me how really common most coins are. There was little on the floor that stood out from the rest ... only a few dealers had anything other than the regular fare of white unc Morgans and commems.

    This common stuff sits in cases and takes up space. The unusual sells as fast as it comes to the market.
  • I do not borrow at all for coins. Cash is king.
  • ColonialCoinUnionColonialCoinUnion Posts: 10,087 ✭✭✭


    << <i>The unusual sells as fast as it comes to the market. >>



    Yep.
  • bidaskbidask Posts: 13,834 ✭✭✭✭✭


    << <i>I forget - is there a number greater than 100%? image

    For dealers above a certain level, I'd say it's the vast majority that borrow in one form or another. >>

    I wonder if this is getting tougher for those who borrow in this environment.

    If so, 'wholesaling' will take on a whole new meaning.
    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.




  • BearBear Posts: 18,954 ✭✭
    This is a very dangerous time to borrow.

    If it is not a straight cash and carry, then the

    dealer will probably be out of business within

    the next 18 months.

    There once was a place called
    Camelotimage
  • UtahCoinUtahCoin Posts: 5,345 ✭✭✭✭✭


    << <i>I can definitively say - with absolute certainty - that it is not ALL dealers. >>



    Not me, nor anyone I know. It seems to be it's a fancy pawn shop.....
    I used to be somebody, now I'm just a coin collector.
    Recipient of the coveted "You Suck" award, April 2009 for cherrypicking a 1833 CBHD LM-5, and April 2022 for a 1835 LM-12, and again in Aug 2012 for picking off a 1952 FS-902.
  • WTCGWTCG Posts: 8,940 ✭✭✭
    The amount of mortgaging of inventory depends on the individual dealers. Most dealers including myself have never borrowed any money against anything in my inventory while some dealers have almost their entire inventories leveraged for cash.
    Follow me on Twitter @wtcgroup
    Authorized dealer for PCGS, PCGS Currency, NGC, NCS, PMG, CAC. Member of the PNG, ANA. Member dealer of CoinPlex and CCE/FACTS as "CH5"

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