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I got a little emotional when Doug Winter's sound analysis of placeholder coins was tainted with men
Longacre
Posts: 16,717 ✭✭✭
I pasted below the latest Doug Winter blog. Typically, these blogs are very well reasoned, and this blog is no exception. However, I did start to weep slightly when a dealer of Winter's calibre starts to discuss strategies for hopscotching another collector in a Set Registry competition. Some members of the collecting and dealing community should be above the artifically-created competitive fray known as the Set Registry, and I am surprised that Winter would even give it mention.
Other than that, I think the analysis below is sound. There are certain pitfalls to buying a placeholder coin, and typically it is best to find the right coin the first time, rather than simply filling a hole with a marginal coin. This blog raises certain questions in my mind:
(1) Is one series more susceptible to generating a need to settle for a placeholder coin?
(2) What thought process do you go through when deciding to buy a placeholder coin?
(3) Do you get a written committment up front from your dealer, as indicated below, that he will give you a 100% buyback when you decide to upgrade the placeholder?
(4) If so, what are the typical terms of that agreement, such as time frame to upgrade?
****************************
April 28, 2008
If you collect a set (or sets) and are competing in the Set Registry, the chances are good that you’ve struggled with the Dilemma of the Placeholder. Let’s examine the Pros and Cons of buying a placeholder coin and try to decide whether this is a smart collecting strategy or not.
First off, let’s define what a “placeholder coin” is. I view a placeholder coin as one that you buy as a stop gap. As an example, say that you are assembling a set of Indian Head eagles. One of the few dates that you are missing is a 1911-D. One comes up for sale at auction in a grade lower than what you really want. You decide to buy it anyway because of the fact that it a) fills a gaping hole in your set and b) gives you a sufficient number of Registry Set points that you move up a notch and pass Collector X. Was this is a smart purchase or not?
Let’s look at the pros of buying a placeholder coin. The first is the measure of satisfaction that filling a really nagging hole can give. There is nothing more frustrating for our hypothetical collector than seeing a big ol’ ugly blank every time he looks at his set inventory - especially if he has a nice date run before and after the missing coin. Coin collecting is a very emotional hobby and the Karmic Value of filling a hole is hard to put a value on.
Another pro is the fact that a Placeholder coin might grow in appeal on the owner. I’m going to assume that as a collector you are smart enough to not buy something truly hideous and to at least hold out for a moderately attractive placeholder. You might learn that your placeholder is actually so rare that it represents the only coin that you are likely to have a shot to buy.
For some collectors a placeholder coin represents a practical decision. Let’s say for example that you are assembling a gold type set from the 19th and 20th centuries and that you don’t have the ability to spend $100,000+ on a nice 1808 quarter eagle. In this case, a decent looking coin in, say, an NCS holder with EF sharpness but with signs of an old cleaning at $40,000-50,000 might be a savvy purchase; especially given the fact that an uncleaned 1808 quarter eagle in this price range might take years and years to locate.
For every pro there is a con, so now let’s look at the cons of buying placeholder coins. To my way of thinking, the biggest con about a placeholder coin is the fact that you know you are going to have to replace it. Unless the market goes up in your series, you are probably going to lose money on it when you sell it. Let’s say, for example, that Collector Z buys the mythical 1911-D eagle we discussed above. He purchases one for $10,500 that’s decent but not really a great looking coin due to the presence of some marks on the obverse. A year later he finds the right coin and it’s going to cost him $27,500. Unless Collector Z has a buyback or “trade up” agreement with the dealer he bought it from he’s probably going to take a 10-15% hit on the coin. Let’s say he’s sells it at auction and nets $9,250; a loss of $1,250. This brings the actual cost of his new coin to $28,750.
Another con about collectors buying placeholder coins is that it teaches them bad collecting habits. I’m a big believer in buying the right coin the first time. I’ve seen some collectors “self-churn” themselves as they buy a 1911-D eagle first in MS61, then upgrade to an MS62 then upgrade to an MS63 and so on. As I just mentioned above, there are transaction costs that will hit you in the wallet every time you upgrade. It also flies in the face of something that I try to teach new collectors: be patient and wait for the right coin. The Coin Gods like to play games with impatient collectors and I can’t tell you the number of times I’ve seen a collector settle on an inferior coin only to have the absolutely perfect coin come along a week, a month or a year later.
So, the bottom line: placeholder coins, yes or no? I’d say in the majority of cases “no”. The exception would be if you are buying something that is so readily liquid and has a tight enough buy/sell spread (a coin like a $50 Pan-Pac Round) that even a short-term hold isn’t likely to have negative impact on its value.
Doug Winter
4/28/08
www.raregoldcoins.com
For more information on U.S. gold coins please contact me via email at dwn@ont.com
Other than that, I think the analysis below is sound. There are certain pitfalls to buying a placeholder coin, and typically it is best to find the right coin the first time, rather than simply filling a hole with a marginal coin. This blog raises certain questions in my mind:
(1) Is one series more susceptible to generating a need to settle for a placeholder coin?
(2) What thought process do you go through when deciding to buy a placeholder coin?
(3) Do you get a written committment up front from your dealer, as indicated below, that he will give you a 100% buyback when you decide to upgrade the placeholder?
(4) If so, what are the typical terms of that agreement, such as time frame to upgrade?
****************************
April 28, 2008
If you collect a set (or sets) and are competing in the Set Registry, the chances are good that you’ve struggled with the Dilemma of the Placeholder. Let’s examine the Pros and Cons of buying a placeholder coin and try to decide whether this is a smart collecting strategy or not.
First off, let’s define what a “placeholder coin” is. I view a placeholder coin as one that you buy as a stop gap. As an example, say that you are assembling a set of Indian Head eagles. One of the few dates that you are missing is a 1911-D. One comes up for sale at auction in a grade lower than what you really want. You decide to buy it anyway because of the fact that it a) fills a gaping hole in your set and b) gives you a sufficient number of Registry Set points that you move up a notch and pass Collector X. Was this is a smart purchase or not?
Let’s look at the pros of buying a placeholder coin. The first is the measure of satisfaction that filling a really nagging hole can give. There is nothing more frustrating for our hypothetical collector than seeing a big ol’ ugly blank every time he looks at his set inventory - especially if he has a nice date run before and after the missing coin. Coin collecting is a very emotional hobby and the Karmic Value of filling a hole is hard to put a value on.
Another pro is the fact that a Placeholder coin might grow in appeal on the owner. I’m going to assume that as a collector you are smart enough to not buy something truly hideous and to at least hold out for a moderately attractive placeholder. You might learn that your placeholder is actually so rare that it represents the only coin that you are likely to have a shot to buy.
For some collectors a placeholder coin represents a practical decision. Let’s say for example that you are assembling a gold type set from the 19th and 20th centuries and that you don’t have the ability to spend $100,000+ on a nice 1808 quarter eagle. In this case, a decent looking coin in, say, an NCS holder with EF sharpness but with signs of an old cleaning at $40,000-50,000 might be a savvy purchase; especially given the fact that an uncleaned 1808 quarter eagle in this price range might take years and years to locate.
For every pro there is a con, so now let’s look at the cons of buying placeholder coins. To my way of thinking, the biggest con about a placeholder coin is the fact that you know you are going to have to replace it. Unless the market goes up in your series, you are probably going to lose money on it when you sell it. Let’s say, for example, that Collector Z buys the mythical 1911-D eagle we discussed above. He purchases one for $10,500 that’s decent but not really a great looking coin due to the presence of some marks on the obverse. A year later he finds the right coin and it’s going to cost him $27,500. Unless Collector Z has a buyback or “trade up” agreement with the dealer he bought it from he’s probably going to take a 10-15% hit on the coin. Let’s say he’s sells it at auction and nets $9,250; a loss of $1,250. This brings the actual cost of his new coin to $28,750.
Another con about collectors buying placeholder coins is that it teaches them bad collecting habits. I’m a big believer in buying the right coin the first time. I’ve seen some collectors “self-churn” themselves as they buy a 1911-D eagle first in MS61, then upgrade to an MS62 then upgrade to an MS63 and so on. As I just mentioned above, there are transaction costs that will hit you in the wallet every time you upgrade. It also flies in the face of something that I try to teach new collectors: be patient and wait for the right coin. The Coin Gods like to play games with impatient collectors and I can’t tell you the number of times I’ve seen a collector settle on an inferior coin only to have the absolutely perfect coin come along a week, a month or a year later.
So, the bottom line: placeholder coins, yes or no? I’d say in the majority of cases “no”. The exception would be if you are buying something that is so readily liquid and has a tight enough buy/sell spread (a coin like a $50 Pan-Pac Round) that even a short-term hold isn’t likely to have negative impact on its value.
Doug Winter
4/28/08
www.raregoldcoins.com
For more information on U.S. gold coins please contact me via email at dwn@ont.com
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)
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)
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Comments
Nice double entendre!
I’m a big believer in buying the right coin the first time.
Me, too.
I would also add:
"If you never find the right coin, it was not meant to be."
Nice double entendre!
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>The only time I'll buy a "placeholder" is if I think there's a significant possibility that I'll never get a chance to buy a better coin. >>
In that case, it really isn't a placeholder then, is it? I mean, of course you would not buy a 1928 Saint in MS-64 for your gem+ Saint set because you know there will be ample opportunity to find a nicer coin.
<< <i>
<< <i>The only time I'll buy a "placeholder" is if I think there's a significant possibility that I'll never get a chance to buy a better coin. >>
In that case, it really isn't a placeholder then, is it? I mean, of course you would not buy a 1928 Saint in MS-64 for your gem+ Saint set because you know there will be ample opportunity to find a nicer coin. >>
Agreed. MrEureka has not 'placeheld', he has 'settled'.
Of course certain series require the nearly unobtainable coin; in Winter's example the 1808 QE. For these sets, the collector needs to manage expectations and decide how they want to assemble their collection. Personally, I prefer to avoid problem coins but that is just my opinion and is limited by my ability to spot problem coins (see the "X marks the spot" thread).
<< <i>
<< <i>
<< <i>The only time I'll buy a "placeholder" is if I think there's a significant possibility that I'll never get a chance to buy a better coin. >>
In that case, it really isn't a placeholder then, is it? I mean, of course you would not buy a 1928 Saint in MS-64 for your gem+ Saint set because you know there will be ample opportunity to find a nicer coin. >>
Agreed. MrEureka has not 'placeheld', he has 'settled'. >>
Is it okay to "settle"?
And it is also likely that you will profit on the sale of the first one.
Maybe not a placeholder, as the first coin is rare in its own right.
There are so many pluses about this series.
I don't view it as "settling". I view it as insurance.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
sense. ok class, 1st grade is now in session. today's lesson is how
to collect 101 and what i think is best for you.
<< <i>MrEureka has not 'placeheld', he has 'settled'.
I don't view it as "settling". I view it as insurance. >>
Oi Vay! First placeholder coins, then settling coins, now insurance coins...what next?
If I were to hit the Mega tomorrow nite, my entire collecting direction would take a dramatic turn!
Regards,
John
1947-P & D; 1948-D; 1949-P & S; 1950-D & S; and 1952-S.
Any help locating any of these OBW rolls would be gratefully appreciated!
Having limited resources helps to define a purpose that brings coherence to a collection.
<< <i>I'm usually happy with the best that I can do so long as it's really the best that I can do.
If I were to hit the Mega tomorrow nite, my entire collecting direction would take a dramatic turn!
Regards,
John >>
Actually, I doubt my collecting would change a whole lot, but I certainly would change my hours at work. In fact, that would be the first thing that I did.
1. Fills the hole
2. keeps the wife from spending the money
3. Duplicates, nothing wrong there. When the time comes i would like the family to keep my set of Liberty proof V-nickels and 1 set of MPL's. They can sell the rest for all i care. Life Ins., rent property and 401 should hold them nice but in case......
4. If and when a nice coin comes along i can usually trade one of the placeholders if need be. Lost money once doing this. But if more than a year has passed i generally make out good. If the series should become hot hopefully the placeholder will gain at about the same rate as the higher graded coin so instead of shelling out 1500 i have a placeholder at 800 and 7 cash out of pocket. ( might only have 550 in placeholder coin.
5. hell i just like to BUY COINS!!!! Ask my wife. I got her believing i had a terrible childhood, no toys, etc. So i am making up for it now.
NGC registry V-Nickel proof #6!!!!
working on proof shield nickels # 8 with a bullet!!!!
RIP "BEAR"