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If a major TPG folded, would the coin market suffer a crisis of confidence?

MrEurekaMrEureka Posts: 23,891 ✭✭✭✭✭
If a major TPG folded, would the coin market suffer a crisis of confidence? If so, what could/should be done to return order to the market?
Andy Lustig

Doggedly collecting coins of the Central American Republic.

Visit the Society of US Pattern Collectors at USPatterns.com.

Comments

  • fcloudfcloud Posts: 12,133 ✭✭✭✭
    No.

    President, Racine Numismatic Society 2013-2014; Variety Resource Dimes; See 6/8/12 CDN for my article on Winged Liberty Dimes; Ebay

  • EdscoinEdscoin Posts: 2,028 ✭✭✭
    Don't worry, The Government would just bail them out and everything would be fine. image
    ED
    .....................................................
  • bidaskbidask Posts: 13,834 ✭✭✭✭✭
    TPG's are like banks...there are to many of them.

    There would not be a crisis of confidence.

    That already exists, which is why we got CAC.

    There should only be two.
    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.




  • MidLifeCrisisMidLifeCrisis Posts: 10,504 ✭✭✭✭✭
    No. But it would be interesting to see the results of all those crossover attempts.
  • STONESTONE Posts: 15,275
    If a major TPG folded, that would create a greater monopoly for the other 1 or 2 top TPG's left.
    I believe that this would hurt the coin market quite significantly, as collectors who once relied on that TPG over the others would then lose confidence in
    the hobby itself. I don't think this would happen, but if it did, then I would be most shocked.

    I would imagine that if a TPG were to go under, there would be a hobbyist or hobbyist's who would purchase the grading firm and re-hire the staff, or
    hire a new staff of graders.
  • QuarternutQuarternut Posts: 1,479 ✭✭✭
    Nope!

    The coin will always be what it is, regardless of the plastic that surrounds it...

    QN

    Go to Early United States Coins - to order the New "Early United States Half Dollar Vol. 1 / 1794-1807" book or the 1st new Bust Quarter book!

  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    Of course it would.

    But only if one of those firms was either PCGS or NGC. A loss of any other grading firm would have negligible effects on the market imo. As this economy tightens up, those lesser TPG's are being squeezed out just like they were in 1989-90. It will be no different this time.

    The loss of NGC would be significant but not critical imo. If PCGS folded that would be critical. We've just spend 22 years weaning people off raw grading and to trust in slabs. A large portion of the market cannot grade accurately. I think this would obviously lead to problems. It would not kill the market but it would be like losing one of the last 2 major US Banks....with only 1 remaining.

    roadrunner

    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • cladkingcladking Posts: 28,305 ✭✭✭✭✭
    I think these markets would abhor the vacuum and a new service would rise from the ashes.
    Tempus fugit.
  • HyperionHyperion Posts: 7,438 ✭✭✭
    depends on the reason for the fold. if there was proof, indictments of fraud and deceptive business practices by a major TPG...

    absolutely.
  • JRoccoJRocco Posts: 14,277 ✭✭✭✭✭


    << <i>Nope!

    The coin will always be what it is, regardless of the plastic that surrounds it...

    QN >>



    image

    Heck - You sound like a coin collector QN
    Some coins are just plain "Interesting"
  • I think that if PCGS or NGC folded, the graders would just set up a new company and keep on going - after all, the failure of the company wouldn't be any reflection on them.

    Check out the Southern Gold Society

  • IGWTIGWT Posts: 4,975
    Geez Louise. Just asking the question will send the market into a tail spin.
  • halfhunterhalfhunter Posts: 2,770 ✭✭✭
    The loss of NGC would be significant but not critical imo. If PCGS folded that would be critical.

    I believe that losing either of these major grading powerhouses would be a crucial loss to the hobby but not a death sentence. Any of the others - wouldn't matter too much. And this comes from one that's kinda agnostic toward the TPGs.

    Regards, John
    Need the following OBW rolls to complete my 46-64 Roosevelt roll set:
    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!
  • IGWTIGWT Posts: 4,975
    In fact, my coins have lost 40% of their value since you started this thread. image
  • roadrunnerroadrunner Posts: 28,303 ✭✭✭✭✭
    What would be the effects of drinking kool-aid for 20 years and then being subjected to cold turkey? That could be fatal!

    With $BILLIONs of dollars or more in coins claimed to be graded by either service, losing either of the 2 major services would leave a "mark." Tell me that the loss of the REG set program at PCGS would have little affect, regardless of who came in to pick up the pieces.

    roadrunner
    Barbarous Relic No More, LSCC -GoldSeek--shadow stats--SafeHaven--321gold
  • QuarternutQuarternut Posts: 1,479 ✭✭✭


    << <i>

    << <i>Nope!

    The coin will always be what it is, regardless of the plastic that surrounds it...

    QN >>



    image

    Heck - You sound like a coin collector QN >>



    I buy coins because I want the coins...not plastic that has someone else's opinion attached to it.

    More than likely that opinion is from someone with far less knowledge about the series I collect, IMHO.

    QN

    Go to Early United States Coins - to order the New "Early United States Half Dollar Vol. 1 / 1794-1807" book or the 1st new Bust Quarter book!

  • lcoopielcoopie Posts: 8,690 ✭✭✭✭✭
    simply, Yes
    LCoopie = Les
  • 291fifth291fifth Posts: 23,896 ✭✭✭✭✭
    I doubt if there would be much disturbance in the market. One of the secondary firms would quickly move to fill in the gap.
    All glory is fleeting.
  • At some point, one of the big 2 will probably go out of business.
    New companies will come along and be just as good, if not better. (No one thought Honda or Toyota would ever be a threat, but look what happened. )

    My understanding is most tpg grading is now regrades, crossovers, and modern, so for my area, I see zero impact or loss to the hobby.

    If the grading companies were ever cought in doing fraud, then , imo, that could paralize the hobby. image
  • It survived PCI, there were some nice coins in their plastic in many cases. It was close to being the oldest grading company.
    John
    Chance favors the prepared mind.
    imageimageimage
  • MacCrimmonMacCrimmon Posts: 7,051 ✭✭✭
    Maybe so, if Henry Paulson was stirring the soup.image
  • BearBear Posts: 18,954 ✭✭
    As long as PCGS and NGC are in business, the rest can fold.
    There once was a place called
    Camelotimage
  • NO
    "Everyday above ground is a good day"

  • GoldbullyGoldbully Posts: 16,823 ✭✭✭✭✭
    From CLCT's 2008 Q4 PR......


    Fourth Fiscal Quarter of 2008. For the fourth fiscal quarter of 2008, the Company reported net revenues of $10.3 million and a loss from continuing operations of $13.1 million, or $1.57 per diluted share. This compares to net revenues of $10.7 million and a loss from continuing operations of $0.9 million or $0.10 per diluted share, for the fourth fiscal quarter of 2007. Results for the fourth quarter of fiscal 2008 reflect a non-cash impairment of $11.2 million or $1.34 per diluted share related to the goodwill and other assets of the Company's jewelry businesses.

    Fiscal Year Ended June 30, 2008. For fiscal year 2008, the Company reported net revenues of $42.0 million and a loss from continuing operations of $15.6 million, or $1.85 per diluted share. This compares to net revenues of $40.5 million and a loss from continuing operations of $0.7 million, or $0.09 per diluted share, for fiscal 2007. Results for fiscal year 2008 reflect the non-cash impairment of $11.2 million recorded in the fourth quarter of fiscal 2008.

    The income tax expense of $348,000 in the fourth quarter and the benefit of $1.0 million for fiscal 2008 include the establishment of a non-cash valuation allowance of $4.5 million against deferred tax assets associated with the impairment and certain state tax credits, due to uncertainties as to the future realizability of these assets.

    Operational and Financial Highlights:

    -- Total revenues decreased 4% in the fourth quarter of 2008, despite a 14% decrease in coin grading revenues quarter-over-quarter, which was substantially offset by a 10% increase in our non-coin revenues. For fiscal 2008, total service revenues increased by 2% as compared to fiscal 2007.

    -- Jewelry grading revenues increased by 24% quarter-over-quarter and by 35% year-over-year, driven by unit volume increases.

    -- More focused Jewelry sales and marketing efforts resulted in a 28% quarter-over-quarter decrease in sales and marketing expenses incurred in the Company's jewelry businesses.

    -- During the fourth quarter ended June 30, 2008 the Company began implementing a cost reduction program aimed at reducing operating expenses by $4 million on an annualized basis.

    -- A decision was made to cease making new loans under our dealer financing programs and in August 2008 the Company sold loans of $3.3 million at a small premium.

    -- A $0.25 cash dividend per common share was paid for the quarter ended June 30, 2008, compared to $0.12 per common share for the same year ago quarter.

    -- Stock buybacks were $0.9 million in the quarter with $4.2 million remaining under the buyback program.

    Michael Haynes, Chief Executive Officer, stated, "Our coin division results were lower primarily as a result of the coin trade show business while the remainder of the coin and collectibles divisions showed flat to modest growth. Our jewelry division operating results improved as compared to the fourth quarter of the prior fiscal year ended June 30, 2007 and although the annual growth is slower than anticipated in part as a result of this macro-economic environment, we are seeing steady progress in this new market for the Company. The non-cash charge to earnings in the fourth quarter ended June 30, 2008 was the result of a fair value determination, under applicable accounting rules, with respect to the value of the Company's goodwill and certain assets of its jewelry businesses as of June 30, 2008. The Company's tangible net worth did not substantially change and its cash flows were unaffected by the recognition of this fair value analysis and related charge. The Company's future prospects are unaffected by this impairment charge and the Company's financial condition continues to be strong with significant cash balances of more than $20 million and no debt."

    Fourth Fiscal Quarter Operating Results

    Net revenues decreased by 4% to $10.3 million for the fourth quarter ended June 30, 2008, compared to the same period of the prior fiscal year, due to the 14% decrease in coin revenues, partially offset by the 10% increase in the non-coin revenues discussed above.

    The gross profit margin was 44% in the fourth fiscal quarter of 2008 compared to 49% in the same quarter of last year. The decrease was primarily attributable to a lower gross margin earned on coin grading services due primarily to the reduction in coin trade show grading revenues (on which we earn a higher average service fees and therefore a higher gross profit margin, because show customers request faster turnaround times), and the effect of our relatively fixed coin grading costs on the lower revenues.

    Operating expenses before the impairment were $6.2 million for the fourth quarter of fiscal 2008 compared to $7.0 million for the fourth quarter of fiscal 2007. That decrease was primarily attributable to lower sales and marketing expenses of $0.4 million (due primarily to the lower sales and marketing costs incurred by the jewelry businesses) and lower general and administrative expenses of $0.4 million (due primarily to lower salaries and professional fees in the quarter).

    The resulting operating loss for the current fourth quarter, before giving effect to the $11.2 million impairment, was $1.7 million as compared to an operating loss of $1.8 million for the fourth quarter of fiscal 2007; while the operating losses, inclusive of the impairment, in the fourth quarter of 2008 totaled $12.9 million.

    Interest income declined to $0.1 million in the fourth quarter of fiscal 2008, compared with $0.5 million for the fourth quarter of last year, as a result of lower available cash balances and lower interest rates in fiscal 2008.

    Fiscal Year 2008 Results

    For fiscal year 2008, the Company reported a 3.8% increase in net revenues to $42.0 million from $40.5 million in fiscal 2007. That increase was primarily due to revenue increases of $866,000, or 14%, generated by our other-related services, and $772,000 generated by sales of coins consisting primarily of coins that we repurchased under our coin grading warranty policy, partially offset by a $106,000, or 0.3%, decrease in grading and authentication service fees. Exclusive of those coin sales, which do not represent an integral part of our business, total service revenues increased by 1.9% in fiscal 2008, compared to fiscal 2007.

    Our gross profit margin declined from 52.3% in fiscal 2007 to 43.4% in fiscal 2008. That decrease was primarily due to a decrease in the number of coins graded in 2008 and a change in the mix of coin services rendered to a higher proportion of lower margin submissions and an $822,000 increase in warranty costs recognized in the second quarter of fiscal 2008 as a result of an increase in the dollar amount of warranty claims. In addition, the Company's early stage diamond and colored gemstone grading businesses incurred higher direct costs, as the Company built grading capacity in support of anticipated increased revenues in future periods.

    The resulting operating loss for fiscal 2008, before giving effect to the $11.2 million impairment, was $6.5 million, and after giving effect to the impairment was $17.8 million, as compared to an operating loss of $2.9 million in 2007 and such operating loss was primarily attributable to the initiative in the jewelry group.

    Interest income declined to $1.1 million in fiscal 2008, compared with $2.1 million in fiscal 2007, as a result of lower available cash balances and lower interest rates in fiscal 2008.

    Financial Condition

    At June 30, 2008, cash and cash equivalents totaled $23.3 million compared with $42.4 million at June 30, 2007. Net cash usage of $19.1 million for fiscal 2008, included the payment of cash dividends to stockholders of $8.5 million, payments for the repurchase and retirement of common stock of $2.2 million, expenditures for capital equipment and software of $3.4 million, net advances made to collectibles dealers by Collectors Finance Corp. of $3.1 million and cash used in operations of $2.3 million. At June 30, 2008, the Company had working capital of $26.0 million and no long-term debt. Since the end of fiscal 2008, the Company has ceased its dealer financing programs, sold the majority of the loan portfolio and expects to collect the remaining balances during fiscal 2009 and capital expenditures are expected to decline.

    Outlook

    Haynes continued, "Our core business in the Collectibles Group is fundamentally healthy with large market shares and positive cash flows and with the recently implemented operational improvements to lower costs and increase efficiencies, we expect to realize improvement of operating margins. Although the initiative into the jewelry markets has yielded slower growth than anticipated, we are encouraged with the direction and progress of our jewelry business which demonstrates our efforts to increase market penetration are bearing fruit. Our balance sheet provides more than $20 million in cash, we have no debt and we expect positive cash flow from consolidated operations for fiscal 2009. The Company is in a conservative posture to maintain a dominant position and market share in the Collectibles markets and to continue its growth in the Jewelry business."

    Declaration of 10% Stock Dividend; Suspension of Cash Dividends

    On September 26, 2008, the Board of Directors determined that, due to market and economic conditions, including the liquidity crisis in the United States, the prudent course of action would be to suspend the payment of cash dividends in order to preserve the Company's cash resources. At the same time, the Board of Directors approved a 10% stock dividend on the Company's outstanding shares, and it declared such 10% stock dividend will be distributed on November 3, 2008 to all stockholders of record on October 20, 2008.

    Chairman of the Board A. Clinton Allen stated, "The financial climate is very uncertain and Collectors Universe has an excellent balance sheet with more than $20 million in cash and no debt. The Board considers it prudent to maintain an extremely strong and conservative balance sheet given the current economic environment. Nevertheless, our board wanted to reward our shareholders in an alternative manner by approving a 10% stock dividend and declaring such stock dividend for distribution on November 3, 2008."

    Adoption of Majority Vote Requirement in Election of Directors

    In accordance with best governance practices, at its September 26, 2008 meeting the Board of Directors approved a Bylaw amendment which provides that, in uncontested director elections, director nominees (including incumbent directors standing for re-election) must receive a majority of the votes cast in the election of directors. If a nominee does not receive a majority vote, that nominee will be required to tender his or her resignation from the Board. In such an event, the Board of Directors will decide, within the succeeding 90 days, whether to accept or reject the resignation, based on such factors as it deems to be relevant. In the event the resignation is accepted, the Board may fill the resulting vacancy by appointing another director or reduce the size of the Board to the number of directors who received a majority vote. If, on the other hand, the Board decides to reject the resignation, then the director will be entitled to remain on the Board for the remainder of the director's one year term and, in that event, the Company will be required to promptly disclose publicly the reasons for its decision to reject the resignation. This bylaw amendment will be effective beginning at the December 2, 2008 Annual Stockholders Meeting.

    At a meeting held on September 26, 2008, the Compensation Committee of the Board of Directors approved an extension of the Company's employment contract with Michael Haynes, its CEO, to December 31, 2009. All of the other terms and provisions of that contract, including the terms of compensation, will remain unchanged.

    Conference Call and Webcast

    Collectors Universe will host a conference call to discuss results on Tuesday, September 30, 2008 at 5:00 p.m. Eastern/2:00 p.m. Pacific. Interested parties may participate in the conference call by dialing 800-240-2134 or 303-262-2130, five to ten minutes prior to the initiation of the call. A replay of the conference call will be available through October 14, 2008, by dialing 800-405-2236 or 303-590-3000 and entering access code 11120440#. A live webcast of the conference call will also be available on the Collectors Universe website, http://www.collectors.com, under Investor Relations: Earnings Conference Calls. The webcast will be archived for 12 months.

  • GoldbullyGoldbully Posts: 16,823 ✭✭✭✭✭


    << <i>At some point, one of the big 2 will probably go out of business.
    New companies will come along and be just as good, if not better. (No one thought Honda or Toyota would ever be a threat, but look what happened. )

    My understanding is most tpg grading is now regrades, crossovers, and modern, so for my area, I see zero impact or loss to the hobby.

    If the grading companies were ever cought in doing fraud, then , imo, that could paralize the hobby. image >>




    Coal, you've got to be kidding!!!

    Your numismatic foresight is underwhelming at best!!! image
  • No, if the reason for the TPG such as PCGS or NGC folding was due to financial mismanagement, invested too heavily in 05 Buffalo Nickels.

    However if a company such as PCGS folded due to a large scale grading scandal then there would be the strong possiblity of the coin market taking a signifiant hit.


  • << <i>

    << <i>At some point, one of the big 2 will probably go out of business.
    New companies will come along and be just as good, if not better. (No one thought Honda or Toyota would ever be a threat, but look what happened. )

    My understanding is most tpg grading is now regrades, crossovers, and modern, so for my area, I see zero impact or loss to the hobby.

    If the grading companies were ever cought in doing fraud, then , imo, that could paralize the hobby. image >>




    Coal, you've got to be kidding!!!

    Your numismatic foresight is underwhelming at best!!! image >>



    Look, BULL, what does this have to do with numismatics ?
    All companies have a predictable life cycle. Name 1 company that was the market leader 50 years ago that is still the market leader today. Companies come and go. Do you really think the "numismatic landscape" will be the same 50 years from now as it is today ?
    I could go on and on with companies that were market leaders that don't even exist today- 100% out of business.!
    I plan on being here 50 years from now and I bet you that PCGS and NGC will not be here. You're the one that must be kidding ! Try reading a few business books for a change. image
  • wybritwybrit Posts: 6,952 ✭✭✭
    It depends on the reason for the TPG folding.

    Financial problems due to cash flow mismanagement = no
    Corruption / criminal activity leading to the folding = maybe

    I'm more concerned about a bigger crisis of confidence in the coin market that will emanate from a very large, highly populated country roughly 12 time zones away from the US. There is a continuous process improvement going on there.
    Former owner, Cambridge Gate collection.
  • GoldbullyGoldbully Posts: 16,823 ✭✭✭✭✭


    << <i>

    << <i>

    << <i>At some point, one of the big 2 will probably go out of business.
    New companies will come along and be just as good, if not better. (No one thought Honda or Toyota would ever be a threat, but look what happened. )

    My understanding is most tpg grading is now regrades, crossovers, and modern, so for my area, I see zero impact or loss to the hobby.

    If the grading companies were ever cought in doing fraud, then , imo, that could paralize the hobby. image >>




    Coal, you've got to be kidding!!!

    Your numismatic foresight is underwhelming at best!!! image >>



    Look, BULL, what does this have to do with numismatics ?
    All companies have a predictable life cycle. Name 1 company that was the market leader 50 years ago that is still the market leader today. Companies come and go. Do you really think the "numismatic landscape" will be the same 50 years from now as it is today ?
    I could go on and on with companies that were market leaders that don't even exist today- 100% out of business.!
    I plan on being here 50 years from now and I bet you that PCGS and NGC will not be here. You're the one that must be kidding ! Try reading a few business books for a change. image >>



    Business books??? What are you preaching here???

    PCGS and NGC are the two top tier coin grading companies in the WORLD!!!!!

    See you in 50 years my friend......I'll be the one in the Wheel Chair!!!! image
  • 500Bay500Bay Posts: 1,106 ✭✭✭
    PCGS and NGC are the major players, as we all know.
    I think the greater danger for the crisis of confidence would be if one/both began to drastically lower standards and slab conterfeits. If the label changed, it would not be terrible, but if the slabs do not distinguish the new and older standards, that is the real danger for a crisis of confidence.

    Using PCI as an example - their old green labels still are generally respected. The gold labels are the ones few trust. If PCI had kept the old green label when it changed ownership and loosened standards, the green label PCI slabs would lose the respect that even now they still have.

    If PCGS/NGC went under today - their coins would still carry a premium. If the went the 'gold label' route with no difference in the slabs first, then the crisis of confidence would be severe.

    The loss of the guartentee would hurt the market - but the trust level is the real guarentee.
    Finem Respice
  • TwoSides2aCoinTwoSides2aCoin Posts: 43,793 ✭✭✭✭✭
    Henry Ford died and I see more car lots than I've ever seen. They don't say FORD. The problem is: I cannot pronounce the names of the guys who own the places that took over. But people have the utmost confidence in their cars.
    I think coins are a little different, but then every Minting company determines a lot more than the slabbing company which puts the coin in plastic.
    "A chain is as strong as it's weakest link".

    That's what I was taught.

    Was there
    ~life before plastic~ ?
    Is there life after death ?

    Anyone who knows coins knows the answer to the thread question. I could have just typed "NO", but I felt a need to express my view on the coin world from a layman's eyes.

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