When a flight to quality coins actually works against you
roadrunner
Posts: 28,303 ✭✭✭✭✭
In reviewing generic gold coin spreads this week compared to those on 1/8/09 some very interesting trends. While this is nothing new and I've seen this happen twice in the past during the gold bull, it's still rather startling when you see it (ie the 3rd time).
The huge gap between many NGC MS65 coins and their PCGS counterparts closed to within 1-3% this week. The best example was the MS65 $5 Lib which was buyable on 1/9/09 at $3350 PCGS or $2700 NGC. I wonder how many were willing to risk their money on a possibly less liquid or low end coin to "save" $650 or 20%. Today the spread is $50 and it matters not whether the coins are low end are just ok. They still sell. Similar gaps occured all the way through the gold denominations. If you bought the PCGS MS65 $5 Lib you made 4% since January....27% if you bought the NGC coin.
In the case of CAC MS65 $20 Libs (PCGS or NGC) you actually stayed even ($4200 today). The quality CAC coin is certainly now the best value by far but it wasn't last month. For those holding quality pieces normally in feverish demand such as $3 gold pieces, those in grades of MS65 actually lost 10% in this period. While not surprising due to the higher cost of such a coin, one would still think it should at least hold value with gold going nuts. These have been 50% higher when gold assaulted $700 and then $1000 for the first time.
The generic gold coin market is not unlike the Comex or futures market. There is significant leverage at play in some circumstances. And it works in both directions. Dislocations occur often enough.
roadrunner
The huge gap between many NGC MS65 coins and their PCGS counterparts closed to within 1-3% this week. The best example was the MS65 $5 Lib which was buyable on 1/9/09 at $3350 PCGS or $2700 NGC. I wonder how many were willing to risk their money on a possibly less liquid or low end coin to "save" $650 or 20%. Today the spread is $50 and it matters not whether the coins are low end are just ok. They still sell. Similar gaps occured all the way through the gold denominations. If you bought the PCGS MS65 $5 Lib you made 4% since January....27% if you bought the NGC coin.
In the case of CAC MS65 $20 Libs (PCGS or NGC) you actually stayed even ($4200 today). The quality CAC coin is certainly now the best value by far but it wasn't last month. For those holding quality pieces normally in feverish demand such as $3 gold pieces, those in grades of MS65 actually lost 10% in this period. While not surprising due to the higher cost of such a coin, one would still think it should at least hold value with gold going nuts. These have been 50% higher when gold assaulted $700 and then $1000 for the first time.
The generic gold coin market is not unlike the Comex or futures market. There is significant leverage at play in some circumstances. And it works in both directions. Dislocations occur often enough.
roadrunner
0
Comments
Knowledge is the enemy of fear
In the case of those NGC coins falling. It wasn't just because of a quality concern. Things get out of whack for many reasons, many of them totally false.
roadrunner
Similar things happen with the scarcer AGEs, APEs, and ASEs - the premiums come down when the price of bullion goes up, except that the premiums usually aren't as high as what you are showing for those MS-65 classic golds.
This looks to me like the numismatic premiums are vulnerable across the board, except maybe for the very top end of the market.
If you're into numismatics, now might be a good time to do the trade that what's-his-name, Richard Nachbar has been touting - trading your bullion in for some numismatic material. That's not what I would do, but I've been wrong before.
I knew it would happen.
roadrunner
<< <i>The MS65 gold coin vs. an AU circ is not unlike someone prefering to buy a $350K home vs. a $100K home. The $100K home still has all the function and basic amenities that a $300K home does (water, electricity, shelter, etc). But that $100K home typically lacks somewhat in quality, workmanship, maintenance, location, etc. to the much higher priced home. The same argument can be made for the $350K home vs the $650K home, etc., etc. There are people for homes at all those levels, no different for coins or any other collectible. Someone collecting a gold type set in MS64 or MS65 might not be happy with an AU coin in the set. Do you want a Mantle rookie card that's creased for a fraction of the mint card or one that's mint? There are different choices for everyone and many different paths to take.
roadrunner >>
While your assesment is correct I'm not sure that now is the time to be "investing" in MS-65-66 gold coins.
In the unlikely event that things really do break down I would rather own several nice AU-58 $20 Gold pieces than one nice MS-66.
This applies even more with silver coins, who in their right mind would want an AU 1893-S morgan dollar instead of 2 $1,000 face bags of Mercury dimes/Walkers?
Or let's take this a step further, how about an MS-66 1932-D quarter instead of 7 or 8 bags of Mercury dimes/Walkers.
Then we could go back to the 1893-S Morgan dollar in MS-66 you could have 20-30 bags of Mercury dimes/Walkers, in the current economic environment any logical person would choose the "Junk Silver" or "Junk gold coins" as the number of buyers available for the high grade coins are few and far between but the other coins could be sold off or used for bartering purposes.
The generic coins to be in are mostly 63 and 65. They have the most recognition by the informed and the uninformed. If there is going to be a surge in price/demand in generics then you want to be positioned to sell to those that provide liquidity to you....either private investors or the MARKETEERS.
58's are a lot of bang for the buck but may not be the easiest to sell when the herd needs to buy. Seems like the 62/63/64/65 Saints are climbing twice a week. They seem to me to be overpriced but I am not the pricing guru. I like the 2 1/2 and the 10's and Nice NGC seems like a better value and a lot more attainable.
Some guy just plunked down $1MILL+ to own the best MS67 1893-s so obviously his goals and yours diverge. The guy must not be logical. Such would also be the case for those buying all the coins at the major auctions.....all are therefore illogical. When silver was dirt cheap in Nov. 2002 ($4-6/oz) that same MS67 1893-s fetched $414,000 at auction. Was that purchase illogical then with silver being so cheap and just starting a bull move? To most of us those types of purchases may always seem illogical, as do the purchases of Rembrandts, Van Goghs, etc. Of course over the past 30-50 years what has performed better, silver bullion or collectible masterpieces?
Apparently the MS saints are under promotion now and doing quite well. I had heard that a major US coin firm is buying 65 saints at these high levels and marking them up 20% to the next destination. AU-62 $20's were great buys when the premiums were only 5-10% to melt. Now that they are bringing 25%-65% premiums (AU to 62), they are not the great deal they once were.
roadrunner
There is a reason Gold breaks thru $1,002 and keeps going and having a lot of *rare* gold coins begins to lose appeal to the guy on the other end of the trade.
Its like, "So what, you want the Toliet Paper or not, pal?" "It will cost you that Eagle"
to be cautious in what you pay if not considering
lightning up. When the bubble bursts is goes very fast.
Camelot
Positive BST Transactions (buyers and sellers): wondercoin, blu62vette, BAJJERFAN, privatecoin, blu62vette, AlanLastufka, privatecoin
#1 1951 Bowman Los Angeles Rams Team Set
#2 1980 Topps Los Angeles Rams Team Set
#8 (and climbing) 1972 Topps Los Angeles Rams Team Set
What a way to complete a collection of Eagles!
I knew it would happen.
<< <i>Then we could go back to the 1893-S Morgan dollar in MS-66 you could have 20-30 bags of Mercury dimes/Walkers, in the current economic environment any logical person would choose the "Junk Silver" or "Junk gold coins" as the number of buyers available for the high grade coins are few and far between but the other coins could be sold off or used for bartering purposes.
Some guy just plunked down $1MILL+ to own the best MS67 1893-s so obviously his goals and yours diverge. The guy must not be logical. Such would also be the case for those buying all the coins at the major auctions.....all are therefore illogical. When silver was dirt cheap in Nov. 2002 ($4-6/oz) that same MS67 1893-s fetched $414,000 at auction. Was that purchase illogical then with silver being so cheap and just starting a bull move? To most of us those types of purchases may always seem illogical, as do the purchases of Rembrandts, Van Goghs, etc. Of course over the past 30-50 years what has performed better, silver bullion or collectible masterpieces?
Apparently the MS saints are under promotion now and doing quite well. I had heard that a major US coin firm is buying 65 saints at these high levels and marking them up 20% to the next destination. AU-62 $20's were great buys when the premiums were only 5-10% to melt. Now that they are bringing 25%-65% premiums (AU to 62), they are not the great deal they once were.
roadrunner >>
I understand the deisire for some people to own pop top coins or 65-67 coins, hey if they have the money and want to spend it on this type of material then more power to them. I've owned some pop top coins too and it's kind a neat to have the finest known of a particular date.
I was trying to relate the current economic environment and the potential long term ramifications for the so called "common man" of which I consider myself one. As a middle class person in this environment I would want tangible assets easily divisible into amounts condusive for smaller transactions, if I still had my Ch. AU 1861-0 double eagle or AU 1870-CC eagle it would be hard to go out and buy gas or bread with it or maybe even find a trustworthy dealer to sell them to if I needed to raise cash in a hurry.
I still like to buy numismatic items but now I usually focus on something like an S mint seated quarter from the 1860's in original G-VF or a CC half eagle from the 1870's in F-XF as long as it's original. I also like matte Proof Lincoln's and have several of them but I'm not gonna have a huge chunk of my money tied up into 5 or 6 figure coins.
I think you could kiss nearly all the premiums for modern TPG gold good bye when/if gold gets to say a $2000 level. It would take a special coin to bring anything more than say 1-3% premium at those lofty levels.
roadrunner
if you have numismatic gold, you want to sell it to a numismatist, and not to a bullion dealer. a bullion dealer will pay bullion prices.
a rising tide lifts all boats... so the numismatic differences among gold can indeed disappear when the bullion price rises... and when the bullioin price falls, the numismatic price is left and can be a significant difference
www.AlanBestBuys.com
www.VegasBestBuys.com
Well, as time passes, what does anyone think about that prediction? Is it possible? I think that if current financial trends continue.........I can't even predict a bottom to the DOW. Sainty and I had a running gag about the S & P hitting 600 and I was confident that we will be there soon.....possibly mid April unless some good news appears. The dog and pony show in DC shows no signs of letting up.
Will gold and the DJ cross at 3000?
More true for the larger coins than for the smaller ones. When platinum passed $2000 last year, much of the premium disappeared for the scarce one-ounce coins, but premiums for the scarce smaller fractionals, especially the 1/10 ouncers, held up much better.
My Adolph A. Weinman signature
<< <i>Several years ago when an informed gold guy....I didn't pay much attention to whom but I think it was Rodgers---predicted that the DOW and Gold will cross at 3000. I thought at the time that he was trying to sell newsletter subscriptions.
Well, as time passes, what does anyone think about that prediction? Is it possible? I think that if current financial trends continue.........I can't even predict a bottom to the DOW. Sainty and I had a running gag about the S & P hitting 600 and I was confident that we will be there soon.....possibly mid April unless some good news appears. The dog and pony show in DC shows no signs of letting up.
Will gold and the DJ cross at 3000? >>
Will all the money sitting in low yielding money market accounts, treasuries and cd's along with the Fed running the printing presses overtime I would say it's entirely possible that the Dow and Gold attain a 1:1 ratio again however I wouldn't bet on 2,000-3,000 being the magic number more like 5,000 maybe even as high as 6,000.
I know many here will laugh about this number but looking at the liquidity being pumped into the system along with all the money sitting on the sidelines I don't see where stocks plunge below 3,000. At some point this money has to find a place with better potential return than 1-3% long term and I truly believe that precious metals and the stock market will provide that until they hit a point where a bubble develops.
I guess with my twenty-twenty hindsight I should have bought a lot more gold when I got my 1924 Saint.
I could at least brag about my return on a percentage basis....
Stocks will end up a lot lower than most people think. Gold will end up a lot higher than most people think. Dow/gold ratio is now in the 7's. We started having this discussion a few years back at 20 to 1. Digit by digit it's inching its way down.
roadrunner
roadrunner
Even my Swiss Francs have fallen.
Some of these advisors make no sense. I like the one I read on Kitco today. (wiegand) The swiss franc will fall, all of euroland will breakup as the Euro goes to zero and the dollar will fall from 87 to 40.
The dollar will go to 40 against what??? the real and the peso??. If they all fall then the dollar will stay the same or rise.
<< <i>Ive been keeping my generics. Krugs etc and selling silver eagles (at 19.50) and other stuff with big premiums. Im still too overweight on PMs and I want to take a little off the table but I see no alternative but cash and I dont like that either.
Even my Swiss Francs have fallen.
Some of these advisors make no sense. I like the one I read on Kitco today. (wiegand) The swiss franc will fall, all of euroland will breakup as the Euro goes to zero and the dollar will fall from 87 to 40.
The dollar will go to 40 against what??? the real and the peso??. If they all fall then the dollar will stay the same or rise. >>
The only way that happens is if there is a currency default/devaluation worldwide.
I find the whole currency ratio sort of archaic as all currencies tend to zero in the long run. What's 0 divided by 0? If the Euro and every other major currency is taking a hit, then by a "magic USD index" forumula the US Dollar maintains "incredible" strength while we print up tens of trillions of dollars? I just don't buy it. At some point the formula breaks down. More than likely, the currencies all get face-lifts and morph into something else. It's similar to comparing the "strength" of JPM/GS to Citicorp, BoA, AIG. All of them are insolvent, and more than likely JPM is more insolvent than all of them if all records were bared to auditors. So which one is less insolvent? And does it matter?
The 0.40 ratio on Euro strength made sense before the banks around the world when "plop." It's probably time to revise that 0.4 estimate into something else.
roadrunner