Is the unwillingness of some dealers to lower prices actually hurting those whose prices reflect the

Longacre

We all joke around that the numismatic industry is immune from the effects of the greater economy, and the market knows no top. However, in reality, prices for coins are coming down, which must be to the dismay of those dealers who do not want to acknowledge the presence of a numismatic recession.

In the context of the overall coin market, is the unwillingness of some dealers to lower prices actually hurting those whose prices reflect the true market? Let me try to explain.

I consider the coin market to be a very “closed” system, meaning that there are relatively few dealers on the physical bourse and the virtual bourse (electronic systems) among which dealer-to-dealer transactions can take place. If a certain percentage of dealers do not acknowledge a softening of prices, the system seems to break down because some dealers want to transact at pre-recession prices, while the ultimate retail market is not accepting such high valuations. This causes less dealer-to-dealer transactions to take place, and a discrepancy between the pricing levels that take place in the wholesale market, and the pricing that appears in the retail market.

In other words, what should be lower wholesale prices, and, consequently, lower retail prices, now results in a conflict of low and high wholesale pricing, and inconsistent low and high retail pricing.

How much damage are these non-believing dealers causing to our markets overall?

Mowgli

<< <i>How much damage are these non-believing dealers causing to our markets overall? >>



Probably the same amount as collectors who refuse to sell their coins at lower prices. Dealers in heavily traded coins cannot keep their prices higher than others and survive. Dealers in rare/hard to find coins might be able to keep their prices high.

Type collectors expect prices to go down (I'm generalizing) because there are lots of choices out there. They do not have to buy from a dealer who has high prices. A set/series collector does the same unless the coins he needs are hard to find either by rarity or scarcity.

Bottom line IMO is that dealers who don't lower prices will simply get less business unless they have what no one else can provide.

291fifth

When the payment on their Bentley comes due and they don't have enough cash, the prices will come down.

Frankcoins

<< <i>

How much damage are these non-believing dealers causing to our markets overall? >>



Less damage than the stock traders who tell their brokers to sell at any price because everyone else is telling their
brokers to sell at any price.

Bcsican

I dont think it will cause any damage, but the bottom line will have to do with actual sales. If dealers do not adjust to move inventory they will see far fewer sales. One of the hardest things I have seen dealers do accepting the fact they need to take a loss sometimes to survive. Just because "X" amount of dollars spent dosen`t mean it is still worth "X' amount of dollars in this economy.

Much to often inventory is held on past any logical point of profit to be made...many times needing to accept a loss and move on...a few dollars less and often "many dollars less" time to put inventory that moves.

There still are to many old time thoughts thinking I paid "X" it has to be worth more than I paid...unfortunatly that is not always the case...

ColonialCoinUnion

I need a drink.

adamlaneus

I have a different opinion. The market is made by items that sell. If your items do not sell, then effectively, those items are not directly part of the market.

In real-estate, consider the situation where you have a bunch of condos. They are all the 'same unit' essentially. When one person sells their condo at a price, it tends to create a 'comparable' that is easily compared with every other condo that might be sold. So, if someone sells low, it is likely that the next one will sell low too, as the item being sold is essentially the same. And it is likely that when an item sells low, that the higher priced items will be that less likely to sell. I see coins in a similar light. Similar coins are easily comparable. Heck, even dissimilar coins are somewhat comparable.

Folks who refrain from reducing their price, and thus are not selling their item are actually propping up the market indirectly. Their item is not available at the lower price (yet), so the number of items available at that lower price is smaller than it could be. But could change quickly with a repricing.

A dealer tends to set their price at a level which gives them enough profit to live on. That is a combination of sales volume and profit on a transaction. Move one, affect the other.

So, please post a picture of the overpriced coin you are waiting for a price reduction on.

mirabela

There's a missing bit of information here -- that is, are those with 'high' prices still able to sell? If they are, then the "real market" is there too. The market is imperfectly efficient, and it is these inefficiencies and inconsistencies that enable most of us to do what we do.

These are interesting times -- both at the retail and the wholesale levels, I believe you are right about these 'high' and 'low' spreads, and they make for wonderful arbitrage opportunities for a person paying attention. I know of a certain item right now that sells in commodity quantities week after week on Teletrade, for instance, for three times what the same thing sells for with Heritage.

RYK

<< <i>I need a drink. >>


It's too early, but I share your sentiment.

I think Longy is making this more complex than it need be.

1. If prices are too high, coins will not be sold.

2. At that point, seller has choice of lowering price or not selling coin.

3. If dealer has stale inventory of material that is priced too high, he ties up capital and makes no money.

Frankcoins

Too many people here trying to equate the coin market with the financial markets. Completely different animal.

TwoSides2aCoin

Here is how I see it from a layman's position, Mr L.

A lot of the dealers I've met are plain ol' , simple minded collectors who've amassed a huge collection over their lifetime. I've talked to tons (that's by weight, not volume). Most have completely and utterly ignored collecting by now. Everything is for sale. These men know what they have in a coin, are trained by the greysheet, and belong to a tough "inner circle" of friends who will not break. This hobby is a give and take business , if you will.
The coins they have look just as good in their inventory , owned for years, as it does in our collection... The inventories are long PAID for because they started off as collections, then these guys went to the "flea market" where trading begins.... the market doesn't bend as bad with a hobby as it does with other "Businesses" in today's world. As a matter of fact, hobbyists flood the market in times like these.

So , dealers may adjust some things, but... the system has it's roots much deeper than WALL STREET, Main Street, or any other street in the world, me thinks.

From this simple minded perspective, it's easy to see why the market of coins functions entirely without certain parameters businesses typically follow, nor is the hobby under the same "rules" of application as businesses typically are. . There is lack of information/tracking for good statistical analysis because of the nature of how "flea markets" operate.
Let's not be naive to think there will ever be a "SET" price in a hobby where "slider" is a coin, not a graph on a chart.
Dealer to dealer trading is nothing more than like kind exchanges with minimal cash flow, probably more than we think. Why should they drop the prices if they're semi-retired and can live off a couple grand per month ?
I can't explain it, sir. I try, but I always trip over my words. I understand your questions, too. They are extremely well worded.

Anyway, like someone said the other day... There is something about a hobby in times like these that actually "HELP" , not hurt it. Can you see the simplicity of it ?
It's a hobby of kings, but paupers dominate the scene.

ambro51

no one has found a way to 'short' rare coins...and for prics to go down (really down) someone has to eat a huge loss.

TwoSides2aCoin

I traded $58 in silver Mercury dimes, roosevelt dimes and Washington quarters for a

PCGS VG 10 1916 S Walking Liberty Half and
PCGS VG 10 1921 D Walking Liberty Half.

I dont' know about what the guy had into his slabbed coins, but I paid five times face for mine


It's a great hobby.

rooksmith

I agree -- coins are not financial markets. In a financial market, when a share value drops, it reflects the price of the last buyer and last sells bid/ask ON THAT EXCHANGE. Basically price is whatever the current trade is going for. In stock trades, much is determined by the value of futures. Thank God there are no futures markets for 1909 S VDB Lincolns. (at least I think there arent any --!?!) .

Coins have much less LIQUIDITY and VELOCITY of exchange. Their prices are supported by the stubborness of the seller, Or the perception that the market does not turn on a dime like with stocks. In the end the price is determined by what the buyer will pay the seller. In a way, they have more in common with real-estate than stock or commodities, per-se.

Each coin dealer is their own little exchange, and values are extremely subjective. Coins of the same grade from the same third party grader, date etc. could be sold on the same day by different dealers, and noone would notice. Who's to say what the correct price is. Supply and Demand will determine it.

So If one dealer unloaded one coin on one day, that doesnt break the entire market, but if all the buyers in the world suddenly stopped paying some ridiculous amount for a particular coin date combo, due to the perception of a falling market, then the market would break - just like a cartel.

The exception, I think are the well known auction houses. When they auction off some expensive coins, the price guide people keep track of the realized values, and make adjustments. Although these auction houses are not really exchanges and only handle a small volume of the business, their influence in the price guide is enourmous.

Whats interesting in the current coin market, is the amount of information, and the speed of the information being disseminated creates the illusion of a stock market like valuation process. In a way the internet distorts the value a bit.

At least thats my take!

TwoSides2aCoin

... what really sucks though is that my girlfriend in Canada broke up with me because I could have spent that money on a ticket to visit her, but instead opted to curb inflation, for what I thought was "our future".


I told you it was a great hobby, didn't I ?

It not only saves me money, it makes me money and gives me freedom.

rooksmith

Your right that sucks...

TahoeDale

Afer having a stiff drink( CCU thought he needs a drink-- I actually had one), my answer to the OP's question is NO.

The dealer who buys and sells at current price levels will do fine. The dinosaur who will not lower his inventory prices(retail), or his wholesale price to fellow dealers, will soon be on the corner, without a job, and getting psych help, so that he doesn't make the same mistake again.

Or, he will start offering high CD rates in the Cayman's, to other non-informed fools, who used to buy his over-priced coins.

So, does the dealer who won't adjust hurt the savvy dealer who will? and will that hurt the coin market? No.

Julian

Your premise works for more generic items, Michael, but it does not hold much water when you are talking about rarer items.

Has an item that hasn't been to the marketplace in years, become worth less because 46-d halves in 64, 81-s in 65 and 1924 saints in 63 are selling for less?

Valuable, scarce coins are worth what a willing buyer and a willing seller agree on. There are no markets on truly uncirculated early halves. Each coin has a unique value.

Just my thoughts!!

MrEureka

How much damage are these non-believing dealers causing to our markets overall?

None. They only damage themselves.

AngryTurtle

<< <i>I need a drink. >>