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A most refreshing transaction (which more dealers were this smart)
halfcentman
Posts: 1,498 ✭✭✭
Last week, I had an opportunity to do some light business with a vestpocket dealer.
While looking through his stock, I picked out a really horrible 1794 Half Cent (not a rare variety). It was horrible because the coin was a decent G-VG, but the seller bought the coin in a 2X2 and missed a light, staple scratch on the cheek.
I asked him for a quote (the aforemnentioned information was unbeknownst to me), but I noticed the scratch. Here's what he had to say:
"Well, I paid $X for it, but that is of no consqeuence to you because I "F"'ed up. He quoted me a price, it was fair market value, and I bought it (it was actually $5.00 more than I wanted to pay for it, but that's nit-picking).
This illustrates a very important point that's lost with many dealers. You do not have an inherent right to make money on every coin. When you say "I'm in this at $X," unless the coin is on memo I could really care less. I am going to pay you that I think is fair for the current market. If you buy a coin for $1K to which you feel has a $100 bill in it, and you find out the coin was bent/straightened halving its value, AND you have a chance to sell it for $550.00 - IF YOU ARE SMART THAT COIN SHOULD BE LEAVING YOUR INVENTORY VERY QUICKLY!!
Did you lose $450.00 on the transaction? Yes, but since you sold it for $50.00 more than it's worth you actually gained. This concept is called "gaining while losing."
Think of it this way. You're playing blackjack and you are dealt two eights versus a dealer's nine. Proper strategy dictates that eights are always split, which entails betting twice as much money. Getting this hand over the course of time is a losing proposition, but you will lose the least amount of money by splitting.
On the other side of the equation, if you buy a $1K coin for $500.00, and you are stupid enough to sell it for $700.00 you just lost $300.00 because you did not maximize your gains. That's called "losing while gaining."
Because I played poker for 10.5 years, and I have an extensive mathematical background in utility theory and game theory. Such disciplines have enabled me to run a successful business. It also enables the knowledgeable dealer to keep his inventory fresh. Collectors find stale dealer stocks tremendous turn-offs. Of course you cannot run a business losing money all of the time, but the point is you learn from a mistake, keep them small, and (hopefully) don't repeat them. Making money is all about net gains and net losses. If you know what you are doing, you should be in the black.
While looking through his stock, I picked out a really horrible 1794 Half Cent (not a rare variety). It was horrible because the coin was a decent G-VG, but the seller bought the coin in a 2X2 and missed a light, staple scratch on the cheek.
I asked him for a quote (the aforemnentioned information was unbeknownst to me), but I noticed the scratch. Here's what he had to say:
"Well, I paid $X for it, but that is of no consqeuence to you because I "F"'ed up. He quoted me a price, it was fair market value, and I bought it (it was actually $5.00 more than I wanted to pay for it, but that's nit-picking).
This illustrates a very important point that's lost with many dealers. You do not have an inherent right to make money on every coin. When you say "I'm in this at $X," unless the coin is on memo I could really care less. I am going to pay you that I think is fair for the current market. If you buy a coin for $1K to which you feel has a $100 bill in it, and you find out the coin was bent/straightened halving its value, AND you have a chance to sell it for $550.00 - IF YOU ARE SMART THAT COIN SHOULD BE LEAVING YOUR INVENTORY VERY QUICKLY!!
Did you lose $450.00 on the transaction? Yes, but since you sold it for $50.00 more than it's worth you actually gained. This concept is called "gaining while losing."
Think of it this way. You're playing blackjack and you are dealt two eights versus a dealer's nine. Proper strategy dictates that eights are always split, which entails betting twice as much money. Getting this hand over the course of time is a losing proposition, but you will lose the least amount of money by splitting.
On the other side of the equation, if you buy a $1K coin for $500.00, and you are stupid enough to sell it for $700.00 you just lost $300.00 because you did not maximize your gains. That's called "losing while gaining."
Because I played poker for 10.5 years, and I have an extensive mathematical background in utility theory and game theory. Such disciplines have enabled me to run a successful business. It also enables the knowledgeable dealer to keep his inventory fresh. Collectors find stale dealer stocks tremendous turn-offs. Of course you cannot run a business losing money all of the time, but the point is you learn from a mistake, keep them small, and (hopefully) don't repeat them. Making money is all about net gains and net losses. If you know what you are doing, you should be in the black.
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Comments
<< <i>This illustrates a very important point that's lost with many dealers. You do not have an inherent right to make money on every coin. >>
You most certainly do. You are confusing right with expectation. You may have a right to make money on every transaction, but it is unrealistic to expect that you will make money on every transaction.
Thanks for pointing that out. When you are typing with a screaming 6-year-old in the kitchen, sometimes you leave something out.
However, that "right" can come at a heavy price, which can often cause you to lose larger profits down the road while making current ones. That's because if it gets back to you that you duped good, long-term customers your repuation will be toast. Stuff like that gets around.
Thanks for commenting.
Greg
<< <i>On the other side of the equation, if you buy a $1K coin for $500.00, and you are stupid enough to sell it for $700.00 you just lost $300.00 because you did not maximize your gains. That's called "losing while gaining." >>
Nobody likes leaving money on the table, but without knowing the circumstances, I'd be reluctant to characterize the transaction as stupid. Sometimes a fast nickel beats a slow dime.
<< <i>
<< <i>This illustrates a very important point that's lost with many dealers. You do not have an inherent right to make money on every coin. >>
You most certainly do. You are confusing right with expectation. You may have a right to make money on every transaction, but it is unrealistic to expect that you will make money on every transaction. >>
No!!! They have an inherent right to TRY to make money on every coin. There is no right to make money on any transaction.
Worry is the interest you pay on a debt you may not owe.
Voltaire: Paper money eventually returns to its intrinsic value---zero.
<< <i>
<< <i>This illustrates a very important point that's lost with many dealers. You do not have an inherent right to make money on every coin. >>
You most certainly do. You are confusing right with expectation. You may have a right to make money on every transaction, but it is unrealistic to expect that you will make money on every transaction. >>
When I was dealer I usually lost money on a couple coins a year. Sometimes the market plays tricks on you, but more often I just got the wrong idea about what something was worth. And sometimes I missed something, which was always a learning experience. When you get burned by a hot stove, you learn not to put your hands on it again.
<< <i>
<< <i>
<< <i>This illustrates a very important point that's lost with many dealers. You do not have an inherent right to make money on every coin. >>
You most certainly do. You are confusing right with expectation. You may have a right to make money on every transaction, but it is unrealistic to expect that you will make money on every transaction. >>
When I was dealer I usually lost money on a couple coins a year. Sometimes the market plays tricks on you, but more often I just got the wrong idea about what something was worth. And sometimes I missed something, which was always a learning experience. When you get burned by a hot stove, you learn not to put your hands on it again.
Yep. I wasn't implying a guarantee or legal right.
<< <i>This conversation is very Malcolm Gladwell-esque. >>
Considering that I have Aspergers, I will choose to take that as a compliment because I do have a very different way of looking at things (and it's not always right).
Some good points made. However, in the cases that I used the scenarios are very cut-and-dried. When there's gray, it makes things a bit different (but not as different as one might think).
I appreciate the discourse,
Greg