How much do future auctions influence a dealer’s decision to purchase current “stock”?

Longacre

In another thread, an excessively prominent dealer made the following comment regarding his decision to bid on particular coins in a current auction versus waiting on others:

“Also, [another auction firm’s] sale in January will contain examples of many of these same types, and so the notion of buying some for stock now seemed riskier than it would have been otherwise.”

I found this comment interesting because it sheds some light on decisions that dealers need to make every day. Please consider the following:

1. Generally, how much do future auctions of similar material influence a dealer’s decision today to purchase coins for inventory?
2. Does the auction today (and the selling prices) give a leading indicator of what the future prices will be for the similar items coming up for auction in a month or two?
3. If so, does the fact that purchases were not made in the current auction indicate that the current coins are inferior to what is coming up in the future auction, or that the prices realized in the current auction were too high?
4. Do successive auctions of similar types of coins indicate a coming lack of interest in a series (or a glut on the market), which, in turn, makes a current purchase for inventory “risky”?
5. Or, given the uniqueness of coins, is there any relevance of one auction’s inventory to another, and the prices realized, to any other auction, thereby making the “riskier” comment in the quote irrelevant?

Boosibri

<< <i>In another thread, an excessively prominent dealer made the following comment regarding his decision to bid on particular coins in a current auction versus waiting on others:

“Also, [another auction firm’s] sale in January will contain examples of many of these same types, and so the notion of buying some for stock now seemed riskier than it would have been otherwise.”

I found this comment interesting because it sheds some light on decisions that dealers need to make every day. Please consider the following:

1. Generally, how much do future auctions of similar material influence a dealer’s decision today to purchase coins for inventory?
2. Does the auction today (and the selling prices) give a leading indicator of what the future prices will be for the similar items coming up for auction in a month or two?
3. If so, does the fact that purchases were not made in the current auction indicate that the current coins are inferior to what is coming up in the future auction, or that the prices realized in the current auction were too high?
4. Do successive auctions of similar types of coins indicate a coming lack of interest in a series (or a glut on the market), which, in turn, makes a current purchase for inventory “risky”?
5. Or, given the uniqueness of coins, is there any relevance of one auction’s inventory to another, and the prices realized, to any other auction, thereby making the “riskier” comment in the quote irrelevant? >>




All of the above...

With thinly traded markets like rare colonial varieties there are likely only a handful of collectors willing to step up to the plate at strong prices. For a dealer to stock this type of issue it would be quite risky to buy a stock coins which are so esoteric and thinly traded.

For more generic issues I don't think that there is much of an influence on future auction prices.

If a wave of 1855-D $2.5's came to auction I would be hesitant of stretching for an example given the thin market. When a wave of a rare date is all of a sudden available there becomes a perception that the issue is less rare than previously thought. In rare gold today one sees this playing out now with certain issues. Often times these prove to be opportunities for the astute collector or dealer to stock waiting for supply to return to normalized levels.

291fifth

It depends on how thin the market is. A specialist dealer should have a very good idea of who is in the market at any given time and if they are a real player for a given coin.

DeepCoin

In a fairly thin market, if clearly superior coins are to be auctioned soon and you only have access to those that are lesser in grade, it could be an issue. The market is being fulfilled at the high end and thus you have to sell to others who must choose to buy what is now a lesser coin. The other ingredient to this stew is pricing. If the coin in question is a $15,000 coin and you will be pricing yours at $11K or $12K, will there be resistance to your pricing. I see a scenario where a dealer would be hesitant to buy a coin for inventory that may sit due to either a lack of buyers or those who a reluctant to pay the going rate for a lesser coin.

Now if the coins you are buying for inventory are equivalent in grade, it is a different story. Then you need two buyers at that price and if the auction does not go as high as you need to make a reasonable profit, again you could be buried in the coin for a long time. If the underbidder was not willing to go the auction price for the coin, why would he buy yours at the same price.

The logic makes sense to me. Also, as you get into the thinly traded series, the major buyers and their habits become fairly well known at the upper end of the spectrum. The coin hobby is a small world and with few exceptions, those collecting very thinly traded series are fairly well known as is the market demand along the various segments.

TwoSides2aCoin

Welcome back. I've missed you.

AngryTurtle

<< <i>
With thinly traded markets like rare colonial varieties there are likely only a handful of collectors willing to step up to the plate at strong prices. For a dealer to stock this type of issue it would be quite risky to buy a stock coins which are so esoteric and thinly traded.

>>



I am not a dealer but agree with what you wrote. One clarification is I dont know that its "strong prices" rather it may be more "5 and 6 digit" prices. My point being that while a 5 or 6 digit price coin may be in the stratosphere for most of us, it still could be a bargain (weak) or fairly priced.

That being said, in general New coins have indeed been "strong"!