Should Auction Houses Limit Supply to Preserve Pricing Bubbles?

Zoins

In the Hot Topics article THE DIFFERENCE IS HOW MUCH?, Laura writes that an auction house that offered four 5C 1912S PCGS MS66 consignments "contributed to bursting this dates bubble". Should auction houses limit supply to preserve bubble prices or should they just auction coins as they are made available, occasionally bursting bubbles?



<< <i>In January a major auction house loaded up on 5C 1912S PCGS MS66 consignments. For what ever reason they decided to allow 4 coins to be sold in order. Prior to the sale, the last 1912S PCGS MS66 to sell at auction brought $30,550.00 in 2014. The 4 decent pieces each sold for $10,575.00 thus crashing that market.

Another 12S 5C came up for sale a month or so ago and went for around $8,000.00. Ouch!

We're not here to point blame at the auction house. However they did contribute to bursting this dates bubble. >>

keyman64

I wonder if it is just as much the fault of the consignors. I have seen similar things happen before as I am sure
many of us have. Maybe the consignors didn't think this could possibly happen?
As a consignor, I would make sure that the auction house agreed not to allow my expensive coin to be sold
in an auction that had other examples or even be seen as available in another auction if there are other
examples at the auction house. I would want it to stand alone. This needs to be agreed upon by the auction house
prior to my consignment being final. If the auction house is unwilling to cooperate/assist in this goal then there are
other auction houses that will.

That being said, it was probably a freak occurrence to happen where these four high grade examples came to
market at the same time...but the auction house should be bright enough not to do this. It not only hurts the
consignor but also the auction house!

LanceNewmanOCC

.
this is a really long and debatable subject.

i really am not even sure where to start as i dont want to type a couple dozen paragraphs.

i will just say, if you have something high-end (subjective to a point), you should check recent sales and current offerings of same/similar items (plenty of exceptions).

your question kind of boils down to, "is it the responsibility (or a courtesy)" of auction firms to inform consignors of similar items in same auctions."

is it in their and the consignors short and long term?

i say, case-by-case basis.
.

halfhunter

Laura says that the 4 coins were "gradeflated" and not stickered, so was this actually a bubble or in reality FMV?

HH

Zoins

<< <i>Laura says that the 4 coins were "gradeflated" and not stickered, so was this actually a bubble or in reality FMV?

HH >>



Bubble was her word so I assume she meant bubble. Perhaps there was a bit of both.

TopographicOceans

Auction houses are a venue for the consignors.

Though supply is half of the supply vs. demand equation, and I know I wouldn’t want my coin listed along others of the same grade, there is no policy that I’m aware of that says if you consign your coin it will be the only one of the same date and grade listed in a particular auction.

And maybe all four of those coins came from the same consignor?

If there is more supply than demand, prices will go down.

These results can say just as much about the demand. If there is a large supply of rare coins, perhaps they aren’t so rare.

keyman64

<< <i>Laura says that the 4 coins were "gradeflated" and not stickered, so was this actually a bubble or in reality FMV?

HH >>

Sale prices come down to supply and demand. If one example only comes up for auction every few years
and at least two people want each one and of course are in the market then the price can be strong.

So, in this case, with 4 examples all at once....there were obviously NOT at least 2 people (8 total) for each example that
were in the market for one and wanted one really bad. So, based on the DEMAND for the given SUPPLY at the time
of the auction, the FMV was certainly achieved. It's just the way economics works. Had there been 20+ in the market for
these expensive coins and they all wanted them really bad....they would have sold for much more.

There's a good chance the max bid for each of the people that won those four coins was higher than what they sold for but there
just wasn't the DEMAND to push the prices higher.

My points of discussion are obviously ignoring quality for the grade since that complicates things much further but it can certainly
be a factor in the prices.

WinLoseWin

Regarding the 1912-S 5c, there seems to be an unusually large number of MS-65 and better showing up at auction in the last year. Makes me wonder if a hoard has recently been added to the market. If that is the case, then I doubt an auction company is going to turn them down as opposed to getting coincidental consignments where some companies might try to stagger them.

In the late 1980's or early 1990's there seemed to be a hoard of doubled die 1939 Jefferson nickels show up. For a year or two or three almost every Bowers and Merena auction had a few high grade Uncs. I'm sure there have been many similar situations before.

If it is a new supply on the market then the price change is unavoidable. Depending on how many there are to come, it may be that 4 MS-66 1912-S 5c in one sale is the auction house limiting the supply.

BryceM

There's a lot of sides to this one. The only thing that makes sense to me is for the auction house to offer what they are given. Playing games tends to hurt businesses in the long run.

If I needed to liquidate something and was turned away from a major auction because "they already have one of those", I'd no longer be a consignor at that auction house. Of course, if five more at the same grade showed up alongside mine, I wouldn't like that either. Life is full of risk and that's just part of the game.

mustangmanbob

So what if it 4 different consignors? What about 4 different auction houses?

I worked for Amazon. The concept of price fixing, be it in negotiations about what to buy, who to buy from, what to sell, how much to sell, etc., the concept of price fixing was ALWAYS reviewed.

The statement "Should auction houses limit supply to preserve bubble prices" especially if it collusion between businesses (auction houses), would have had our legal department on fire.

Price Fixing

Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor. When consumers make choices about what products and services to buy, they expect that the price has been determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices. Accordingly, price fixing is a major concern of government antitrust enforcement.

A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification. Price-fixing schemes are often worked out in secret and can be hard to uncover, but an agreement can be discovered from "circumstantial" evidence. For example, if direct competitors have a pattern of unexplained identical contract terms or price behavior together with other factors (such as the lack of legitimate business explanation), unlawful price fixing may be the reason. Invitations to coordinate prices also can raise concerns, as when one competitor announces publicly that it is willing to end a price war if its rival is willing to do the same, and the terms are so specific that competitors may view this as an offer to set prices jointly.
Text

amwldcoin

Auction Houses do stage their consignments. I think it is ridiculous when a low pop coin is offered in the same auction. It hurts the consignor and the auction houses commissions. I have had consignments with Heritage held back do to staging. Sucked because the market was at it's peak when they did it to me!

Zoins

<< <i>Auction Houses do stage their consignments. I think it is ridiculous when a low pop coin is offered in the same auction. It hurts the consignor and the auction houses commissions. I have had consignments with Heritage held back do to staging. Sucked because the market was at it's peak when they did it to me! >>



Good to know. Perhaps something happened this time around to prevent the staging of these four.

ricko

While the comments about supply affecting market prices are valid, the real point is made clearly by mustangmanbob. Controlling sales by manipulating supply or coordination between suppliers (auction houses) is illegal. The free market is just that and it serves a purpose. Cheers, Rick

messydesk

If the auction house burst the bubble, who created it?

DennisH

In answer to the question: No.

MrEureka

Bubble was her word so I assume she meant bubble.

Is that really how it works?

oih82w8

As a seller - Stagger these out to reduce the amount of "fall out" from previous sales.

As a buyer - bring 'em on! The prices are a droppin'!

I know that is stating the obvious, but I agree that it is the consignors that should be strategizing the placement of these into the auction houses. I don't major house auction sell, but when I do, I ask if there are others of the same date/mm/grade of the coins. If there are others...I would pull back a couple of weeks.

Four 1912-S 5C MS66 consecutively at one auction??? That is a special kind of stupid!!!

BillJones

From what I hear from those who have been attending them, the shows have been really slow. Conversely every time I've bid in an auction recently, I've been blown out of the water. A few of the times, I've not even been close. People are bidding double or more the "Coin Facts" prices, catalog prices and even recent auction results. I even get blown out on "the dark side."

I don't understand this market. All these people are saying it's bad, and yet you can't buy anything because the bids are through the roof.

As for the idea of denying the appearance of certain items because too many of them are in one auction, my answer would be "NO!" The auction house might advise a client that it would be better to hold off on an item because too many are in the same sale, but it should be the client's choice, not the auction house. AND it most certainly should not be done to please the marketing strategy for a given dealer.

Zoins

<< <i>From what I hear from those who have been attending them, the shows have been really slow. Conversely every time I've bid in an auction recently, I've been blown out of the water. A few of the times, I've not even been close. People are bidding double or more the "Coin Facts" prices, catalog prices and even recent auction results. I even get blown out on "the dark side."

I don't understand this market. All these people are saying it's bad, and yet you can't buy anything because the bids are through the roof. >>



Sorry to hear that. I love reading about your collection so I'm always looking to your next post.

Regarding the market, perhaps relatively few pieces are generating the demand and the market is continuing to become more bifurcated?



<< <i>As for the idea of denying the appearance of certain items because too many of them are in one auction, my answer would be "NO!" The auction house might advise a client that it would be better to hold off on an item because too many are in the same sale, but it should be the client's choice, not the auction house. AND it most certainly should not be done to please the marketing strategy for a given dealer. >>



Good answer. I think information and advice are good.

Christos

<< <i>While the comments about supply affecting market prices are valid, the real point is made clearly by mustangmanbob. Controlling sales by manipulating supply or coordination between suppliers (auction houses) is illegal. The free market is just that and it serves a purpose. Cheers, Rick >>



This +100

It is not good to think that the market is being manipulated even though it is. If this is done to much someone is going to cry foul and then all the bubbles will burst. I have yet to be told by ebay that I could not sell 3 or 4 of the same item.

19Lyds

<< <i>In the Hot Topics article THE DIFFERENCE IS HOW MUCH?, Laura writes that an auction house that offered four 5C 1912S PCGS MS66 consignments "contributed to bursting this dates bubble". Should auction houses limit supply to preserve bubble prices or should they just auction coins as they are made available, occasionally bursting bubbles?



<< <i>In January a major auction house loaded up on 5C 1912S PCGS MS66 consignments. For what ever reason they decided to allow 4 coins to be sold in order. Prior to the sale, the last 1912S PCGS MS66 to sell at auction brought $30,550.00 in 2014. The 4 decent pieces each sold for $10,575.00 thus crashing that market.

Another 12S 5C came up for sale a month or so ago and went for around $8,000.00. Ouch!

We're not here to point blame at the auction house. However they did contribute to bursting this dates bubble. >>

>>


So..............you're asking if Auction Houses should conspire to actually "control" coin prices? Or is that Laura's idea?

That's what it really is you know, price control/manipulation and I think it's illegal for an auction house to do such things.

Zoins

<< <i>

<< <i>In the Hot Topics article THE DIFFERENCE IS HOW MUCH?, Laura writes that an auction house that offered four 5C 1912S PCGS MS66 consignments "contributed to bursting this dates bubble". Should auction houses limit supply to preserve bubble prices or should they just auction coins as they are made available, occasionally bursting bubbles?



<< <i>In January a major auction house loaded up on 5C 1912S PCGS MS66 consignments. For what ever reason they decided to allow 4 coins to be sold in order. Prior to the sale, the last 1912S PCGS MS66 to sell at auction brought $30,550.00 in 2014. The 4 decent pieces each sold for $10,575.00 thus crashing that market.

Another 12S 5C came up for sale a month or so ago and went for around $8,000.00. Ouch!

We're not here to point blame at the auction house. However they did contribute to bursting this dates bubble. >>

>>


So..............you're asking if Auction Houses should conspire to actually "control" coin prices? Or is that Laura's idea?

That's what it really is you know, price control/manipulation and I think it's illegal for an auction house to do such things. >>



Umm no.

If you read Laura's article, she mentioned that there was only 1 auction house in question that offered all 4 specimens. No collusion between auction houses. I thought that would be clear from the quote, but it's worth pointing out.

The "Auction Houses" plural in the title is intended to mean should more than one auction house behave in the way quoted, limiting their own listings, independent of others.

Hope that clears up any confusion.