Collecting in a zero-inflation environment
EagleEye
Posts: 7,677 ✭✭✭✭✭
chart from here
This chart show inflation from 1955 to today. We are nearing zero inflation. Except for the 2008 credit crisis, we have always had small to large inflation, beginning in modern times in 1955. As a collector you expect your coin collection to beat inflation. Have we grown so accustomed to seeing our coins that we bought a few years ago sell for a profit that we almost expect it. Do you buy coins with a profit expectation down the road or do you buy just for the enjoyment factor without thinking about selling for a profit or loss in the future?
If there is no profit motive for buying a coin, would you still do it?
Rick Snow, Eagle Eye Rare Coins, Inc.Check out my new web site:
0
Comments
<< <i>. Do you buy coins with a profit expectation down the road or do you buy just for the enjoyment factor without thinking about selling for a profit or loss in the future?
If there is no profit motive for buying a coin, would you still do it? >>
I don't expect profit but I do not buy unless I feel comfortable that if I need to sell my shorts will be mostly intact.
.
CoinsAreFun Toned Silver Eagle Proof Album
.
Gallery Mint Museum, Ron Landis& Joe Rust, The beginnings of the Golden Dollar
.
More CoinsAreFun Pictorials NGC
If it is true, I guess educating yourself before buying will be more important than ever.
-JB
==Looking for pre WW2 Commems in PCGS Rattler holders, 1851-O Three Cent Silvers in all grades
Successful, problem free and pleasant transactions with: illini420, coinguy1, weather11am,wayneherndon,wondercoin,Topdollarpaid,Julian, bishdigg,seateddime, peicesofme,ajia,CoinRaritiesOnline,savoyspecial,Boom, TorinoCobra71, ModernCoinMart, WTCG, slinc, Patches, Gerard, pocketpiececommems, BigJohnD, RickMilauskas, mirabella, Smittys, LeeG, TomB, DeusExMachina, tydye
I buy gold coins and then the price of gold goes down 20%. I buy silver coins and the price of silver goes down. I buy classic coins and everyone else is collecting modern coins. I buy coins and the average age of coin collectors is going up and the younger generations aren't interested in coins.
I buy coins because they're pieces of history that I can hold in my hands.
As long as I'm not buying MS-66+ coins that later turn into MS-65 coins (valued at 40% less), then I'm OK with dealing with a typical dealer's bid/ask spread.
Check out the Southern Gold Society
<< <i>I think that the published inflation figures simply do not reflect reality for everyday spending. It would be interesting to see a chart that factors only on items without real estate prices and electronics/computers figured in. So how about grocery store food, groceries, car repairs, insurance, governmental fees, energy, taxes and utilities?
-JB >>
Agree. I just don't trust government numbers. And you can add health care costs to your list.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
If you don't trust the Government's numbers, then I guess all countries are in on the fix.
<< <i>
If there is no profit motive for buying a coin, would you still do it? >>
I'm a collector, and get great enjoyment out of the coins I own. It has nothing to do with profit. If that enjoyment costs me money when I sell, I'm totally fine with that, thats the cost of the experience. Just as every other enjoyable experience, i.e. a concert, movie, night out, vacation, etc. has a cost.
I do believe coins appreciate, beating the inflation rate.
Let's see 1955 ...
No ....
Personal computer
Smart Phone
Digital Camera
The Internet
How do you account for the above four in the inflation rate? Can't be done IMO.
Plus products from China you could not possible make yourself at a lower cost.
Another example: I bought a 5" Color Fish Finder with GPS (Global Positioning Satellite) and Sonar for for $349 ...... What would such a system cost in 1955? ..... perhaps a few billion dollars
According to the table I posted, England and France are at zero inflation.
Look at Brazil. It has a very high inflation rate while it is not running high deficits and its Debt/GDP is half of the US. Interest rates at 14.25% - ouch!
Edited to add: possibly the Olympics is to blame. Government spending run amok.
Does not look like budget deficits and debt or even low interest rates are to blame for inflation.
<< <i>chart from here
If you don't trust the Government's numbers, then I guess all countries are in on the fix. >>
change the word "countries" to "banks" maybe?
<< <i>chart from here
If you don't trust the Government's numbers, then I guess all countries are in on the fix. >>
It's a common refrain, "I don't believe those numbers, the prices of the stuff I buy just keep on going up"
The secret is, that's not general monetary inflation, that's supply and demand for those items; you're competing with the other consumers and bidding those prices up.
This is distinct from systemic currency devaluation, and is something that most folks simply do not seem to understand.
If there was truly high inflation, the prices of everything would be going up.
The fact that some things go up and some things go down has more to do with market forces, and less to do with "inflation"
Liberty: Parent of Science & Industry
The main CPI (Consumer Price Index) was changed awhile back, because it did not reflect changes in the quality of goods it included.
Computers is a good example of that. Cars are another.
One thing happening in the CPI at present is the price of gas/heating oil which affects some people more than others.
However, for comparison to rate of return on coins, I think you want the nominal interest rate,
which basically equals the "real" interest rate + inflation.
At present interest rates like on T-bills are at all time lows, so this is a bigger factor than the inflation rate.
For myself, probably like many others, I don't have a high percentage of my assets in coins.
They are a luxury good / hobby.
It would be nice if I didn't lose too much money on them, compared to the opportunity cost of putting that money in some more mainstream investment.
For investments, I purchase stocks, mutual funds and ETFs. For enjoyment with my disposable income, I purchase coins. But with my purchase of coins, I'm patient and try to buy with as much advantage related to value.
The government is cooking the books by limiting the items that get on their cost of living index numbers just like it is understating unemployment by leaving off the people who are under employed and those who having given up looking for a job. The labor participation rates are lower than they have been since the late 1970s.
Sounds flimsy to me.
Oil is way down, which effects many things. These numbers for fuel, transportation, power etc. will offset other numbers like housing and food, so the net is 0%. I am not assuming a belief system here. Facts.
What causes inflation?
Not debt - The world economy now runs on debt. We issue it, China buys it. Banks have nearly unlimited access to money. Take it way and the banking industry would collapse.
Not deficit spending - This keeps our economy from falling apart. We spend on disaster relief, wars and other things without any regard to a budget. Refuse these sectors with money and you'll lose public support (or corporate support in the case of wars)
Not low interest rates - it has been 0% for five years.
If there is no profit motive for buying a coin, would you still do it? >>
I have no issue with a coin not making a profit way down the road as you never know what the future may hold. The limiting factor to me is more short term. I have a hard time buying coins from big dealers and being buried for a while and not knowing if I can ever overcome the initial hit. Lots of hobbies are this way. I have to look high and low to find the coins that work for me.
If I could pay the asking price for any coin I like from every dealer and break even anytime down the road I would buy 250k worth of coins tomorrow.
NGC registry V-Nickel proof #6!!!!
working on proof shield nickels # 8 with a bullet!!!!
RIP "BEAR"
<< <i>"I don't buy it". "I don't believe it". "Choose your own stats". "Shadowstats"
Sounds flimsy to me.
<< <i>
I hear the same crap at coin shows. Same demographic as here.
As for your question, I do not collect for profit. Try to limit my losses as best I can.
It is based on very detailed surveys and price samplers.
The smaller package sizes mentioned in one post are fully accounted for. It's price per weight, not price per package with package size varying.
<< <i>What goods and services does the CPI cover?
The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:
FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
>>
http://www.bls.gov/cpi/cpifaq.htm
And the Bureau of Labor Statistics is in a very different branch of the gov't than the Social Security Administration.
Probably the main factors contributing to lower current inflation are:
- globalization. There used to be a cycle of union wage increases and corresponding price increases. But unions are local, not global, so that cycle was broken by overseas manufacturing.
- technology improvements. Faster/better computers, cars, TVs, etc. Reduced production costs for some things (for example, can be cheaper to make a company website rather than paying for ads in print media).
I've boiled it down to buying really juicy coins and bullion with discretionary cash and basically get ready to hold until I die, or just before! I'll be the old crusty stoved over dude, mustard and all, at a show 25-30 years from now asking whatever I want for quality items that have been off the market a long time. I'll look for a guy with the same mentality who can step up for the goods and someday do the same in his turn. It's basically a strategy I'm copying from other timers I run across who are gonna come out fine. Patient hobby. Think about going to a coin show 25 years ago buying nice stuff at yesterday's prices and fast forwarding to today and having them in your case at today's prices.
I'm betting there will be a coin market throughout my life, as well as a stable economy, healthy or not.
<< <i>Fun question, but when the charts come out from the economic academics its either over my head or I just glaze over...
I've boiled it down to buying really juicy coins and bullion with discretionary cash and basically get ready to hold until I die, or just before! I'll be the old crusty stoved over dude, mustard and all, at a show 25-30 years from now asking whatever I want for quality items that have been off the market a long time. I'll look for a guy with the same mentality who can step up for the goods and someday do the same in his turn. It's basically a strategy I'm copying from other timers I run across who are gonna come out fine. Patient hobby. Think about going to a coin show 25 years ago buying nice stuff at yesterday's prices and fast forwarding to today and having them in your case at today's prices.
I'm betting there will be a coin market throughout my life, as well as a stable economy, healthy or not. >>
Wow, really well said, summarizes my viewpoint regarding the investment aspect of my collection.
Liberty: Parent of Science & Industry
<< <i>Great post Rick but I am not sure I buy the 0% inflation that the government is selling us.
If it is true, I guess educating yourself before buying will be more important than ever. >>
I'm with you.
Inflation is not required for coins to appreciate in value, but it helps.
Anyway, to answer the question, I'd still collect coins if there was no hope of making a profit, but I would not spend anywhere near as much money at it.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>"I don't buy it". "I don't believe it". "Choose your own stats". "Shadowstats"
Sounds flimsy to me.
Oil is way down, which effects many things. These numbers for fuel, transportation, power etc. will offset other numbers like housing and food, so the net is 0%. I am not assuming a belief system here. Facts.
What causes inflation?
Not debt - The world economy now runs on debt. We issue it, China buys it. Banks have nearly unlimited access to money. Take it way and the banking industry would collapse.
Not deficit spending - This keeps our economy from falling apart. We spend on disaster relief, wars and other things without any regard to a budget. Refuse these sectors with money and you'll lose public support (or corporate support in the case of wars)
Not low interest rates - it has been 0% for five years. >>
OK look at oil. This is a chart from the 80's. Has oil and gas not risen and fallen back some since then?
And what causes inflation is the vast amounts of money available and on hand. Which is obvious we keep printing.
We (USA) have changed the way we compute inflation by changing what the goods that are in the basket. Such as removing "ribeye" and replacing it with "Sirloin".
Dow does it too. Apple is now in the DOW basket where it was NASDAQ before.
We need to talk same for same if you really want a gauge.
But overall look at that chart and tell me that things for the average person in 1980 cost the same to purchase today. I don't think anyone here can say they do. Therefore we have had inflation regardless of the improper measuring stick the US Gov wants to try to measure it with.
As a dealer no. I would assume no dealer would be in the business.
To answer your question I have no problem collecting in this environment. Today more then ever you have to be SUPER selective on everything you buy.
mark
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
The opportunity cost must be considered and this calculation is a bit different for every person.
As for the numbers, I don't really trust them. They're derived from rules that are continuously changing.