Liquidity in the Numismatic Marketplace
Sonorandesertrat
Posts: 5,695 ✭✭✭✭✭
In a recent 'Hot Topics,' Laura Sperber made the following comments:
"As we’ve been saying, MS and PR Seated and Barber Type has been hit the worst. Then semi generics like $5 Indians in GEM which had double whammy of being manipulated by a huge telemarketer years ago to sky high prices. Why are PR $20 Libs only bid at $80G when it would cost almost $100G to buy a PCGS CAC piece (of which almost none exist)? We could go on and on about ridiculous low bids and prices.
I believe had we been less liquid as a market, more people would hold their coins longer and not make them into the first dumping item when ever they need to raise money. You can’t dump antiques, art, or even most collector cars by simply making a few calls or hitting bids. Sure the coin market would be smaller, but not by much if we were not so liquid. Its kind of ironic that being so liquid is actually causing some illquidity in the market."
Do you agree with her view of market liquidity? If numismatic collectibles were not perceived as (somewhat to very) liquid, wouldn't the market virtually collapse (think stamps, baseball cards, etc.)? I think that many investors and 'collector-investor' types would exit.
Second, investors care about ROI---quick flipping to reap a profit is better. Holding longer does not mean that a profit will be realized, due to the fact that the coin market values do not necessarily increase with time. Sometimes they crash or run in irregular up-down cycles.
Third, what about the roles of dealer-dealer transactions? Many coins go through several pairs of dealer hands before they reach a retail buyer.
"As we’ve been saying, MS and PR Seated and Barber Type has been hit the worst. Then semi generics like $5 Indians in GEM which had double whammy of being manipulated by a huge telemarketer years ago to sky high prices. Why are PR $20 Libs only bid at $80G when it would cost almost $100G to buy a PCGS CAC piece (of which almost none exist)? We could go on and on about ridiculous low bids and prices.
I believe had we been less liquid as a market, more people would hold their coins longer and not make them into the first dumping item when ever they need to raise money. You can’t dump antiques, art, or even most collector cars by simply making a few calls or hitting bids. Sure the coin market would be smaller, but not by much if we were not so liquid. Its kind of ironic that being so liquid is actually causing some illquidity in the market."
Do you agree with her view of market liquidity? If numismatic collectibles were not perceived as (somewhat to very) liquid, wouldn't the market virtually collapse (think stamps, baseball cards, etc.)? I think that many investors and 'collector-investor' types would exit.
Second, investors care about ROI---quick flipping to reap a profit is better. Holding longer does not mean that a profit will be realized, due to the fact that the coin market values do not necessarily increase with time. Sometimes they crash or run in irregular up-down cycles.
Third, what about the roles of dealer-dealer transactions? Many coins go through several pairs of dealer hands before they reach a retail buyer.
Member: EAC, NBS, C4, CWTS, ANA
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
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Comments
I couldn't disagree more with her longing for less liquidity in the first place. I want as liquid a market as possible with as few transaction costs as possible.
Venues like Ebay and Auction Houses provide much needed market liquidity. If your worried about whether your coin is liquid or not, just start it on the bay at 99c or send it to your auction house of choice.
As an online seller with low overhead, I am very competitive in regards to price and I am sure of them with their expensive overhead are getting whipped. As an investor, I care about ROI and not a long term holder of coins flipping them all the time. Without current market liquidity which we currently have, the market would collapse. My focus is on the "real coin market" what collectors of average means can afford. I track the metals prices and the PCGS 3000 to arrive at how the market is really doing not some ones blog. You do not need a $100K coin to fill the hole in most instances and tying up $100 K in something ill liquid over a long period is not good. What happens when the $100 K coin goes bad in the holder. A Bulk Accumulator like my old buddy Fred circa 1968 who had rolls of BU Dollars and BU $20 Double Eagles is a more rational model. Now he would have a bank box full of rolls of AGB, AGE, ASE with probably about 60 slabs of nice Dollars, Walkers, Commems, WGTC but not 5 figure or 6 figure coins. Being a bulk accumulator opens up all kind of flipping opportunity plus taking advantages of upticks in metals prices.
$100 K for a coin - not for me. I would put it in my Stock Market Portfolio (which is highly liquid) or real estate, boat, muscle car or some combo. Numismatic investment is risky and the premiums (above CDN) can be high. Furthermore there can be coin preservation issues.
Before we go much further, let's clear something up. There are two issues here, being represented as one.
The first issue is liquidity, which is a function of how easily you can sell something, especially in quantity, at or near the perceived market value. The coin market is relative liquid, in the sense that it can absorb vast quantities of coins without much of an impact on price levels.
The second issue is transaction costs, which are a function of the commissions and spreads charged by auction companies and dealers. Compared to other collectibles, transaction costs on rare coins are very low. Compared to stocks and bonds and bullion, transaction costs on rare coins are very high.
Anyway, the bottom line is that high liquidity and low transaction costs attract money to the rare coin market. My gut says that this leads to significantly higher prices at all stages of the market, but makes little difference with respect to volatility.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
In a recent 'Hot Topics,' Laura Sperber made the following comments:
"I believe had we been less liquid as a market, more people would hold their coins longer and not make them into the first dumping item when ever they need to raise money. You can’t dump antiques, art, or even most collector cars by simply making a few calls or hitting bids. Sure the coin market would be smaller, but not by much if we were not so liquid. Its kind of ironic that being so liquid is actually causing some illquidity in the market."
Disagree. The only way people wouldn't be tempted to sell their coins is if the prices never fall, or they remain so financially secure that they never have a need to sell, or they never lose interest in their collections/holdings. Some require all 3 conditions to be met.
The coin market has been quite liquid for the past 40 years, with the exception of only a few scattered years when bids were hard to come by. If the market were consistently less liquid, there would be consistently less buyers/investors/collectors/dealers. Holding coins longer has little to do with liquidity. If you need to sell, you will sell, regardless of market liquidity. The Eliasberg heirs sold their gold coins into the bottom of the coin market in 1982. They did nearly the same thing again with the other coins in 1996-1997. Pittman's coins were sold at that time as well. All of them did well in those auctions despite "poor" market liquidity. The type of coins Legend handles shouldn't have a problem with the "when." They are always saying they have $30 MILL or more in "want lists" and can't find the coins. If the coins aren't showing up so they can be bought, how does this support or refute her thesis? Are they liquid or illiquid?
If art owners need to sell for financial reasons or just because market cycles dictate that, they will sell. While art is less liquid than coins, you can still sell them within hours/days /weeks if you had to. It's just a matter of price. If you consign to auction, you'll still get paid within 2-6 months. That's still pretty liquid imo.
If Legend's argument was viable, then we should be able to apply it to the stock markets as well. Does the ease in liquidity of most securities make them "less liquid" or disrupt the market place? I don't think so. More people are in the markets than ever because of that ease of being able to get in and out, and at the same time the cost of transactions (coins included) has generally come down over the past 15 years. So is she saying that in financial and tangible assets we should force people to hold them longer to improve liquidity?....or something like that. Bottom line......people will sell, when it's time to sell, period. Coins are typically harder to sell when financial markets are under stress. But you can still sell them quickly if you adjust to current market levels.
When I owned collector cars in the 1993-2004 period, most were more liquid than I thought. In a few cases it took no more than running an ad and waiting a week for buyers to show up. A couple of them sold within a day or two after the first person showed up. In today's internet world it would 10X easier. Put your collector car up on Ebay this week and it will be sold by next if you are willing to accept market prices. If you're a price dreamer (as most collectors tend to be) then your waiting period is directly proportional to your dream state.
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
There are dealers and collectors who do quite well "flipping" $20K to $250K coins. It's an art just as much as being able to flip rolls of AGE's. Colonel Jessup has played that market quite successfully. Numismatic investment is no more risky than anything else out there. It all comes down to market cycles and when/what you buy. The numismatic market place was not risky in 1973-1975, 1982, 1995-1997, and in 2009-2010. It all comes down to timing. Collector cars are just as "risky" as collector coins or art. I don't consider real estate without risk. "Preservation" concerns as seen with rare coins apply equally well to boats, real estate, and collector cars. Condition is everything in most tangible assets. My bank account is not without risk either due to the new "bail-in" mindset among the govt and regulators.
Liquidity is great. But by itself, offers no safety. Volatility in coins is being driven by volatility in the financial markets. You can't break that linkage. Currently, financial markets are in great stress as numerous currencies, bonds, commodities, and the stock markets are still figuring out where the 7-8 year bottoms and tops have or are going to occur. The big QE run up from 2009-2015 is shaking itself out. Coins are feeling some of that "shake." It has little to do with the fundamentals or structure of the coin market.
All money making investments are because of low buying price. When you sell, your asking price has to be competitive even item is unique.
The liquidities of 'B' coins, still stickered by CAC, are attenuating (in the opinions of some dealers).
'A' coins, stickered by CAC, are the darlings and most liquid of the triad. Is it that gradeflation has conditioned sharp-eyed people to preferentially chase these?
If this is true, will a new sticker be needed to separate 'A' from 'B' coins? And, if a subset of the 'A' coins upgrades in the near future, what's left?
Push the reset button?
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
Coins are quite similar in that big collections are sold at highly publicized auctions with a similar frequency. Yes, you can buy coins at weekly auctions, but the high end material will not be there, typically.
Also, both areas of collection are subject to going in and out of favor. Anyone who bought a Dodge or Plymouth Hemi from the 60s in 2008 is still way under water on a six figure investment. Now, one can take out a car and drive it in addition to looking at it, so there is a different value there. My point is both coins and cars go up and down, with the long trend up for the most part over time.
Liquidity in the lesser coins is very high and transactions costs much lower, the same is true for lower end collector cars. I sold a 1970 Lotus Europa for 9K to a guy in California when I lived in Maryland, cost me $100 using Ebay and I got all the money for the car. Barrett-Jackson (A primarily No Reserve Auction house for cars) typically charges a seller and a buyers premium, negotiated I suspect based upon past history and the quality of the car, not unlike Heritage. I have also spent about 9% of final value with Ebay and shipping when liquidating my collection every time I change my focus. The similarities are remarkable.
Rare Coins and Currency need liquidity in order to be a viable collection / investment medium. Its all about timing, the question is are we near a peak or valley?
Who knows?
While the quote below was intended to apply to stocks, the narrator on an old Barron's
television commercial said something to the effect of:
When you buy a stock (coin) convinced that it is going to go up, you are buying it from someone who is convinced it is going to go down.
Thank goodness that nice coins tend to be prettier than brokerage statements!
"the question is are we near a peak or valley" .... that depends entirely on what you are holding. if you have the material that the deep pocket collectors want, youre on the hill, but if you have a roll set of circulated walkers that you bought 10 years ago, well, you may be in the grass
If external events caused a large number of collectors to sell, there just aren't enough dealers with cash available to buy and the coin market would in essence collapse.
I don't invest in coins, (I collect) so I don't care much about ROI. That's why I don't have any 5 figure coins - but probably too many 4 figure coins.
As far as sales, I firmly believe most sales are dealer-to-dealer.
A collector buys a coin from a dealer, holds it and sells it back (usually at a loss since dealer needs to eat).
Then it trades in a dealer to dealer cycle for a while until it finally is sold to a collector. Then the cycle starts over again.
I don't think I agree with her on that premise. I also think that liquidity is highly cyclical. It may be less so now than in the past, with the large firms having big credit lines, but I think it definitely has an effect.
Not the whole truth there Laura... 2016 market drop , energy drop caused the rich to lose 10-15 % so far this year alone ..although a fellow coin club member lost a cool $10 Million in assets ...rather than his change lifestyle .. he reduced coin purchases since last Fall.. just like the little guys in coins ,,
In essence it said
The coin market is thinly capitalized and you may experience a substantial loss when you sell - or the market for your coins may be non-existent.
Not always. I have sold coins and stocks just because I needed the money, not because I thought they were going to go down.
A collector buys a coin from a dealer, holds it and sells it back (usually at a loss since dealer needs to eat).
Then it trades in a dealer to dealer cycle for a while until it finally is sold to a collector. Then the cycle starts over again.
I think eBay has changed this dramatically. Now, a lot of coins are bought and sold between collectors on eBay without ever going through a middle man (the dealer). I basically can sell my coins on eBay and lose 15% to fees or sell them to a dealer and lose 40% because they need to eat.
I don't think I agree with her on that premise. I also think that liquidity is highly cyclical. It may be less so now than in the past, with the large firms having big credit lines, but I think it definitely has an effect.
Not the whole truth there Laura... 2016 market drop , energy drop caused the rich to lose 10-15 % so far this year alone ..although a fellow coin club member lost a cool $10 Million in assets ...rather than his change lifestyle .. he reduced coin purchases since last Fall.. just like the little guys in coins ,,
The S&P is down 5% in 2016.
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......
I don't think I agree with her on that premise. I also think that liquidity is highly cyclical. It may be less so now than in the past, with the large firms having big credit lines, but I think it definitely has an effect.
Not the whole truth there Laura... 2016 market drop , energy drop caused the rich to lose 10-15 % so far this year alone ..although a fellow coin club member lost a cool $10 Million in assets ...rather than his change lifestyle .. he reduced coin purchases since last Fall.. just like the little guys in coins ,,
The S&P is down 5% in 2016.
mark
Sorry folks.. S&P down 5 %??? .. many stocks down 20 - 40 % from highs last year
Coins are tougher to judge as it depends on what of the many different choices you are holding. I suspect coins are down more than 3 percent on average, but I do not have quantitative data to prove it. I could do an analysis of eBay sales on MS63 Morgans of select years for 2015 versus 2016 to get the needed volume, but I am too lazy to do the work. And that would only be one segment of the market with has a ton of segments, all very different.
Investments: Yourself! oh and utility stocks and real estate long term.
100% Positive BST transactions
Any type of investment, takes a bit of faith. It can be hard to understand why a little coin can be worth $50,000 or a million dollars or even $500. But that goes for everything. Gold bullion---why do people feel like it worth $1200 an ounce? Stocks---there have been plenty of companies that have gone to zero and people thought they were solid (Enron was considered a blue chip at one time). Even cash itself---it takes faith to believe it is worth more than the paper it is printed on (ask a gold bug what currency is worth). So one has to have some faith in whatever he or she wants to invest in.
Every investment has risk. Real Estate has risks (people who bought in Fla some years ago that home prices could not go down and then they crashed). There are even risks having to do with purchasing real property that go beyond the investment and deal with enviormental issues or natural disasters. Stocks have risks----any one stock can crater today. A group of stocks is less risky but still has risks. For years people thought investing with Madoff was a sure thing--that ended up having risks. And on and on.
Whenever I think about what I pay for a coin---I think about this. There are individuals who will pay 1 million dollars for a coin. Then there are those who will go as high as 6 figures. Next investors/collectors who will pay 5 figures and on down to collectors who may not spend more than $500 ever for a coin. Lets say the most I would every pay for a coin is $10,000----there are coins now that cost $15,000 that if they dropped below 10k, I would purchase in a heartbeat. The same can be said at every level. Maybe a collector would never pay 1 million for a coin but if it dropped to a certain level, he or she would . Multiple that by many people and I think that coins are a pretty decent investment with a pretty decent market. For coins to crater---a lot of things would have to happen. The same could be said for almost all investments.
At the end of the day---the best investments are usually made when the party had done their due diligence and is educated. Whether it is buying stocks or real estate or coins.
Sometimes, that price is disappointing to the owner of the asset. Especially if the number is negative.
Liberty: Parent of Science & Industry
Liquid Market: Someone bought my junk
ILLIQUID MARKET: No one will buy my junk at my price.
Anything beyond that is just fluff.
First Lesson: US Army, Deployed Down Range. On the 28th of the month, you could buy ANYTHING with a little cash. On base, unless you had CASH, nothing sold. Off base, you could get, searching for a word that fails me, well, anyway, a 5 pound can of coffee, a bottle of Jack Daniels, a $5 bill, or a bottle of Tang, and you were a King.
On the 3rd of the month, Cash was flowing everywhere, and the market was saturated. Liquid versus illiquid market, Economics 101.
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Super high end art photography, not so much.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
Any asset is "liquid" at the right price. BINGO: We have a winner.
Liquid Market: Someone bought my junk
ILLIQUID MARKET: No one will buy my junk at my price.
Anything beyond that is just fluff.
First Lesson: US Army, Deployed Down Range. On the 28th of the month, you could buy ANYTHING with a little cash. On base, unless you had CASH, nothing sold. Off base, you could get, searching for a word that fails me, well, anyway, a 5 pound can of coffee, a bottle of Jack Daniels, a $5 bill, or a bottle of Tang, and you were a King.
On the 3rd of the month, Cash was flowing everywhere, and the market was saturated. Liquid versus illiquid market, Economics 101.
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How true! I recall using some of the silver coins I had put aside for movies at the Roosevelt Theater at Kagnew Station back in 1971. Those last few days before payday were very lean. The movies at the theater cost 35 cents for regular movies (nearly all of them) and 50 cents for "special" movies. They changed the movies twice a week and I saw nearly all of them.