Tough times for the middle market
Greeniejr
Posts: 1,321 ✭✭✭
I figured I should readdress an issue that was being discussed in a way more to the liking of our hosts.
The middle of the market is huge. I would say that it goes from right below the top 1-2% all the way down to the 50% level. These numbers are truly meaningless but should be an indication about how potentially large a problem this is. Most of the collectors here fall into the middle area. Those who don't I am sorry but this doesn't really effect you because you are above it. The bottom of the market we really don't need to concern ourselves with in this discussion because it is occupied by low low end coins, circ stuff most of the people here don't mess with and telemarketer coins that unfortunately we have to deal with their existence because without them our industry would not survive. So I am talking about hobbyists who spend anywhere from a few hundred a month to thousands but don't have indefinitely deep pockets.
The problem arises in the middle of the market when we try and classify items too definitively. For this purpose we will group coins into 3 categories A, B and C. Ignoring D and F. For instance, for the same price which would you rather have, a level C MS65 or a level A MS64. Mind you these are both problem free, unmolested coins with similar eye appeal. One just got overgraded. Many people would jump and say clearly you want the A level piece because it is PQ for what it is. But remember it is the same money as the C piece. What if the coin gets regraded as a MS64. Does it then become an A coin? Looking at it that way, the potential upside for owning a C coin might actually might be better because if an MS65 might go up more than a MS64 and you can always move it down to become an A if need be. It seems however in the market now these C coins are getting hammered possibly more than they should. There are people who want these C coins because they are relatively cheap. They recognize the fact they are not PQ but lowering the grade they are PQ.
Now comes the trouble which is the B coins. B coins are very popular among average collectors because they are typically reasonably priced and available. This could be a coin that is just eh for what it is or an A coin that has been conserved or market acceptably altered. Clearly the market does not accept them as A coins because they are not but then how does one differentiate them from C coins. Further, if a person who is not a sophisticated collector or a collector at all, how does a person get reasonable value for their B level coins or worse yet unidentified A level coins? Really there is no way. There is a saying in economics that bads make goods less good. Everything gets brought down to the lowest common denominator. Dealers can only reasonably pay what they think they can move a piece for. If they are can't be 100% sure where a piece falls, they will assume the worst. This is tough for dealers who want to be fair and tough for collectors who want to get value for their coins.
A final problem is differentiating on a wholesale level B coins from C coins. There is a saying that ownership adds a point in perceived grade. That being said, how can these middle coins effectively trade on the wholesale level when people think their Cs are Bs and Bs are As. The fact that the market is really being harsh right now on B and C coins is causing difficulty and possibly harm to the middle class of collectors.
The middle of the market is huge. I would say that it goes from right below the top 1-2% all the way down to the 50% level. These numbers are truly meaningless but should be an indication about how potentially large a problem this is. Most of the collectors here fall into the middle area. Those who don't I am sorry but this doesn't really effect you because you are above it. The bottom of the market we really don't need to concern ourselves with in this discussion because it is occupied by low low end coins, circ stuff most of the people here don't mess with and telemarketer coins that unfortunately we have to deal with their existence because without them our industry would not survive. So I am talking about hobbyists who spend anywhere from a few hundred a month to thousands but don't have indefinitely deep pockets.
The problem arises in the middle of the market when we try and classify items too definitively. For this purpose we will group coins into 3 categories A, B and C. Ignoring D and F. For instance, for the same price which would you rather have, a level C MS65 or a level A MS64. Mind you these are both problem free, unmolested coins with similar eye appeal. One just got overgraded. Many people would jump and say clearly you want the A level piece because it is PQ for what it is. But remember it is the same money as the C piece. What if the coin gets regraded as a MS64. Does it then become an A coin? Looking at it that way, the potential upside for owning a C coin might actually might be better because if an MS65 might go up more than a MS64 and you can always move it down to become an A if need be. It seems however in the market now these C coins are getting hammered possibly more than they should. There are people who want these C coins because they are relatively cheap. They recognize the fact they are not PQ but lowering the grade they are PQ.
Now comes the trouble which is the B coins. B coins are very popular among average collectors because they are typically reasonably priced and available. This could be a coin that is just eh for what it is or an A coin that has been conserved or market acceptably altered. Clearly the market does not accept them as A coins because they are not but then how does one differentiate them from C coins. Further, if a person who is not a sophisticated collector or a collector at all, how does a person get reasonable value for their B level coins or worse yet unidentified A level coins? Really there is no way. There is a saying in economics that bads make goods less good. Everything gets brought down to the lowest common denominator. Dealers can only reasonably pay what they think they can move a piece for. If they are can't be 100% sure where a piece falls, they will assume the worst. This is tough for dealers who want to be fair and tough for collectors who want to get value for their coins.
A final problem is differentiating on a wholesale level B coins from C coins. There is a saying that ownership adds a point in perceived grade. That being said, how can these middle coins effectively trade on the wholesale level when people think their Cs are Bs and Bs are As. The fact that the market is really being harsh right now on B and C coins is causing difficulty and possibly harm to the middle class of collectors.
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Comments
<< <i>Now comes the trouble which is the B coins. B coins are very popular among average collectors because they are typically reasonably priced and available. This could be a coin that is just eh for what it is or an A coin that has been conserved or market acceptably altered. Clearly the market does not accept them as A coins because they are not but then how does one differentiate them from C coins. >>
It's easy to distinguish B coins from C coins. B coins get beaned, C coins don't
<< <i>The fact that the market is really being harsh right now on B and C coins is causing difficulty and possibly harm to the middle class of collectors. >>
I think you have the causation reversed. It's that the economy is being hard on the middle class of collectors which results in a softer market for middle market coins.
It's not:
Softer middle coin market > middle class collectors losing wealth
It's:
Softer economy > middle class collectors losing wealth > softer middle coin market
<< <i>Softer economy > middle class collectors losing wealth > softer middle coin market >>
this is my opinion of how it works, not to say i am right, but this is what makes sense to me
but i do agree with the OP about the percentages of quantity of low, middle and high quality/value coins and which group seems to be affected the most right now
.
<< <i>The fact that the market is really being harsh right now on B and C coins is causing difficulty and possibly harm to the middle class of collectors. >>
I wasn't sure if the post had to do with beans or not. I read it twice and wasn't sure I saw that or not.
I guess the "middle class collector" that buys average coins to collect might be happy now because the coins are cheaper to buy.
If the middle class collector thought that mediocre coins would always be a great investment then we might be sad at least for the near term.
One rule is always true, if you collect coins then have fun doing it and don't rely on profit as the only fun.
Compared to the best investment it might suck but compared to going out to more movies or buying more beer then even the worst coin probably leaves us ahead. At least someday those coins are worth something, other things we do for fun might be all money spent and gone.
Bottom line is do it if it's fun and don't sweat the market changes.
We are still in a recession, and this has had a major impact on the coin market. A lot of collectors of modestly priced coins are sitting on the sidelines, due to financial worries. In past recessions, collectors tended to gravitate towards quality---they became a lot pickier. The reverse happens when the economy is OK and there is a bull coin market---many collectors just grab at stuff because they've got money in their pockets and also figure that rising coin prices will bail them out of their mistakes (a sort of greater fool theory is in effect).
Increasing amounts of investor money have quietly entered the coin market, and investors do not tend to be impressed by B and C coins. They want some indicator of quality (whether quality means profitability is a different issue---this is not always true). Bottom line: there isn't much of a market for B and C coins right now, and the entry of an organization with a three-letter acronym didn't cause this 'problem'. If particular dealers are feeling a financial pinch due to fewer customers and/or greater difficulty buying at prices they feel are reasonable, then they should consider a different business model. Many small dealers (particularly small B&M dealers) would be out of business today were it not for robust trading in bullion-related material, including purchasing old jewelry.
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
In honor of the memory of Cpl. Michael E. Thompson
<< <i>My head is spinning ... >>
Thanks. I thought I was the only one. Perhaps the OP can give us a summary in simplified and less convoluted language.
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
<< <i>Good luck trying to buy a C ms65 for the same price as an A ms64. The value of the holder is too great. >>
You have said you have done it multiple times. I believe generic Saints have the same exact bid for "A" coin MS65s and generic MS66.
<< <i>
<< <i>Good luck trying to buy a C ms65 for the same price as an A ms64. The value of the holder is too great. >>
You have said you have done it multiple times. I believe generic Saints have the same exact bid for "A" coin MS65s and generic MS66. >>
Generics aren't rare coins. And I suppose anything can happen at an auction...including having a coin fall through the cracks
First, middle class people in general, which extends to middle class collectors, are either getting pounded in this economy, or they are worried about losing their sources of income and ending up getting pounded. That explains why we see sluggish sales for collector coins that do not contain a lot of gold or are not among the high flying "premium" pieces. Many middle class collectors are either tapped out, or they are concerned about their economic position which makes them seem tapped out to dealers. I know some dealers are having a rough go of it because I'm getting lists through the mail these days from dealers who had not done something like that for a long time. Their "snail mail" lists tell me that their sales are sluggish.
The second dynamic is CAC. It's becoming increasing obvious that there are a large of collectors who have come to view CAC as the gold standard in coin grading. Among this group there is a very significant number who view the PCGS - CAC combination as the ONLY acceptable grading combination. This is narrowing the market to a pinch point. A number of dealers are now pushing this PCGS - CAC pinch point home as part of their marketing strategies. Anyone who expresses the opinion that anyone, including the market markers at CAC, is not perfect will be subject to much verbal abuse and some pressure from those who have a financial stake in this. I know this first hand.
The bottom line is the coin market is getting narrower and more elitist, and this is not good. We already have demographic studies that tell us that many younger people are not collectors. Their interests run to other things. Add to this a top heavy market that emphasizes duel grading and the potential for market manipulation, and you have an unhealthy situation that might not bode well for the future.
And I also agree with this:
<< <i>The bottom line is the coin market is getting narrower and more elitist, and this is not good. >>
Too few dollars chasing too many coins allows buyers to be very selective, and if the gold standard PCGS/CAC provides them
that added assurance, then that is what is in demand.
But there have been booms and busts in the coin market before, and we may again see demand for average collector coins
being pursued by average collectors.
being pursued by average collectors."
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
<< <i>Thanks Bill - well stated.
And I also agree with this:
<< <i>The bottom line is the coin market is getting narrower and more elitist, and this is not good. >>
Too few dollars chasing too many coins allows buyers to be very selective, and if the gold standard PCGS/CAC provides them
that added assurance, then that is what is in demand.
But there have been booms and busts in the coin market before, and we may again see demand for average collector coins
being pursued by average collectors. >>
Yes, markets do go in cycles and things can and probably will change. The important aspect of this is the U.S. economy. If we are destined to have a sluggish economy as it is in Europe, we could be in this rut for a very long time.
We also need to stamp pizzas with coin designs.
And find a way to get coins into the same status as an offshore tax shelter.
<< <i>The point is that average quality material is getting hammered as dreck despite there being a clear differentiation between this average material and dreck. >>
Although there may be a clear differentiation between average material and dreck, demand may be currently low for both average material and dreck.
<< <i>I don't see the middle of the market as being that weak. If you have the right kind of middle of the road material, people are still buying it. >>
What's the right kind of middle-of-the-road (B?) material in your experience?
I do think there is a market for some non-A material as I just saw a coin sell on eBay for over 350% of what it sold for on TT earlier this year. I'm still looking for a larger pattern here.
<< <i>People who have them are not selling because they see people paying C level money for them. Dealers who do have them are asking A money for them and they sit. >>
Are the dealers that have A-level ask prices the same ones that have C-level bid prices? If dealers have inventory that is sitting, I can understand if they don't want to add more.
In the old days, if you had an average $500 coin and it didn't sell, someone would buy it at, say $400.
Now, if you have an average $500 coin and it doesn't sell, many buyers will see it as average, will say "since it's an average coin, it will always be available, and I can buy it later, maybe at a significantly reduced price", and they won't buy it now, at $400 or even lower.
That's what I'm seeing in the market for "average" coins.
An authorized PCGS dealer, and a contributor to the Red Book.
I think today's post is losing ground based on its degree of complication.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
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<< <i>I don't see the middle of the market as being that weak. If you have the right kind of middle of the road material, people are still buying it. I have want lists for people that are 4 and 5 figures for average coins that I can't fill because there is confusion and no consistency as to what a B coin is worth. People who have them are not selling because they see people paying C level money for them. Dealers who do have them are asking A money for them and they sit. >>
I know that when I have tried to sell the coins that I have upgraded in my collection that the dealers offered me low prices. I've put them up on the "buy and sell" areas on the blogs and gotten fair prices and raves for what I sent them. I don't know if the dealers were being greedy or if their markets are that weak, but selling to dealers is not that easy right now.
The market makers at CAC are not perfect - CAC makes mistakes too. CAC's existence has in some ways hurt the market and hurt collectors.
There - happy?
In general, however, CAC has been a good thing for the coin collecting community. Values have gone up for nice material - and collectors own the lion's share of nice material. Profits have fallen for doctored coins and the TPG's have tightened their standards leading to more stability in the grading venue. The constant beat of gradeflation has waned. Overall, these positives far outweigh the isolated negatives above.
<< <i>I'm seeing some of the same things the OP is referring to, but I would describe it differently.
In the old days, if you had an average $500 coin and it didn't sell, someone would buy it at, say $400.
Now, if you have an average $500 coin and it doesn't sell, many buyers will see it as average, will say "since it's an average coin, it will always be available, and I can buy it later, maybe at a significantly reduced price", and they won't buy it now, at $400 or even lower.
That's what I'm seeing in the market for "average" coins. >>
I think what you are describing is a weak market. If a dealer feels that he can sell a piece for a reasonable mark-up he'll buy it. If no not he won't, or he will hem and haul about the price.
<< <i>The market makers at CAC are not perfect - CAC makes mistakes too. CAC's existence has in some ways hurt the market and hurt collectors.
Happy - happy >>
Yes, I am very happy with that response. It is fair and objective.
One solution to this is working with dealers that do offer guarantees and will sell you a coin contingent on it being beaned.
The real problem is a lot of collectors are newish to the market (>2000) and only remember the boom years and got out cheaply from most mistakes and now are starting to be caught with their pants down and having to re-evaluate their own chops and a lot of people thought they had a better eye then they really do because they never felt the pain before. CAC is a symptom and not the cause and until the core collector base improves it is unrealistic for the core of the hobby to keep going up no matter how much the strong money and metal markets prop up expectations. I think a lot of recent gains have been margins of the dealer network more so than increased interest and they are in "bleeding the rock" phase of pricing when I see coins bounce more from dealer to dealer (instead of going off the market) and auction houses increase fees and lower payment options to buyers all while getting nicer to consigners shows that the paradigm has shifted and someone has to be hurting.
I suspect we will find out sooner rather than later.
<< <i>Regarding the issue of paying more for a non-beaned coin, it was expressed there may be hope but no guarantees a coin will be beaned.
One solution to this is working with dealers that do offer guarantees and will sell you a coin contingent on it being beaned. >>
The only question I have about this is whether or not it good for one person to have that level of influence over the coin market. I question that level of influence.
<< <i>Regarding the issue of paying more for a non-beaned coin, it was expressed there may be hope but no guarantees a coin will be beaned.
One solution to this is working with dealers that do offer guarantees and will sell you a coin contingent on it being beaned. >>
Or buy from a dealer who stands behind what they sell and will buy it back no matter what. The only people who can truly guarantee a coin will pass muster are those who control the stickers.
<< <i>
<< <i>Regarding the issue of paying more for a non-beaned coin, it was expressed there may be hope but no guarantees a coin will be beaned.
One solution to this is working with dealers that do offer guarantees and will sell you a coin contingent on it being beaned. >>
Or buy from a dealer who stands behind what they sell and will buy it back no matter what. The only people who can truly guarantee a coin will pass muster are those who control the stickers. >>
Some dealers will send in the coin to be beaned themselves and only deliver it to the customer if it is beaned. In this case, the customer is never in possession of an unbeaned coin so the dealer doesn't have to take the coin back, though dealers that do are always preferred.
<< <i>
<< <i>Regarding the issue of paying more for a non-beaned coin, it was expressed there may be hope but no guarantees a coin will be beaned.
One solution to this is working with dealers that do offer guarantees and will sell you a coin contingent on it being beaned. >>
The only question I have about this is whether or not it good for one person to have that level of influence over the coin market. I question that level of influence. >>
If there is a desire for more participation, perhaps there could be a discussion of expanding the organization.
It's important to remember that it didn't start this way. When this started, it appeared many people weren't interested in participating. Only after it became successful, did some of these questions start to appear.
The primary driver of the market is still inertia and precious metals profits. Coins
that were strong four years ago are still the same coins attracting the money now
but today the money is largely coming from the sale of or the buying and selling of
precious metals.
Of course there's always a grading component now with the TPG's and the specific
group or individuals actually trading plays a role. The "middle market" will recover
when the economy does or when "smart money" moves into lower tier coins.
<< <i>One thing not mentioned, but are dealers facing more competition from collectors who are selling or has that always been something of a constant in the marketplace? >>
I think that's been around for a long time. The trouble is collectors find out that to sell many things at a reasonable price you have end up doing what a dealer does (spend money on advertising, travel, taking tables at shows) so that you end up in the same financial spot as a dealer. Sure you can sell some stuff at a club auction or meeting or on the "buy and sell" area here, but if you want to sell enough to really add to your income, you end up like a dealer.
<< <i>I suspect this market is about neither grading nor the health of the middle class.
The primary driver of the market is still inertia and precious metals profits. Coins
that were strong four years ago are still the same coins attracting the money now
but today the money is largely coming from the sale of or the buying and selling of
precious metals.
Of course there's always a grading component now with the TPG's and the specific
group or individuals actually trading plays a role. The "middle market" will recover
when the economy does or when "smart money" moves into lower tier coins. >>
While I think that is a large part, there are lots of dealers that don't market metals and while they get a bump in sales 2nd hand from the ones that do, sooner or a later they have to sell to collectors that haven't got the full bump of value or you have a dealer network that is detached from the hobby core which is similar to a Ponzi scheme and bound to collapse when the greater fool isn't found.
Truth is most coins value has nothing to do with metal prices and while many dealers paid strong during the boom and after to chase strong innovatory in the after boom boosted by metal revenue, as customers budgets and pools of collectors shrink and dealers & collectors get more selective the classic "margin call" will come and the question is who will be holding the bag?
Yes more checks being written for AARP memberships than ANA Membership is probably true.