Dealers and flippers, what is your strategy for taking a loss?
MGLICKER
Posts: 7,995 ✭✭✭
We have all overpaid for a coin. Once you realize that you will undoubtedly get stuck for a loss, what is your strategy?
A. Leave it in the case or on Ebay at a winning price until the next Epoch (or someone buys it)!
B. Dump it as soon as possible and get the loss behind you!
C. Let it age for a few months until the blundered buy is forgotten and take the loss then!
D. Wait until you have a super good month, and sell off the losers when the sting will be lessened by the success!
E. Give it to your wife for Valentines Day!
F. Other!
A. Leave it in the case or on Ebay at a winning price until the next Epoch (or someone buys it)!
B. Dump it as soon as possible and get the loss behind you!
C. Let it age for a few months until the blundered buy is forgotten and take the loss then!
D. Wait until you have a super good month, and sell off the losers when the sting will be lessened by the success!
E. Give it to your wife for Valentines Day!
F. Other!
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Hoard the keys.
But I know lots of dealers that would rather hang onto a coin they know they overpaid for, hoping that one day some fool will come along and buy him out of it.
RAD#306
On the other hand, if I make a mistake on the quality of the coin, I usually can't wait to dump it, even for a loss.
Doggedly collecting coins of the Central American Republic.
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<< <i>I've never overpaid for anything, how is it possible to pay more than your willing to pay? >>
Lots of coins, grades, holders and stickers. In a thin margin business, one occasionally pays too much for a coin or three.
Have the money available for the next good deal to come your way.
Partner @Gold Hill Coin
sometimes waiting only makes it worse, others waiting may have a slight uptick to make it less worse. it is positional.
but the idea is to sell as soon as practical.
<< <i>take the loss and move on >>
Good advice, but I prefer to let them simmer for a while.
A few have been simmering for a couple years.
Seriously though, sometimes it takes a bit to realize the market changed or i just flat out priced it wrong. It usually comes down to how bad I need the money for other items or how bad of a mistake it was. If it was just a small pricing error I may take offers until one breaks me even or minimizes the loss. But if it is something bigger like I missed a grade or coin came back cleaned, I just get out from under it as soon as possible.
Sometimes things just take a while to sell even when they are priced reasonably.
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While I really like coins and currency, I regard Numismatics as a long term hold. Sooner or later I get my price.
As far as mistakes I let them accumulate until I either dump or dip / resubmit.
<< <i>My cost has nothing to do with my decision to sell the coin or to keep it.
On the other hand, if I make a mistake on the quality of the coin, I usually can't wait to dump it, even for a loss. >>
Best answer so far.
“In matters of style, swim with the current; in matters of principle, stand like a rock." - Thomas Jefferson
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For example, you overpaid for a few coins, but another coin in your collection increased in value. So, overall, you're still ahead.
A local dealer of mine bought a slabbed MS65 seated dime for $1200 back at the 2003 pre-ANA show from a friend of mine. The coin has since sat in inventory with the same asking price of $1500.
Today that coin is worth at best $500-$550 as the coin has turned in the holder exhibiting ugly dip residue. Over 10 years with one's money tied up while the market only moved lower on you. Makes
no sense to me.
Liberty: Parent of Science & Industry
I never wanted to take the loss though. I held onto it for a year and it cut deep everytime I thought about it, I even isolated it from the rest of my collection.
Finally a year later, I decided I was going to get rid of the coin once and for all. I listed it at $0.99 with a BIN of $350. I fully expected to take a loss... but someone bought it for $350 an hour after I had listed it. Couldn't believe my luck.
The most embarrassing part of it all? Right after it sold, i thought - damn, that was actually a pretty cool coin.
The good part of the story is that I have become much more disciplined in my buying, Less compulsion and more diligence. The way I look at it now, if I buy a coin, I have already lost money. I might as well hold it long term and enjoy it.
Tyler
<< <i>Personally I have always found it easier to sell coins for less than I paid... >>
I love this response. Well done sir.
<< <i>I bought an error coin for $200 on Heritage a couple years back - my first coin I had ever bought from them. I liked the coin, but I thought I overpaid by about $100, and I realized that I'd have to take a big lose if I wanted to sell it in the future. The coin seemed to get uglier and uglier in my mind.
I never wanted to take the loss though. I held onto it for a year and it cut deep everytime I thought about it, I even isolated it from the rest of my collection.
Finally a year later, I decided I was going to get rid of the coin once and for all. I listed it at $0.99 with a BIN of $350. I fully expected to take a loss... but someone bought it for $350 an hour after I had listed it. Couldn't believe my luck.
The most embarrassing part of it all? Right after it sold, i thought - damn, that was actually a pretty cool coin.
.. And that is the germ of an idea for an economic psychology experiment.
"Everything is on its way to somewhere. Everything." - George Malley, Phenomenon
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"D. Wait until you have a super good month, and sell off the losers when the sting will be lessened by the success!"
I usually put it in a lot so it's washed with the profit from other items...
But the other options make sense, depending on the item and circumstances.
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<< <i>Personally I have always found it easier to sell coins for less than I paid... >>
Latin American Collection
My attitude was let it sit in the case for a while, but if it wasn't get any action, blow it out and move on. Sometimes I used eBay; other times a another dealer got a bargain.
Some dealers hold on to dead stock forever. That just ties up your capital for no good reason, other than perhaps you pride.
But when I started selling I was a little surprised to find that I learned quickly not to try to get an unreasonable price for anything. Some prices had gone down, some had gone up, and some I paid too much for. Somehow I had no problem selling some for less if that was their true value.
Successful BST deals with mustangt and jesbroken. Now EVERYTHING is for sale.
I know a couple of dealers down here that will hold it until they make a profit no matter how long it takes.
For example : if they buy a coin at 100 bucks, value drops to around 75 while in their possession , they will hold out for the 105 for years and years.
some of these same dealers I am referring too have coins in their case that are approaching 3-4 year s and longer
My record on picking winners was fairly decent, so the few bad deals were quickly liquidated and the money turned back into more profitable ventures.
Holding on just kills you on the opportunity cost of the tied up money IMHO
I see no shift in this dynamic in the next 6 months (or much longer). My guess is I lost about $15K overall. The losses were already built in by the market shift. Like MrE, my cost is, at best, only marginally relevant.
Instead of the opportunity cost incurred by $200K of dead inventory, I chose to look at the marginal utility of $185K cash in the current market environment.
From a Heritage sale about 5 months ago, I paid $850 or so for an MS64 NM 25c (would have paid $1200) and it worked the first time at PCGS. No bean. No argument. One hairline and no fun to look at. MS65 CDN is about $2750. How should I figure it? On cost? I got $2150 and could have gotten maybe $2300 if I'd waited longer. Maybe, and maybe much longer. I also sold two other coins (another NM 25c and an 53 WA 10c, both 64's) that didn't work, and of similar cost and upside from the same sale. Might have made another $200 on the pair if I'd waited longer, but, while they were prettier than the coin that worked. I would have lost $100 a coin to sell them if I could. That's the market today. I've made stupid money on coins I'm in no way in love with, and teeth-gnashing losses on coins I've like a lot.
People in "the real world", like Lakesammmannnaannanann's (er, Tim's) friends, would think I'm nuts just considering this stuff, let alone putting money into it. I have a friend with a civil service pension of over $75K who doesn't have much of a clue at all about what capital gains are. I have friends who own retail businesses and could skim a bit, but they mostly feel safe owning index funds.
My accountant doesn't care about my stories. Neither, in my own one-man operation, does my CFO. My psychotherapist friends think I'm doing a good job of channeling my aggressions through rational use of my obsessive-compulsive qualities, even if I am occasionally grandiose. That crowd likes index funds too.
Wednesday night, I went to MrE's house, was greeted at the door with a glass of Cabernet, played with the puppies, and then bought Andy dinner in return for an antique (or so he called it) tensor lamp. My osso bucco was only adequate. I knew I was in trouble when it wasn't served with a marrow spoon. Last night I lost $2700 on a coin in Laurie's auction. Wouldn't have lost as much if I'd taken a smaller loss sooner, not that I didn't try. The best coin is a sold coin. The best loss is a fast loss. Last night's Thai food was pretty good.
I hate losing money, who don't, but "it is what it is". The one sure thing you can bet on right now is that there is no sure thing, especially in a market with downward momentum, much of which has very little to do with any "Pogue effect".
I've got a cute picture of me with Esmeralda and Sylvester. The kids have likely already chewed that lamb shank into dust.
This is a mid-high-range wholesale dealer's view. Freshness to the market and shelf-life are important to my own business model. Some of the principles by which I guide such decisions are not as useful for others, especially collectors.
For instance, I have no strategy for taking losses. The recognition that, macro, losses are inevitable is considered in my strategic thinking, whereas taking any specific loss is purely a micro/tactical issue. For a dealer with knowledge and discipline, ego is fine, but pride of ownership is a sin. Better to read the coin dealer's self-help book "How Not to be Your Own Best Customer"
For further exposition on this overall subject, check out my sig-line, do your market research, consider who you are and why you own coins, and then look at your holdings today.
Then sell off the worst 15% of overall value in selections of your most generic/ordinary non-bullion coins in the next six months. No matter what their cost. This is the way many astute grownups gather metrics on their holdings. Yet the numismatic heart does not throb to a metric, nor sometimes answer to or interfere with a budget, and some people buy deliberately non-generic,
so YMMV