Intresting commentary on liquidity
jdimmick
Posts: 9,935 ✭✭✭✭✭
A few months back, I needed to liquidate a couple of coins from my collection, 1) because of a huge loss fronting a dealer on a gold deal that went south, but more importantly to cover some extra medical expenses. I sold three coins, ones that I could live without if I had too:
first one a better date slq PCGS cac MS range
the other seated $ key in high au. pcgs (not cac)
Other was a proof type coin (which is not part of this commentary)
(withholding exact coin/ and dealers for reasons that don't need to be stated for discussion
These exact coins have traded hands between 3-4 different dealers in approx. 4 months time frame.
When I sold these market softness had already taken affect, so the price I received was just a we bit less than I had hoped, but honestly fair. After thinking that the dealer I sold them too, was able to get a retail buyer soon after, because it had disappeared of their site, it shows up on another, and then another and so forth several times, and these are national large size dealers. What made me want to post this, is one of these coins I just saw just last week on a dealers site for sale, is now at anothers and its the 4th different dealer who's had it.
I was thinking at the original time of sale, that maybe I should have held out for just a we bit more, but after seeing this, actually kind of glad I went ahead and let em roll.
There are a few coins I follow at auctions (between 10k-50k) and over the past year or so have noticed this same trend on some other pieces that sold in the past, only to find out they were wholesale traded between dealers over and over.
first one a better date slq PCGS cac MS range
the other seated $ key in high au. pcgs (not cac)
Other was a proof type coin (which is not part of this commentary)
(withholding exact coin/ and dealers for reasons that don't need to be stated for discussion
These exact coins have traded hands between 3-4 different dealers in approx. 4 months time frame.
When I sold these market softness had already taken affect, so the price I received was just a we bit less than I had hoped, but honestly fair. After thinking that the dealer I sold them too, was able to get a retail buyer soon after, because it had disappeared of their site, it shows up on another, and then another and so forth several times, and these are national large size dealers. What made me want to post this, is one of these coins I just saw just last week on a dealers site for sale, is now at anothers and its the 4th different dealer who's had it.
I was thinking at the original time of sale, that maybe I should have held out for just a we bit more, but after seeing this, actually kind of glad I went ahead and let em roll.
There are a few coins I follow at auctions (between 10k-50k) and over the past year or so have noticed this same trend on some other pieces that sold in the past, only to find out they were wholesale traded between dealers over and over.
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I have maintained for quite a while that with so many shows and "hobby dealers" a coin often sells 3-4 times before it ends up in the hands of a collector. the downside --- both the original seller and the end owner lose due to such a market.
Not sure that it can be proved, but I'm confident that high liquidity and active wholesale trading LOWERS the wholesale/retail spread. Liquidity allows dealers to blow out anything that doesn't sell quickly, which allows them to work closer, take more shots, and turn their inventory more often.
In other words, yes, dealers tend to make money when trading coins among themselves, but the margins are (on average) so thin that those cumulative markups don't amount to much. If you doubt that, compare the liquidity and spreads in the coin market to any other collectibles market.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
The coin was a nice slider but had small nasty scratch on the obverse, and I was able to secure it for a little less than AU Bid.
I showed to a dealer friend who BEGGED me for it, and for a $250 profit let him have it. I was concerned it might genny holder anyway, so I was fine with that.
He sold it within 10 min for another $200 profit to another dealer, who then sold it to ANOTHER dealer at the show who was convinced it was 'new' and paid strong $ for it.
Talk about liquidity!
The more desirable the coin, the less time it will float around on the open market, all other things being equal. There is some really good stuff out there that doesn't hit the market but maybe once or twice in a generation. Not all of it is terribly expensive either. Even if the OP's three coins were very nice, they were the ones he figured he "could live without"...... likely not his "really good stuff".
Some dealers have the eye, the knack, and the connections to continually offer top-shelf stuff. I admire them and think that what they're doing is pretty tough. Several collectors-turned-dealers have started their businesses by using their collection as startup capital. It sounds like it's pretty tough to replace that initial inventory. Dealers who find the good stuff are positioned to make money on both the "buy" side and "sell side" of the equation. It seems that most dealers try to make their profit on the "buy" side of large quantities of marginal material, which often results in weak offers from those dealers.
As far as liquidity in collectibles, certain classes of firearms are very liquid. For most collectibles, people simply don't care about liquidity because they purchase for enjoyment, not as part of some mental exercise in "investing."
Even if the OP's three coins were very nice, they were the ones he figured he "could live without"...... likely not his "really good stuff".
--- I didn't really think about it till you posted the line above, but I think the OP was surprised about the coins trading the way they did and maybe they were better than he thought.
Andy, my main point was that the more times a coin trades between dealers the less room there is for the eventual collector who buys it.
While that may be true, I think his point is that the fact that such liquidity exists lessens the wholesale/retails spreads overall.
Latin American Collection
Andy, my main point was that the more times a coin trades between dealers the less room there is for the eventual collector who buys it.
That sounds logical on the surface, but if fails to take a number of things into consideration.
First, like I explained before, the velocity at which a coin trades increases liquidity and thereby reduces margins.
Second, dealers price their coins primarily based on how much they think they can get, not based on cost, and not based on how many hands the coin has been through.
Third, buyers don't care about anything but the coin and the price. You'll never convince them to pay more by telling them that multiple coin dealers had to make a profit.
If none of that makes sense to you, take a look at the stock market, where trading is far more active and market-makers typically work on a small fraction of 1%. In that market, I think we can all agree that there's "less room in there" for the market-makers, and that the concept of there being "less room in there" for investors is almost nonsensical. Why would the coin market be any different?
Edited to say that on the other hand, if you said that the active wholesale market and resultant liquidity creates a situation where it's harder for collectors to buy coins BELOW market, I would have to agree. In fact, it's harder for everyone.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I have maintained for quite a while that with so many shows and "hobby dealers" a coin often sells 3-4 times before it ends up in the hands of a collector. the downside --- both the original seller and the end owner lose due to such a market.
Not sure that it can be proved, but I'm confident that high liquidity and active wholesale trading LOWERS the wholesale/retail spread. Liquidity allows dealers to blow out anything that doesn't sell quickly, which allows them to work closer, take more shots, and turn their inventory more often.
In other words, yes, dealers tend to make money when trading coins among themselves, but the margins are (on average) so thin that those cumulative markups don't amount to much. If you doubt that, compare the liquidity and spreads in the coin market to any other collectibles market.
I agree with the above comment.
ANA 50+ year/Life Member (now "Emeritus")
Author: 3rd Edition of the SampleSlabs book, https://sampleslabs.info/
In selling Real Estate many different Brokers will advertise the same property giving the impression from their websites that the property is in their own inventory. In reality the listing broker encourages this practice since it gives broader exposure to the subject piece of property. I suspect there are many instances where the subject coin has not physically moved but it just appears that way because multiple dealers are marketing it.
So wouldn't all of those dealers have listed the coin/s about the same time then? Seems like from the OP's description that the coin moved from A to B to C etc. Would it also be fair to assume that there is little or no demand for the coin/s at retail pricing?
Do any other collectibles have liquidity that equals or exceeds that of coins?
Antique fishing lures if you know what you are doing. A 1920's Heddon lure in a mint box will move for strong money very quickly online.
Andy, my main point was that the more times a coin trades between dealers the less room there is for the eventual collector who buys it.
Keets - you are assuming that all the dealers made a profit. That is not always the case. I have purchased a coin at a show, realized I made a mistake and sold it for less later that same day.
Not often, but it does happen.
More frequently I have sold coins at break even prices soon after, once I realized that the chance and effort and time needed to properly market it did not justify my holding on to it.
"Seu cabra da peste,
"Sou Mangueira......."
What does First Shot mean for a coin that has been bought and sold probably dozens of times since it was pulled from circulation? It must mean, "First opportunity to buy it from someone who bought it cheap from someone who didn't know the value of what they had, or wanted to sell it fast for whatever they could get"
Last shot, then, must mean, the coin now resides with someone who knows exactly what they have and what it's worth, and can afford to wait for a full-price buyer to come along.
Later, when that full-price buyer runs into hard times, or dies and leaves the nice coins to the widows and orphans, the process can start again?
Liberty: Parent of Science & Industry
"Seu cabra da peste,
"Sou Mangueira......."
First shot means that you are the first one who has a chance to buy a coin that has been off the market for an extended period of time, ie, a fresh coin. The term is pretty straightforward and has been in use in numismatics for quite some time.
+1
What's extended period of time? 15 years or 20 years and longer ?
The OP's coins were "fresh" to each of the successive dealers who "handled" and then "placed" them
Liberty: Parent of Science & Industry
Cutting out the middleman dealers for 21 years.
That said I do like to occasionally buy and sell coins for fun.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
``https://ebay.us/m/KxolR5
I have maintained for quite a while that with so many shows and "hobby dealers" a coin often sells 3-4 times before it ends up in the hands of a collector. the downside --- both the original seller and the end owner lose due to such a market.
I'd disagree with that last part, about the "losers" in this situation.
As a seller, maybe I'd rather take 80% of "full market value" *right now* than spend hours "marketing", and days, weeks, or months more "holding" to*try* to maybe get "all the money".
Similarly, If I am looking for that specific coin, and have finally found it, I don't really care how many times it has traded in the past, I just want to pay the money and have the coin, and then hold onto it and enjoy it in my collection for years and years.
Note that none of what we're talking about applies to "ordinary" coins.
No one cares how "fresh" my white 1885 dollar in MS64 is or isn't, and no one is drooling over it or the opportunity for "first shot" at it.
Liberty: Parent of Science & Industry