Dealers burying coins
Gazes
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I always thought most dealers strived for quick turnover of their inventory. Recently I had one dealer tell me that he will buy certain coins and bury them until he learns someone needs it---sometimes taking up to a decade to sell. I saw another reference to this on a recent thread. Is this common?
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I tend to mostly buy coins I don't mind owning. Needless to say I don't get in a hurry when selling!
Some dealers can't take the idea of not making every last dollar from every coin they sell. This type of dealer does not understand the concept of "opportunity cost". Fortunately, I don't think there are that many dealers of that type anymore as holding coins for the long term is likely to be a mistake in a declining market.
I am not looking for a quick flip.
I want quality unique major error coins with fantastic eye appeal.
I really like these coins so I do not mind if they sit in inventory for awhile, I look at the growing inventory as a business expansion.
Just one clarification to my op. I'm talking about dealers buying coins and not actively listing them for sale but rather waiting until it becomes known the buried coin is wanted. Thx
When I was dealer, my philosophy was to go for the quick turnover. I flipped coins for a 10 to 20 percent mark-up and kept moving. If I made a bad buy that hung around for 6 months or so, which happened a couple of times a year, I'd blow it out wholesale or throw it up on eBay to get rid of it. Money in dead stock is dead money. It's better to recover some of the money to put it work on productive buying and selling.
The only coins I kept were the pieces I put in my collection. When I got an upgrade, the replaced coin went out of sale. Those coins seldom lasted for more than one or two shows.
I also did a lot of want list work. Those coins were sold almost instantly.
When I was dealer, good coins were available. Today it seems like they aren't. Perhaps the fact that would buy and sell just about anything in The Red Book had something to do with that.
The trouble with holding material forever is that your inventory gets stale. People stop coming to your table because you have the same stuff show after show. Show them something new every time, and they visit you regularly. Keeping your inventory fresh is one key to running a successful business.
I do think some small dealers don't run their business very efficiently by burying inventory or holding onto coins for too long. As BillJones pointed out, the inventory gets stale. Where I live there is a small local show every few months and there are a couple of guys that I stop and say hi to and chat with but they have had some of the same coins in their display for years.
I suppose burying a coin hoping that it will become wanted and a buyer will pay a premium is not much different than someone who hoards a certain coin hoping to drive the price up but there is a lot of risk from a financial standpoint IMO especially if the holding period is lengthy.
Just a couple random Sunday thoughts!
K
The way I looked at it is, if I flipped all my inventory for a quick profit, then I would have NO inventory and it would appear that I am not a coin dealer.
I am in a very thin field and it may take awhile for a buyer to find my coins. As a Coin dealer, I believe you "need" a very good inventory of eye popping coins. These are all on the internet on my website.
It reads to me like this is a collector who flips on occasion.
In honor of the memory of Cpl. Michael E. Thompson
It took becoming a dealer to learn that MOST retail customers want dreck.
Birthday coins, proof sets, junk boxes, dip, tubes, and to sell bullion.
It was a two week learning curve for me to stock crap that sells.
Oh, except state quarters!
I couldn't stand that phase.
Of course that came very late in the game for us.
Thank God!!!!!!
afford, yes time is a major problem, especially for me as I am opening up a third business.
It works for me because I only buy and sell in a very thin field. I use to have everything (all types of coins, proof sets, etc) but decided that was not for me and sold it all so that I now only have super eye appealing error coins. Much easier to mange the "time" now with a a smaller much higher quality inventory.
Some dealers do this unintentionally I think... as others mentioned, some dealers refuse to ever take a loss on their mistakes and end up having the coins for way too long. I know one dealer who sets up locally who has some of the same exact slabs in his case that were there nearly 10 years ago!!! Same price as well... maybe they'll sell some day???
But as far as buying coins with the intent to hold them back for awhile, I think that's more rare. But it does happen. As a dealer, if I think a certain area of coins is historically cheap and under the radar, I might start stocking up and hoarding those coins. Especially if I can do so without putting a ton of money into the venture. I wouldn't do that in most cases though as most coins worth holding back take too much capital away that could be used on quicker deals today, but if it's something I know I will eventually be able to sell for a really nice gain (and I don't mind owning them anyways if I end up wrong), then why not.
Michael Kittle Rare Coins --- 1908-S Indian Head Cent Grading Set --- No. 1 1909 Mint Set --- Kittlecoins on Facebook --- Long Beach Table 448
For me there was not much money to be made in "dreck." The stuff took up room in your case, or it sat outside in boxes when the "five finger discount" can come into play. Proof sets are dead. There's no money to be made in them, and if you had them for too long, the bids would go down never to recover. Finally that stuff can get heavy and bulky - not the type of stuff you want to weigh yourself down with at a show.
The closest thing I had to "a junk box" was was a book of Civil War tokens, and some raw circulated classic coins. The Civil War tokens were hand selected by me, and I always made sure I had at least three or four hundred of them in stock at least. I had a wonderful supplier. The margin I made on them more than paid for my table at every show.
The overall net is the important thing. I let some coins go for way less than I paid to get that money working again. I don't look back. Holding on does no good in my opinion...
I absolutely do this as well and at the same time keeping my best coins in inventory. If I ever need quick cash, then of course I'll take a great coin out of inventory and run a 99 cent ebay auction.
As to burying coins, I use to do that quite a bit, but now just occasionally. These would go into my extensive personal collection. The great thing about doing this is when I tighten up my personal collection, the extremely nice outcasts go into business inventory giving my clients access to some really nice material.
We strive to turn our inventory over 6 times a year. Would rather sell coin at "market" and continue to buy new inventory and turn it over.
It especially helps in areas of the market that have declined in the past 10 years. For example, we can buy and sell a lot of Proof Seated type coins, buying each for a little less and selling for a little less rather than being buried in a coin or group of coins we refuse to take a loss on.
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The Reeded Edge
Buying something to save and sell later is investing.It doesn't become inventory until ready for sale.Then you have your eye candy and items that a dealer doesn't care if it sells or not.If someone is willing to overpay it sells.If not the dealer doesn't care it's not taking up that much space in the case.I've been on both sides.I've sold things under cost just to move them but still cleared a good profit on the overall show.Others don't do it that way which is fine.
BST references several
Most astute dealers look at coins first as product. Can they "buy it right," and can they "blow it our" quickly? They'd rather buy generic product and make a quick 25% rather than buy an expensive coin if they don't think they can turn it over quickly. An astute dealer will eat a loss and move on.
Some niche dealers have well to clientele so they don't have to go the route above, but they are the exception.
"Seu cabra da peste,
"Sou Mangueira......."
I'm not a dealer, but list coins on eBay.
They put a nag notice on a couple of my listings:
_eBay note: This listing hasn't had any sales in the last 16 months. Please consider revising it. _
One has 1329 views with 19 watchers.
I guess if I really wanted to sell it, I could lower the price but then I would have to replace it in my type set.
I am a dealer, not in coins. I used to have over 3300 line items in my inventory. Now I am less than 1200. I IS about turns and profit ratio. My rule of thumb is I do not buy if I cannot make 100% return (with a minimum of $10), IE, I buy for $15, sell for $30, or on larger items, must make at least $50 (Buy for $100, sell for $150). I dropped the slow movers and low value, except for stuff that my cost is Zero.
For example, I bought a complete power steering system off a 1965 Mustang for $150. The pump pulley sells for $50, the pump canister sells for $45, The steering gear box sells for $145, the centerlink sells for $100, and the pitman arm sells for $60. $150 nets $400, knock off $60 for ebay and paypal fees, so I net $190 on a $150 investment. However, the small parts that come with it, I do not "value", so they are free. Specialty power steering pump bolts, $5, pump core: $15, power steering ram core: $15, Ram frame mount: $15. None of this had any value to ME when I bought it, so it is pure profit.
By cutting back on the inventory that was slow moving, it freed up time and energy for the fast moving, high margin stuff.
In the example above, everything in that buy was gone in 3 months.
When I worked for Amazon, most of what was manufactured in my facility was sold before being made. Day 1 it went up for sale, then raw inventory (based on sales), was delivered on Day 2, manufactured and shipped on Day 2. That is what drives an $800+ share price for Amazon.
Local dealer here used this philosophy for years, well guess what he is folding up in two months! Cant maintain
I might add, there are coins that have been sitting in there for going on 5yrs +
more impressive I know of certain dealers who would buy certain coins and store them for 5+ years and then magically come up with the "sunshine collection" or the "mountain air collection" etc.
So this became a constant promotion. these dealers used to continuously have "fresh collections" to offer for sale.
You can never tell how long you may have to hold a coin. I made over 100% in a coin sold at full market retail I held only 6 months and skeptical it would go at retail anytime soon. I buy low and sell high. Some coins I have held 10 years before finally getting my price.
I buy low / sell high. 10c on the dollar does not cut it in the coin business. Frankly, I would say it takes at least cost + 40% to make it in the business. Any numismatic business should have a good mix between buying cash (for super deals) and inventory and cut back on buying when inventory gets too high. My offers / bids based on what I can sell a coin for and make a decent profit NOW. Unless I consider the coin or banknote some kind of buying mistake, I will hold it until I get my price. This has paid off for me time after time.
I've heard of dealers, collectors, and investors "putting away" or "putting back" nice, rare, difficult -to-replace and always-in-demand coins, "for later", and I'll admit to doing it myself, for things I enjoy owning and that I'd miss if I sold it, and would almost certainly have to pay more for the next one.
It makes little sense to me to "sit on" common, easy to find, and they're "making" (certifying) more and/or making (producing more of the type) every day. That seems like a losing proposition with lots of opportunity cost involved.
Liberty: Parent of Science & Industry
As a pocket dealer, just my own neighborhood and seldom at that, I sell everything as fast as I can. The only exception is raw coins worth submitting which I will keep until I have enough to make the mail to PCGS, etc.
I do have a "leftover" collection which consists of stuff I don't think worthy of putting up on ebay as there is no profit to do so. Not that I'm buried it just that the market is not right for this stuff and it just goes into the back of the safe for the kids to laugh at when I'm gone. I do have my core CC collection but have not pursued upgrading or such for years. It's basically another kid problem....lol
bob
PS: the stuff I do buy has not seen the light of day for decades for the most part as my community is a senior community......just oldies but goodies. Of course most collected just like those today, common easy to obtain material....pretty boring for the most part.
Some dealers going to 30-40 back of bid on common coins ..little wonder after reading posts
Many years ago when I just started working at Rarcoa, I used to go out and stay at Abe Kosoff's home in Palm Springs. He would sell me collections he had put away. He gave me some very sage advice back then. He said most dealers make the mistake of buying a collection and then sell off the good stuff to pay for deal, and end up with the junk. He said always sell the lowest end off first. Then you should take a few pieces of the best material and put away for the future. Then you have a lot of good material when you go to retire. But always put some good stuff away, not the mountains a low end junk that most B&M's end up within the end. I always thought it made good sense. Kagins used a ten year rule when they bough collections, they wrapped them in brown paper and dated them, taking them out 10 years later. It a fresh supply of material to sell.
Interesting. Your comment about kagins was exactly what I was getting at with my OP. Thanks
This is what I have been doing and it is working out very nicely.
I am not a coin dealer.. as most already know. I was, however, a business professional for many years. Some of the business models above, while perhaps enjoying moderate or occasional success, are counter to good business practice. Inventory turns are critical to a thriving business... good product, moved quickly with good margins. The last business I was in, my two friends and I, took it from $33 million annually to $145 million annually in 17 years...That is good business. Cheers, RickO
As others have mentioned, anyone financially literate will tell you it's about cash flow and inventory turnover - in any business.
Someone sitting on an item to get the desired price in 10 years doesn't realize that they have either achieved a subpar return, or possibly lost money by the long holding period.
I look at my inventory and constantly designate 60 coins or so the A team and don't sell them until make 50-100 pct.
The junk / low end no hesitation to occasionally blow out if not sell at retail after a period of time,
If estate pickup blowout junk immediately bc getting 2x my cost anyhow.
I think the OP is referring to high profile or thinly traded coins for instance the 1913 liberty nickels...
Coin Club Benefit auctions ..... View the Lots
Which coins ?
``https://ebay.us/m/KxolR5
I think a lot of Dealers look at their holding as "their collection" and accordingly enjoy the idea that certain coins are fun to look at so they are kept around. If there's an expectation that a certain series might be going up in the future, that's a consideration too I'd think.
When I was a full-time dealer, I bought whatever I thought I could make at least 25% in a quick flip, or if I didn't think I could move it immediately, my number was 50%.
But some of the above posters are absolutely correct: I learned the hard way when buying collections. I used to sell the gemmy stuff first and as indicated, ended up with several piles of poopoo from every collection.
But then I got a guy who bought all the poopoo and I turned that crap first and then bought even better stuff.
It's so much more liberating when you get rid of the crap first instead of having it all over the place.
Where were you guys 30 years ago???
Hell, I probably wouldn't have listened anyway.
You are correct. Although it could just be a top pop in a series. Doesn't have to be a famous rarity
Interesting to hear everyone's take on this.
Click on this link to see my ebay listings.
Even when I made fair offers to the public to buy their "poo-poo" they still wouldn't sell it to me. They thought they had stuff from King's Soloman's mines....and you couldn't convince them different. In the end, it was just easier to buy stuff from dealers.
This is so very true.
Buying a collection--a true collection, not merely an accumulation of poop from a non or casual collector, is a lot easier. By that time the collector has usually realized what sinks and what floats.
All true.......When smoeone would come in the shop with three Morgan dollars, there was no way I was going to be able to buy them. But when somebody would come in and ask, "do you buy silver dollars", and I would answer "yes", they would sometimes say "can you help me bring them in from the car", and I knew we would make a deal.
I've seen this with key dates and high demand items like certified $50 slugs salted away to be sold after they meet their maker by the family, makes a lot of sense.
Opportunity cost is important. Ditto for inflation.