A Layman's way to think about cac and their business model
joebb21
Posts: 4,776 ✭✭✭✭✭
Hopefully this helps those who dont understand what cac does. This below is just my interpretation
Imagine cac as a your local dealer in your city.
Every dealer has their own standards for grading and their own perspective on how a coin should look.
Imagine you take your raw coin collection with millions of coins down to this local dealer and the dealer tells you "These are the coins I would buy and these are the ones I wont buy". The ones that he chooses not to buy could be for any number of reasons.
Eye appeal is weak, not high end, large marks in focal areas, old cleaning, coin has been damaged, repaired or some other problem, or possibly they are foreign coins or currency and this dealer only deals in a specific group.
You obviously cannot get upset at the dealer. He is willing to buy hundreds of thousands of coins from you but the others are just not for his clientele. And once again this doesnt mean that your coins are no good-or that they are not valuable. It just means this one dealer does not handle/make a market in these certain coins. You dont need to take offence that he didnt like it-everyone just has a different opinion or look that they like.
Now imagine that John Albanese is your local dealer. You bring him your entire collection and since there are millions of coins in your collection, in order to remember which items he liked and that they dont get mixed back up with your other coins, he puts a little green stickers on the coins that he feels he would like to buy from you. If he really likes the coin he will place a gold sticker on it and pay you alot more because he really really really likes it.
The other items in your collection that he does not put a sticker on does not mean that they are not nice or valuable. It just means that he doesnt have the clientele for such coins as his particular clients are very picky. Sometimes a coin will come through his office for evaluation and he will place a sticker on the coin because he thinks that he has a client for it and he would be willing to buy the coin for this client. If the coin lingers in his inventory for an extended period of time and nobody wants to buy it, then he would take off his sticker and sell the coin for a possible loss as he doesnt want to keep the coin forever and obviously his clients dont like the coin.
Similarly there are coins that will walk into his office and he will think about but decide that he doesnt think is for his clients. His clients are very picky and he has worked for years to learn their preferences. Since he doesnt think he could sell such a coin to his clients for whatever reason, he decides not to place a sticker on it thereby declining to make an offer.
Now it could be that after passing on placing a sticker on a particular coin, a client of his calls him up and says "Hey john I was just offered a beautiful coin i heard you passed on and was wondering why you didnt buy it first and offer it to me?" John can reply "well I know how picky you are and because of this that and the other thing I didnt think you would like it." But I actually do like it the client says- and if you see other such coins with this exact look please buy them for me- so upon reconsideration of the coin john will go ahead and sticker it because he knows he has a client that wants to buy it.
This ultimately is the CAC model. John has very picky clients that he has developed over decades. He knows 99% of the time what coins they are looking for and the particular "look" that his clients like. Therefor, when people send coins to CAC for evaluation, John places a sticker on the coins that he thinks he could sell to his clients. If he doesnt think he could sell them to his clients he does not place a sticker on them. This once again does not mean the non stickered coins are "bad" or "not valuable"- it just means that his particular clients would probably not be interested in such coins because they are so darn picky. Take the non stickered coins to another dealer in another town and he may make offers on everyone of the coins and pay you well for them. John just felt he did not have the clients for those coins and just passed.
John is now no fool. If he is going to spend hours upon hours evaluating millions of coins for his picky clients, he wants to make sure that he is compensated well for his effort. Therefor, if an ms65 morgan dollar is trading in the generic market for approximately $115-$125, John will say I looked at hundreds of thousands of ms65 morgan dollars and I chose for you my client the best of the best. However I want $150 for this coin as I spent hours upon hours weeding out coins you would not like to find this beauty that I know you will like. Same with all coins and all grades.
A cac coin is worth more because John can sell it to his super picky customer whom is willing to pay over generic money to get the coin he so desires. As John knows what his market is, he places certain "bids" or "offers" online to tell all people that these particular coins are ones that his clients are looking for right now and since he has a need for them is willing to pay strong money (over generic looking average price) to fill his orders.
Now dealers hear through the grapevine that some dealer named John Albanese is paying more money than anyone else for certain coins with a certain look. If a coin that they would have been asking $500 for they could now sell it for $600 and increase their margin by another 20% they would love to make such a sale. So they package up their coins and send them to the CAC office for evaluation. On a particular 20 coin submission, 5 get a sticker. This does not mean the other 15 were bad coins-this just means that johns very picky clients would only be interested in those 5 and not the other 15. Oh well- at least they can get another 20% for 5 coins!
The next submission yields 20/20 getting a sticker-score!
Another 3/20
Another 0/20
Another 10/20
All this once again does not mean coins that fail to sticker are not valuable or nice. It just means your local dealer John Albanese does not think he has a particular client for your particular coin and therefor does not make an offer.
Dont take offence once again for coins john doesnt place a sticker. We all have looks that we like and things we are more picky on than others. Same with CAC. They only want to buy coins they know their clients will be willing to pay a premium for.
Now lets all have fun and enjoy our coins 
Comments
Great summary @joebb21, I really like the perspective of "in order to remember which items he liked and that they dont get mixed back up with your other coins, he puts a little green stickers on the coins that he feels he would like to buy from you."
Very well reasoned and thought out, therefore several people will likely jump on and flame you. But, apparently, not yet.
Have to say that this is the first time I've heard of JA or any other dealer removing the bean because a coin doesn't fly out of the case. I've seen a couple that were hard to sell in spite of the bean.
Also never heard of him failing to sticker a deserving coin just because he has no buyer for it, esp. since the lion's share of the coins that he blesses will never be sold by him anyway.
More of the Rick Snow model. Rick though does not have the footprint of a goliath across all classes of non modern numismatics as JA does.
If Analyst is correct, almost every $1000 plus coin at a major auction has been submitted to CAC. That places a virtual scarlet letter on the coins that have not.
In the TPG era collectors have tried to create added value by upgrading and more recently getting a sticker. In the aggregate though, there is no free lunch. If too many submitters convert their old dollar from MS65 to MS66 the price of the 65 collapses. A non CAC'd coin value will suffer whether submitted or not.
Very well thought out. Ultimately I think the concept is short sighted. What happens when John is no longer around?
That will begin the era of old cac stickers vs new cac stickers. Maybe carbon 14 dating will be employed.
I have seen particular coins have their sticker removed because for one reason or another john no longer felt the coin was worth a premium. For example an 1882 50c in pcgs pr64 that is just run of the mill is worth $1050-$1200. The same coin with a cac sticker john will pay $1275-$1300 and sell for some number over that.
If his bid gets hit on this coin for $1275 the first time them great- he now owns it. If nobody buys it from him then his only option will be to auction it or sell it privately for less. If he is posting a Bid for say $1275 for such a coin, it would not specifically make sense to sell it for less than $1275 into the market as he has a bid for a higher number. Lets say he sells it for $1275 into the market (no profit) and another dealer takes a shot to try and make some money. If dealer 2 cannot then sell it for x time he might want to get rid of it. What are his options? Either sell at auction and most likely will lose money, sell directly to another dealer to break even (and repeat original deal), sell to another dealer at a slight loss (john is still bidding $1275 so offering it for $1250 might be enough incentive for another dealer to buy it, or lastly hit johns bid and sell it back for $1275. Using almost all possibilities other than auction, the basic financial best sense is to sell it back to john and break even.
Now John whom used to own this coin and was not able to make money really doesnt want to have to buy such a coin back as it will become stale again and start the ball rolling all over. So he has 2 options. Either lower his bid-thereby lowering the value for all generic date pr64 cac seated half dollars, or removing the sticker and thereby preserving the value of the other 99% of his product. This is the methodology for most valuations and pricing structures. Once something reaches a resistance point that is where the value is capped out. In this case the coin this particular coin is either overpriced (which it would not be as all other pr64 cac seated halves are selling with little resistance at $1300+) or more likely was not really deserving of a sticker to begin with an he made a mistake in stickering it thinking his clients would be interested.
So to preserve the value of his brand he just removes the sticker, sells it into the market (possibly losing 10% or so) and is then able to keep his particular market strong and constant. A small loss to preserve a large market.
In terms of not stickering something that "deserves" to be is a whole other animal. Buying and selling 1901 1c pcgs vg8 cac (value apx $1) is not something John is interested in doing. He does not place bids for such coins as the work involved is not really worth his time. This is the same with hundreds of dealers that do not handle low end common coins. For them they dont feal the cost/benefit ratio is worth the time and therefor they just pass. Pick your large dealer that deals in high end coins and ask them to make offers on low end $1-$2 slabbed coins. They would not be interested. Same with Cac. They ultimately only want to make a market in certain types of coins.
However, some collectors and dealers know how good John's eyes are and want coins for their collection to be viewed with the same level of expertise as John views higher value coins. Remember that time is valuable. Also to be able to scrutinize so many more coins requires other labors to help (accepting packages in house, logging them in, carefully repackaging and shipping out). Therefor CAC will agree to evaluate any persons coins with the same level of scrutiny but will have to charge money for it as now they have to pay extra employees to handle the extra work.
So a sticker on such a lower value coin that john may not have the clients for means "this coin is exactly the type of coin I would be looking for had I been searching for such a date and grade."
Once again this is all my perspective and actual policy could be different.
What's their policy if someone ELSE doesn't like the looks of the coin?
Exercise the guarantee?
Oh wait.
This model is made for a multi-purpose (all still my opinion). The cac idea for one is a business model designed specifically for John's clients. What will happen if John is not around? well his buyers will just have to get their coins from somewhere else. The sticker from a certain perspective was once again designed to identify specific coins that John feels he could sell to his clients at premium prices and therefor he is willing to pay premium bids to get them.
CAC coins will still be identified at some later point as having been viewed by john in some time gone by and having had been the quality that he strove to provide for his picky buyers.
What the market will be for such coins at that point will then be dictated by the market just as pcgs and ngc coins were dictated in the late 80's and 90's (with the idea that certified coins could then be traded more sight unseen as appose to raw coins which needed in hand evaluation).
Thats the whole point. If you do not agree with them then thats fine. Dont buy their product or their coin. Also make sure to look at the coin before you buy it. The sticker is designed to identify coins that are out there to John himself so that if somebody calls him and says I have 100 coins all stickered that are of different denominations and grades he can place a value on the coins immediately as he knows he saw them in the past and knew they were acceptable for his clientele.
I know one thing for sure.
NO ONE can guarantee to buy ANYTHING..... for an unlimited time.
I had a competitor in Stockton who GUARANTEED (on TV no less) to buy back coins at ...either.... grey sheet bid......
OR....get this....
20% per annum appreciation.
FOREVER!
Guess who went out of business under a BIG cloud?
Joebb21, all that makes perfect sense. The one thing that makes CAC supremely different from any of my local B&M's or local vest-pocket dealers in my area, or even national show bourse table holders, is that few or none of them were a founding member of PCGS, the owner of NGC for over 10 years, and now the owner of CAC for 10 years. This person has unique significance within the market. When JA says a coin is not sticker worthy, it bleeds not only into that coin, but the entire market. Even if ALL my local dealers got very fussy and only bought the top 10% of the coins offered to them, it would not affect the overall US market one bit. I could still take my coins out of state and sell them nationally despite a reluctance on local dealers to buy. But now, with JA's influence at the national level....that has swept into the regional and local markets as well. In a way, nearly every dealer has become a mini-JA in their perception of the coin market.
There's no one else doing this stickering thing that has the clout, expertise, and market following of JA. There are significant consequences of the CAC model that JA may have never envisioned. But, they are there and playing out. That's not CAC's problem as they are free to pursue any path they wish. The upper end of the coin market (typically coins worth $250-$500 or more) still has to deal with the consequences. The bifurcation that existed before 2008-2009 is even wider today. Collectors and investors, especially newer ones or those without solid grading skills, see this and gravitate towards the stickered product. CAC really didn't identify anything "new" that wasn't already recognized by the top market players. CAC just brought it all out into public view for everyone to see. And in summary, it's been a way of stating that 40-50% of the higher dollar coin market doesn't measure up to solid for the grade quality. In gem gold where stickers only run about 5-15% on all coins submitted, it's been a tsunami effect.
It's easy to understand the CAC business model. It works, for them, their clients, and their strongest member dealers who market mostly CAC coins. It also has effects on everyone else who aren't in those categories.
I didn't say to AVOID the stickers if you don't agree with needing ACCEPTANCE in order to like your coin.
I can consider CAC to be a negative development in the hobby but still BUY whatever coin I like without anyone ELSE frowning on it for NOT having JA approval.
@joebb21
Very nicely written
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"Now John whom used to own this coin and was not able to make money really doesnt want to have to buy such a coin back as it will become stale again and start the ball rolling all over. So he has 2 options. Either lower his bid-thereby lowering the value for all generic date pr64 cac seated half dollars, or removing the sticker and thereby preserving the value of the other 99% of his product. This is the methodology for most valuations and pricing structures. Once something reaches a resistance point that is where the value is capped out. In this case the coin this particular coin is either overpriced (which it would not be as all other pr64 cac seated halves are selling with little resistance at $1300+) or more likely was not really deserving of a sticker to begin with an he made a mistake in stickering it thinking his clients would be interested.
So to preserve the value of his brand he just removes the sticker, sells it into the market (possibly losing 10% or so) and is then able to keep his particular market strong and constant."
Makes business sense. BUT...There will be plenty of instances when the niche market for a certain type (or grade) of coin drops significantly and CAC dealers will have trouble moving their stickered coins too, unless they accept losses. What happens then? Do stickers come off these because of market conditions? If so, things will get 'curiouser and curiouser' (to paraphrase Alice in Wonderland).
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
No Interest
I know how to grade and look at coins, don't do big ticket material unless MWG, do currency and world coins also. I am not going to pay somebody beyond PCGS for their opinion and will not pay you a premium bc u have s sticker on a coin.
Where can I get some removed stickers?
"""I have seen particular coins have their sticker removed because for one reason or another john no longer felt the coin was worth a premium. For example an 1882 50c in pcgs pr64 that is just run of the mill is worth $1050-$1200. The same coin with a cac sticker john will pay $1275-$1300 and sell for some number over that.
If his bid gets hit on this coin for $1275 the first time them great- he now owns it. If nobody buys it from him then his only option will be to auction it or sell it privately for less. If he is posting a Bid for say $1275 for such a coin, it would not specifically make sense to sell it for less than $1275 into the market as he has a bid for a higher number."""
Now my head is aching. So if JA buys a stickered coin at his bid price and cannot move it, that reason and that reason alone would be enough to remove the sticker? Why not just lower his bid?
The problem with this "Aw, Shucks, I'm just evaluating coins for my own purposes" view of CAC completely ignores the facts that:
So, it's not really just a simple act by a corner store owner. It's much more than that.
(I'm staying out of the "Is that good or bad" discussion. But I don't think we get anywhere by ignoring the totally intentional influence of CAC).
Can I get the condensed version? My ADHD will not allow me to read it.
My dyslexia won't let me type it!
Every coin has a price and value. What that number is gets determined by both the buyer and the seller. Throw in a bunch of these buyers and sellers and we have our market.
If you have a particular coin that the date and grade has been trading in the market for $500: If you price it at $600 it might take longer to sell. Priced at $500 it should sell relatively quickly. Price it at $400 and it should sell immediately.
If you need something more specific lets use a gold eagle. Price it at $1350 ($100 over spot) it could take awhile to sell. Price it at spot ($1250) and it should sell pretty quickly. Price it at $100 back of spot ($1150) and it should sell immediately.
If a cac pr64 seated half is trading wholesale consistently at the $1300 range we can assume thats basil market value (similar to an ounce of gold selling for melt). If you mark it up say 5% and it doesnt sell then that means either the price is too high for the type (which we stated is not the case since they are selling consistently in that range as a type coin) or else the market is not viewing this particular piece as what is stated on the holder.
If 10 pr64 cac seated halves get bought by cac and 9 sell right away while 1 remains over and then another 10 are bought and those all sell right away with the original 1 still lingering, that to me would says that this is not a pricing issue but a quality issue.
It could just be that on the given wednesday that CAC happened to look at this coin John was on the fence because it was borederline cac quality and he gave it the sticker. He does make mistakes. As its shown that his clients continue to pass over this coin, the solution is to remove the sticker and sell the coin into the market thereby ensuring that next time this coin sells (say at a public auction) that it does not sell significantly under the cac bid giving the impression that a cac pr64 seated half is no longer worth the $1300.
Remove a rotting apple from the barrel you preserve the quality of the other apples.
Let the rotten apple stay in the barrel and the quality of the rest of the barrel becomes diminished.
What if, Joebb21, it is merely unattractively toned. Even though JA thought the grade to be proper but the coin was less attractive to the general market, would the sticker still be removed?
I can think of two recently auctioned examples of CAC'd Morgans that realized significantly lower prices then their bright white counterparts.
So where is this coin that won't sell? Who is getting and returning it?
Is it sitting in JA's office waiting to have its sticker removed?
How did it get the sticker in the first place?
Gosh, it must have been in error.
What will happen is completely up to JA. There have been mistakes of coins that later turned in holders, john missed some type of tooling, or otherwise was decided that the coin should not have stickered in the first place but because cac is fallible they buy back the coin at current market and remove the sticker.
Unattractively toned coins are really up to the individual. If you dont like it does not mean the next person will not like it.
I know nothing about how many times stickers have been removed or what the actual protocol is. I am only speculating but feel that I am probably correct
100!
(A preemptive strike, since I was beaten to the punch last time.
)
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
There was a $5 liberty in a pcgs ms64 cac holder at my local parsippany show that was covered in putty. It looked absolutely hideous. The dealer did not even realize that the funky look was from putty. I advised him to send the coin to cac and have them buy it off the market. He agreed and cac bought the coin. They removed the sticker and I cant tell you for sure what they did with the coin next but the cert number was definitely removed from the database.
This is but one story of a coin I know where a sticker was removed.
What happens to a coin like this? I am a fan of toners and kind of like the look. The market though did not and it sold for $376 at Heritage. Nice white shiny ones bring $500 plus. A de stickering candidate?
not at all. that coin still trades well within the value of an ms66 specimen
@joebb21.....Interesting and well thought out perspective..... While not 'literally' the business model, it certainly approximates the situation. Of course, CAC may not have been possible without JA - specifically - due to his experience, skill and reputation. Cheers, RickO
I think this was a great explanation of how the CAC market works. I think If people understand that CAC puts stickers on coins they like and are willing to buy(of course based in the standards they publicize A,B&C coins) and won't put stickers on coins they don't like(whether for the grade,problem or just the particular look) I think it will stabilize the whole market.
I think that the concern by some that CAC can harm the market are valid, but only because many don't really understand his business model as you explained it. Once you start to realize that he is not perfect and that he only stickers coins that he likesand is willing to buy at his bid, some of the boogeyman arguement should go away.
My Ebay Store
Superb point TommyType. They could have simply recorded serial numbers and not placed stickers on coins they liked...and kept that a secret at CAC. The stickers are really just a quick identifier so they readily stick out for sale on the bourse floor. Then again, there would also be buyers who would make it a point to look up every potential purchase on the CAC website so see if the coin was there.
Without being able to verify the cert# at CAC's website, they would leave an opening for fraud.
Sooner or later, someone will try to copy, the existing sticker. and place it on a non approved coin.
Without the cert# lookup, they could stick it on any coin holder. Now they have to also fake the slab and Cert# of an existing coin.
I can hardly wait for the day that they decide to revamp the sticker for one with more security features. Then we will have a gen 1 sticker collector market vs the current gen sticker. Just think how many more CAC discussion threads there will be
I'm for PLUS stickers. Yep, there's the ticket.
Interesting, after all these years so many people speculating on what the CAC business model is. And so many different speculations. Meanwhile so many come on here and say what JOHN REALLY means and thinks. I have no doubt he speaks for himself. And has on the website.
CAC seems like it means what you want it to mean. Those people in the know sure let everybody run with it. If it is positive of course.
Just to clarify this. I am not at all saying this is for sure the business model. I have 0 inside knowledge and never spoke to JA specifically about this. This thread was designed more to try and explain to people why not having a cac sticker does not mean the coin is not valuable as well as saying something is wrong with a coin or is not accurately graded.
Any coin that you see graded ms65 very well may grade ms65 99/100 times it is submitted and still not sticker. Saying a coin is no good because it is not stickered removes over 50% of coins out there. In fact, There are many coins that no matter what grade is given to it will never sticker.
There are many proof coins for example (actually ms as well) that the surfaces are almost perfect (especially for the grade) but the coin is just TOO original (toning is 100% natural but dark and unattractive). Such a coin will not ever sticker even though the surface quality could easily be 1-2 grades higher than the stated slab grade. If the eye appeal is not also there then no sticker. Now determining eye appeal and what he will sticker I leave to the cac team
""""Just to clarify this. I am not at all saying this is for sure the business model. I have 0 inside knowledge and never spoke to JA specifically about this. This thread was designed more to try and explain to people why not having a cac sticker does not mean the coin is not valuable as well as saying something is wrong with a coin or is not accurately graded.""""
Was the assertion that JA decertifies coins based on poor market demand for a given coin speculation as well?
Poor market demand is not the correct way of stating this. John can and has made mistakes in giving coins a sticker when theoretically they should not have. This could be from overlooking certain faults (tooling, cleaning,some form of damage or doctoring) Keep in mind he is human. Other than those- if a coin somehow was given a sticker and it has poor eye appeal the ability and decision to remove a sticker is up to them. Does it happen often? I presume not. Has it ever happened? I know yes
Fair enough, although my post was not directed to just you. My post is from years of observation on this issue.
joebb21 - it was great meeting you at Central States and talking coins.
This was a good and thought out thread on CAC.....enjoyed.
Good explanation, even to some little known anecdotal nuances. I quibble on the topic of "would not sell" since I have only seen coins de-stickered that John did not want sold with his imprimatur because he missed a critical problem that had been subsequently pointed out.
In 2010, I bought an 1892-S $1 MS65 PCGS in FUN Platinum Night for $115,000 when CDN was 95K in MS64 173K in MS65. Never expected it to sticker, but I showed it to JA for advice on the surface texture beneath the non-pretty, slightly murky toning. With the stated intent to crack out and dip. Because I already knew, as did JA, that six-figure Morgan collectors want white. He related that if the coin was an 1892-S 50c, he would sticker it as an MS66 because type collectors showed their appreciation for nice original toning by paying top dollar. Very knowledgeable about what's market-acceptable because he is a two-way player in many market segments. He expressed appreciation for my restraint in using the "jaws of life" and referenced PT Barnum on "this way to the egress"
I've seen CAC take the sticker off a 1793 H1c MS63BN PCGS for a $20,000 hickey when a hairline was missed. Another time, $2500 for the same on a 1908 $5 PR66 NGC. I likely send JA a coin a year I see in an auction that's just "wrong". Never had a question, just a check.
A few months ago, I sent him a 1920 10c MS66FB from a HA Internet sale. Big mark behind the eye. Got a fast check as usual. A few weeks later, a submission package came back to me with a 1935-D 10c MS65FB that had a big red dot over most of the face containing the word "scratch" and an arrow pointing to that now-obvious shiny line.