Coin Market Dynamics
Pedzola
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Lots of discussions come up around the strength of the market, auction results, etc. I would like to better understand the role of dealers and how they affect pricing.
Every day (often several times a day) I run a series of searches to see if anything new has popped up on ebay or dealer inventories or upcoming auctions.
Most days there is nothing I'm interested in. Sometimes something pops up that I would consider adding to my collection. Unfortunately when I click through to see the item, it seems like about a 90% chance that it's already sold.
I chalk it up to a hot market and that my collecting area must have a lot of competition. Even with a hair trigger you still have to find the coin first. So - oh well, hopefully another widget will pop up for me.
I've seen some evidence lately that leads me to believe that maybe I'm not competing against other collectors - but dealers! Increasingly it seems like the coins I miss by minutes are showing up a few days later in a new dealers inventory at a large markup. What was an interesting coin is now just plain overpriced.
I'm not arguing against the free market - if a dealer sees an arbitrage opportunity good for them I guess. Overpriced for me doesnt mean someone else won't buy it. But it really feels to me like dealers are dealing to each other at the expense of collectors. This includes auctions. I was watching one the other day, the winner got a fair deal I thought! Then it popped up on ebay for a big markup. Just left a sour taste in my mouth. If dealers weren't bidding up prices then maybe coins like the one I was watching (a bit above my budget) would be more accessible to collectors like me.
Increased competition drives up prices, but is this real collector demand or just dealers trying to get inventory? Is it a common business model for a dealer to purchase their inventory the same way their own customers are searching - public auctions and retail websites?
Are there too many dealers?
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This is just supply and demand.... Other than the Mint, coins are not manufactured competitively. Therefore, the market is open to all, and those with funds, get the products. Yes, the little guy suffers. And with the lack of coin shows over the last year, dealers are scrambling for products wherever they can find them. Good luck in your search. Cheers, RickO
Interesting question I have asked my self in different ways over the years. To answer your questions: no there are never too many dealer as there is a built in economic mechanism that self regulates: which is the pain point of the retail buyers to absorb middle transactions and accept losses on the sell side. There is a Vin diagram of loss absorption overlapping by the dealers as well as many have found out the hard way.
The better question IMHO is would the hobby be better off with less middle transactions not applying upward pressure on prices. And to that I say the impact to liquidity aka the 2way market of always having a buyer around the corner would be missed. Yes I have lost out on the ability to collect double eagles (my true love) but having a easy to sell asset has allowed me to not just-hoard like some other hobbies where once you buy it, it’s yours.
11.5$ Southern Dollars, The little “Big Easy” set
Was at the Vegas show a couple weeks ago. This was the first large show we’ve had since Covid. There was one dealer in particular there on setup day with slightly below market prices and a good variety of bullion and type coins.
By the end of set up his 4 full cases were sparse and 3 dealers were cussing at each other and nearly got in a fist fight in front of his table.
You’ve always been competing with dealers for coins in auction and on the floor of every coin show. The difference now is that dealers are stretching for coins that they may not have been willing to in the past because of the lack of available coins on the market. It may cool off and it may not.
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If they're able to make a business (or hobby, if that's their interest) of buying and selling coins, then no. And, hypothetically, if there were too many, how would you propose telling people they're not permitted to buy and sell coins and enforce it?
This has always been the case.
PQ material is almost always going to go for PQ prices before it gets to the end buyer. There is absolutely a TON of competition out there for that kind of material because it is super liquid. A lot of dealers will take lower margins on PQ stuff because they know as soon as they get it in front of the right buyer, it'll move, and given the ease of getting product in front of eyes in the digital world, that is not exactly difficult.
On the contrary, mediocre stuff languishes in inventory for extended periods of time, essentially dead money, so the margins better be substantial. If anything, you should take seeing coins you'd buy showing up for sale with a dealer elsewhere as confirmation of your eye for quality, and get more aggressive with acquiring those pieces, since you know you would be able to resell for a slight profit if you end up deciding not to keep it.
"It's like God, Family, Country, except Sticker, Plastic, Coin."
Dealers bid up prices because they think they can find a buyer, even after marking the price up. Maybe you should be asking "Are there too many collectors?"
Of course you are in competition with dealers. I see regularly and been the end buyer on coins that trade multiple times between dealers for a profit before they reach the final buyer(retail).
Appreciate the insights. Thought I might stir the pot a bit with this thread, but wanted to understand the collective thinking, especially as I know there are a few dealers here!
It feels like inefficiency in the market but I guess I can't put my finger on it exactly.
To be able to buy in an auction and then resell elsewhere for more $$ is because other buyers didnt know about or have access to the original auction, right? If everyone in the market for a coin was participating in the original auction then the highest price would have been found and there would be limited "resalability."
Besides sharing w/new eyeballs other value-adding can be through better pictures, better descriptions I suppose.
Non-ebay auctions were initially pretty intimidating for me. I eventually got used to Heritage and Great Collections, but havent tried stacks, legend, or others yet. So market access and access to info for various customer segments is still a big deal even with great resources like coinfacts and collectors.com and trueview images etc.
Maybe I'm not thinking enough about collector/dealers - those who try to make a buck here and there but are not doing it for a living.
Why couldn't amazon take over the rare coin business? What would make the market work better for collectors?
Should I become a dealer? Would I get any privileged access or other advantage? Or is this a technical arms race like buying from the mint website at noon for a hot release? I need someone to write me a bot or app that constantly scours the internet for new dealer or auction listings and pre-fills my CC info!
Partly I'm looking at panic buying over the past year - toilet paper, lumber, gas, whatever. I hope that this isn't what we're seeing in coins - panic or speculation driving a spiral of increasing prices with no substantive increase in "real" demand (from collectors adding to collections vs reselling).
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This assumes everyone in the market is putting a comparable amount of time into looking for coins to buy and knew about what coins are coming to market. Dealers do this all day long and sometimes, on the weekend, too. How much time do collectors put in? Would you still want to collect coins if you had to put in as much time as dealers do? And if so, how would one manage to do that without giving up their own day job?
But it's not inefficient. Dealers spend thousands of hours developing contacts and getting to know who buys what. They also spend thousands of dollars making themselves visible as buyers/sellers. Now, take them out of the equation. Totally. All that's left is collectors. Where are you going to go when you want to sell your collection? Do you let everybody know you're a coin collector? Most collectors don't. If you don't know who's buying, you can't sell. That sounds inefficient.
Did I mention I look down on retail flippers. Dealers aren’t the same thing as mint flippers and supply constraint opportunists
11.5$ Southern Dollars, The little “Big Easy” set
Did we mention that we don't care?
I see no difference. It's retail arbitrage in either case. We buy on the open market, We sell into a different segment.
I feel for most dealers. I assume they make their money on the buying side of the equation. When a little guy like me has the opportunity to bid online for the same coins they want as inventory that has to really cut into the margins. My guess is that a major auction 30 years ago was attended primarily by dealers. Now my guess is that in any major auction the collectors outnumber dealers 10-1.
I've bought almost exclusively from auctions over the past several years. I RARELY see coins in my area of interest at prices within 20% of what they sell for at a typical auction.
I can tell you I sell a tremendous amount of stuff on ebay and even what seems to me to be strong retail prices on stuff, at least 45% or more goes to dealers, so there still has to be room left. I'm happy, as its was bought right, and brings a lot more than the cheap folks that visit my place locally will pay.
As others have noted, it is actually market efficiency. The coins that you feel are a "good price" are actually probably underpriced. The market corrects this by having someone else buy and apply a markup. On the other end, if a coin is too expensive it sits... and sits... and sits in inventory until the dealer lowers the price.
Yes, if everyone who was interested bid in the original auction the market value would already be established, or possibly even overshot.
You are worried about high markups now? Wait until you see what Amazon charges sellers. 🙂
Without getting political, the money supply has been substantially increased over the past year. Since they aren't making any more 1881 S Morgans, it would be logical to assume that, given the same demand, prices would go up. In actuality, there is also probably increased demand, so you are seeing two factors at once.
Interesting thread, consider the pot stirred 🙂
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Collectors have always been in competition with dealers, now lots of money in the pockets of collectors are pushing prices in auctions way up. And as dealers are having trouble getting new material they are having to outbid those strong bidding collectors, the result is big money for the right coins is being paid by both collectors and dealers.
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Never a slave to one plastic brand will I ever be.
Just to add I don’t care that you don’t care. Whale dung may be as low as stuff gets but it isn’t typically smart enough to look up
11.5$ Southern Dollars, The little “Big Easy” set