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JCH22
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JCH22
Posts: 344 ✭✭✭✭
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Fairmont?
I think that the above scenario has likely occurred on multiple occasions, though for largely varying sizes of hoards or accumulations.
Several observations (some of which are merely stating the obvious), thoughts and opinions come to mind…
The dealer is acting on behalf of the owner and the auction house is acting on behalf of the dealer.
I see nothing wrong with the auction house referencing pop reports. That’s standard practice and the pop report figures should be updated and reported as more coins are graded.
The emphasis on the rarity of the coins could easily become a thorny issue, however. It depends on what the auction house knows and specifically, how they go about emphasizing the rarity of the coins.
In general, it shouldn’t take a scenario such as this one for market participants to understand that coins can be rarer or more common than pop reports might indicate.
I wouldn’t expect the owner or the dealer to tell the auction house that the coins aren’t as rare as is widely believed and that their populations will be increasing.
I think I’d need more hypothetical specifics regarding precisely what’s known, stated and done by each party before I’d condemn any of the participants for a breach of ethics.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
@MFeld said it better than I could have, the minutiae of the information withheld by whom, and the scale would influence my opinion of ethics.
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The active participants have a responsibility to both the consignor and the bidders. The only reasonable course of action is to keep to the facts, as they come out.
When it comes to the pop reports, there’s a reason people say “finest known” instead of finest. Everyone should already understand that. Could a bag of BU 83-S Morgans come to light? It’s not impossible.
While it might seem that there could be some kind of ethical breach - along the lines of insider trading - I don't really see any actual ethical breaches happening here.
The auction house is completely in the clear - they can only work off of certainties. It's not their obligation to remind everyone that "top pop" is a fluid statistic, prone to changing at the drop of a hat if some new wunderkind coin gets submitted to the TPGs out of the blue. The auction house's job is to achieve maximum prices for the coins consigned to them, and the best way to do that honestly is to describe the rarity by broadly accepted measurements of rarity - including the TPG pop reports.
The dealer's "ethical expectations", in this scenario, are to maximize profits first for their clients, and then for themselves. The dealer in particular is taking a gamble here: a gamble that their own grading skills are indeed on par with the TPGs. It's entirely possible that the not-yet-submitted coins have some hidden flaw unseen by owner or dealer but the TPGs spot it and downgrade or even bodybag the coin accordingly. They might think they're on a "sure thing", but ultimately it would be a gamble. They are also gambling that some other collector isn't also going to come along in the meantime and submit yet another new "top pop" into the mix. They are the one rolling that dice, they ought to reap the rewards if their gamble pays off.
I don't really see the owner of the coins as having any obligation or expectation to "correct" the auction house's descriptions. If the coins being sold are, at time of print, the "top pop", then that should rightly be so described. How would the owner suggest it be otherwise described? "it's top pop but maybe topper pops are waiting in the wings"? The owner, too, is gambling along with the dealer that their other potential "top pops" will indeed make the cut.
Whether any dealer or collection-owner actually does this would depend on whether they perceived that any potential profit gain outweighs whatever increase in TPG submission fees might be incurred by sending in multiple smaller submissions over time instead of a single large submission.
Roman emperor Marcus Aurelius, "Meditations"
Apparently I have been awarded the DPOTD twice.
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tl;dr
seems the pop report is a problem
I've considered this type of thing myself in the past, and here's what I've come up with.
In this case, there is a clear problem with numismatic ethics, mainly on the part of the dealer and owner, and possibly the auction house depending on what they know. While “buyer beware” has some place in coin collecting, ethical behavior means more than just avoiding lies—it means being open and fair. The dealer and owner know that many more of the same “rare” coins will be sold later, yet they allow the auction house to use population reports and claims of rarity that they know are misleading. By not telling buyers that the supply of these coins will grow, they create a false sense of rarity. This may help them make more money in the short term, but it damages trust in the coin market and takes advantage of less informed buyers.
God comes first in everything I do. I’m dedicated to serving Him with my whole life. Coin collecting is just a hobby—but even in that, I seek to honor Him. ✝️
Depends on the ethical standard you use.
I've seen dealers that are incredibly ethical, and other dealers that blatantly cross the line and don't care.
I'd imagine what the OP posted is a dividing line between ethical dealers and unethical ones. I'd imagine it happens far more than we think.
What bothers me is the lack of disclosure years or decades AFTER a hoard has been disbursed.
Witness the continued secrecy regarding details on the 1908 NM Wells Fargo Saint Hoard. While I don't expect names, I think we could know where the original bags came from. Ditto Fairmont.
As far as when a sale is ongoing...I'm sure the dealers and auction house have run it by legal. If any buyer makes his or her purchase conditional on the seller/auction house NOT coming out with a future sale (near-term or ever) of a similarly graded coin, that would probably be something no seller would ever agree to (how could they).
As the Fairmont Collection/Hoard became known, it was clear it was massive. Lots of people didn't bid because they feared being underwater a few months later with more coins coming out. That's fine. What isn't fine is telling the auction house you want a guarantee that there will be no more of a particular year's or mint's $5 Quarter or $10 Half Eagle. Even if they DIDN'T know there were more they had graded ready to bump up the population census, they're simply not going to make that promise.
I believe that Elite Collection did rely on the promise that the existing 1933 Double Eagle would be the only legal 1933 to own. Since he (and Stuart Weitzeman before him) relied on an explicit promise as a condition of purchase, their situations are unique with a coin that has a population census of 1 coin.
Many years ago, probably 1974, I ran into a situation where auction house ethics were seriously weak. I had obtained a group of what were believed at the time to be very rare banknotes from a country on the horn of Africa. I had obtained them from a source in the country at a very low price. I didn't collect notes of that particular country and wanted to sell the notes as quickly as possible. I consigned the notes to an auction house in the UK and specified that the notes were to be sold without reserve. The notes appeared in the auction with high estimates. None of those notes sold as the auction house had, against my specific written instructions, set very high reserves on them. I had also consigned other notes which did sell.
My unsold notes were returned. My payment from the auction of the other notes was also sent along with a listing of the various fees and charges. (This auction house loved fees and charges.) I ended up getting up almost nothing as they charged freely for the notes that did not sell. To say I was not happy was an understatement.
In a few weeks I received a sales brochure from the dealership arm of the auction house. It contained more examples of the same notes I had consigned. Apparently the source in Africa had been offering the supposedly rare notes to many different dealers. The auction house had apparently ignored my instructions to sell without reserve in order to protect its own investment in the notes they had bought from the source in Africa.
THE REST OF THE STORY:
Some months later I was in New York on business at the same time an international coin and currency show was taking place in the city. I went to the show and spotted the booth that represented the auction house. Just in case they were at the show I had brought all of my paperwork regarding the auction with me. I confronted the representative and demanded they refund my fees and charges related to the consignment of the unsold notes. The show was crowded and many other collectors standing nearby were hearing what I had to say to the representative. The representative refunded the fees and charges on the spot. I never did business with that firm again.
Thin market equals significant risk. Unless it’s your business, participate for the enjoyment, eyes wide open.
What ethical obligations does an auction house have if they also own the hoard?
To disclose any known significant change in the population of rare or scarce coins. Not that I would expect it.
@JCH22 said
Is there ever a point where the hobby would find a seller himself has an affirmative ethical obligation to disclose to the buyer (through his agents the auction house, dealer or through other means)? Say if I had stumbled upon a cache of 20 ungraded 1927-D, Double Eagles by way of just one example (and assume that I can accurately grade gem Double Eagles –last assumption is a stretch I concede)? Especially as it relates to the first few purchasers ?
Great question!
To practice impeccably transparent ethics, HERE’s WHAT NO ONE EVER WOULD DO:
Immediately get all 20 coins graded and into the TPS population report, thus sending shockwaves through the coin market and immediately lowering the value of, not only the 20 coins you own, but also every other example of that date in collector and dealer hands.
BUT There’s a better way to prevent SO MANY PEOPLE from suffering genuine financial losses:
Just get the best coin graded, and then sell it.
And then repeat that sporadically over the course of your expected lifetime.
30+ years coin shop experience (ret.) Coins, bullion, currency, scrap & interesting folks. Loved every minute!
My first gold coin was an 1881/0 5$ liberty in EF that the Coin world add proclaimed 2 Known for 550$ about 4-5X the non-varitey in the early 90s. I opened up the most current Redbook and it had the mythical line though where the prices should be listed and 2 Known in the mintage line. That was all the conformation young me needed. Everyone else knew that multiples had been located once people started looking for them.
The trick to buying is know more than the sellers, the trick to selling is know more than the buyers. Ethics comes into play but most transactions use the leverage regardless
11.5$ Southern Dollars, The little “Big Easy” set
Seems too complex of an issue to try mine ethics out of it but see below. Do you have a large number of big ticket raw coins? Get them graded.
Additionally it wb prohibitively expensive for the seller as he would probably be charged time and materials for the person preparing the items for grading shipment. Probably a time and materials fee of $50 per hour.
Population reports are a point in time. Some may be way over bloated (crackouts) anyway so imo throw that out. Like expansion of the universe coin pops increase anyway. It’s simply a non controllable. However current low single digit pops can be used as part of the marketing strategy. Now if the client wants to get the coins graded before selling that is his respondibility.
The key question to me - Did the consignor get payment for everything submitted for sale (less any fees, sell expenses)? So that part of the project is complete. Is there any material unsold? Is there an inventory list of it? What is the game plan remaining going forward? The play call going forward will the dealer offer an amount to acquire it all lump sum offer? Or another run at the auction house route?
From a ethics point of view the client should be advised what remains unsold and then compensated as those items sell.
If raw coins nobody can really know. Like a Martian lander hopefully it wb a smooth landing after the long voyage. What coins are going to grade (or body bagged) or how many is a an unknown. Many estates I have seen were nothing but crap pieces.
The good stuff blown out long ago.
I don’t consign material I don’t own. I have procured collections where the seller took my offer.
As long as the collector got his money from the liquidation from that process see no ethical issue. If individuals lost money from higher pops decreasing CDN bid (speculation) too bad so sad for them. One needs to churn their inventory / move it - just basic RCI strategy. Everybody knows pops are not a static number.
Based on your reply it looks like you somehow missed the question posed by the thread originator. It was: “In the above hypothetical, has the owner, dealer, or auction house committed any breach of numismatic ethics in your view? If so, who/why? Or does caveat emptor control?“
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
You did not read the first sentence did you? Do you count off for spelling too lol.
I did and unfortunately, I read the rest of the off topic ramblings.🫤
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.