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The Pinnacle market report raised some interesting comments on the market
Longacre
Posts: 16,717 ✭✭✭
The market report on the Pinnacle site raised some interesting points about the current bull market. In particular, I found the following comments noteworthy:
1. "Revenue received by a dealer for the sale of some $20 gold pieces is typically reinvested by the dealer into more inventory, thereby increasing demand."
Does anyone know to what extent dealer driven demand is contributing to the bull market? I don't think it accounts for a large percentage of demand, but I can fully understand how markets can be impacted by dealer activity. In fact, I had another thread previously about "unreported" transactions outside of the CCE system (i.e., the hotel room deals) and how those deals can be used to affect prices.
2. In commenting on the plethora of information available to today's collectors, one of the risks cited by the article is "anything that might stifle the amount of accurate information available thereby eroding the confidence level of today's collector-investors."
I think there is such an emphasis on the population reports today by collectors, that there already is a lack of accurate information for a collector/investor because the population reports are so skewed for particular issues. An uninformed collector is already in the dark as to how many coins are in existance. The article even supports this with the statement, " After watching what NGC and PCGS were churning out for 15 years, most dealers felt they had a better grasp as to what issues were truly scarce and what coins were undervalued."
3. Regarding coin investment funds, the article states, "today's existing funds operate a bit differently in that they are "trading-intensive" by nature and utilize market-making strategies. For example, the market for expensive issues such as High-Relief $20 Saints or Pan-Pac $50 Commems used to lack a fungible buy/sell spread. For the last few years, at least one of these funds has established reliable bid and ask values for these issues."
How exactly does a large fund establish a fungible buy/sell spread for a relatively rare issue, and by default, does the establishment of that "fungible" floor/ceiling generate an increase in price (or at least a floor)?
1. "Revenue received by a dealer for the sale of some $20 gold pieces is typically reinvested by the dealer into more inventory, thereby increasing demand."
Does anyone know to what extent dealer driven demand is contributing to the bull market? I don't think it accounts for a large percentage of demand, but I can fully understand how markets can be impacted by dealer activity. In fact, I had another thread previously about "unreported" transactions outside of the CCE system (i.e., the hotel room deals) and how those deals can be used to affect prices.
2. In commenting on the plethora of information available to today's collectors, one of the risks cited by the article is "anything that might stifle the amount of accurate information available thereby eroding the confidence level of today's collector-investors."
I think there is such an emphasis on the population reports today by collectors, that there already is a lack of accurate information for a collector/investor because the population reports are so skewed for particular issues. An uninformed collector is already in the dark as to how many coins are in existance. The article even supports this with the statement, " After watching what NGC and PCGS were churning out for 15 years, most dealers felt they had a better grasp as to what issues were truly scarce and what coins were undervalued."
3. Regarding coin investment funds, the article states, "today's existing funds operate a bit differently in that they are "trading-intensive" by nature and utilize market-making strategies. For example, the market for expensive issues such as High-Relief $20 Saints or Pan-Pac $50 Commems used to lack a fungible buy/sell spread. For the last few years, at least one of these funds has established reliable bid and ask values for these issues."
How exactly does a large fund establish a fungible buy/sell spread for a relatively rare issue, and by default, does the establishment of that "fungible" floor/ceiling generate an increase in price (or at least a floor)?
Always took candy from strangers
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
0
Comments
<< <i>Does anyone know to what extent dealer driven demand is contributing to the bull market? >>
Whenever I go to Long Beach and walk through the thousands of expensive coins I can't help but wonder that too. If it wasn't for the dealers hoarding such large inventories of coins for resale would the prices be as high as they are or would that supply in the hands of true collectors significantly reduce the demand.
What percent of the collecting public goes to national shows every year jetting around the country like major dealers do ? I believe attandance at national shows are down because internet access is going up every year and soon will be as common for people as telephones & tv sets. My best coin that I sold this week would never have been mine or even on my radar if it wasn't for the internet and I think it will greatly reduce the ability of anyone to predict long term bear markets from now on.
Les
<< <i>"Revenue received by a dealer for the sale of some $20 gold pieces is typically reinvested by the dealer into more inventory, thereby increasing demand." >>
I'm not so sure this statement is accurate. Think about it; the dealer ALWAYS has inventory. The dealer is constantly just trying to move inventory. He is, in fact, just a conduet between collectors (investors) who are selling and who are buying.
What drives prices is when more collectors (investors) come to the market OR when more dealers come to the market looking to 'gather" inventory. Otherwise, the market is stable.
"How exactly does a large fund establish a fungible buy/sell spread for a relatively rare issue, and by default, does the establishment of that "fungible" floor/ceiling generate an increase in price (or at least a floor)?"
From my standpoint, High-Relief $20's (as one of my examples) are not very rare. However, they are fairly expensive so it takes significant funds to create and maintain a market-making platform for them.
"Personally, I've never liked the "coin dealer" type and would not have gotten back into the hobby if it weren't for the internet and TPGs"
I respect your statement and I'm sorry you've had a poor experience working with dealers. But I would suggest that the vast majority of collector-investors will always need them. Yes, I may be hopefully-bias, but my firm is betting that the more transparent and effective the information is that we provide you, the better the relationship. Even with all the significant developments (like TPGs) and information available to the average collector-investor, there's just no substitute for "being in the proverbial trenches" everyday.
Partner / Executive VP
Heritage Auctions
I have posted numerous times and places that I believe the value of the coin show to the collector will diminish over time.
IMHO, coin dealers are on the way out, or at best marginalized to only high-end product.
IMO, never have coin dealers been more important, especially for high-end product. The rare coins and those that are high-end for the grade are usually purchased by coin dealers for resale to an established client base. The rest go to ebay, Heritage, etc. to be sold to unsuspecting collectors that are out of the loop and think they are getting a good deal because of the low price. I experienced this first hand when I returned to collecting a few years ago, buying schlock (is that an accepted forum term?) on ebay and Heritage internet auctions, only to wind up with a collection of ugly low-end for the grade coins. A relationship with a trusted coin dealer can save you a lot of money in the long run--most notably by keeping you out of bad coins.
We talk about these as though they are inherently and always a bad thing -- but isn't that only when a person has paid an average- or nice-for-the-grade price for one, or thinks that's what they'll get when they sell?
After all, a low-for-the-grade 65 ought to be a nicer coin than a top-end 64... if everyone understands that coins are not struck, marked, oxidized, and worn to discrete levels, but along an uninterrupted spectrum, we have no problem. A coin is what it is, and it is worth what it is worth.
That said, it is also exactly why the internet can't ever entirely replace shows, dealers, and the need for somebody, whether or not it is you, to be making sight-seen, in-hand transactions.
<< <i>I respect your statement and I'm sorry you've had a poor experience working with dealers. But I would suggest that the vast majority of collector-investors will always need them. Yes, I may be hopefully-bias, but my firm is betting that the more transparent and effective the information is that we provide you, the better the relationship. Even with all the significant developments (like TPGs) and information available to the average collector-investor, there's just no substitute for "being in the proverbial trenches" everyday. >>
Todd, I appreciate your response. From what I hear your firm represents the "good guys" of coin dealers. My experience is admittedly limited, and I may be drawing hasty conclusions.
<< <i>IMO, never have coin dealers been more important, especially for high-end product. The rare coins and those that are high-end for the grade are usually purchased by coin dealers for resale to an established client base. The rest go to ebay, Heritage, etc. to be sold to unsuspecting collectors that are out of the loop and think they are getting a good deal because of the low price. I experienced this first hand when I returned to collecting a few years ago, buying schlock (is that an accepted forum term?) on ebay and Heritage internet auctions, only to wind up with a collection of ugly low-end for the grade coins. A relationship with a trusted coin dealer can save you a lot of money in the long run--most notably by keeping you out of bad coins. >>
RYK,
I agree with you as the value of a good dealer goes way up on high-end product. When a mistake of one grading point can mean thousands or even tens of thousands of dollars, a buyer would be remiss in not relying on a trusted advisor. On the other end of the spectrum, I also agree that unsuspecting collectors have their work cut out for them. However I believe a free market (i.e. ebay, teletrade, heritage), particularly for lower-end coins, is much more efficient and has led to better prices for even the semi-educated. Who knows, having just re-entered the hobby recently myself, I may just be buying "schlock" myself and be ignorant. Ask me again in a few years....
I could be wrong, but I'd guess the vast majority of coin collectors are not in it to "make money", but rather to enjoy the hobby. The value of a coin is exactly what the buyer paid for that coin, regardless of the value assigned to it by a dealer or anyone else. Admittedly, my experience is not in high-end coins. I've yet to commit significant funds to this hobby -- I prefer to "learn" on the cheaper stuff. However, if removing dealers from the lower-end coins leads to a more efficient market and better prices, i.e. more coin for the money, I'm all for it, and I would suggest virtually everyone except the dealers would agree. Markets funadmentally changing, as I would contend the coin market has and continues to as a result of the TPGs and on-line auctions, are always painful to someone. In this case it is the dealers (I'm referring to local dealers, for the most part) that are feeling the pain.
I understand how my response ruffled some feathers, particluarly given the audience on this forum, but I call them how I see them, sometimes to my own detriment. A man's gotta know his limitations.
Who knows, I may strike up a relationship with a trusted coin dealer and my opinion may change. Until then, I will remain skeptical, as taking advise from the one you are purchasing something from is fundamentally a risky proposition, and my experience heretofore has not been good.
Take care...Mike
Speaking for myself, my feathers were not ruffled at all by your comments. I always appeciate professional, candid discussions.
It sounds like your first experiences with coins (and coin dealers) was pre-PCGS/NGC where collector-investors relied on the "totally unbiased" seller to place a grade on the coins. I think it was a brutal time to be a collector.
Regardless, I'm glad you're dabbling in it again. It really can be an enjoyable hobby and a potentially good investment. Even if you choose to continue looking at dealers as playing for the other team, with all the information now available, I think you'll at least discover that today's playing field is much more evenly balanced.
Partner / Executive VP
Heritage Auctions
p.s. the new website looks great.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
maybe not what many want to hear but certainly food for thought and a fresh breath of reality to the usual
hype and poppycqck that you usually see on the net
<< <i>One "What to watch for" that Pinnacle's report did not provide is the level of activity in Registry Sets. I believe this to be a fad, in part, and that a measure of new entries (e.g., number of participants or new coins) into the registry will prove to be an indicator of a market slowdown. I don't know how to measure the data, but somebody does and probably already is. >>
I would be more inclined to believe that the "obsession" for quality is a fad and the registry sets are a symptom of this.
It would be most surprising to see interest in the registry sets wane while superb quality coins continue to command record prices.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
<< <i>I personally am not a fan of the registry sets. Not becuase I cannot afford to collect at that level, but because of the absurd prices that are paid for one grading point higher in order to have better "weighted average" (or whatever) than the next guy. I think it is crazy and it is exactly what the grading services would hope to have happened. >>
Certainly. But to a large extent the grading services themselves are an outgrowth
of the demand for quality. If collectors weren't so concerned with getting the best
they can afford, understand, grade, etc, then there would be little difference in val-
uations from the lowest grades to the highest grades and little need to have coins
graded at all. Certainly few collectors from the '50's would see much point in grading.
There attitude would have been "How many grades do you need? There's worn, good,
excellent, new, and superb. (P, F, XF, U, chU)"
If the grading services hadn't thought of the registry thing first then someone else
would have. Running it themselves allows them a large degree of control which
wouldn't be possible if they were private.
<< <i>1. "Revenue received by a dealer for the sale of some $20 gold pieces is typically reinvested by the dealer into more inventory, thereby increasing demand." >>
From personal experience as a "brick and mortar" storefront coin shop, that was NOT true.
The inventory I "maintained" was a bullion position. I always had bullion in stock. My profits were on the "spread" or "turn." "Rare" coin sales were a miniscule portion of our business.
The "dealer" will not disappear due to the Internet. I used the Internet to sell coins that sat too long in the case. Coin collectors, being inherently....um.....frugal, will rather pay a higher price on eBay than buy it from the dealer face-to-face.
Fact.
The bread and butter of the storefront dealer is the scrap gold that isn't dealt on the Internet. And the BUCKETFULS of 90% silver coins that NEVER quits. And VG dollars. Dateless Buffalo nickels. AG Indian head cents............. all that wonderful stuff.
It fills closets and makes daily trips to the coin shops of America. And is shipped in boxes too dang heavy to lug to the post office....... every DAY.
THAT.... is the romance and excitement of the COIN DEALER.
CLADKING: Well stated. Collector-investors pursuing the highest quality is nothing new. And I think we're already seeing a decline in the "irrational exuberant" bidding that has caused some concern over that past couple years.
TOPSTUF: Please understand that the article is written from our perspective and experience -- specifically as a dealer servicing collector-investors of high-quality / rare date coinage. By our own admission, we operate in a fairly small niche compared to the larger numismatic and precious metal communities.
Partner / Executive VP
Heritage Auctions