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Coingate, key dates and......................investing.
keets
Posts: 25,351 ✭✭✭✭✭
The fiasco in Ohio seems to have everybody's attention and has subsequently brought the dirty little Numismatic laundry out into the fresh air----------Coin Investment Funds. While I pretend to have no solid proof about anything, logic would dictate that these exist, and probably to a greater degree than we suspect. That's fodder for another day, though. What interests me is the fear of the word "investment" when it relates to Numismatics, particularly to key-date issues. I suppose that those are neat to have just because there aren't many of them available, but it seems at the same time a bit disingenuous to claim that there isn't at least some forethought given to the appreciation of key-dates, appreciation that stays safe in up times and down. The inevitable comparison of coins to stocks always takes place when the discussion of investing in coins comes up, yet the approach of sound stock inevestment is never equally applied to coin investment. I'm certainly no professed expert in much of anything. What would make sense to me in a coin investment plan would be something similar to what would make sense in a stock portfolio------Blue Chippers with a good track record and a manager who can be trusted.
Am I really crazy to think that's stupid and doomed for ruination?? Do key-date collectors really collect key-dates because they "like coins" and aren't concerned about the money tied up in their collection?? Could a properly managed and properly divested personal Coin Fund yield a safe return while having the additional caveat that the hobby provides?? Should I shut up now??
One last thought----If you really think that this scandal won't affect the hobby and prices or that $55 Million plus all the other "funds" haven't helped raise the current market, you're probably whistling past the graveyard. Choose your tune carefully.
Al H.
Am I really crazy to think that's stupid and doomed for ruination?? Do key-date collectors really collect key-dates because they "like coins" and aren't concerned about the money tied up in their collection?? Could a properly managed and properly divested personal Coin Fund yield a safe return while having the additional caveat that the hobby provides?? Should I shut up now??
One last thought----If you really think that this scandal won't affect the hobby and prices or that $55 Million plus all the other "funds" haven't helped raise the current market, you're probably whistling past the graveyard. Choose your tune carefully.
Al H.
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However, I like what you said about key-date coins being similar to 'blue-chip' stocks-- they (almost) always make money, you just have to be patient.
It looks like this is could be the spark that gives numismatics a public black-eye. Isn't that how the other bear markets started?
Good to see you posting again, Keets. I usually enjoy your posts/new topics.
- Marcus Tullius Cicero, 106-43 BC
The thing that concerns me about the huge run-up in prices for key date coins compared to price of more common dates is, where does this leave the collector? Are REAL collectors willing to pay the much higher prices for key date coins, or is it just the speculators who are driving this market? If it's speculators and a lot of collectors are on the sidelines, these prices will not hold and prices will not go up in the immediate future.
Key date coins get their fundamental value from collectors who want to fill every hole in their album. There might be some collectors who want only the rarities, but I can only see that applying to relatively high grade coins. History has shown us that coin markets that are based on "investment" or speculation only, will not hold their value.
One thing about coins that prevents me from putting them in the same investment category as stocks is that they, in themselves, do not do anything. If you buy stock in GE, you own a very, very, very small piece of company, which generates revenue/profit, pays a dividend, and has a very liquid market value. In a heartbeat, I can sell my GE shares at the current quote at a very small cost to me.
If you buy a 1916-D 10c, it sits around and looks pretty (not mine, it's an F-2). Yes, over time, the demand for 1916-D dimes might go up and the push the price up. Also, it can go down, like a stock. While it sits in my album, it does not pay me interest. There is a reasonably liquid market for these, but the frictional costs are much greater than with stocks. I can sell it on ebay (with all of its inherent risks, costs, and pitfalls) or sell it to the dealer, but either way, the coin has to go up in value 10-15% for me to break even. That's assuming I did not overpay for it in the first place.
I like to think of coins as a hobby with a potential for profit but one that pays the dividend of enjoyment. It keeps me from getting out of control, and it helps me sleep better at night.
a coin fund, to my way of thinking, would have to be managed in a very certain way with strict discipline. the hardest part for me, and probably for most of us here, would be the need to seperate the fund from any mental tie to collecting. no allegiance or love of a certain coin(s) and a set price at which to sell, tied to a percentage gain, would be good rules of thumb. right now would be the absolute worst time to begin a venture like that but the one embarked upon by Mr. Noe and the State of Ohio seems as though it was timed well-----at the start of an up cycle. imagine, if you will, having had something in the works around 1993-4. the stock market probably would have beaten it until a couple years ago with recent gains serving a well structured assortment of key-dates evening things out. has anyone done a serious study of such a thing taking into consideration all the variables from 1990 to date?? my hunch is that some have and are reaping the reward even as i punch the keys.
the Ohio Fund doesn't seem to me like it put a whole lot at risk given the $14 Billion Workmens Comp Account. i'd assume they were cautioned about the risk and heeded the advice to limit things to the initial $50 Million. is my calculation correct that the amount is a paltry .3%?? GEEZ, even i can afford that!!
To Bill's point, today I was talking to a few dealers who wondered if there were "any" collectors. Is it all dealer trade? Many key dates have gotten so pricey that "box of 20", and type set collectors are the norm. The high-grade sets builders have to have pretty deep pockets. I hope collectors don't get shut out.
Link to Travers 1994 market analysis on this site.
and it sets us apart from practitioners and consultants. Gregor
Link to gold auction archive.
and it sets us apart from practitioners and consultants. Gregor
no need to pick the concept apart; we could make points for both sides of the discussion which would prove either arguement. here's mine, a rather extreme one------for the same coin, an EF45 sold in August of 1992 at $2860 and another sold in July of 1993 for $4070. short term and long term there will always be losses and there will always be gains. my query was about a well managed and well divested coin fund being safe and profitable. there are no sure things anywhere. look at Enron and the profits it generated up to the fall. there are myriad examples and i think it's important to consider that the appreciation will most always be best at the upper grades, the nicest coins. for the 1838-D $5 that you linked that seems to hold true. upper AU and MS grades perform well. so it would probably go with most other key-date issues.
in a nutshell, my best scenario is a key-date low pop in a high grade with eye appeal. i see nowhere to go but up......................perhaps after a slow ride down, but always back up and usually a little higher each cycle.
Investments either produce income or have the potential of producing income. Rental (& potential rental) real estate, stock and bonds all produce potential or actual income. That make them-- and not coins-- investments. Futures options for pork bellys etc., stock indexes, stock puts, and stock calls are NOT investments--they are either speculation or or used as financial hedges. So are rare coins.
consider diversification. In stocks one can pick those in various sectors with various levels
of profit and growth. They can be chosen for dividend or market sector growth. They can
be picked based on the apparent competence of management or the strenght of their geo-
graphical location. The importance of infrastructure improvements can be guessed at and
the dynamics of their markets and their costs can be weighted.
None of this really applies to coins. There aren't any numbers and the coins don't pay divi-
dends. The only thing that can be guessed at is supply and this has much less importance
to price than does demand. Demand is a complicated interplay of reward, pleasure, cost and
risk on an individual level among a group which is ephemeral and in a state of flux. Human
nature always tends to the perverse and will destroy the best laid plans even in known ar-
enas like the stock market. In coins it is simply unpredictable.
Trying to diversify will usually look very personal; one guy will get MS-66 Morgans and some
key date circs and believe all his bases are covered. Another might by every proof set since
1968 in quantity and believe he's immune from any changes in the market. But almost any
individual will stick with what he knows best even though real diversification in collectibles
would require buying coins from all countries and all eras. It would mean ancients and it would
mean super grade crap. In reality though it wouldn't stop at coins at all because there is no
hard and fast edge to what is a coin and what isn't. Look at the great success of the states
quarter spoons. How about hard times tokens. These could be bought in AU/ Unc for a few
dollars each in 1994 but what do you think they go for now? How about the scarcer ones?
There are many coin like things which vary from fully coins to hardly coins at all. Why even stop
at coins. Collectibles come in and go out of style. The next big thing may be old LP's or 45's,
how do you include these in a well diversified portfolio. You can pick these up by the ton for
next to nothing so a $50,000,000 portfolio would need to spend a significant amount on storage
and security for items with very little current value. Vinyl coins, maybe it's the wave of the future.
Who knows?
Since diversification is essentially impossible would be investors are left with trying to outguess
the future. No one has ever really done this successfully and many of those suspected of it have
been persecuted.
The best bet is to try to have fun and play around as time and resources permit, but never de-
lude yourself into believing that you have to come out ahead or that you have diversified.
What if mintmark collecting goes out of style, with interest only in the date, regardless of mint origin?
Now that's a scary thought.
I believe that certain sets have more long term appeal than others. For example, the Indian cent set, in my opinion, will never lose its popularity. There are only 2 mintmark examples and only the 1877 is expensive in lower grades followed by the 1909-s. With this in mind, if you decide to own one indian cent, it should most definitely be a problem-free 1877. Of course there are other underrated dates, but as usual, the 1877 remains most popular.
TorinoCobra71
<< <i>There goes that fine line again, Do I collect for the hobby or do I collect for future investment......
TorinoCobra71 >>
Ideally, you collect for both reasons. At least I do.