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Crash senarios...write your own!
291fifth
Posts: 25,201 ✭✭✭✭✭
It is January, 2006, the coin market has been sluggish for several months. Auctions at the "big summer show", while touted as smashing successes, were anything but. A few high profile rarities did very well but anything ordinary was soft...if it sold at all. The overheated Florida housing market is beginning to come apart at the seams. The wild speculation and outrageous mortgage lending practices have left several Florida based coin dealers in serious financial trouble. To make things worse, their bills from the summer auctions are past due and they can't pay because they haven't been able to "flip" the coins they bought.
Offerings of coins on eBay, especially more expensive coins, have increased sharply but few have sold due to high reserves. Collectors are noticing this trend and are scaling back their buying even more as they become uncertain about the state of the market. Collectors who need to sell quickly try their local dealers but find that they have little interest in buying unless the coins are being "given away" so-to-speak.
A major January show is very weak. The auctions do poorly and dealer-to-dealer trading is the worst in years. Unless a dealer has a "sure thing" home for a coin they are not buying... unless the coin is being offered for far,far under "sheet". The trend toward poor public attendance at major shows accelerates and many dealers leave before the weekend even begins.
Pricing guides haven't reflected much in the way of declines due to the way they collect their pricing data but the editors start mentioning trouble in the marketplace in their editorial comments and suggest that downward revisions may be coming soon. The "cat is now out of the bag" and collector buying dries up. Dealer buying is cut back even more.
The few collectors who bother to attend the big February show leave disgusted. They were there to pick up bargains but found only "swill". The truly nice coins have vanished. Dealer display cases are filled with low-end-of grade slabs that nobody wants even at sharp discounts.
A few more months pass. Marginally capitalized dealers begin to fail. Marginal collectors who were only in the hobby because of the profit potential vanish overnight with many dumping their coins for anything they can get. Many eBay coin offerings now have low reserves as dealers and collectors alike try and dump their less desirable coins. Everyone now notices how poorly many coins are doing.
Collectors who were waiting for the downturn are disappointed by the poor quality of what is being offered. This is not what they had been waiting for. The "good stuff" is not being offer to them. Even they cut back on their buying.
Some truly rare coins do change hands in private sales at prices well below their last public selling price. These high quality coins are being bought by the "old money" collectors who were never caught up in the speculative buying in the first place. These are people who know how to preserve and grow their wealth in good times and bad. Few people even know they are collectors. The coins these "old money" collectors buy will not be seen again for many, many years.
LET'S HEAR WHAT SOME OTHER SEERS HAVE TO SAY!
Offerings of coins on eBay, especially more expensive coins, have increased sharply but few have sold due to high reserves. Collectors are noticing this trend and are scaling back their buying even more as they become uncertain about the state of the market. Collectors who need to sell quickly try their local dealers but find that they have little interest in buying unless the coins are being "given away" so-to-speak.
A major January show is very weak. The auctions do poorly and dealer-to-dealer trading is the worst in years. Unless a dealer has a "sure thing" home for a coin they are not buying... unless the coin is being offered for far,far under "sheet". The trend toward poor public attendance at major shows accelerates and many dealers leave before the weekend even begins.
Pricing guides haven't reflected much in the way of declines due to the way they collect their pricing data but the editors start mentioning trouble in the marketplace in their editorial comments and suggest that downward revisions may be coming soon. The "cat is now out of the bag" and collector buying dries up. Dealer buying is cut back even more.
The few collectors who bother to attend the big February show leave disgusted. They were there to pick up bargains but found only "swill". The truly nice coins have vanished. Dealer display cases are filled with low-end-of grade slabs that nobody wants even at sharp discounts.
A few more months pass. Marginally capitalized dealers begin to fail. Marginal collectors who were only in the hobby because of the profit potential vanish overnight with many dumping their coins for anything they can get. Many eBay coin offerings now have low reserves as dealers and collectors alike try and dump their less desirable coins. Everyone now notices how poorly many coins are doing.
Collectors who were waiting for the downturn are disappointed by the poor quality of what is being offered. This is not what they had been waiting for. The "good stuff" is not being offer to them. Even they cut back on their buying.
Some truly rare coins do change hands in private sales at prices well below their last public selling price. These high quality coins are being bought by the "old money" collectors who were never caught up in the speculative buying in the first place. These are people who know how to preserve and grow their wealth in good times and bad. Few people even know they are collectors. The coins these "old money" collectors buy will not be seen again for many, many years.
LET'S HEAR WHAT SOME OTHER SEERS HAVE TO SAY!
All glory is fleeting.
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Comments
Why? Two reason. First, crashes almost always come when they are not anticipated, when they come from out of nowhere, and they most often come after a hugh buildup.
Second, the economy is good. Just this morning I checked the receipts of the US Treasury. Recipts for April were up 57 BILLION vs April of last year. Year to date receipts are up 144 Billion compared to last year. Sure, we are running large deficits, but the problem is not the amount of money coming in. It's the amount going out, but the receipts growth versus last year shows the country continues to do well.
What if the coin market keeps growing with the economy?
Knowledge is the enemy of fear
While I feel for the dealers, as a collector I could care less if the (coin) market crashes, it just means I can complete more sets.
If I need more money, I just go to work; collecting is what I do for fun.
I have no intentions of ever selling any of my coins & my only hope is that one of the kids will continue to work on Dad's collection.
-g
I'd give you the world, just because...
Speak to me of loved ones, favorite places and things, loves lost and gained, tears shed for joy and sorrow, of when I see the sparkle in your eye ...
and the blackness when the dream dies, of lovers, fools, adventurers and kings while I sip my wine and contemplate the Chi.
The deficits are even more huge than can be imagined. Never before have we seen anything like it. The key will be the Feds reaction. When inflation starts to heat up they may slowly raise rates, allow heavy inflation and the market will still have a good leg before it pulls back
OR
move rates up rapidly and "choke" inflation and in the process "pop" the real estate and coin bubble sending our economy in a sharp downturn.
My guess is they will allow a significant amount of inflation while they "choke" things slowly (not like 1982) resulting in the infamous "stagflation". Again, the only question still open is "WHEN?"
This is not some "doomsday" scenario although it may be that way for those who lose thier jobs/homes etc.
It will be the price we must pay for failure to get control of our economy and our deficit problems. Just part of the cycle which of course will see the upside again someday. If you plan to hold for 20 years then it won't even be an issue.
2. Oil jumps past $100/barrel within weeks.
3. Interest rates spike to 8% and then 10% within months.
4. Real estate values plummet.
5. Foreclosures, defaults and bankruptcies go ballistic.
6. Coin newcomers head for the exits.
7. Dealers heavy in inventory are sucked into the vortex.
8. Prices in the Blue Sheet are suddenly wildly high.
By the way, I live on the central Florida coast and the real estate market is very hot. I agree that the deficit is going to impact rates, and that should have downward influence on mortgage rates and the real estate market. If you own a home and are not mortgaged heavily, those events should have little or no impact on your financial condition.