A Post That Deserves A Thread of It's Own--Excellent Reading Whether Beginner or Pro
Clankeye
Posts: 3,928 ✭
This post was written by forum member Sunnywood. It is embedded in a thread about Heritage and selling coins at auction. I think it is as interesting and worthy a post as I have read in some time. I would like to post it again as an independent thread so it can be read by as wide an audience as possible. My thanks to Sunnywood for taking the time to write this. --Clankeye
I think it is a mistake to categorically claim that all coins that Heritage handles are low-end. That is nonsense. What is true is that Heritage handles the largest volume. The reason is that many sellers & consignors see that Heritage has the largest reach of any auction house. The high volume of consignments runs from generic product & recycled junk to fabulous rarities and everything in-between. Heritage's use of web technology is awesome and far exceeds that of any other dealer / auction house. Their voluminous catalogs, online catalogs with photos, CD's, internet bidding, Ebay live bidding, mail & fax bidding, & telephone bidding ensure that everyone who wants to sees the coins and has a chance to bid on them. They are also straight-forward & easy to deal with contractually.
Every buyer, whether s/he is a collector or a dealer, needs to be able to identify which coins are worth bidding on. That is where dealer representation can be the most useful. Very few collectors have the market-savvy eyes of a dealer. One possible exception to this is a specialist who has spent years collecting a particular series. Specialsts may have more in-depth knowledge than dealers, especially regarding die varieties. However, the dealer is more likely able to assess the overall market value and salability of the coin.
When a collector buys a coin at auction, if it is a really good one, there is likely to be competitive pressure on it that drives the price up. The consignor who is selling that coin may get the hammer price, but you pay 15% more. So, assuming every coin you buy realizes the price at auction that you paid at auction to buy it, you will automatically lose 15% on every coin you buy. Granted that is still better than most collectibles hobbies (even including art & antiques) where you'd be lucky to get 50% of what you paid, unless you are collecting at the most expensive high-end levels.
On the other hand, when a collector has assembled a large collection within a series, and then consigns them all at once to auction, the market may be saturated, and the prices realized may be LESS than the collector paid. Then his loss will be more than 15%. Conversely, if his collection is truly of the highest quality, and is sold in a hot market, maybe it will realize MORE than he paid ... if s/he is lucky, it will realize at least 15% more, and then the collector will break even. Some might even MAKE money!! This has been happening with certain PCGS Registry series.
Another thing to realize is that TIMING IS EVERYTHING. And, it is impossible to time the coin market unless you are a major promoter who influences market timing. For example, if you bought a coin at a time when no-one else was looking at it, you might actually make money !! I assembled the #1 set of PCGS Indian $2.50 (now #2) on the Registry, and nobody else was even LOOKING at those coins then. Now they are hot as anything, and I sold my set quite comfortably. I bought pop-top MS Lib & shield nickels when nobody cared about them, and sold them at anywhere from 20% to 200% gain. Ditto for patterns. Of course, there were also many I lost money on .. especially the generic coins. The truly fabulous and valuable rarities that I acquired were relatively easy to sell for what I paid, and did not need to be consigned to auction (yes, that means if you wanted to buy them, you would have had to go through the dealers that I consigned them to or sold them to).
What I made money on: coins that were out of favor that came into favor (patterns, Indian $2.50); and pop-top PCGS Registry coins. For example, nickels that I made by taking NGC coins that I bought when Lib & shield nickels were out of favor, conserved them at NCS, and then got them crossed into PCGS holders. Part of my profit was from market stupidity that derives from the Registry program: people suddenly were willing to pay $6000 for better date PCGS MS66 Lib nickels, when I bought the same coins for $900 in NGC MS66 holders. (Why did I submit these coins for conservation? Because PCGS would generally only put white nickels into MS66+ holders ... I gave up on trying with any originally toned coins.)
What I lost money on: generic product, such as NGC coins that would not cross, and were not super rare, and did not have fabulous toning. Example, NGC MS66 Lib nickel, better date, that I paid $1500 for from a dealer, and then realized only $650 at auction (hammer price). Lost money on ordinary coins, with ordinary appearances. Also some fabulous coins that I bought at auction under very competitive circumstances, where because of timing, I could re-create those exact competitive circumstances when selling the coin. Also lost money on some Pop 1/0 coins that had become pop 5/0 by the time I sold them, because those series were getting hot, and everyone was trying hard to make new coins. (Hint: that can't happen when you have true absolute rarity.) Some beautiful coins that I bought from high-end retail dealers didn't perform as well at auction because of timing (for example, you sometimes can't know when you consign a coin that there will end up being five others of that date in the same auction !!!)
What I broke even on: all the truly classic rarities, including proof gold, early proof type, early MS type, early coppers. The more expensive classic coins were more likely to be break-even propositions.
How I did overall: it's not over yet, but I will end up about 7% ahead of where I started on the group that I have sold ... and I consider myself incredibly fortunate to have achieved that result. But if I look ONLY at the coins I sold by auction, I end up down about 15% on those ... gee, no surprise, that's the amount of the buyer's fee !!! My worst losses were on some coins that I truly overpaid for - but these were equally divided between coins that I bought retail & coins that I bought at auction, and they were equally divided between generic junk that I shouldn't have bought (or certainly not at that price), and superb beautiful coins that had intrinsic value, but I still paid too much.
How I sold: the best stuff went through top dealers. If you wanted to buy it, you had to know them. Dealers bought outright what they really wanted, and the rest went on consignment. Other pop-top Registry stuff went directly to Registry collectors who were accessible by e-mail from the PCGS Registry site. Additional pop-top Registry-type material went through specialty dealers to private collectors who do NOT put their sets on the Registry, but who have super sets that could easily beat anything on the PCGS Registry. The rest went by auction. This included many fabulous coins, and pop-top coins, that I didn't find buyers for the other ways. Not everything that went by auction was "junk" & "leftovers." (For example, most of the high-end proof seated dollars in the last few Bowers auctions came from here ...)
Why I sold: some things scared me. I saw pops going up as new coins were being made. I saw some coins made by insiders that should NEVER have been able to get into those holders. It made me feel the whole thing was rigged. I saw more AT coins showing up, and lasered proof gold. I saw the crossover game, the crackout game, the doctoring game, the dipping game, the Registry hype, the ridiculous moderns. I saw coins evolve from one holder to another, and go from dealer to dealer, and go from $15000 auction price to $75000 asking price. I got a sense that the whole thing is such an incredible racket. But mainly I sold for the usual reason: I had been so obsessed, and had put so much money into it, that I couldn't justify it any more !!
Bottom line: you should know & deal with the top dealers if you want to assemble a top collection, or sell one. But you should also pay attention to all the major auctions, and be well-versed in the auction venue as a means of buying and selling. You should spend several years or more looking at the series that you collect before you presume to think that you know what you are looking at !! You should talk to other collectors who share your interest in whatever specialties you collect - sometimes great coins pass from collector to collector if they know each other. You should remember that at every auction there are people with far more experience than you. Some of these people are truly mind-boggling in their talent and experience, either as numismatists, as dealers, or as insider-professionals who buy coins & work them into the right holders.
My advice: don't buy coins to make money. You can't, unless you get lucky, or you work with a truly top seasoned professional. Buy coins to enjoy them, and try to be smart enough not to LOSE too much money. You can't outsmart the coin market any more than the stock market. But you can educate yourself to the point where you don't do stupid things.
Hope this advice is useful to everyone !!
Sunnywood
I think it is a mistake to categorically claim that all coins that Heritage handles are low-end. That is nonsense. What is true is that Heritage handles the largest volume. The reason is that many sellers & consignors see that Heritage has the largest reach of any auction house. The high volume of consignments runs from generic product & recycled junk to fabulous rarities and everything in-between. Heritage's use of web technology is awesome and far exceeds that of any other dealer / auction house. Their voluminous catalogs, online catalogs with photos, CD's, internet bidding, Ebay live bidding, mail & fax bidding, & telephone bidding ensure that everyone who wants to sees the coins and has a chance to bid on them. They are also straight-forward & easy to deal with contractually.
Every buyer, whether s/he is a collector or a dealer, needs to be able to identify which coins are worth bidding on. That is where dealer representation can be the most useful. Very few collectors have the market-savvy eyes of a dealer. One possible exception to this is a specialist who has spent years collecting a particular series. Specialsts may have more in-depth knowledge than dealers, especially regarding die varieties. However, the dealer is more likely able to assess the overall market value and salability of the coin.
When a collector buys a coin at auction, if it is a really good one, there is likely to be competitive pressure on it that drives the price up. The consignor who is selling that coin may get the hammer price, but you pay 15% more. So, assuming every coin you buy realizes the price at auction that you paid at auction to buy it, you will automatically lose 15% on every coin you buy. Granted that is still better than most collectibles hobbies (even including art & antiques) where you'd be lucky to get 50% of what you paid, unless you are collecting at the most expensive high-end levels.
On the other hand, when a collector has assembled a large collection within a series, and then consigns them all at once to auction, the market may be saturated, and the prices realized may be LESS than the collector paid. Then his loss will be more than 15%. Conversely, if his collection is truly of the highest quality, and is sold in a hot market, maybe it will realize MORE than he paid ... if s/he is lucky, it will realize at least 15% more, and then the collector will break even. Some might even MAKE money!! This has been happening with certain PCGS Registry series.
Another thing to realize is that TIMING IS EVERYTHING. And, it is impossible to time the coin market unless you are a major promoter who influences market timing. For example, if you bought a coin at a time when no-one else was looking at it, you might actually make money !! I assembled the #1 set of PCGS Indian $2.50 (now #2) on the Registry, and nobody else was even LOOKING at those coins then. Now they are hot as anything, and I sold my set quite comfortably. I bought pop-top MS Lib & shield nickels when nobody cared about them, and sold them at anywhere from 20% to 200% gain. Ditto for patterns. Of course, there were also many I lost money on .. especially the generic coins. The truly fabulous and valuable rarities that I acquired were relatively easy to sell for what I paid, and did not need to be consigned to auction (yes, that means if you wanted to buy them, you would have had to go through the dealers that I consigned them to or sold them to).
What I made money on: coins that were out of favor that came into favor (patterns, Indian $2.50); and pop-top PCGS Registry coins. For example, nickels that I made by taking NGC coins that I bought when Lib & shield nickels were out of favor, conserved them at NCS, and then got them crossed into PCGS holders. Part of my profit was from market stupidity that derives from the Registry program: people suddenly were willing to pay $6000 for better date PCGS MS66 Lib nickels, when I bought the same coins for $900 in NGC MS66 holders. (Why did I submit these coins for conservation? Because PCGS would generally only put white nickels into MS66+ holders ... I gave up on trying with any originally toned coins.)
What I lost money on: generic product, such as NGC coins that would not cross, and were not super rare, and did not have fabulous toning. Example, NGC MS66 Lib nickel, better date, that I paid $1500 for from a dealer, and then realized only $650 at auction (hammer price). Lost money on ordinary coins, with ordinary appearances. Also some fabulous coins that I bought at auction under very competitive circumstances, where because of timing, I could re-create those exact competitive circumstances when selling the coin. Also lost money on some Pop 1/0 coins that had become pop 5/0 by the time I sold them, because those series were getting hot, and everyone was trying hard to make new coins. (Hint: that can't happen when you have true absolute rarity.) Some beautiful coins that I bought from high-end retail dealers didn't perform as well at auction because of timing (for example, you sometimes can't know when you consign a coin that there will end up being five others of that date in the same auction !!!)
What I broke even on: all the truly classic rarities, including proof gold, early proof type, early MS type, early coppers. The more expensive classic coins were more likely to be break-even propositions.
How I did overall: it's not over yet, but I will end up about 7% ahead of where I started on the group that I have sold ... and I consider myself incredibly fortunate to have achieved that result. But if I look ONLY at the coins I sold by auction, I end up down about 15% on those ... gee, no surprise, that's the amount of the buyer's fee !!! My worst losses were on some coins that I truly overpaid for - but these were equally divided between coins that I bought retail & coins that I bought at auction, and they were equally divided between generic junk that I shouldn't have bought (or certainly not at that price), and superb beautiful coins that had intrinsic value, but I still paid too much.
How I sold: the best stuff went through top dealers. If you wanted to buy it, you had to know them. Dealers bought outright what they really wanted, and the rest went on consignment. Other pop-top Registry stuff went directly to Registry collectors who were accessible by e-mail from the PCGS Registry site. Additional pop-top Registry-type material went through specialty dealers to private collectors who do NOT put their sets on the Registry, but who have super sets that could easily beat anything on the PCGS Registry. The rest went by auction. This included many fabulous coins, and pop-top coins, that I didn't find buyers for the other ways. Not everything that went by auction was "junk" & "leftovers." (For example, most of the high-end proof seated dollars in the last few Bowers auctions came from here ...)
Why I sold: some things scared me. I saw pops going up as new coins were being made. I saw some coins made by insiders that should NEVER have been able to get into those holders. It made me feel the whole thing was rigged. I saw more AT coins showing up, and lasered proof gold. I saw the crossover game, the crackout game, the doctoring game, the dipping game, the Registry hype, the ridiculous moderns. I saw coins evolve from one holder to another, and go from dealer to dealer, and go from $15000 auction price to $75000 asking price. I got a sense that the whole thing is such an incredible racket. But mainly I sold for the usual reason: I had been so obsessed, and had put so much money into it, that I couldn't justify it any more !!
Bottom line: you should know & deal with the top dealers if you want to assemble a top collection, or sell one. But you should also pay attention to all the major auctions, and be well-versed in the auction venue as a means of buying and selling. You should spend several years or more looking at the series that you collect before you presume to think that you know what you are looking at !! You should talk to other collectors who share your interest in whatever specialties you collect - sometimes great coins pass from collector to collector if they know each other. You should remember that at every auction there are people with far more experience than you. Some of these people are truly mind-boggling in their talent and experience, either as numismatists, as dealers, or as insider-professionals who buy coins & work them into the right holders.
My advice: don't buy coins to make money. You can't, unless you get lucky, or you work with a truly top seasoned professional. Buy coins to enjoy them, and try to be smart enough not to LOSE too much money. You can't outsmart the coin market any more than the stock market. But you can educate yourself to the point where you don't do stupid things.
Hope this advice is useful to everyone !!
Sunnywood
Brevity is the soul of wit. --William Shakespeare
0
Comments
Russ, NCNE
Read this in the other thread. Great post, thanks for taking the time to give it a ride on its own.
Cheers,
Bob
We'll use our hands and hearts and if we must we'll use our heads.
The Ludlow Brilliant Collection (1938-64)
Veep
Frank
Didn't someone flame Sunnywood about the time Legend threw the temper tantrum about coins not crossing and he hasn't posted since? I think we lost a great asset and source of information there.
part he bought wisely, dealt with reputable businesses, and likely had some ex-
perience before he started buying. Collectors should sell some material as they
go along so they can learn a little about how to sell and so they know what their
true costs are. New collectors will rarely do so well unless they have the same
factors working in their favor or are collecting in a rising market.
Certainly the soundest advice is to collect and not invest since profit is difficult to
come by in this field.
spelling- clarity
Come on over ... to The Dark Side!
I will print this post as I have printed a couple of his PMs to me.
As my grandfather used to say , " you're sharp as a tack Dougie".
09/07/2006
Hats off to all of you,
Sunnywood
Sunnywood's Rainbow-Toned Morgans (Retired)
Sunnywood's Barber Quarters (Retired)
Come on over ... to The Dark Side!
Doug, would you believe that I didn't even realize you were Sunnywood, until now?
To those who do not know Doug, except through his posts - he is extremely knowledgeable (perhaps even more so than you would know from his contributions here, if you can believe that!) and pleasant in person. He is also a heck of a lot of fun to talk to.
And that guy, Carl - I can't say much bad about him, either.
Just once for the evening/night shift.
Carl
I always tried to keep a low profile as a collector, but the anonymity allowed by the forums afforded me the opportunity to speak out while not compromising my identity or collecting habits. At this late point in the game, I don't mind if you finally put 2 + 2 together !!!
Sunnywood
P.S. I have always held Mark Feld in the highest esteem among dealers. He is polite and reasonable beyond anyone's justifiable expectations!! And has a supremely knowledgeable eye, of course ...
Sunnywood's Rainbow-Toned Morgans (Retired)
Sunnywood's Barber Quarters (Retired)
Here's a warning parable for coin collectors...
Sunnywood is a sharp cat.
Clankeye
realistic view.
I don't collect these type coins, but do like to read the messages here.
I did start to until I discovered ancient coins and have yet to buy anything else other than ancients.
The same can be applied to ancients.
I started collecting ancients coins about 4 years ago and selling just over 2 years.
I thought when I started I could make some good money by buying in bulk or cleaning and selling the unclean ancients.
Soon learned this was a wrong approach.
It is good for building a satisfying collection, but not getting rich.
I am now very happy with the idea that selling the coins will provide me with 2 things.
1. a nice collection that I am very happy with.
2. A thinner wallet. ( okay this part isn't quite so happy,
Breaking even or close to this is what I can expect to happen. And this isn't very easy.
After all, it is about the enjoyment of the coins more so than profiting from it. Speaking only for myself.
Loved your article, quite educational.
Doug
The Faustina Collector
42/92
Stuart
Collect 18th & 19th Century US Type Coins, Silver Dollars, $20 Gold Double Eagles and World Crowns & Talers with High Eye Appeal
"Luck is what happens when Preparation meets Opportunity"
~~~~~~~~~~~~
Coin collecting is not a hobby, it's an obsession !
New Barber Purchases
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)
What Sunnywood points out more clearly than I have seen anywhere else, is that if you are doing everything right; identifying the right coins, buying from the right dealers or auctions, selling at the right time, you are likely to to about break-even or maybe make a little. This speaks volumes towards making certain we are approaching this as a hobby, not a hoped for semi-occupation.
Thanks a whole bunch Sunnywood. No one should be under any assumption about easy money in this hobby.
SUNNYWOOD...
Do you think it is possible for an average collector to come out ahead?----bearing in mind that what you have done requires above average knowledge and you are candid enough to admit many failing moves.
I don't think the average collector should be trying to come out ahead. I don't think anyone, especially the average collector, should be trying to make money on coins, or buying them as an investment. There are probably two ways to make money on coins. One is to be a full-time professional. You have no idea how good some of these guys are. You can't possibly hope to compete with them unless it's your life. The other is to be a dedicated long-term collector who educates herself/himself as much as possible, and buys the best quality that her/his budget allows (without overpaying too much of course !! - although true quality always carries a higher price tag, and it's worth it).
So what the average collector needs to do: be patient, have long-term goals, have a collecting strategy, learn about the coins you are collecting, buy quality, buy certified coins with eye appeal (unless you are in a different market sector, such as ancients, or circulated type). For heavens sake, don't buy anything expensive unless you know what you're doing. Don't buy uncertified coins, or coins in holders other than PCGS or NGC unless you know what you're doing. Oh, and don't ever think you know it all ... unless you're a three-headed dog with the brains of Dave Bowers, Laura Sperber and Jim Halperin !!!!
Well, I could go on and on ... but then you'd probably conclude that I think I know it all
Best,
Sunnywood
Sunnywood's Rainbow-Toned Morgans (Retired)
Sunnywood's Barber Quarters (Retired)