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“Liquidity is another word for confidence”—should we look to dealers’ activities to see if the bull
Longacre
Posts: 16,717 ✭✭✭
I was taking a look at a financial program on TV today, and there was a report about the sudden change in liquidity in the markets as a result of the credit crisis. The talking head quoted Alan Greenspan, who supposedly said, “liquidity is another word for confidence.”
Given the raging bull market in coins, and assuming that this Greenspan quote is true, who should we look to to determine when the bull market is beginning to end? Should we look to dealers’ liquidity, in terms of their ability to pay up front for coins in anticipation of selling them to collectors? Should we look to collectors’ liquidity, in terms of available cash for discretionary items, like coins? Should we look to bid prices to see if there is a contraction in pricing among particular grades, dates, and series? What do you think?
Given the raging bull market in coins, and assuming that this Greenspan quote is true, who should we look to to determine when the bull market is beginning to end? Should we look to dealers’ liquidity, in terms of their ability to pay up front for coins in anticipation of selling them to collectors? Should we look to collectors’ liquidity, in terms of available cash for discretionary items, like coins? Should we look to bid prices to see if there is a contraction in pricing among particular grades, dates, and series? What do you think?
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)
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Comments
It is another word for confidence on the part of dealers or market makers.
However, numismatics will always be a hobby. If there are not enough appreciative collectors, then the bulk of the inventory has to go to people (dealers or investors) who will hold the material until a new group appears.
Collectors, for the most part, will only buy a single example of what their collection calls for, whether it is just a date, or even if it is a die state. All they need is just one.
If dealers get overstocked with unsaleable material, then they have to lower prices to attract buyers. If they lower their sell prices, then, of course, they lower their buy prices.
Market makers are necessary in all markets where there is more supply than there is demand.
I firmly believe in numismatics as the world's greatest hobby, but recognize that this is a luxury and without collectors, we can all spend/melt our collections/inventories.
eBaystore
"War is Peace, Freedom is Slavery, Ignorance is Strength." -- George Orwell
The Fed should hire shrinks instead of economists.
this is exactly correct............however when refering to coins it means that as a market skrinks .....meaning fewer collectors with money to spend on coins means dealers hold on to their cash harder...and in fact buy only coins that they reasonably know that will be sold
thus ..........if you indeed have monster coins there will be a market as the demand has much more " staying " power....if you have just so so coins it will be much harder for a dealer to sell....that being said....so so coins will have to be discounted
as a long time monster toned buyer there are several buyers buying...so so coins purchased by newbies might have to go pegging
monsterman
out of rockets ...out of bullets...switching to harsh language
liquidity is another word for confidence.”
love that comment
monsterman
out of rockets ...out of bullets...switching to harsh language
I doubt Greenspan said that because it's false. However, liquidity is to some extent a function of confidence.
That said, I do believe that the best clue as to the short term direction of the market is dealer liquidity. This is not so much because dealer liquidity drives the market - it doesn't - but because dealer liquidity is easier to track.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>“liquidity is another word for confidence.”
I doubt Greenspan said that. However, liquidity is to some extent a function of confidence.
That said, I do believe that the best clue as to the short term direction of the market is dealer liquidity. This is not so much because dealer liquidity drives the market - it doesn't - but because dealer liquidity is easier to track. >>
Very interesting. How does a common collector track a dealer's liquidity? Or does the collector need to be in the trenches to the same extent as a dealer to really see this?
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)
It helps to be in the trenches, but all you really have to do is talk to some of the players. It doesn't take a dealer long to figure out when lots of other dealers need time to pay for new purchases, or when lots of dealers are paying slower than usual, etc. It's a small community and word spreads fast.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>I was taking a look at a financial program on TV today, and there was a report about the sudden change in liquidity in the markets as a result of the credit crisis. The talking head quoted Alan Greenspan, who supposedly said, “liquidity is another word for confidence.”
Given the raging bull market in coins, and assuming that this Greenspan quote is true, who should we look to to determine when the bull market is beginning to end? Should we look to dealers’ liquidity, in terms of their ability to pay up front for coins in anticipation of selling them to collectors? Should we look to collectors’ liquidity, in terms of available cash for discretionary items, like coins? Should we look to bid prices to see if there is a contraction in pricing among particular grades, dates, and series? What do you think? >>
All the above. I am especially concerned for any dealer that is leveraged. You cannot convince me that what is happening in the credit markets will not spillover to coin dealers that are unduly levered.
BTW, here is another Greenspan quote from WSJ August 7, 2007 "These adverse periods are very painful, but they are inevitable if we choose to maintain a system in which people are free to take risks, a neceesary condition for maximum sustainable economic growth."
The guy is brilliant!
I give away money. I collect money.
I don’t love money . I do love the Lord God.
The coin market isn't the stock market anyway. Google could print a couple million new shares tomorrow but no more 1916-D Mercury dimes will ever be minted. Dilution isn't a problem.
I sure hope that a rep from the Mint never reads this post. We might be looking at the opportunity to buy a few rolls of new, BU 1916-D Mercs, minted as restrikes, just for us lucky collectors.
I knew it would happen.
The guy is brilliant!
He certainly sounds that way until you recognize the internal inconsistency of the quote. Then it reads like gobbledygook.
For a collector, true confidence is buying despite the relative illiquidity of coins at any given point in time.
<< <i>"These adverse periods are very painful, but they are inevitable if we choose to maintain a system in which people are free to take risks, a neceesary condition for maximum sustainable economic growth."
The guy is brilliant!
He certainly sounds that way until you recognize the internal inconsistency of the quote. Then it reads like gobbledygook.
For a collector, true confidence is buying despite the relative illiquidity of coins at any given point in time. >>
I don't think Greenspan reads like gobbledygook.
But, I do agree with yours and Julian's definition of collectors of coins.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
The guy is brilliant!
He certainly sounds that way until you recognize the internal inconsistency of the quote. Then it reads like gobbledygook.
Lou - I think you misread the quote. I wouldn't go so far as to say it's brilliant, but it's perfectly logical.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Now if you were the lender, what interest rate would YOU want ?
Liquidity?
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The occurrence of very painful adverse periods means that the growth was not "sustainable." That's the inconsistency. I'd agree with the quote if the word "unsustainable" were substituted for "sustainable."
I suppose it depends on your time horizon. Regardless, it's semantics. I think most of us would agree with Greenspan's intended point.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>“Liquidity is another word for confidence.” -- Alan Greenspan >>
<< <i>"War is Peace, Freedom is Slavery, Ignorance is Strength." -- George Orwell >>
<< <i>The Fed should hire shrinks instead of economists. >>
Young Numismatist ............................ and growing!
I see that Robert Hughes is back to buying. He supposedly has some well heeled seated collectors looking for rarer dates.....like that is news. Even Sil has got Tangible back up and running again (bye bye Superior). Sounds like each guy wants his own share of that numismatic pie. And Brian Yutzy who used to work for USCoins and then Richard Melamed, is now on his own. He's a good guy to show higher end classic coins to. All this looks like we aren't at the end our numismatic rope yet.
roadrunner
I knew it would happen.
<< <i>I had a headache before I started reading this post, and it has not gotten any better. >>
Take two aspirin and call me in the morning.
I firmly believe in numismatics as the world's greatest hobby, but recognize that this is a luxury and without collectors, we can all spend/melt our collections/inventories.
eBaystore
<< <i>Out of curiosity, why isn't "bifurcation" considered to be one of the initial stages of illiquidity in coin markets? >>
I don't know if it's an "early stage" of overall illiquidity, but it's certainly a partial loss of liquidity for some material. It's not a foregone conclusion that the "top tier" coins are going to plummet in price for lack of buyers as an eventual result.
CCU, I didn't mean to contribute to your headache. Actually, based on your post of the stellar Colonials that you have handled in the past, I'd have thought that you'd be the last one to buy into the "bifurcated" concept.
I knew it would happen.