Do dealers ever factor in a "risk premium percentage" when they hold very expensive coins
Longacre
Posts: 16,717 ✭✭✭
I was taking a look at another thread, and a very seasoned dealer made the comment that coins of very high value (say, in the $100,000 range), only generate a 5-6% return for the dealer upon ultimate sale. In any market, I think there should be some sort of correlation between the risk of the venture and the reward that the businessman generates. For example, if someone provides a product that is in short supply, or even possibly unique, then there should be some sort of "risk premium" that the seller can charge for taking the risk of holding that item in inventory. In coins, however, it seems that there is some sort of unspoken "limit" on the percentage that a dealer can make on any coin, whether that coin is excessively rare, or whether it is as dirt common as a Morgan dollar.
Am I misinformed that there is no risk premium pricing in numismatics for high value items, or do even high-value numismatic items follow the standard supply and demand plus a reasonable markup that other products follow?
Am I misinformed that there is no risk premium pricing in numismatics for high value items, or do even high-value numismatic items follow the standard supply and demand plus a reasonable markup that other products follow?
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>In coins, however, it seems that there is some sort of unspoken "limit" on the percentage that a dealer can make on any coin, whether that coin is excessively rare, or whether it is as dirt common as a Morgan dollar. >>
A hard limit??? Surely you jest. That is coin dealer heresy
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
<< <i>
<< <i>In coins, however, it seems that there is some sort of unspoken "limit" on the percentage that a dealer can make on any coin, whether that coin is excessively rare, or whether it is as dirt common as a Morgan dollar. >>
A hard limit??? Surely you jest. That is coin dealer heresy
And hearsay too.
David
<< <i>It is very much built into the price people are willing to pay. A coin that might normally sell for $12,000 retail, another dealer might pay $11,000 or $11,500 for if he had an immediate home for it. If he had to hold it in inventory for an extended period of time he might only pay $10,000 because of the market risk involved and the carrying cost.
David >>
I agree with David. There is not a large number of collectors for rare varieties and problem coins. Accordingly, the dealer has to consider how long the coin might stay in inventory when deciding how much to pay for such a coin, particularly when the coin is expensive.
An authorized PCGS dealer, and a contributor to the Red Book.
Doggedly collecting coins of the Central American Republic.
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Those dealers with big inventories that often hold for a year or more, typically have much wider margins, at least on the retail asking price. If they don't, they are candidates for going under during the next down turn.
<< <i>
<< <i>It is very much built into the price people are willing to pay. A coin that might normally sell for $12,000 retail, another dealer might pay $11,000 or $11,500 for if he had an immediate home for it. If he had to hold it in inventory for an extended period of time he might only pay $10,000 because of the market risk involved and the carrying cost.
David >>
I agree with David. There is not a large number of collectors for rare varieties and problem coins. Accordingly, the dealer has to consider how long the coin might stay in inventory when deciding how much to pay for such a coin, particularly when the coin is expensive. >>
As a dealer why would you tie up money in an expensive coin unless you were pretty sure that you had a place to flip it? Am I wrong to assume that a lot of stuff bought by dealers at shows probably already has a home?
What happens if that coin gets held for a year? What could that money do on the stock market?
<< <i>
<< <i>
<< <i>It is very much built into the price people are willing to pay. A coin that might normally sell for $12,000 retail, another dealer might pay $11,000 or $11,500 for if he had an immediate home for it. If he had to hold it in inventory for an extended period of time he might only pay $10,000 because of the market risk involved and the carrying cost.
David >>
I agree with David. There is not a large number of collectors for rare varieties and problem coins. Accordingly, the dealer has to consider how long the coin might stay in inventory when deciding how much to pay for such a coin, particularly when the coin is expensive. >>
As a dealer why would you tie up money in an expensive coin unless you were pretty sure that you had a place to flip it? Am I wrong to assume that a lot of stuff bought by dealers at shows probably already has a home? >>
<< <i>Many dealers seem to shy away from big purchases unless they are pretty sure they know of a buyer ahead of time.
What happens if that coin gets held for a year? What could that money do on the stock market? >>
Believe it or not, as a dealer most of the time I don't know who might buy a certain coin. Plus, sometimes I buy coins as part of a group or set; I might know where a couple of the coins might go, but I have to either buy the entire set or pass, therefore there would be a lot of coins that I wouldn't have homes for. My usual rule is, if it is a nice coin, and the price is right, and I like the coin, I figure someone else will like the coin just a little more than I do.
An authorized PCGS dealer, and a contributor to the Red Book.
im sure they would have insight on this one.
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