Is the Coin Market Starting to Depress?

[astrostu]

Disclaimer: I do not want to start any political conversation here, please keep to my actual question.

 

My question is fairly simple: For nearly two decades (to my understanding), coins have been in a bull market with no real indication of slowing down. Prices kept rising. Coin World's "Coin Values" site pretty much supports the idea that it's still goin' up.

 

However, I've started to hear a few mutterings on coin boards that prices are starting to go down. I happened to look at some winning auction prices over the last year for a few coins I'm interested in on Teletrade and they've also started to go down.

 

So my question is: Is the coin market finally starting to slow down and go into a recession like the rest of the economy, or do folks still think that it's going up?

[coinman1794]

Many coin prices in my field stayed flat for nearly a decade, so it isnt true that they have all been on the rise. Further, many 20th century issued have been sinking for 3 or more years, like MS66FBL franklins wich have gone down 70% in some cases. There ar many non-economy related factors at work in bringing down auction prices recently. That said, there seems to have been a downward shift in prices since October. I have had to mark items down 10-15% just to get them to sell, but they have been selling steady at those levels. So, there is a softening right now, but it isnt neccesarily reflected in auction records over the past year.

 

[ant]

Is the Coin Market Starting to Depress? yes i am depressed due to the market prices

 

serius tho. i have seen a change but i dont know how long it will last and how deep it will go.

[Houston Investor]

I would say yes the market is starting to depress. Retail selling is becoming more difficult for me. There are fewer people with significant money to spend on coins. The January 2 issue of the CCDN - Bluesheet had 147 minus signs with 12 plus with the rest (9915) holding steady. Hardly a bull market.

 

I dispute the statement about coins being in a bull market for 2 decades. The Jan 90 Baseline of the CCDN Coin Market Index is 1000. The index is at 929.82 as of 01/02/09. Coins are a great investment?

 

 

[physics-fan3.14]

While some prices are going down, others remain strong or even increasing. With particular regards to FBL Frankies - common dates, average coins, borderline coins are all going down and you can get great deals. Attractive, eye appealing, scarce, higher graded, or hard to find coins are still very strong and increasing. I'm starting to see a dichotomy, with some real winners and losers.

 

I think these rules of thumb generally apply across most market segments. In hard times, the collector base, and the amount of money they have to spend, are going to shrink. Those that remain are the dedicated ones that will continue to spend money on coins even in hard times, and these are the ones that require the finest coinage. Indeed, it is usually these collectors which seek out the finest coinage in the strong market too - the collectors who are leaving or reducing their spending significantly are the ones who made the market in the lower quality coins. Thus you see the lower quality stuff decline in price, but the solid stuff stays pretty level or increases slightly.

[EZ_E]

It all depends upon which area of the market you want to analyze. The fluff in the market will continue to spiral downwards as people dig deep to turn a little cash. Post 1950's proof & mint sets will continue to loose value. Interest continues to wane for MS/PR 70 coins unless they are ultra rarities. Run of the mill, generic coins will see the biggest fall. Key date coins will fall some, I'm sure but will still be priced much higher than the pre 2003 prices. However, early coins with nice eye-appeal and patina will continue to hold their own, maybe even continue to increase in price. This is what I see for 2009, a probable year of deflation. However, as the money presses continue to run to meet all of the bailouts in the works then hyperinflation will be seen unlike anything the US has ever experienced. As the money supply is doubled then its purchasing power is cut in half.This will lead to an artificial rise in all coin prices in the years ahead.

[TomB]

The coin hobby-industry was severely hurting throughout most of the 1990s and gnerally stabilized somewhere around 1997-1998 with the mild start of a bull market in 1999 or so while the raging bull market started a little later.

[World Colonial]

I can only speak for my series and yes for one of them, prices have weakened because of exchange rates if nothing else. However, I continue to expect most coins to lose value going forward, though not in a straight line, for several years due to the economic recession (depression) with the worst hit to be US modern conditional rarities, modern proofs, and modern commemoratives followed by conditional rarities of all types and US generic "investor" type coins.

 

As for recent price performance, there are two US indices that I am aware of that WERE/are market averages. One is for collector coins (I believe from Coin World) and the other is for "investment coins". One was discontinued years ago well below the prior late 1980's peak and I cannot tell you what happened to the other.

[michael]

 

 

Is the coin market finally starting to slow down and go into a recession like the rest of the economy YES!!!

 

some pockets of select coins are still in great demand and might even go up in value and demand or at the very least stay the same in price and overall demand

 

 

[gpnyc]

Yes.

 

Coins and currency, with a few exceptions, are bringing less than they were 3 months ago. This is from my observation of auction results. My FUN pickups were at an average 25% discount to recent sales. Additionally, and unfortunately, my FUN sales came in at an average 30% discount to recent sales.

 

Dealer prices on existing inventory, however, have generally not adjusted accordingly. Again, from my own personal observations.

[MikeKing]

I don't believe any of it. (broad generalization that I have no credence in whatsoever but just trying to make a point).

It's like stocks. Pick the right ones and you'll make a lot of money in the worst of markets.

 

 

[chinook]

I don't believe any of it. (broad generalization that I have no credence in whatsoever but just trying to make a point).

It's like stocks. Pick the right ones and you'll make a lot of money in the worst of markets.

 

 

Do they have ultrashort coin etfs?

[World Colonial]

That was also going to be my next question but you beat me to it.

[James_OldeTowne]

Is the Coin Market Starting to Depress?

Yes.

[physics-fan3.14]

Is the Coin Market Starting to Depress?

Yes.

 

Care to elaborate Mr. Dorito Man?

[Brando]

If the coin market is depressing, it could prove to be an excellent buying opportunity for younger people like myself.

[physics-fan3.14]

If the coin market is depressing, it could prove to be an excellent buying opportunity for younger people like myself.

 

My sentiments exactly. Same for the stock market. I'm like a woman with a brand new credit card the day after Thanksgiving! The markets are having a 45% off sale - Buy Buy Buy!!!

[jackson64]

depressing or correcting? I don't know which, but they are definitely going down.

[Barndog]

the 2009 FUN was unlike the previous five years' FUN Shows. Selling to dealers was never more difficult than in 2009. I was never more selective in buying, either. The feeling of cautiousness was almost palpable.

[Oldtrader3]

Thank you Barndog for injecting some reality into this thread. Everyone that I know personally is less worried about scoring "deals" on coin buys than they are in surviving the next 9-12 months in this economy. Myself included. I will not be buying anything that we can not eat or do not need to make it through our monthly budget for the balance of 2009.

[World Colonial]

That is a sensible approach. I am also being a lot more selective than this time last year. I will still buy coins that I can probably be sold for more. And if there is a really hard to find item, I might buy that also. One example is a South Africa three coin specimen set (farthing, half penny and penny 1952 silver plated). I probably paid more than I can resell it for but it is unlisted and I might not have another opportunity to buy it.

[Houston Investor]

The CDN for 01-16-2009 had a number of minus signs. Certainly replacement cost is going down in a number of areas. However, gold advanced $25 today I believe.

 

I have been successful in buying considerable nice slabbed material at 60 - 70% of sheet at the shop, auctions, and shows. Mainly Walkers, Dollars, and Commems. Nice Type and Gold usually requires a higher offer.

 

Todays Greysheet stated FUN auctions totaled over $62 Million - I would not be surprised if floor dealers wished they had gotten a piece of that pie. Its tough enough for a floor dealer as it is without a big auction sucking out all the big money.

 

I like down markets as they are a good time to load up on more inventory at less money. I always find something I can make good retail money on and then channel those funds buying good stuff right. Plus I have considerable other income besides coins. These down markets are a time to hold tight on your really nice stuff and don't let it go cheap. A good bullion position will help in this one.

 

[Scott Gardener-migration]

Just guessing, but we might see a split. Coins in lower price ranges that are less rare, like uncertified modern proof sets, may stall out or drop in price, whereas many of the more coveted rarities, such as MS65+ gold or key date uncirculated members of popular series like Morgans may continue to climb. My hunch, and I freely admit it's nothing more than a guess, is based on the premise that while casual buying will be down due to the depressed economy, investment buying will go up.

 

Gold bullion and lower grade generic gold seems to be doing pretty well, but I'm surprised it's not doing even better. Back around July of last year, when Bear Sterns went under, setting off the cascade of bank failures, gold spiked to over $1000 an ounce. Since then, it's sunken back as low as $670 before climbing back to, as of this post, $839. (By the time you read this, it'll be completely different.) Of course, just to kill my theories, platinum spiked around $2000 an ounce during the Bear Sterns thing and then took a long, steady dive that makes even the Dow Jones look good.

 

I'm more worried about the value of rarer coins going down when the economy turns around, as hopefully it's not going to remain crappy indefinitely. Then again, maybe all the newcomers turned on to rare coins as an investment will stay hooked for the numismatic, intellectual, and aesthetic interest by that time. Sure, a panel of mutual funds may be good for building a retirement portfolio, but once you've handled a 100 year old Saint Gaudens double eagle and shown it off to your in-laws, you start thinking less about portfolios and more about inheritances.

 

Forget weathering the current recession; the 1855 gold liberty sitting in front of me weathered the Great Depression, several others before it, and the American Civil War. The thing is AU58, practically uncirculated, meaning the only wear and tear it got was probably changing hands shortly after Abraham Lincoln took office, being squirreled away on the eve of war. Rather puts into perspective the current political climate, and it's a nice tie-in to how far we've come having Obama's inauguration just around the corner.

 

Edit: quick disclaimer: not trying to turn political either. Just pointing out that coins have among other elements a fascinating association with history, something that could encourage continuing interest in collecting beyond the rush to invest during an economic crisis period.

[EZ_E]

Excellent post, Scott!!!

[World Colonial]

I am not trying to single your post out because I have written several about the split in the market that I expect to happen in this bear market. But I do have some comments I will add.

 

I completely agree with you that the area which will be hit the worst will be modern US conditional rarities of all types and to a lesser extent, modern proofs and modern commemoratives generally. These coins are either ridiculously overpriced (in the case of conditional rarities) or as common as the sand on the beach for the other two categories.

 

I would disagree with you that many of the other coins you appear to refer to will not also decline substantially. Coins like the Morgan dollar are almost exclusively generic "investor" coins (yes, I know there are some exceptions but this description unquestionably applies to most of them) and while I consider the most important factor in their future price performance to be bullion prices since historically that has been when they did well or poorly, I still expect them to do poorly because of contracting liquidity in the economy generally. And at least for the near term, I am also bearish on metal prices especially silver because it is more of an industrial than an "investor" metal. Moreover, these coins are not rare either. No Morgan dollar is rare by my standards (yes, even the proofs and circulation strikes such as the 1889-CC and 1893-S) except as a die variety or conditional rarity and this can be proven by the frequency with which they come up for sale and by the census numbers. The same applies to other generic investor coins such as common date US gold. And given the huge price spreads for these coins in the higher grades, it is entirely feasible that most collectors or "investors" will settle for a coin with a lower grade for a fraction of the money or simply refuse to pay anywhere near recent price levels.

 

The third category is world coins which is my specialty. I cannot speak for all of them but one of mine has weakened substantially in recent months (since July or so) and I attribute this to exchange rates first and second, to the fact that these are much thinner markets. So though these coins are unquestionably rarer than many or most US coins, their price performance might be weaker recently.

 

On the more desirable US type coins, others on this board would be in a better position to know their recent price performance. My expectation is that either they will also fall (and some substantially such as conditional rarities which are also ridiculously overpriced) since most of these are not rare either, or as some have stated, there will be little to no activity in some or many of them. This could happen in both this area and scarcer world coins to the extent that the current owners have the financial capcity to keep them.

[DonHeath]

the area which will be hit the worst will be modern US conditional rarities of all types

 

I sure hope that's true. I agree the premiums have been ridiculous in most cases, and I'm interested in a few difficult pieces. I think some collectors will welcome an adjustment, although I believe the adjustment will be almost universal. Most collections aren't composed of coins that rarely come to market, and neither are most dealers inventories. Coins that don't fit that description will adjust. I hate the adjustment for the dealer community. Collector sentiment is their livelihood. Buyers are going to be a cautious this year. Sellers should be too. It will probably be an easy time for either to make a mistake, as values might be difficult to establish. JMO

[World Colonial]

Well, in my opinion, your wish is about to come true because if you are a US modern conditional rarity collector, those prices have substantial room to fall and still remain overpriced. Some of them such as that 2003-W AGE PR-70 that sold for $36,000 on Teletrade and that MS-70 Lincoln Cent that (I believe) sold for $39,000 (or was it $13,000?) could lose 90% or 95% of their value and still be absurdly overpriced.

 

For those who are collectors (of any coins) as opposed to "investors", they should welcome the price adjustment. Why not? Those who do not are either closet "investors", someone who has a disproportionate amount of their net worth in their collection or someone who is worried that economic circumstances will turn them into forced sellers at lower prices (maybe with the possibility of having little to no opportunity to buy them back later). These types of people should take the opportunity to sell NOW while they can still get what I believe will in retrospect be favorabke prices.

 

You are correct that most collections and dealer inventories are not composed of scarce or rare coins. That is one of the reasons I believe that the market value of their holdings are going to suffer and probably for many of them, disproportionately. Its also why, from an economic standpoint, most collectors would be better off reducing their financial exposure now with a high likelihood of buying them back cheaper later. (This will obviously, only or primarily work for those who do so early.)

 

As with many other areas of the economy, coins have been a beneficiary of the credit bubble and the mania. That is over. Most coins are available in reasonably large quantities or common in absolute terms and the combination of shrinking demand and forced selling is likely to depress the prices for many of them much more than most of us currently believe possible.

[cladking]

Well, in my opinion, your wish is about to come true because if you are a US modern conditional rarity collector, those prices have substantial room to fall and still remain overpriced. Some of them such as that 2003-W AGE PR-70 that sold for $36,000 on Teletrade and that MS-70 Lincoln Cent that (I believe) sold for $39,000 (or was it $13,000?) could lose 90% or 95% of their value and still be absurdly overpriced.

 

 

Sure.

 

The typical $1000 conditional rarity with almost no speculation has much further to fall than a $100,000 classic rarity that is everyone's darling. Never mind that the modern is much scarcer and has a growing market that isn't as dependent on baby boomers and older collectors.

 

Why do I get the feeling that if moderns ever do take a big hit much of the coin market will be gleeful?

[physics-fan3.14]

 

Why do I get the feeling that if moderns ever do take a big hit much of the coin market will be gleeful?

 

Because many people have pretty much said so.

[DonHeath]

I love some moderns, and I'll be gleeful no matter who said so.