Is the Coin Market Starting to Depress?

[physics-fan3.14]

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

 

For some reason, people consider the Franklin half to be a modern. I love them, as is well known. The more high grade, attractive, eye appealing, FBL Franklins I can get for a good price the better, in my book. I'm guessing FBL Franklins count in the conditional scarcity modern category.

[DonHeath]

I like the Franklins too. I collect 20th century coins. Since they are fairly available, I try to collect really nice examples. I usually find them raw, but the tough coins are sometimes easiest holdered. I'd prefer not to overpay for them, and would prefer the opportunists that rifle the raw material for resale would lose some interest, so a change in valuation is OK with me. The good thing about some moderns IMO is that they are collectible without "investing", and that keeps collecting fun.

[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.

 

 

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?

 

Well, first it depends upon whether you are talking about US or world coins. We have had disagreemnts in the past and then it turned out we were not even talking about the same thing. So for the record, my post did not include world moderns because I agree with your opinions on them because many of these coins are actually rare in any higher grade and deserve to sell at substantial premiums, though the premium will vary in different market conditions.,

 

But for US moderns, look at the price difference between these conditional rarities and other coins that are one grade or a few grades lower You know them better than I do. While this applies to ALL or ALMOST ALL US coins, it is at least as true of modern US coinage as classic US coinage. Someone can buy most of these coins for a few dollars (which are almost always readily available) in most mid-circulated grades (it varies with the issue) and then the conditional rarities (which appear to be above MS-65 from what I see) sell for hundreds or thousands of dollars. Those price differences are insane for ANY coin, US modern or not.

 

Morevover, in at least some cases, most collectors would not be able to tell any real difference between one grade and the other which as many have pointed out here before, means that the prospective buyer is paying this gigantic premium for a piece of plastic with a number of it. This is a very dubious factor to rely upon for future price appreciation regardless of what exists today.

 

Certification increases the marketability to be sure, but in a bear market (which we are almost certainly going to enter for most coins if it has not started already) there will be fewer collectors who will be either willing or able to pay such premiums. Within these issues, they will or are likely to gladly settle for a specimen which costs as much as 99% less that looks about the same.

 

As to the future "investment" or financial potential of these coins, any price forecast is completely speculative. And that includes one based upon demographics for which I have seen a few claims on this board for one series or another in the past. (These were claims for a particular classic series claiming that baby boomers would have increased demand for them. I consider this to be completely spurious unless someone can provide a logical analysis to the contrary. Otherwise, it is simply an unsubstantiated statement)

 

The "market capitalization' of "investor" and collector coins is a pittance compared to overall financial and investment flows and this niche is pint sized compared to both, possibly as little as a few million today if not less. Given this fact, there is no way to know whether this segment (or any other) will move counter trend to coin prices generally but there is no reason to believe so absent specific evidence to the contrary.

 

My opinion is that these conditional rarities will sell for less in the near future (many substantially less) and many will also sell for less or much less many, many years from now, especially if trends such as registry sets do not last or NGC or PCGS become defunct. I expect at least one of them to be a casualty of the bear market because submisison volumes will undoubtedly shrink from recent levels and possibly substantially.

[cladking]

I like all coins but I don't like all coins from an investor standpoint. But, it's not a good idea to invest in coins so this is a relatively minor point usually. The point is that I don't like all moderns from an investor standpoint and I don't hate all classics from an investor standpoint. I do avoid talking about any coin that I think is overpriced. To me it's not so much being overpriced or underpriced as being overappreciated or underappreciated anyway.

 

You suggest it's impossible to gauge the effect of demographics on any particular coin and, of course, you're right. But there is one thing that's a basic fact; In fifteen or twenty years almost every active collector will have gotten his start in states coins or other moderns. Sure the guys with whiskers might still hate moderns, and for all I know most others will too, but they'll have gotten their starts in clad quarters. To suggest otherwise is to suggest the hands of the clock will stop or the sun will reverse in its course.

 

I don't know what the future holds but I know it comes faster than anyone expects and that evrything changes. Markets do whatever necessary to prove everyone wrong and those supported by speculation always collapse. Common sense always suggests a sort of drifting toward the mean; common high priced coins will tend lower and rare low priced coins, higher.

 

Yes, we are usually in much more agreement than is apparent and I do tend to jump first and ask what you meant later. I certainly agree world coins from all eras are more likely to be underappreciated than US coins. I do not agree that all high priced US moderns are common, overpriced, overappreciated or in any special danger of collapsing. I've said many times that if you're going to pay a large premium for a high grade coin that's otherwise common you should be aware of both the difficulty of finding similar coins at a lower price and the differences in grades. Paying a large premium for a difference you can't see is very risky. There are inherent risks in all collectibles and this is the best reason to collect for fun rather than profit. I don't believe many people collecting for pure enjoyment would pay large premiums for differences they don't understand or appreciate. This goes for about any sort of collectible and hardly applies only to modern coins.

[Oldtrader3]

I always love it when people say that you should not invest in coins. Getreal! Do dealers and collectors who say this think a $50,000 collection is truly disposable, wasted money to burn for most people? Do they think this money is only disposable income left over from their cat food budget or what? The statement that one should not consider coins an investment is patently stupid for any collector that owns more than $10,000 worth of coins. That statement "don't buy coins as an investment" is the most stupid coin dealer hype statement that I have ever heard in my 65 years of living! Anyone who actually thinks that way is retarded!

[World Colonial]

Good points but I need to clarify one assumption you are making related to one of my prior statements.

 

When it comes to demographics, I do believe that there are some reasonable inferences and projections that can be made. I simply do not believe that this is possible to do for either the level of interest or future prices for US modern conditional rarities or any other niche market. The reason for this is that a handful (or possibly a single) collectors could push the segment substantially higher for any reason they choose.

 

For US circulating moderns, since prices are so low, you (nor anyone else) will get no argument from me that a $4 coin (for example only) will not rise to $8 or maybe even $20 in 5, 10, or 20 years. There are a reasonably large number of coins that will do so and I know that. But I would still say that will only happen to a low percentage of them.

 

The assumption you are making about future collector preferences is only partially true. Yes, there are many collectors who are growing up with State Quarters or other recent issues, but the evidence does not support that a high proportion of them will express a preference for them or be willing to pay the same or equal premiums that todays' collectors who buy conditional rarities are willing to pay. Maybe they will or maybe they will not.

 

Most collectors in the United States grew up with clad coinage which compose most US circulating moderns yet they do not show a preference for them now. I was born in 1965 (yes, I am that old) and never collected them even though I collected US coins first as a youngster. Other do or may collect them but they almost always prioritize them lower in their collections. We know this is true from collectors on these boards in addtion to the low market prices these issues fetch. And I do not see any evidence that future collectors will prefer (for example) the FDR dime to the Mercury Dime simply because they used it in circulation. The simple reason for this is that most collectors today find the latter coin attractive but not the other. That is unlikely to change in the future.

 

This is different than say, making a forecast for future demand of coins from China or Mexico. Both of these countries presumably have few collectors today (Mexico probably more proportionately) and the demand for these coins will increase substantially as these markets adopt some of the "investment" practices that already exist in the US: Auctions, coin clubs, third party grading, professional marketing organizations.

 

In the case of Mexico, I believe this demand will come substantially from transplants and second (or subsequent) generation collectors who have developed world incomes. And unlike most US coins, many Mexican coins are scarce in higher grades (yes, even modern ones). The same applies to Latin American coins generally from both the Spanish colonial and post-independence periods.

 

 

 

[World Colonial]

I always love it when people say that you should not invest in coins. Getreal! Do dealers and collectors who say this think a $50,000 collection is truly disposable, wasted money to burn for most people? Do they think this money is only disposable income left over from their cat food budget or what? The statement that one should not consider coins an investment is patently stupid for any collector that owns more than $10,000 worth of coins. That statement "don't buy coins as an investment" is the most stupid coin dealer hype statement that I have ever heard in my 65 years of living! Anyone who actually thinks that way is retarded!

 

Wow, your post is as harsh as some of the ones I have posted. But I have to agree with your sentiments.

 

My collection is worth about $50,000 now and no I do not consider it a consumption item. But at the same time, I am also not buying these coins as "invesments" either though I have selected them with the intent to be able to sell them for more later. (By my definition, this is a speculation and not an investment, though for most this might be a matter of semantics.)

 

What I have done since I started spending more money on coins about five years ago is to increase my selectivity in what I buy. I only buy coins for my core series and nothing else, I will usually only buy higher grade coins, I buy fewer coins that I could not resell immediately for my full cost and I only buy coins that I expect to grade with NGC (or else I dump them).

 

Now that the coin market is weakening for my series, I will buy fewer of them and I will also probably sell more of them than I would have otherwise. My intent is to sit tight and buy those I can replace at lower prices later.

[ant]

hi all im retarded!

 

im a person_having_a_hard_time_understanding_my_point cause i buy coins i like as a "collector". i buy bent,carroded,holed,beat up, worthless coins for MY collections. i like them.they are still coins in my mind. not anywhere near an investment. if everyone bought coins for flip they wouldnt be collectors. collectors collect regaurdless of value of item.

 

pez despensers, licence plates, guns, razors.... all things COLLECTABLE.

 

so i am a proud person_having_a_hard_time_understanding_my_point! COLLECTOR!

[physics-fan3.14]

hi all im retarded!

 

im a person_having_a_hard_time_understanding_my_point cause i buy coins i like as a "collector". i buy bent,carroded,holed,beat up, worthless coins for MY collections. i like them.they are still coins in my mind. not anywhere near an investment. if everyone bought coins for flip they wouldnt be collectors. collectors collect regaurdless of value of item.

 

pez despensers, licence plates, guns, razors.... all things COLLECTABLE.

 

so i am a proud person_having_a_hard_time_understanding_my_point! COLLECTOR!

 

Buy what you like! Just don't expect to be able to sell it again. And there is the difference - a collector doesn't care if he can sell it again, and certainly doesn't care about a profit. That is not to say a collector doesn't care about price or selling, certainly money is always an issue. Its just not the primary one. An investor patently needs to be able to sell it again, and usually for a profit (or at least stable price). An investor buys things which are expected to hold or increase in value, and their prime consideration is monetary gain. There is nothing wrong with either (usually incompatible) mindset.

[Oldtrader3]

Just wait until you get old and have health problems and have to sell your collection without having the luxury of a year to do it! Then sell to an organization such as: Dealer-who-shall-remain-nameless (at least on this site!). Then tell me about collector's who buy coins, not ever considering the money but buy just because they like them! Just wait until all your coins dated after 1938 are sold for 30-50% of sheet yield to you. Additionally, watch your higher value classic coins go for 30% discount to retail because they are not "popular" right now and never were or will be in the future. The reality is, that the only (!) money that I have ever made on any series of coins that I have owned is on gold, period, end of story.

 

Physics-fan, no insult intended but, have you broken the age of 30 yet? If the above ever happens to you, call me and I promise I won't say I told you so.

[physics-fan3.14]

I'm sorry you had problems, OT3. (And no, I'm only 23).

 

The problem you mention is why I consider myself a collector/investor hybrid. I buy what I like, certainly, and I'm a little more loose with the price I'll pay than an investor might be. But I also try to buy coins with solid value that won't evaporate on me. No offense intended to ant, but the things he mentions in his post probably won't be resaleable, at least not for any decent amount. He enjoys what he collects, and that's great - whatever makes him happy. But the pure collector needs to be aware of what he's doing (as I believe ant is). The pure investor generally doesn't care much for the underlying asset - he's trading numbers and appreciation and such. The collector/investor hybrid genuinely enjoys collecting, but also has a consideration for the monetary issues.

 

Of course, this all assumes sufficient liquidity. If you try to sell your collection instantly, there will be problems. This is part of the problem the banks are having trying to value mortgages right now - there is such low liquidity that nothing is trading, so the value is vague, undefined, or nonexistant.

[cladking]

I always love it when people say that you should not invest in coins. Getreal! Do dealers and collectors who say this think a $50,000 collection is truly disposable, wasted money to burn for most people? Do they think this money is only disposable income left over from their cat food budget or what? The statement that one should not consider coins an investment is patently stupid for any collector that owns more than $10,000 worth of coins. That statement "don't buy coins as an investment" is the most stupid coin dealer hype statement that I have ever heard in my 65 years of living! Anyone who actually thinks that way is retarded!

 

 

ROFL.

 

I more than half agree. While I'd never suggest that anyone ever buy a coin because they think it will increase and never buy coins with the rent money, I do "invest" in low value coins and have done exceedingly well (at least on paper) and don't expect this to change going forward.

 

I really do collect what I like but I try very very hard to like coins that I feel are underappreciated and try not to like coins that I consider overappreciated. Both appeal to me and I'll even collect both but I work harder on sets that might do well. If you're around the hobby long enough you just might be able to collect almost everything. How can a person getting interested in coins now who has an interest in ancient history resist something like ancient coins. These things are just going begging for buyers and there are few takers. There are always numerous coins, tokens, and medals where a dollar goes a very long way. But there are many serious risks even in buying something like ancients. Just because they're cheap doesn't mean they'll ever go up. There can be huge hoards discovered or you could be right but it takes 50 years for them to go up and you aren't able to hold on so long to the asset, your health, or even your life. Sure, you can always drop whatever you're doing and collect what's popular but you have to be the first out the door or you'll get burned most of the time.

 

We each make our own choices.

 

I'm not going to tell somebody on the internet that a coin is a terrible "investment" because people are going to get their toes stepped on and I'm not going to say it's a great investment because even if I'm right they might miss the post when I suggest they sell and then I'm a heel and a fool. Lots of people buy coins mainly for investment and I don't have a problem with it but I'm not going to say it's a good idea and I'm sure not going to say which specific coins would be good ideas.

[cladking]

 

Most collectors in the United States grew up with clad coinage which compose most US circulating moderns yet they do not show a preference for them now. I was born in 1965 (yes, I am that old) and never collected them even though I collected US coins first as a youngster. Other do or may collect them but they almost always prioritize them lower in their collections. We know this is true from collectors on these boards in addtion to the low market prices these issues fetch. And I do not see any evidence that future collectors will prefer (for example) the FDR dime to the Mercury Dime simply because they used it in circulation. The simple reason for this is that most collectors today find the latter coin attractive but not the other.

 

This is exactly my point. Clads were neglected by young and old alike from the day it began until 1999.

 

That is unlikely to change in the future.

 

Beauty is in the eye of the beholder. I assure you a nice gem clad Roosevelt dime is far more beautiful to me than any merc. Of course many mercs cost a lot more.

[Oldtrader3]

Thanks Cladking, I am half joking but not really. Collect what you like but just please be go in with eyes wide open and be ready to pay the exit toll on the way out. This is especially true do not live near any large dealers or can not attend national shows (omitting that joke of a show that is held at Tacoma Dome).

 

 

[cladking]

Thanks Cladking, I am half joking but not really. Collect what you like but just please be go in with eyes wide open and be ready to pay the exit toll on the way out. This is especially true do not live near any large dealers or can not attend national shows (omitting that joke of a show that is held at Tacoma Dome).

 

 

 

I was still typing during your last post.

 

That is another risk of any collectible; a rapid sale. It's impossible to find a single buyer for a diverse collection who'll pay top prices. Even when they are fairly popular coins they have to go to the various specialists to bring their full wholesale value which will usually be only 70- 80% of retail or what collectors pay. Dealers always feel that they are sticking their necks out buying lots of stuff they aren't extremely familiar with so will offer very low. Of course sometimes they'll offer too low.

 

There are unseen, unknowable, and uncalculable risks with any collectible.

 

I hope you do well on anything remaining if there is any.

[World Colonial]

Yes, but the points I am trying to make are that clad coinage is still neglected from a financial standpoint for the most part and that will probably be the case going forward.

 

I used myself as an example because I grew up during the "clad period" though I lived outside the United States until 1975. Most collectors are like me even though they collect other coins. They grew up with clad coins but that does not make any difference in terms of their preferences on what they collect or how much they are willing to pay for these coins in most cases, even when they collect them. When I started collecting coins, my favorite was the Bust half and other similar coins because my step grandmother had many of them. Each person will have their own reasons but the evidence does not support that most collectors have a preference to pay significant premiums for coins they see in their pocket change (from the US or elsewhere) or that if they do at first, that this will be their primary focus later.

 

The only cases where it does matter today are with conditional rarities which is why this is a niche market. And even then, this is at least partly associated with general collecting practices because collectors in other series have also selectively shown a preference for conditional rarities in the series they collect.

 

In the future, I agree that some demographic preference change will occur for some of thse coins but I would disagree that it will be substantial from a financial standpoint for these coins generally. This is probably just a difference of opinion between us. And the reason for this is because I have seen no logical argument why the existing trends will change in any substantive way. For the most part, the coins are just too common which makes it remote that the shift will be large enough to generate significant premiums other than selectively.

 

If you have any analysis that can be shared with me (such as the one I use that you do not seem to like) then I would definetely be interested in hearing it. I would like to think that I have an open mind about these things.

 

The example I gave for the FDR dime was given for illustrative purposes only but it is valid. The best explanation for why the prices are cheap (and are likely to remain so after 63 years) is because most collectors do not find the coin attractive compared to an issue such as the Mercury dime. (This is apart from the metal content though that is also a factor.) This differs for some of the other series (or apparently does) such as the Lincoln cent and Washington quarter. So because of the large number of series and combinations, some will become more (or possibly less) popular than they are today.

 

This is different from say, the South Africa Union coinage I collect, Chinese coins or some area like that. These coins are either scarce in absolute terms which is the case for many South Africa coins or at least in proportionate terms. With these coins, any increase in the collector base (if it happens) is likely to have an impact on these prices because it will only take a small number of collectors to do so.

 

Outside of die varieties and conditional rarities, US clad coinage has neither of these advantages. Additionally, the US is already a developed coin market from the infrastruture standpoint while these others are not.

 

As I have stated several times, I think there is also a valid case that the long term demographics for US coin collecting generally is at best neutral or even negative. If we look at who most of the US collectors are today, this group is going to shrink as a proportion of the population. (The typical profile is someone like me.) A disproportionate number of the potential future collectors will be immigrants and second generation transplants which combined with the on-going Balkanization of this country, increases the probability that those of Mexican decent (for example) will not collect US coins at all but those of their home country.

 

Now of course, the argument can be made that this shift, if it occurs, will come at the expense of classics and not moderns and I think there is a valid argument for that to some extent. But any decrease in investment flows to US coins generally cannot be a good thing for clad coinage specifically.

 

What I have written in this post is not argument to dissuade anyone from collecting US clad coinage (or anything else for that matter). It is simply a dispassionate analysis on the potential financial prospects of these issues.

[physics-fan3.14]

In regards to the above - there is also the fact that a hundred million of them were made. They are not scarce at all, except in the absolute very highest grades. And even then there are still often hundreds graded at those levels. Supply and demand dictates price and value.

[Houston Investor]

Frankly I want to buy more coins but slow sales, GF exp (she is 27 yr old Exotic Dancer / Law Student, x cheerleader - about $1000 / month), and routine costs have held me back. I would love to load up on more gold and commems.

 

A case in point:

At a show this weekend (sales were really slow) a guy asked my price on an NGC 65 1883 NC 5c. I quoted him $250 which is coin world trends. He said that was too much so I then asked him what his counter offer was (I had $220 in coin and Bid was $225). After some hagling we arrived at $230, a lousy $10 profit. At least it would pay for my post show drive thru meal. I figured go ahead and move the coin, not much room in it anyway.

 

 

[EZ_E]

I think that all will agree that, in general, collecting clad coinage is much cheaper than collecting exotic dancers.

[bsshog40]

I think that all will agree that, in general, collecting clad coinage is much cheaper than collecting exotic dancers.

That's exactly why I haven't started my collection of them!

[cladking]

... I would disagree that it will be substantial from a financial standpoint for these coins generally. ... And the reason for this is because I have seen no logical argument why the existing trends will change in any substantive way. For the most part, the coins are just too common which makes it remote that the shift will be large enough to generate significant premiums other than selectively.

 

 

In twenty years most active collectors will have gotten their start in clad coins.

 

This doesn't mean they'll like 'em, love 'em, or hate 'em but it certainly is a far cry from the current generation which mostly would either prefer they go away or are still in denial that they exist at all.

 

[Oldtrader3]

I kept most of the gold that I have left and am in better shape on these coins, of course, because they are gold.

 

When you get to be my age with health problems, collecting exotic dancers makes as much sense as collecting exotic animals. Plus the animals won't plunder my gold coins!

[cladking]

I kept most of the gold that I have left and am in better shape on these coins, of course, because they are gold.

 

When you get to be my age with health problems, collecting exotic dancers makes as much sense as collecting exotic animals. Plus the animals won't plunder my gold coins!

 

 

You've apparently never priced Purina Platypus Chow.

[rrantique]

I think that all will agree that, in general, collecting clad coinage is much cheaper than collecting exotic dancers.

 

Someone told me there was a ( * ) ( * ) bar in Longview.