How long did it take for certification-driven prices to cool off in the 1980s?

[fantastic_four]

I've heard that when coin slabbing began in the mid-1980s, that for a time the ultra-high-grade slabbed coins brought in big premiums, but after a few years, this began to cool off--or perhaps even "crash," whatever that means. How long did it take for the prices on high end stuff to cool off, and once the market dropped a bit, was an across-the-board drop, or did rare coins in short supply never really drop off in value?

 

I'm primarily a comic book collector, and I'm curious about this topic because I figure there could be parallels between the coin, card, and comic collecting hobbies. Comic certification is now entering its fifth year and I'm trying to see if it is following a similar pattern to the one coins followed almost two decades ago. I suspect the impact that certification is having on comics is different than that it had on coins because of the Internet making it easier for collectors to liquidate their holdings, but I'm not sure whether it's impacting the market positively or negatively.

[truthteller]

The cycle of the late 1980's was very speculative in nature. In 1988, there was serious discussion that major investment houses were going to invest tens of millions of dollars in the slabbed rare coin market. With that information, major coin dealers began to bid up most of the higher end slabbed market in MS63 and higher. Each week, a new high bid was posted on the electronic trading system(ANE), but many of these bids were phantom in nature. By mid 1989, the investment houses invested a mere 3-4 million in customer portfolios. The phantom bids were not being honored by the coin traders, and the market collapsed in June of 1989. There was a slight adjustment recovery in early 1990, but by 1991, the market was in a consistent downturn, again generated by sight unseen trading.By 1992, the investment porfolios were all liquidated at a loss for most clients, if not all. The wall street investment dollars never returned as with the death of coins as purely a hobby.

 

 

TRUTH

[BillJones]

The high grade, high priced coins of that era took a big beating because their prices got too high for many collectors. For a while the "coin investment counselors” tried to sell people the line of bull that there were two coin markets, one for lower grade coins, which collectors purchased, and one for higher-grade coins that were for investors.

 

In reality the only true long-term consumers of coins are collectors. If collectors don’t care, what good are coins? You can’t eat them, breath them or really exchange them for more than then their melt value or face value that a bona fide government places on them. Speculation is just that, and in the long run all speculators do, who overpay for coins, is watch their “investments” crash and burn.

 

[James_OldeTowne]

I don't think it was the "ultra high" grades that went crazy. Common grades, like MS-64 and MS-65 Morgan dollars were crazy too.

 

James

[Oldtrader3]

1. Dealer price fixing on the ANE market that was unsupported by actual sale prices and volumes.

2. Investors who knew absolutely nothing about Numismatics (or grading) blindly dumping mega-money into raw and certified coins.

3. TPG Services were new and were feeling their way through the mine-field of market grading, plus making mistakes early on.

4. Widespread overgrading and outrageous pricing of raw Morgan and Peace dollars. Fairly common date MS65 Morgan & Peace dollars were selling for historically outrageous prices.

5. Rarity claims that drove high prices on coins that were not so rare (no reliable data base).

6. Suddenly, all those high priced raw MS65 coins (mostly Morgans) were slabbed as MS63.

7. Marketing hype and fraud by coin investment hedge funds, coupled with a weak economy (recession).

8. Overgrading, overgrading, overgrading.....

9. Most investor portfolios probably decreased 60-70% in value over a 2 year span in the early '90's. Astute collectors fared somewhat better.

10. Wall Street saw through the ill-disquised hype, phony bid system, blatent overpromotion, price manipulation and walked away quickly.

 

It all boiled down to dealer manipulation and lots of greed by all. A few people made money off the bubble, most did not. Sounds familiar, doesn't it?

[truthteller]

That's a pretty good synopsis.

 

 

 

TRUTH

[cladking]

 

It all boiled down to dealer manipulation and lots of greed by all. A few people made money off the bubble, most did not. Sounds familiar, doesn't it?

 

The one thing which hasn't been pointed out is that the coins which fared so poorly were not really the top-notch coins. The ones which lost huge percentages of their "values" were the over graded and mid grade Morgan dollars and the near top grade walkers and coins of this sort. Real MS-65 dollars crashed right alongside the over graded pieces where they were fairly common. But the scarcer 65's and the higher grades were not so badly hurt and soon recovered. The only thing that sounds familiar is the same ol', same ol'.

 

The easiest way to recognize a bubble before it pops is that it is popular among just about everyone and most people are participating. A sea change is recognizable because it is held in disdain by many and will often have demographic roots or it springs up from the outside.

 

There are many grass roots changes ocurring to the hobby and they will continue.

[fantastic_four]

It all boiled down to dealer manipulation and lots of greed by all. A few people made money off the bubble, most did not. Sounds familiar, doesn't it?

 

It might sound familiar...once I get a few more questions answered to make a better comparison of the markets I might have a better idea. Can you assign some dates to your list so I can get an idea on the time span that all occurred over? What date did third-party grading first begin with coins, and how much longer after that was it before Wall Street got involved?

 

 

2. Investors who knew absolutely nothing about Numismatics (or grading) blindly dumping mega-money into raw and certified coins.

 

When did it become apparent that non-collecting investors were putting so much money into coins? Was it public knowledge at the time, or did this only become known years later in retrospect?

 

 

5. Rarity claims that drove high prices on coins that were not so rare (no reliable data base).

 

Is there a reliable census today, or will there pretty much never be one? Have rare coin finds been consistent enough over the years to mistrust all the population reports available?

 

 

10. Wall Street saw through the ill-disquised hype, phony bid system, blatent overpromotion, price manipulation and walked away quickly.

 

Two questions about this. First, is the coin market stronger today than it was before certification entered the hobby? Second, is the coin market stronger today than it was before Wall Street entered the hobby?

[fantastic_four]

The one thing which hasn't been pointed out is that the coins which fared so poorly were not really the top-notch coins. The ones which lost huge percentages of their "values" were the over graded and mid grade Morgan dollars and the near top grade walkers and coins of this sort. Real MS-65 dollars crashed right alongside the over graded pieces where they were fairly common. But the scarcer 65's and the higher grades were not so badly hurt and soon recovered.

 

How has the long-term trend been on the scarcer coins? Enough to beat inflation?

 

 

The easiest way to recognize a bubble before it pops is that it is popular among just about everyone and most people are participating. A sea change is recognizable because it is held in disdain by many and will often have demographic roots or it springs up from the outside.

 

There are many grass roots changes ocurring to the hobby and they will continue.

 

Compelling advice! Hehe, "sea change" and "grass roots" are change descriptions I never hear in comics; I guess it's still too comparatively young a hobby. When you say it "springs up from the outside," you mean outside the hobby? What's an example of a change that has sprung up outside the coin hobby--maybe the rising popularity of credit cards minimizing the importance of currency, or maybe inflation making coins less relevant?

[cladking]

[

 

How has the long-term trend been on the scarcer coins? Enough to beat inflation?

 

The trend toward higher grade coins started even before the grading services started, but their advent pushed this trend much further by making it easier to search out the highest grade coins.

 

 

 

Compelling advice! Hehe, "sea change" and "grass roots" are change descriptions I never hear in comics; I guess it's still too comparatively young a hobby. When you say it "springs up from the outside," you mean outside the hobby? What's an example of a change that has sprung up outside the coin hobby--maybe the rising popularity of credit cards minimizing the importance of currency, or maybe inflation making coins less relevant?

 

Credit cards and inflation would both be examples of outside changes which would tend to suppress the hobby and coin collecting. The biggest outside change is the numbers of people who have become interested in modern coins since 1995. There is a multitude of factors which has driven this but one of the largest is simply that many people percieve the highly desirable older coins as being out of their price range. Certainly great classic collections can still be assembled on a shoestring budget but it does require a lot of knowledge and effort. Another driving factor is the increasing array of modern coins minted since 1965 including the commem and bullion issues. There are the regular issue silver proofs and a host of medals which can also be included. There has been a growing realization that many of the rarest modern coins are extremely affordable. The bicentennial issues and the states quarters have many people examining their change and this is propelling some to explore the coins which are available in circulation, from the mint, and on the secondary market. While the classic coins may still get the lion's share of the attention, the moderns are beginning to get some of the attention denied them for two generations and are attracting huge numbers of people to the hobby.

 

However these trends develop over the coming years, it will be seen that this is one of the most dynamic and important eras for the hobby.

[TomB]

You may want to check the comics forum for a thread I started about the Comics Registry shortly after it was announced that it would take effect. The thread wrote about many of your concerns.

[Oldtrader3]

1. PCGS started TPG in 1986. NGC a few months after PCGS.

2. The investor bubble burst in mid-to-late 1989.

3. The major downturn trend continued through the recession that started in 1990 and lasted at least through 1993.

4. Auction reports in 1988-89 revealed strong buying customers (Asset firms) that normally did not collect coins. Also, local dealers were selling to a large, previously non-existant customer base. IMHO, most knew about investor buying.

5. Population reports from TPG's are an indication but not totally reliable sources of rarity data. Auction results are a better indicator. Prior to 1986, rarity information was spotty (or nonexistant) on many issues.

6. The coin collector market is much more broadly based now. I remember numbers from the late '80's that listed the US coin collector base at about 30,000. Auction dollar and volume records alone would indicate a much wider base now. I have seen estimates as high as 300,000 (or more).

[Conder101]

What date did third-party grading first begin with coins,

Third party grading began in mid 1978 when INS began assigning grades to the coins they wee authenticating. This was followed soon afterwards by ANACS in March of 1979. Slabs as we know them first appeared in 1984 from Accugrade. PCGS began operations in Feb of 1986 using slabs, followed shortly therafter by PCI. NGC did not begin until over a year later, around Sept of 1987.