Are we on the cusp of the biggest bull market in rare US coins ever?

[Conder101]

Things were beginning to improve by the late thirties,

To some extent because of increased production of war materials for Europe.

[therealanaconda-migration]

The coin market tanked in the early 90's, and remained in the doldrums for much of them.

 

Lots of wealth was created in the late 90's. It didn't translate into higher coin prices.

 

Fast forward to the 2000s, we start off with a recession, but by mid-2002, we're recovered and chugging along. The coin market exploded in the early to mid 2000's in a way that quite literally hadn't been seen since the 60's.

 

Why? The economy?

 

Probably not. Many researchers claim it as very simply a result of the 50 state quarter program, and I'm inclined to agree.

 

..... and Bullion in coin form is the catalyst for today's market vitality.....that and the internet bringing everything to our fingertips.Let's face it.... a nicely designed coin is very compelling. They are objects of desire. I've said it in the Comic Forum and will say it here..... Investment as a motivator is most often a form of denial used to justify the pursuit of a luxury item..... nothing more. That being said, I can still recoup a lot more of my outlay from a coin than I can a night of drinking GOD BLESS...

 

-jimbo(a friend of jesus) (thumbs u

 

I hear ya'. I started buying a lot of coins years ago because stocks and cash didn't turn me on and I knew that if I didn't spend my money on rare books and coins and art, I'd blow it on cars and other depreciating stuff.

 

In an earlier post (page 1) you stated "I have no vested interest in this argument. I essentially own no rare coins and am not currently in the rare coin biz." Yet in the above post you state that you "started buying a lot of coins years ago".

 

It is clear your intent is to stimulate conversation on your hypothesis regarding the value of collectible and rare coins in a declining economy.

 

So why the contradictory statements regarding your ownership of rare coins?

 

Carl

 

You made a reasonable but incorrect assumption which is that I still have my inventory; I sold it in 2008 through Heritage; Anaconda Rare Coins;

 

Announcement of the Sale of my Inventory

 

OK, let me try and understand the rationale for your post. In the OP you state that in your opinion, in the face of a declining economy, buying and holding rare coins is a way of avoiding the economic pain associated with a wide spread economic collapse.

 

You then state that you were a strong buyer of rare coins in the past. Then you state that you sold your holdings in 2008. It appears that you do not honor the viewpoint stated in your OP.

Am I misunderstanding anything?

Carl

 

Some people change goals or get new ones that conflict with old ones. My goal had been get rich. I got rich. It was great, it was fun. It ceased to be my main goal. My new goal then became stop working, move to Central america and have fun. I sold my coins to do that. (I had a lot of fun.)

[e1cnr]

Actual cost of production is....

 

 

Clearly someone does not understand mining and high overhead businesses.

All producers have different 'costs of production', and even if selling at a loss, they will not close up shop completely unless they have given up all hope of future - especially when they have millions and years invested in their business..

 

 

All prices are 'manipulated' by supply and demand - more willing buyers than willing sellers, the price goes up

[therealanaconda-migration]

How much of the 1989 spike was due to underlying metal prices? Silver made a 500% run-up in a couple years....

 

 

Good question but it can only be answered with speculation, so here's my answer; some maybe half. Like I said in an earlier post, PCGS had just launced in 1986 or so if I remember correctly, and everyone got excited that the grading problem had been solved to some extent; as a result, demand and prices skyrocketed for rare coins.

 

Then they crashed, hard. Many if not most commems in 65 and higher lost 80-90 of their value.

[therealanaconda-migration]

Another thing, and Mark Feld, you can help me out on this, I believe it was at about this time (late 80's) that some rich Iranian (?) had come into the market and was spending big money on rare coins (10 million plus)

 

AND

 

the Kidder Peabody Rare Coin fund had also launched when the market was already hot, sending it even higher. Kidder came in with a lot of money; 40 million which was about the amount of equities purchased in the NYSE while you read this paragraph.

 

[Which in part is my point; just a tiny bit of traditional money would have to come into the market to substantially raise prices.

 

Part of that has already happened; lookie here at Wikipedia on Bob Simpson; who I predict will probably the next owner of the 1794 dollar that just sold for 10 million.

 

He was co-founder of XTO Energy which was bought by Exxon Mobil for 41 Billion dollars; this fellow has already bought a bunch of rare coins some over a million dollars. I think it is public knowledge that he is a client of Legend Numismatics, who has a strong relationship with the new - and very smart owner - of the 1794 dollar. Why wouldn't he buy it? He already has a baseball team; he needs a twelve million dollar rare coin. Then Bruce can go out and corner the market on Love Tokens or toned Peace Dollars......in NGC holders....(that's a little bit of an inside joke that Mark will probably get and that Bruce will certainly get....)]

 

Bob Simpson on Wikipedia

[Conder101]

A lot of the excitement was the speculation that now that the grading problem had been "solved" and coins were now fungible, that Wall Street would come charging in wanting to invest in coins. And indeed there was some looking by the Wall Street crowd and prices rose in anticipation. They didn't come running and instead went elsewhere. The speculative bubble burst, prices crashed, and then a couple of coin funds which had been created liquidated and lost money scaring Wall Street away for good. It was really something to live through and watch the rise and crash.

[therealanaconda-migration]

Here's an internal page from PCGS on Bob Simpson purchase of one one million dollar+ coin; below this post is a link to the collections he's putting together; it's not chump change...

 

Bob Simpson in the News with links to his collection at PCGS

 

He'll buy that first strike 1794 dollar, start carrying around in his pocket, start showing it to his rich friends who will think "well, that's more fun than owning electronic assets like stocks and fiat currency and safer because the currency is getting unstable as are the banks..."; they'll see that girls like rare coins, then they'll do their research and find out Mark Feld is the most trustworthy dealer in the world and then send him 100 million dollars to buy 90 million dollars worth of rare coins and then Mark will show up at the next coin show looking like this:

 

 

...and then you won't be able to find anything for sale except wooden nickels.

[therealanaconda-migration]

Bob Simpson is working on a few sets.....

 

....and Keeping at least one lucky coin dealer very busy....

 

 

[RWB]

e1cnr -

So, complain to the Silver Institute. They are the industry experts.

 

FYI- "Manipulation" means active alteration of a market for singular benefit -- not ordinary supply/demand. This should be clear to most....

 

[therealanaconda-migration]

If we have high inflation, rare coins will go up, no doubt about that. Take a look at one of the charts that covers the PCGS3000 from 1970 to date. You can see that during what I recall as the Carter years, we had high inflation and rare coin prices did rise quite dramatically, so it may not take a mass immigration of rich 50-70 year olds, just high inflation (although a bunch of rich old dudes would help; or just one rich middle eastern dude with a new interest in rare US coins.)

If you believe that the "PCGS3000" is useful, then comparing it against a graph of historic inflation should readily disprove your theory above. Just as an example, Reagan's first couple years to my recollection experienced very high inflation -- and the coin market experienced a large, extended collapse, just the opposite of your assertion.

 

The reason coins ran up at the end of Carter's term had little to do with inflation, and much to do with the run-up in the silver commodities market.

 

I simply do not believe that specific economic principles and benchmarks are very useful predictors of coin market performance. The only general rule I would take a stab at is:

 

... more expendable personal wealth = growing coin market

 

But again, this is true of most any hobby-oriented pursuit, whether it be rare books, rare art, rare cars or vintage performance audio equipment.

 

Here is a graph for per capita disposable income for the last 44 years. The coin market clearly does not follow it. The graph does not support your contention that more expendable wealth = a growing coin market.

 

[Nutmeg Coin]

You go down to the local coffee shop or diner in the morning and everyone is talkiing about Morgan and Peace dollars, type gold coins, which grading service is best, etc., and you can't get in a word edgewise. It ain't going to happen.

 

Plus it is a field that is divided by the long term PQ collectors, CAC enthusiasts for investment or other purpose and the blue collar basic collector who likes the designs of classic US coins and currency. It is preposterous to suggest that new waves of investment or collector money will surge into coins except maybe bullion. That is another division where I see dealers who submit virtually no coins to the grading services and they have wide spreads with the raw coins they buy and sell with no return options if the coins turn out to be vastly different than they stated in grade, etc.. These people are stashing away gold eagles and other easily traded bullion and the cream of what they buy.

 

When the precious metals surge again, as many believe they will, the certified coins will not share the same premiums relative to the metal, which are actually quite low now historically.

[therealanaconda-migration]

You go down to the local coffee shop or diner in the morning and everyone is talkiing about Morgan and Peace dollars, type gold coins, which grading service is best, etc., and you can't get in a word edgewise. It ain't going to happen.

 

Plus it is a field that is divided by the long term PQ collectors, CAC enthusiasts for investment or other purpose and the blue collar basic collector who likes the designs of classic US coins and currency. It is preposterous to suggest that new waves of investment or collector money will surge into coins except maybe bullion. That is another division where I see dealers who submit virtually no coins to the grading services and they have wide spreads with the raw coins they buy and sell with no return options if the coins turn out to be vastly different than they stated in grade, etc.. These people are stashing away gold eagles and other easily traded bullion and the cream of what they buy.

 

When the precious metals surge again, as many believe they will, the certified coins will not share the same premiums relative to the metal, which are actually quite low now historically.

 

It is true that talk at coffee shops will never be about rare coins. It has never been about rare coins even during the best bull markets. No one is arguing that coins are going to become the talk of the town.

 

Actually, it's preposterous to suggest that investors are not a part of the market or that they never will surge into the market again. I came into the market initially as an investor. I've sold millions of dollars worth of coins to investors. Many, many, many books have been written about investing in coins.

 

Do you think the 40 million dollar Kidder Peabody Fund was buying for collectors?

[Mr.Mcknowitall]

I wouldn't be surprised if we are at the beginning of what may eventually be the longest bull run in numismatics and semi-numismatics (saints, Morgan and peace dollars, etc.) we have ever seen. Banking has never been more fragile (i.e. Cyprus) which puts our whole society at risk; couple that with our nation's history of gold bullion confiscation and you have a scenario that could guide people into truly rare coins (and other collectibles) like we have never seen.

 

What else is there besides rare and semi-rare US coins that 1) isn't likely to be confiscated (to force people into a fiat currency or new fiat currency) 2) has a well-structured trading marketplace 3) whose price isn't heavily correlated to industrial demand (like silver which isn't likely to be confiscated but whose price is heavily contingent on industrial demand) and which can be very privately owned?

 

(The only thing that comes to mind is "guns".)

 

I am certain that my response to your in depth analysis will be expected by you; however, I will humbly and with all respect for your thoughts, post it anyway, because that is the kind of guy I am, and I wish Sprinkles for everybody on everything.

 

Here goes: Baloney

[therealanaconda-migration]

You should believe that it wouldn't surprise me, however, I understand where you are coming from. (I'm just not from there.)

 

Thanks for the sprinkles (and grins!).

[Mr.Mcknowitall]

You should believe that it wouldn't surprise me, however, I understand where you are coming from. (I'm just not from there.)

 

Thanks for the sprinkles (and grins!).

 

Gentlemen should always be Gentlemen, no matter their differences, even (and especially) if they rob the "Bank" as partners........

 

It is not being a Gentleman that usually gets in the way of a good thing.

[therealanaconda-migration]

I totally agree.

[Tradedollarnut]

Hmmmmmmm

 

 

 

 

[e1cnr]

?? I have to wonder if the logarithmic scale on the 2nd chart makes them similar

[therealanaconda-migration]

Hmmmmmmm

 

 

 

 

Amazing how straight that line fits into the second graph; almost makes you suspect that you can predict its future value.

 

Bruce; what annual return on investment has that coin returned to its owners?

[therealanaconda-migration]

I see one problem though; the second graph does not have equal amounts on the left side; it goes first from one thousand to ten thousand (a 9,000 jump) and then it goes from 10K to 100K; (a 90,000 jump).....so that would need to be fixed before you can compare graphs.....it might actually show a hockey stick type of growth rather than linear.

[therealanaconda-migration]

?? I have to wonder if the logarithmic scale on the 2nd chart makes them similar

 

You beat me to it.

[Tradedollarnut]

Haven't calculated it exactly - educated guess is 12%

[James_OldeTowne]

Here is a graph for per capita disposable income for the last 44 years. The coin market clearly does not follow it. The graph does not support your contention that more expendable wealth = a growing coin market.

 

I don't believe for one second that this graph reflects reality, not at all! Therefore, I obviously wouldn't expect a realistic graph of coin market performance to follow it.

 

What data went into it?

[Tradedollarnut]

?? I have to wonder if the logarithmic scale on the 2nd chart makes them similar

 

You beat me to it.

 

Suffice it to say they are both trending in the same direction....

[World Colonial]

What evidence do you have to support this claim? The worst of the depression was over around mid-1933.

 

This is not completely true. In 1937 the U.S. pretty much went through a "depression within a depression" and the economy slumped even more. It had not all cleared up by mid-1933 and the New Deal measures were not completely successful in ameliorating the effects of the Great Depression notwithstanding the optimistic phrasing sometimes used in middle and high school textbooks. Things were beginning to improve by the late thirties, but it was the Second World War that was ultimately responsible for the economic recovery.

 

With this said, I do not dispute your central conclusion that the coin market will suffer during tumultuous economic periods once things reach certain critical periods. As people become poorer and poorer, they are more concerned about surviving and making ends meet rather than spending money on luxury items.

 

I should have been more specific. My recollection is that economic conditions bottomed shortly after the stock market low of July 8, 1932. Yes, there was a relapse in 1937 or thereabouts but to my knowledge not as bad as the first period.

 

Another point I want to make is that people make assumptions that sound good until you evaluate them more closely. For example, I have heard many gold bulls claim that gold mining stocks did great in the depression. My understanding is that they recovered after the stock market low but fell hard into it, though maybe less than average. At the same time, I have also read that gold stocks did no better than the DJIA in the 1930's bull market where the DJIA rose from 41 to 190 on March 5, 1937. And this with the government raising the gold price by 75% from $20 to $35, a recurrence that I would place the odds at zero today.

 

Lastly, the OP presumes the high likelihood of hyperinflation (whatever rate that may be). For a variety of reasons that I can provide, I disagree that it is remotely the most likely outcome anytime in the foreseeable future. I disagree that there is any political consensus in favor of intentionally creating it at this time (regardless of existing QE) and I also disagree that anyone has the power to do it contrary to market forces in the fractional reserve lending financial model which exists today..

[therealanaconda-migration]

?? I have to wonder if the logarithmic scale on the 2nd chart makes them similar

 

You beat me to it.

 

Suffice it to say they are both trending in the same direction....

 

That's true but it doesn't support the contention that "best thing for coins long term is an overall feeling of wealth in the world"; although you may be right and I will agree that aggregate wealth does fund coin buying for the collector segment

 

but

 

there may be a time when rare coin investment is particularly attractive; a time when other investments are less attractive; a time when currencies are unstable, banks are unstable, when bullion might be dangerous to have; when silver bullion will suffer from lower industrial demand and in the case of semi-numismatics like Saints, could benefit from the double play of being gold and not likely to be confiscated.

 

We may be approaching a special time. That's all I'm basically saying.

 

By the way, if coin values are dependent largely from collectors, we should only be seeing coin values trending downwards; membership in the ANA (I suspect) has been declining for years. (Again, I suspect this is true but am not sure.)

[e1cnr]

Disposable income? I guess it depends on where you get your source, and who you are trying to fool (to sell them stuff they don't need?)

[Tradedollarnut]

I am a coin collector but no longer an ANA member. Effect does not equate to cause....

[therealanaconda-migration]

I am a coin collector but no longer an ANA member. Effect does not equate to cause....

 

I see your point; I'm not sure what a good measure of the numbers of coin collectors would be; while you may be an exception, I'm not sure what would be a better gauge; Coin World subscriptions?

 

Didn't they just go from a weekly to a monthly? That may be because of other pressures; competition from the internet.....

[therealanaconda-migration]

Disposable income? I guess it depends on where you get your source, and who you are trying to fool (to sell them stuff they don't need?)

 

That graph also does not support the contention that disposable incomes are the major factor determining rare coins prices; it doesn't look anything like the PCGS3000.