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

[James_OldeTowne]

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.

It's a tough graph to read, but I would gander that it is a lot closer than what was posted before. The five year (approximate) runs from 1977 - 1982, and 1987 - 1992 look about right for what happened in the coin market. A run up, a year or so of a propped up market, then a collapse.

[therealanaconda-migration]

I see what you're saying.

 

I don't disagree with the contention that rising wealth can cause rising coin prices. That's not an issue that can be argued against; again my contention and the reason for this post is to posit that we may see the market rise for other reasons.

 

If I were a coin dealer I would want to popularize this idea; if I was a coin collector I wouldn't.

 

This is a board of coin collectors, not dealers, so maybe that has something to do with beliefs here; maybe not.

 

[James_OldeTowne]

I see what you're saying.

 

I don't disagree with the contention that rising wealth can cause rising coin prices. That's not an issue that can be argued against; again my contention and the reason for this post is to posit that we may see the market rise for other reasons.

 

If I were a coin dealer I would want to popularize this idea; if I was a coin collector I wouldn't.

 

This is a board of coin collectors, not dealers, so maybe that has something to do with beliefs here; maybe not.

Although I have been a collector since 1979, I work for a dealer. It would benefit my financially if the coin market did rise, yet I would rather be truthful than self-serving, which is why I admitted above that I foresee a stable or slightly downturn coin market for the next couple of years or so.

 

As you state, of course increased wealth leads to a rise in disposable income, which fuels purchases of non-essential items. But if you are looking for other factors, here are some that I have seen in the past, and if history repeats itself, well, you get the point:

 

(1) (OK, I've only read history on this one) Roll collecting was a craze in the 1960s which ballooned the market... until (a) everyone realized that if everyone else was saving BU rolls, then the supply would be overabundant, and (b) release of the various government hoards clobbered the market.

 

(2) Manipulation of silver commodities in the late 1970s drove coin prices up into the stratosphere for the whole market (I will always remember the 1979 headline "Brasher Doubloon $725,000, an astonishing record at the time)... and then collapsed when that effort failed.

 

(3) Severe over-hyping of certification at the end of the 1980s drove up huge spikes in some segments of the so-called "investment level" market (basically widgets), and that market severely collapsed when dealers realized there was an almost infinite supply of MS-65 widgets. I would wager that the market has yet to recover from that.

 

(4) The State Quarters was a staggeringly brilliant marketing strategy for the mint at the end of the 1990s, so good that it wound up driving a ten year bull market. I would contend that this program did more for coin profits than the proliferation of certification. We know what happened to that market.

 

(5) Chinese coins skyrocketed in value as the Chinese government relaxed restrictions on personal income. Honestly, I don't know exactly where that market stands right now, but the whole World coin market is on a nice bull right now.

 

Etc.

[Tradedollarnut]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

[e1cnr]

I agree the the coin market is going to go up.

 

 

But believe the underlying basis for this will be the increasing value of the base precious metals, as a result of the sinking US dollar due to government over spending / ponzi scheme (is this an economic meltdown? not if you can keep it going ....)

[therealanaconda-migration]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

 

So, why do you think the coin market is going to get hot? From increasing disposable income? Inflation? Just time for prices to rise since it's been a while since a good run up? You own the most expensive coin in the world and your hooked up with one of the largest dealers; curious minds want to know!

[therealanaconda-migration]

Like I said, it wouldn't take too many more Bob Simpsons in the world to start the ball rolling; in fact he could do it alone.

[Tradedollarnut]

Because the money supply is going nuts. All that cash has to go somewhere

[James_OldeTowne]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

TDN, can you please elaborate? Do you foresee an "explosion" in the coin market, or merely steady growth? And are you thinking in the immediate term?

 

To expand on what I've stated above, I believe the coin market will cool for the next two to three years and then begin to rise rather nicely. My reasoning? I think that as the real estate market has finally settled, we will see a lot of "disposable" income go into "upgrading" homes as folks become more comfortable that prices have stabilized. This will take a lot of pent-up demand and turn it into dollars entering that market, leaving less money for hobbies. That'll take a few years, though.

 

It's just my pet theory -- I am certainly no economist.

[coinman_23885]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

TDN, can you please elaborate? Do you foresee an "explosion" in the coin market, or merely steady growth? And are you thinking in the immediate term?

 

To expand on what I've stated above, I believe the coin market will cool for the next two to three years and then begin to rise rather nicely. My reasoning? I think that as the real estate market has finally settled, we will see a lot of "disposable" income go into "upgrading" homes as folks become more comfortable that prices have stabilized. This will take a lot of pent-up demand and turn it into dollars entering that market, leaving less money for hobbies. That'll take a few years, though.

 

It's just my pet theory -- I am certainly no economist.

 

James, there are objective indicators which suggest that we may be nearing another housing bubble. I would not say that the real estate market has "finally settled." I do, however, agree with your central premise that increased disposable income associated with economic prosperity would be good for the coin market.

[World Colonial]

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.....

 

To me, the best measure are the prices of the coins themselves. The fact that so many US coins sell for what are in actuality very high (If not astronomical) prices is an indication of both the sheer number and the money they are willing to spend. And I say this acknowledging that all prices are set at the margin and it only takes a small fraction of coins trading owners to set the market level.

 

Collectors in the US do not even blink at the thought of paying $1,000 or even $10,000 for a coin, even when they are actually very ordinary or mediocre based upon any impartial assessment of their numismatic merits. Outside the US, few coins sell for $10,000 even when among the best and scarcest.

 

I believe I read a quote once from David Bowers in the 1980's that he estimated approximately 50,000 who would spend $100 on a coin at the time. I believe the number who will spend that amount and maybe a lot more today must be a multiple of that, like maybe five or 10 times.

 

With improvement in communication, collectors can get either all or at least most of the information without subscribing to coin magazines or joining the ANA.

[World Colonial]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

TDN, can you please elaborate? Do you foresee an "explosion" in the coin market, or merely steady growth? And are you thinking in the immediate term?

 

To expand on what I've stated above, I believe the coin market will cool for the next two to three years and then begin to rise rather nicely. My reasoning? I think that as the real estate market has finally settled, we will see a lot of "disposable" income go into "upgrading" homes as folks become more comfortable that prices have stabilized. This will take a lot of pent-up demand and turn it into dollars entering that market, leaving less money for hobbies. That'll take a few years, though.

 

It's just my pet theory -- I am certainly no economist.

 

James, there are objective indicators which suggest that we may be nearing another housing bubble. I would not say that the real estate market has "finally settled." I do, however, agree with your central premise that increased disposable income associated with economic prosperity would be good for the coin market.

 

Amazing as it is, I also believe their is a miniature rerun of the housing bubble and no, I do not believe it is sustainable now anymore than it was before.

 

The housing market looks better because prices have stopped falling and inventory is lower but this is due to a variety of temporary factors such as: 1) Bailouts which allow banks to hold property off the market and to drag their feet on foreclosures. 2) Artificially absurd lax politically imposed lending standards, not as bad a s before but still absurd given the actual risk. The government has basically taken over the mortgage market. 3) QE which has TEMPORARILY lowered mortgage interest rates. 4) The apparent "corporatization" of the residential single family housing market where hedge funds are or at least have been buying hundreds and even thousands of single family homes for rental.

 

The fact is, the typical American is flat broke. The minority at the top is still doing well (for now) and this is the group that pays the headline prices for coins and even down to the mid four figures.

 

As far as I am concerned, the recovery since 2009 is all smoke and mirrors driven by government deficits and temporary and artificially cheap money. I never thought it would even last four years but I am about as confident as I can be that regardless of what happens, the standard of living of the typical American is going to decline for the foreseeable future and the majority of the more affluent are not going to be immune to it either.

[Tradedollarnut]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

TDN, can you please elaborate? Do you foresee an "explosion" in the coin market, or merely steady growth? And are you thinking in the immediate term?

 

To expand on what I've stated above, I believe the coin market will cool for the next two to three years and then begin to rise rather nicely. My reasoning? I think that as the real estate market has finally settled, we will see a lot of "disposable" income go into "upgrading" homes as folks become more comfortable that prices have stabilized. This will take a lot of pent-up demand and turn it into dollars entering that market, leaving less money for hobbies. That'll take a few years, though.

 

It's just my pet theory -- I am certainly no economist.

 

I think Newman selling his coins is going to drive the market to a frenzy. These are once in a lifetime pieces in many cases. Miss out and never see them again types of coins.

 

[Zoins]

I think Newman selling his coins is going to drive the market to a frenzy. These are once in a lifetime pieces in many cases. Miss out and never see them again types of coins.

 

It's always exciting when coins of this caliber are brought to market. I agree with the once in a lifetime description and it's definitely something to consider.

[RockMyAmadeus]

There was a fairly large spike near 1989-1990

 

If the prices go up now, how can you tell if coins are going up or hyperinflation is making US dollars worth less?

 

 

The 1989 spike was due almost completely to Morgans in MS65 (and better.)

 

There was a monstrous surge in prices paid for these coins. Grading was brand new, people could actually be guaranteed of getting MS65 (rather than a lot of sliders) coins, and they were being pitched for things like investment portfolios. Because so few had been graded, the demand for the ones that had was insane.

 

The prices soared. Common date MS65 Morgans sold for as much as $3,000.

 

It was a crazy, crazy time.

 

It all came crashing down by early 1990. Those same common dates selling for $3,000 in the spring of 1989 could be had for $150 by the summer of 1990.

 

It was hideous, and created a monstrous drag on the entire hobby for the entire rest of the decade, not to recover, as mentioned, until the early 2000's.

 

Sorry, but much of what you wrote above is incorrect. The 1989 spike included a lot more than Morgan Dollars. Walkers, silver commemoratives, Saints, mint state and Proof type, among other areas, participated strongly. And those are just the ones that I specifically remember.

 

Additionally, MS65 common date Morgans topped out at approximately $800, not (anywhere close to) $3000.

 

While I certainly don't have the experience you do, I will do research and provide the source for the $3,000 number.

 

As for what participated...the Morgans were clearly in the driver's seat at the time, but I will amend the statement to that, rather than "almost completely." You are correct, Walkers, Saints and Commems were also chugging along quite nicely. My apologies for neglecting to include them.

 

As to "much of what I wrote being incorrect"...you only disputed two of the statements. I made several. Do you disagree with the rest? Do you disagree with my basic premise, or just specific details?

[Kurtdog]

Collectors in the US do not even blink at the thought of paying $1,000 or even $10,000 for a coin, even when they are actually very ordinary or mediocre based upon any impartial assessment of their numismatic merits.

The bull is driving this market.

[ComicConnoisseur]

I think the coin market is indeed going to get even hotter. I just disagree with the premise that it is due to an economic meltdown

TDN, can you please elaborate? Do you foresee an "explosion" in the coin market, or merely steady growth? And are you thinking in the immediate term?

 

To expand on what I've stated above, I believe the coin market will cool for the next two to three years and then begin to rise rather nicely. My reasoning? I think that as the real estate market has finally settled, we will see a lot of "disposable" income go into "upgrading" homes as folks become more comfortable that prices have stabilized. This will take a lot of pent-up demand and turn it into dollars entering that market, leaving less money for hobbies. That'll take a few years, though.

 

It's just my pet theory -- I am certainly no economist.

 

James, there are objective indicators which suggest that we may be nearing another housing bubble. I would not say that the real estate market has "finally settled." I do, however, agree with your central premise that increased disposable income associated with economic prosperity would be good for the coin market.

 

Amazing as it is, I also believe their is a miniature rerun of the housing bubble and no, I do not believe it is sustainable now anymore than it was before.

 

The housing market looks better because prices have stopped falling and inventory is lower but this is due to a variety of temporary factors such as: 1) Bailouts which allow banks to hold property off the market and to drag their feet on foreclosures. 2) Artificially absurd lax politically imposed lending standards, not as bad a s before but still absurd given the actual risk. The government has basically taken over the mortgage market. 3) QE which has TEMPORARILY lowered mortgage interest rates. 4) The apparent "corporatization" of the residential single family housing market where hedge funds are or at least have been buying hundreds and even thousands of single family homes for rental.

 

The fact is, the typical American is flat broke. The minority at the top is still doing well (for now) and this is the group that pays the headline prices for coins and even down to the mid four figures.

 

As far as I am concerned, the recovery since 2009 is all smoke and mirrors driven by government deficits and temporary and artificially cheap money. I never thought it would even last four years but I am about as confident as I can be that regardless of what happens, the standard of living of the typical American is going to decline for the foreseeable future and the majority of the more affluent are not going to be immune to it either.

It will all blow up around 2015 to 2016 just in time for the election !

How convient is that?

[World Colonial]

The 2016 time frame sounds reasonable to me, but my prior comment was non-partisan. My opinion is based upon the premise that those who have the most influence will do whatever they consider to be in their self-interests, the future consequences to the country and everyone else be dammed. It is the proverbial "can kicking" exercise writ large.

[James_OldeTowne]

I think Newman selling his coins is going to drive the market to a frenzy. These are once in a lifetime pieces in many cases. Miss out and never see them again types of coins.

My impression is he's selling off his "junk" ( ) to help fund the museum. For example, I doubt his complete set of BU bust dollars would ever be sold.

[cladking]

The current coin market is being driven primarily by the strenght of metals. If silver and gold had collapsed in 2008 like everything else the "entire" coin market would have as well. As is, the money is being plowed into the things that have been hot for years; rare and high grade coins. Everything else is languishing because there isn't enough demand to siphon off the supply coming onto the market. The relative weakness of the stock market and paltry return on bonds also are helpful to the coin market.

 

These are by far the major macroeconomic factors currently affecting the coin market. Of course there are other factors that can be even more important and chief of these is demographics. This is a little more difficult to assess since there are countless collectors leaving the hobby for age related reasons and countless more enterring the hobby as a result of the states quarters program and an exploding middle class in China, Russia, and India (et al). Much of the exploding demand is affecting principally foreign coins at this juncture but there will much more demand of US coins once the world economy actually turns the corner.

 

All these forces seem to be unusually great and are pushing in opposite directions so almost anything is possible. I believe the best guess is that a soaring stock market will delay the bull market in US coins for at least a few years and we'll see slowly growing demand for the high end coins but no respite for the lower end of the market in the near term. The explosion in prices will be mostly limited to world coins for the next few years and especially modern world coins which never before had any demand. The US market will recover and begin a boom around 2016/ 7 and be pulled out of its slump by modern coins just as it was in 1995. The demographic change in US coins will be well underway by the time the lower end of the market begins its recovery. This time it will be a little more selective with things like AU indian cents increasing much more than VG's. Watch for "Americana" coins like buffalo nickels and bust halfs to do better than more pedestrian series. In the future there's going to be more worldwide demand for all coins and this means US as well.

 

The next ten years will bring tremendous change to the hobby.

[Tradedollarnut]

I think Newman selling his coins is going to drive the market to a frenzy. These are once in a lifetime pieces in many cases. Miss out and never see them again types of coins.

My impression is he's selling off his "junk" ( ) to help fund the museum. For example, I doubt his complete set of BU bust dollars would ever be sold.

 

I believe that you are wrong

[Zoins]

The explosion in prices will be mostly limited to world coins for the next few years and especially modern world coins which never before had any demand.

 

There are some amazingly low mintage world moderns relative to US and general classic coins. It's like looking at US proofs 100+ years ago.

[Hard Times]

I think Newman selling his coins is going to drive the market to a frenzy. These are once in a lifetime pieces in many cases. Miss out and never see them again types of coins.

My impression is he's selling off his "junk" ( ) to help fund the museum. For example, I doubt his complete set of BU bust dollars would ever be sold.

 

I believe that you are wrong

 

Which part, the 'junk' part I think James was joking, so do you think he will sell his BU bust dollars?

 

Best, HT

[Tradedollarnut]

I think that he's selling most of his coins

[World Colonial]

For the time period described in your post, I think most coins are going to do worse than most describe here. The trend especially since 2008 is for most people to become worse off and I expect it to continue. Up until 2007, the expansion of credit enabled people to increase consumption and appear better off (even though they were not) by increasing their debts despite stagnant incomes. In my opinion, that trend has mostly run its course for the foreseeable future, regardless of fiscal and monetary policy at the moment.

 

High end coins I will admit are somewhat different because there are far fewer of them and yes, there are enough affluent people to buy them IF they choose to do so. I do not believe this will happen to the extent described here by the optimists. Somewhat, maybe.

 

On world coins, while I agree that they are massively undervalued given their relative numismatic merits versus practically all US coins, the collecting culture in most countries is completely different than in the US except for isolated cases. People are simply not used to paying exorbitant prices for them like they are here. The lopsided majority also could not care less about TPG and what are in actuality completely trivial differences in quality between different MS grades.

 

The market which I think most resembles the US across all its coins in terms of collecting practices is South Africa. Yes, I know that there are other markets which may do so selective (such as maybe with some modern Chinese coins), but it is not widespread to my knowledge.

 

I am very familiar with how collectors think of coins in SA and for a variety of reasons which are too numerous to list here now, I do not see that these practices are going to result in similar pricing trends to the US, not just in SA but practically everywhere. I post on the BidorBuy (SA eBay) coin forum and have said exactly this to those collectors numerous times since they share the same optimistic sentiments expressed in this thread.

 

Finally, given how low the census counts are for world coins, I believe that a disproportionate number of the better world coins (by TPG standards) are actually owned by US collectors and not those in the home country. To my knowledge, there is selective demand for coins preferred by US collectors elsewhere , but it is not widespread at all.

[World Colonial]

The explosion in prices will be mostly limited to world coins for the next few years and especially modern world coins which never before had any demand.

 

There are some amazingly low mintage world moderns relative to US and general classic coins. It's like looking at US proofs 100+ years ago.

 

You are right but finding the ones that will appreciate much is probably going to be like looking for a needle in a haystack.

 

To give you an example, i bought a couple of the Swiss 1000 franc gold commemoratives for exactly this reason in 2005. These date from 1984 and have mintages from 200 to maybe 500 or so. I bought them first, because the premiums to spot were relatively low and second, because i thought the price versus the exchange rate was also low.

 

Well, turns out there was a reason the prices were low. Nobody wants them, even though by the standards of world coins, Switzerland is definitely no "backwater" like most others.. So yes, because of the sheer number of world moderns, a large number will perform well but its only going to be a very small fraction.

[Zoins]

The explosion in prices will be mostly limited to world coins for the next few years and especially modern world coins which never before had any demand.

 

There are some amazingly low mintage world moderns relative to US and general classic coins. It's like looking at US proofs 100+ years ago.

 

You are right but finding the ones that will appreciate much is probably going to be like looking for a needle in a haystack.

 

To give you an example, i bought a couple of the Swiss 1000 franc gold commemoratives for exactly this reason in 2005. These date from 1995 and have mintages from 200 to maybe 500 or so. I bought them first, because the premiums to spot were relatively low and second, because i thought the price versus the exchange rate was also low.

 

Well, turns out there was a reason the prices were low. Nobody wants them, even though by the standards of world coins, Switzerland is definitely no "backwater" like most others.. So yes, because of the sheer number of world moderns, a large number will perform well but its only going to be a very small fraction.

 

It's nowhere near as hard as finding a needle in a haystack. You've done a pretty good job analyzing how segments of the population will be relatively worse off in the future. Now just choose coins that will be attractive to segments of the population that will be relatively better off in the future. Of course, those coins would have to be of interest to you from a collecting perspective as well. Collecting isn't only about financial return.

 

The reason some parts of the world are doing worse off on average is because other parts are doing better. It's a post WWII equilibrium process.

 

For example, one modern gold Chinese coin I was looking at a few years ago in your time frame with the same characteristics as your Swiss coin sold for $500. It's now at over 10x. Hard to predict? I don't think so but those coins also have to appeal to one as a collector.

[World Colonial]

I believe it is more than just rebalancing. I believe that most people the world over are going to be worse off for the foreseeable future though I do agree that there will be enough of them to push prices higher should they choose to do so.

 

I understand your point but let me describe it this way.

 

Because there are so many different countries and even within them, so many coin series, its not practical for me to be really much more specific than I was in my last post. I just do not know enough about all of them to do so.

 

All I can tell you is that if you look at the apparent scarcity, price structure and collecting practices elsewhere and compare them to the United States, I do not see that there is that much similarity.

 

I collect many different world coin series, though I do not own many moderns but let me give you one example.

 

One obstacle to significant price appreciation is that in many instances, the coins are not available in any numbers. You cannot collect what cannot be bought. If this sounds crazy, it isn't. Normally, scarcity is better for prices and it is but only to a point. How many collectors in the US do you think would collect the series they do now if a disproportionate number of them were "key dates" but just a lot scarcer? And by scarcer, I am not talking about as a niche specialty so widely practiced in the US but as a generic coin in any better grade and sometimes in any grade.

 

I do not believe that more than a few people are going to stick with it if they cannot even buy them. Though I believe that the actual supply of world coins is higher than is apparent now in most instances, many of these coins are so hard to find that to many people it is probably pointless to even try.

[cladking]

The explosion in prices will be mostly limited to world coins for the next few years and especially modern world coins which never before had any demand.

 

There are some amazingly low mintage world moderns relative to US and general classic coins. It's like looking at US proofs 100+ years ago.

 

It is primarily demand that drives coin prices rather than supply so low mintage is no guarantor of high prices. So long as buyers are even scarcer than the coins prices won't escalate. I believe circulation is almost a guarantor of demand because one of the primary motivations of collectors is nostalgia. While most moderns were minted in the millions they were saved in the hundreds and demand is outpacing supply. The total valuation of these markets is still tiny and might never be great. The variety and nature of world moderns is extremely extensive and diverse and demand is likely to prove ephemeral and unpredictable. Some rare coins will be cheap forever and very similar common coins might be expensive because demand will tend to focus on specific countries, series, and dates. Some low mintage coins will be in great demand and some rare coins will have very little demand.

[Zoins]

The explosion in prices will be mostly limited to world coins for the next few years and especially modern world coins which never before had any demand.

 

There are some amazingly low mintage world moderns relative to US and general classic coins. It's like looking at US proofs 100+ years ago.

 

It is primarily demand that drives coin prices rather than supply so low mintage is no guarantor of high prices.

 

I agree demand is a necessary component which is why I believe coins of some countries have done better than others. High mintage coins can have high prices with strong enough demand (the 2001 silver buffalo dollar comes to mind), but with a smaller mintage, you can get greater leverage. It's certainly interesting to try and predict what will happen.

 

Of course, there are a number of places to make bets and it's important to find the areas that match one's collecting interests.