Pricing methodology 0

[bernard55]

This is my first post here on this forum--forgive the long question but I'm really trying to learn this market so I don't become a victim.  I collected when I was young but in the last 2 years have been getting more and more serious about what I purchase. My most recent purchase was a 1795 Draped bust dollar and currently I've been only purchasing coins that have been graded by PCGS/NGC as I'm still not great at grading (learning fast).

My questions for the experts: How do these companies set these prices?  How do you determine the price you purchase at? Who do you trust (a company or the auction data)?

I am trying to understand coin valuation so I don't over pay as I add to my collection and I'm looking for any thing I can read that shows how companies like NGC, PCGS, CAC, CPG build their pricing strategies and how often they are updated etc..   

I've been looking at a 1800 Draped Bust, Large Eagle Dime MS 61 and here is what I've found:

• NGC $28,500
• PCGS $21,000
• CAC $20,600
• CPG (Retail) $18,200
• $15,000 (Greysheet)
• Auction: (couple years old) $25,850

I was thinking that these companies set pricing around what the market would pay (they all have links to ebay and ha) so I've been studying a few coins to see how close all these companies are to fair market.   Here is a 1880-O Morgan MS 63

• NGC: $405
• PCGS: $425
• CAC: $488 (Retail)
• CPG (Retail) $422
• $325 (Greysheet)

And then here is what has sold at eBay.  The last 14 out of 18 transactions have been lower than everyone but the Greysheet.

1880-O Morgan Dollar ICG MS63 Micro O S$1 No Reserve *Credit Card Payment Only	$152.00	2020-05-04
1880 O Morgan Silver Dollar ANACS MS-63 - Scarce Date Edge Toning	$295.00	2020-05-18
1880 O Morgan PCGS MS63 White Coin !	$306.56	2020-05-17
1880 O Morgan Silver Dollar Graded MS63 by NGC	$320.00	2020-05-09
1880-O Top-100 Silver Morgan Dollar $1 VAM-48 HANGNAIL Certified NGC MS 63	$345.57	2020-06-07
1880-O $1 Morgan Dollar PCGS MS63	$349.99	2020-05-18
$425-$545 VALUE! 1880-O Morgan Silver Dollar, PCGS MS-63!	$350.00	2020-06-02
1880-O MORGAN SILVER DOLLAR PCGS MS-63 "GORGEOUS"	$365.00	2020-05-31
1880-O Morgan Silver Dollar - PCGS MS 63	$377.00	2020-05-01
1880-O $1 Morgan Dollar PCGS MS63	$385.00	2020-06-04
1880-O $1 Morgan Dollar PCGS MS63	$385.00	2020-05-21
1880-O NGC + CAC MS63 Gorgeous Bright White Morgan Dollar BU GEM PQ Better Date	$399.93	2020-04-28
1880-O Morgan Silver Dollar S$1 PCGS MS-63	$400.00	2020-05-31
1880-O Morgan Silver Dollar NGC MS63 CAC Sticker Nice Eye Appeal Strong Strike	$404.00	2020-06-09
1880-O Morgan PCGS MS63 Silver Dollar, Tougher Date, Color-Toned on Both Sides!	$444.00	2020-04-30
1880-O MORGAN SILVER DOLLAR - PCGS MS63 - BEAUTIFUL, OBVERSE TONED, TOUGH DATE	$550.00	2020-06-09
1880-O Morgan Silver Dollar S$1 PCGS MS-63 Toned Toning Nice Color (26)	$577.50	2020-05-24
1880 O $1 PCGS MS 63 PL Morgan Silver Dollar, PROOF LIKE, Old Green Holder PQ	$971.00	2020-05-04
	$ 410	=average
	$ 971	=maximum
	$ 152	=minimum

[Just Bob]

Welcome to the forum, and may I say "good job" on doing such thorough research. It looks as though you have pretty much answered your own question: The above companies' retail prices tend to be high, CDN is the dealer wholesale (low end, and what we would like to pay for all of our coins), and actual prices realized are your best indicator of what you should reasonably expect to pay for a coin. As far as how the companies determine prices, I have no clue, but it does not appear to be from following Ebay auctions.

Do you have any local coin shops or nearby coin shows? A friendly relationship with a local dealer can be a good thing, and dealers at shows are often willing to negotiate if things are slow.

By the way, we like pictures.

[World Colonial]

Look at auction results and compare the relative quality between specimens to obtain an idea of relative value.  There is no absolute value, so what a coin is worth can only be evaluated relative to the closest comparable. 

Deciding how much to pay is also largely a matter of personal preference if it doesn't sell frequently.  In the area I collect which isn't US, there isn't much to data due to the lack of sales history and the scarcity.  The coins are much cheaper so the financial risk is much lower, but I decide to pay mostly using a combination of prior experience and how badly I want it.

[Just Bob]

1 hour ago, World Colonial said:

... I decide to pay mostly using a combination of prior experience and how badly I want it.

That is exactly how I approach buying tokens, although availability of funds often plays a part, as well.

[Conder101]

Price guides are always as guess at what the market price is, and they tend to work best when pricing "widgets".  Widgets are relatively common generic type coins that are readily available and which trade frequently. (A MS 1800 Bust dime is NOT a widget.)

You also have to consider that with the exception of CAC none of these companies are "setting" prices, they are reporting past prices modified in their best estimate as to what they would sell for now. (CAC is different because they are actually dealers and the CAC listing are actual offeres to pay for coins in those grade WITH a CAC sticker.  The other guides you are dealing with prices for coins that haven't been seen.  So will be low end some solid for the grade and some high.  And some coins are pieces that are overgraded.  The CAC sticker coins have already been seen and they know they are solid or high end for the grade.  Much less uncertainty so prices are higher.)

The NGC and PCGS guide prices are basically for coins slabbed in their holders and do not necessicarily reflect tose for coins slabbed by other services

The graysheet is put out for dealers and is  (or at least was) a wholesale listing for what dealers should pay buying coins from each other.  Coins bought from collectors or the general public they should pay even less.

The CPG is put out by the same people who put out the graysheet and is aimed at collectors to tell them how much they should pay the dealers who bought the coins at the graysheet levels.

There is also some psychology in the PCGS and NGC price guides,  They want to at least try to indicate that coins in their holders are worth more so there could be a bias to indicate a higher price than warranted.

Now as I mentioned the MS1800 bust dime is NOT a widget. There is only one solid data point in those prices listed and that is the auction result, which is old and obsolete.  All the rest of the prices are WAG's Wild A** Guesses. They will all be revised, probably significantly, the next time one actually sells at auction, and there is no way to predict what it will sell for ahead of time.

The 1880 O dollar in 63 IS a widget.  But let's take a look at your ebay data. You have an average price of $410.  The average for the three "retail" price guides (PCGS, NGC, and CPG) is $417.  I'd say a fairly close fit.  But I would like to drop from the data the MS-63 PL, the ICG and the ANACS coins.  MS-63 PL is not the same grade as MS-63 as the price it sold for would indicate,  And ICG and ANACS tend not to be as highly approved of and sell for lower prices even if the coin in the slab is superior.  If we do that the average drops to $398.  Not as good a fit, but still within 5%

[bernard55]

Thank you all for the generous replies and information. 

I did not realize that the the CAC listing are actual offers to pay for coins in those grade WITH a CAC sticker.  I'm wondering If my strategy needs to shift to purchasing only CAC coins given I'm getting increasingly uncomfortable with the pricing from others the more I analyze the data. That is a great piece of info--thank you!

As you can tell i'm a bit of a data nerd (programmer so it goes with my INTJ personality :-) )

Conder101--your comment about widgets makes a great deal of sense.  What doesn't make sense and I'm a bit stuck on it is how the company with the 425 price tag on the 1880-0 MS 63 widget has not changed that price given auction prices.  Here is what THEY are tracking since sept of last year-very few prices match the 425 price in the guide--and you can see from the chart below this one that the price has been coming down but not matching the auctions.

https://www.pcgs.com/auctionprices/details/1880-o-ms/97115

From: https://www.pcgs.com/pricehistory#/?=7114-63

 

So, net is that I don't really agree that "they tend to work best when pricing 'widgets'".  I'm doing analysis on quite a few of these -- I really want to understand the strategies these companies are using to set the prices in the market (on widgets and non-widgets) before I invest large $ as I don't want to be holding a dime that I invested 23k on now being sold for 18k.

Thanks again for you insight. 

 

[bernard55]

I forgot to add some detail on the "non-widget".  I respect but might debate your point "They will all be revised, probably significantly, the next time one actually sells at auction" --I'm seeing the "reaction" (mostly downward across my research--a problem for another post) but I'm not seeing the "reflection" of the market.

Here is the history of 2 graders for a higher grade with a few more in the population (MS 62)

from: https://www.ngccoin.com/price-guide/united-states/dimes/28/history/14470/62/

 

From: https://www.pcgs.com/pricehistory#/?=4470-61,4470-62

From here you can see the auction prices (population 4, vs. 3 that they report) and look at their pricing trend and where things sold (inclusive of buyers premium).   I hear you on your point about not going with these services for the non-widgets and I agree with you.  What I don't see is their reaction to the market in regards to reflecting the market. 

I do see this: https://www.ngccoin.com/price-guide/disclaimer.aspx and it's good advice.. I've always been happy with NGC--I own a lot of NGC graded coins. 

Disclaimer: The prices listed in the various NGC Price and Value Guides are compiled from a number of independent, third party sources in the numismatic community which NGC believes to be reliable. Prices provided are averages, not specific prices for individual coins. Further, because these prices are only updated from time to time, they do not reflect short term pricing trends, which are quite common and are often quite dramatic, given the volatile nature of the collectible coin marketplace. This is especially true for rare coins, where there are fewer sales and greater variations in sale prices. For all of these reasons, the prices in these guides are designed to serve merely as one of many measures and factors that coin buyers and sellers can use in determining coin values. These prices are not intended, and should not be relied upon, to replace the due diligence and — when appropriate — expert consultation that coin buyers and sellers should undertake when entering into a coin transaction. As such, NGC disclaims all warranties, express or implied, with respect to the information contained in the NGC Guides. By using the NGC Guides, the user agrees that neither NGC nor any of its affiliates, shareholders, officers, employees or agents shall have any liability for any loss or damage of any kind, including without limitation any loss arising from reliance on the information contained in the Guides.

 

So, knowing all of this.  Would you pay $23,700 for this dime? https://www.ebay.com/itm/1800-10c-PCGS-MS62-ex-D-L-Hansen-Rare-Mint-State-Example-Bust-Dime/203003440942 

PCGS says, maybe offer 21k, NGC says it's a great buy at that price... Auctions say, offer 15 to 16k...  What should the offer be?

by the way this is 1 more to add to PCGS's population of 3... now it was easy to find 5 different serial numbers out there.  but this is yet, another problem for another day...

another example of same coin.. would you pay 26.4k for this one:

 

if you knew they paid 16.8K

 

can you see why I'm confused about what to pay :-) and not being a victim...

 

Again, thank you for your advice. I can see that this is a valuable forum with good people .  I know Just Bob likes pictures so I included some this time.  I tried to delete the one below but they keep showing up.  sorry, just ignore the ones below. 

 

 

 

Edited June 10, 2020 by bernard55

[VKurtB]

2 hours ago, bernard55 said:

I forgot to add some detail on the "non-widget".  I respect but might debate your point "They will all be revised, probably significantly, the next time one actually sells at auction" --I'm seeing the "reaction" (mostly downward across my research--a problem for another post) but I'm not seeing the "reflection" of the market.

Here is the history of 2 graders for a higher grade with a few more in the population (MS 62)

from: https://www.ngccoin.com/price-guide/united-states/dimes/28/history/14470/62/

 

From: https://www.pcgs.com/pricehistory#/?=4470-61,4470-62

From here you can see the auction prices (population 4, vs. 3 that they report) and look at their pricing trend and where things sold (inclusive of buyers premium).   I hear you on your point about not going with these services for the non-widgets and I agree with you.  What I don't see is their reaction to the market in regards to reflecting the market. 

I do see this: https://www.ngccoin.com/price-guide/disclaimer.aspx and it's good advice.. I've always been happy with NGC--I own a lot of NGC graded coins. 

Disclaimer: The prices listed in the various NGC Price and Value Guides are compiled from a number of independent, third party sources in the numismatic community which NGC believes to be reliable. Prices provided are averages, not specific prices for individual coins. Further, because these prices are only updated from time to time, they do not reflect short term pricing trends, which are quite common and are often quite dramatic, given the volatile nature of the collectible coin marketplace. This is especially true for rare coins, where there are fewer sales and greater variations in sale prices. For all of these reasons, the prices in these guides are designed to serve merely as one of many measures and factors that coin buyers and sellers can use in determining coin values. These prices are not intended, and should not be relied upon, to replace the due diligence and — when appropriate — expert consultation that coin buyers and sellers should undertake when entering into a coin transaction. As such, NGC disclaims all warranties, express or implied, with respect to the information contained in the NGC Guides. By using the NGC Guides, the user agrees that neither NGC nor any of its affiliates, shareholders, officers, employees or agents shall have any liability for any loss or damage of any kind, including without limitation any loss arising from reliance on the information contained in the Guides.

 

So, knowing all of this.  Would you pay $23,700 for this dime? https://www.ebay.com/itm/1800-10c-PCGS-MS62-ex-D-L-Hansen-Rare-Mint-State-Example-Bust-Dime/203003440942 

PCGS says, maybe offer 21k, NGC says it's a great buy at that price... Auctions say, offer 15 to 16k...  What should the offer be?

by the way this is 1 more to add to PCGS's population of 3... now it was easy to find 5 different serial numbers out there.  but this is yet, another problem for another day...

another example of same coin.. would you pay 26.4k for this one:

 

if you knew they paid 16.8K

 

can you see why I'm confused about what to pay :-) and not being a victim...

 

Again, thank you for your advice. I can see that this is a valuable forum with good people .  I know Just Bob likes pictures so I included some this time.  I tried to delete the one below but they keep showing up.  sorry, just ignore the ones below. 

 

 

 

Those graphs look like mesas in the Southwest.

[kbbpll]

I'll toss Numismedia into the mix. They show $375 "old price" for that 1880-O widget with an up arrow to $419 "current price". When buying, I check Numismedia, NGC, PCGS, then mostly Heritage archives, then evaluate how often I've seen the same coin come up, how current offerings compare (uglier coins at higher grades, prettier coins at lower grades but more expensive, etc), and then toss in "how bad do I really want it". I don't want to be a "victim" either, but I consider all my coin purchases, with rare exceptions, to be from disposable income. This removes my anxiety over it. If I had to sell for less, I'll write it off as enjoyment value. $16-26k for that dime is well outside my disposable income criteria, so it would have to fall into "wise investment" criteria, and coins are definitely not that for me.

The $23,700 dime you posted is "ex-Hansen", so price might be influenced by the cachet of the provenance.

[bernard55]

kbbpll--I've never use Numismedia pricing. I'm not a member (yet).  I see on their website it say "The pricing information we report comes from all over the numismatic market including many reliable dealers known for their unbiased market knowledge and information."  I also see they say "We also offer ALL of the NumisMedia Price Guides (Market, FMV, PCGS, NGC, CAC, & Plusа+) in Excel database format (.xls), on a monthly or weekly basis."

Is it worth the $45/month? http://www.numismedia.com/benefits.shtml - it seems like a bit of a black box from the outside.  Are they repackaging all the price providers?

If I were eBay or HA I'd get into the pricing business as they have a better read on the market than anyone else.  Every coin dealer I visit just pulls up CPG compares to NGC/PCGS and says "it's a deal, NGC/PCGS says" so I'm not sure they have an incentive for market transparency...  is Numismedia more transparent? more aligned with what the auction prices are?

this brings up another question I've been thinking about but have not found an answer. Is there a consolidator of all auction prices?

[bernard55]

VKurtB -- "Those graphs look like mesas in the Southwest." -- Yes, I'm studying this hard to figure out where to invest money in this market.  I love numismatics, always have...  but now that I'm retired and want to put time and money to work on it I want to make smart investments.  It's interesting to watch the rare US gold coins (especially the liberty $5, $10 and $20) right now compared to other 'non-widgets'.  I showed some of this data to several dealers at the last long beach show and I heard from all of them that the market is shrinking and the issue is that there are no longer young people investing time/money etc. into the hobby.  This worries me a bit but I'm seeing some hot spots in the 'non-widget' world so it still has my interest.  however, overall I'm not impressed on where I see the overall market headed--I'd like to be part of the solution if there is one. 

[VKurtB]

1 hour ago, bernard55 said:

VKurtB -- "Those graphs look like mesas in the Southwest." -- Yes, I'm studying this hard to figure out where to invest money in this market.  I love numismatics, always have...  but now that I'm retired and want to put time and money to work on it I want to make smart investments.  It's interesting to watch the rare US gold coins (especially the liberty $5, $10 and $20) right now compared to other 'non-widgets'.  I showed some of this data to several dealers at the last long beach show and I heard from all of them that the market is shrinking and the issue is that there are no longer young people investing time/money etc. into the hobby.  This worries me a bit but I'm seeing some hot spots in the 'non-widget' world so it still has my interest.  however, overall I'm not impressed on where I see the overall market headed--I'd like to be part of the solution if there is one. 

It should worry you, and not just a little bit. The trends are not encouraging. Finding sound numismatic “investments” is even tougher now than ever, and it never was easy. To me, the key is not to find what’s hot now, but rather to get a crystal ball and think about what may heat up in the future. A few musts - 1) superior quality, 2) under appreciated now, 3) avoid current fads unless you think they will accelerate even more. The entire Collectables field is affected. Watch some old Antiques Roadshow episodes. Prices from 2006 to now are often well lower today. 

Edited June 10, 2020 by VKurtB

[kbbpll]

1 hour ago, bernard55 said:

I've never use Numismedia pricing. I'm not a member (yet).

I'm not a member either. I don't know where they get their data. They just seem to update it more than the TPG price guides, for "widgets" anyway. They have your 1800 10c MS62 at $25940 with a big down arrow from $29,060.

@VKurtB those aren't mesas, they're escarpments.

[World Colonial]

I'd never buy any coin as an "investment".  A very low percentage of collectors make money but no reason to believe it's any more than that.  I also believe the collector base is shrinking but even if it isn't, very poor liquidity and wide buy-sell spreads versus "mainstream" asset classes.  Someone has to pay all the slippage covering the intermediary's expenses and it's the collector.

It's debatable but I don't think either of the coins you use as examples are good for this purpose either.  An 1880-O Morgan dollar in MS-63 is simultaneously very common, generally not a very appealing grade and yet it still sells for a huge premium to silver spot. I have not studied the price history in detail but my suspicion is that someone is more likely to make money buying a larger number at lower premiums which benefits from a rising spot price.  Or, the more expensive but simultaneously scarcer and better quality dates favored by bigger budget buyers.  The 1880-O MS-63 seems to be in the middle.

The 1800 dime is desirable but it's still an expensive "collector" coin, even in MS-61.  You are probably also going to have a hard time buying it considering that NGC only lists one and PCGS none, in this grade.

[RWB]

With exceptions for readily available collector coins, each piece is unique even if hundreds are known. Therefore, binning them into some sort of price or value tracking guide is a futile exercise. The apparent volatility in auction prices comes from the reactions of individual collector and dealer perceptions to different specimens of the same date/mint of coin over time. A meaningful relationship only exists if one tracks the same coin (regardless of plastic container or source of 'grade') through multiple sales, over time.

As others have said, collecting coins is a hobby not an investment - except in enjoyment.

[bernard55]

RWB --but why would anyone invest time and money in a hobby if they knew each dollar would be worth less in the years that come? I collect rare wine--it goes up in value. I collect fine art--it goes up in value. If there is no relationship to value then the hobby is not going to be around much longer and NGC/PCGS and a lot of dealers are not going to have bright futures.  That's kind of depressing to hear that from experienced folks.  

[World Colonial]

8 minutes ago, RWB said:

With exceptions for readily available collector coins, each piece is unique even if hundreds are known. Therefore, binning them into some sort of price or value tracking guide is a futile exercise. The apparent volatility in auction prices comes from the reactions of individual collector and dealer perceptions to different specimens of the same date/mint of coin over time. A meaningful relationship only exists if one tracks the same coin (regardless of plastic container or source of 'grade') through multiple sales, over time.

As others have said, collecting coins is a hobby not an investment - except in enjoyment.

Agree

Another consideration is prospective relative financial performance.  I'm not even positive on silver now yet would still buy it over either of those two coins, at near current prices.  I expect it to lose value so I would try to buy it somewhat cheaper first but I think the likelihood is a lot higher than it will double to about $36/oz before either one of those coins will increase 100% after selling expenses.

[bernard55]

World Colonial - yes, I hear you on "slippage covering the intermediary's expenses".  it's easy to see that the people making money here are in the auction business--now that might be a better investment :-) . Just look at the annual reports (example: http://www.artfixdaily.com/artwire/release/5509-heritage-auctions-reports-2019-sales-of-8247-million-online-sales) "The firm’s core category, rare U.S. Coins, generated $181.3 million in auction sales, giving Heritage Auctions 55 percent of the world’s auction market for U.S. rare coins. Heritage sold the market’s most valuable U.S. rare coin in 2019: the finest-known 1885 Trade dollar, graded NGC PR66, which realized a record $3,960,000. Additional records include three other seven-figure coins, as well as the April sale of a 1964 Kennedy Half Dollar, which sold for a world record $108,000, making it the most expensive coin of its type."

[World Colonial]

2 minutes ago, bernard55 said:

RWB --but why would anyone invest time and money in a hobby if they knew each dollar would be worth less in the years that come? I collect rare wine--it goes up in value. I collect fine art--it goes up in value. If there is no relationship to value then the hobby is not going to be around much longer and NGC/PCGS and a lot of dealers are not going to have bright futures.  That's kind of depressing to hear that from experienced folks.  

I'll answer your question for myself.

It's a function of the buyer's attitude toward collecting. Many buyers aren't collectors at all or it is secondary to money, so obviously they will have the sentiments in your post.  This is a lot more true of a coin like the Morgan dollar than the bust dime.  The first coin is one of the few that I would somewhat describe as an alternative "investment" substitute since it is bought in much higher proportion by financially motivated buyers.  I infer this by how common it is and who is selling it.

Most others presumably still expect to lose money but are willing to treat it - to a point - as an alternative consumption expense.  They like what they buy but just not enough to lose a "noticeable" proportion of their outlay.  It's a subject I have commented on extensively where I have undoubtedly expressed unpopular opinions but it's what is evident in the numismatic press and anecdotally expressed on coin forums.

 A declining price level doesn't mean the hobby will cease to exist.  It just means that a lot of people will potentially lose a noticeable or large proportion of their outlay and it will be a lot less profitable for those in the business.

[RWB]

3 minutes ago, bernard55 said:

RWB --but why would anyone invest time and money in a hobby if they knew each dollar would be worth less in the years that come? I collect rare wine--it goes up in value. I collect fine art--it goes up in value. If there is no relationship to value then the hobby is not going to be around much longer and NGC/PCGS and a lot of dealers are not going to have bright futures.  That's kind of depressing to hear that from experienced folks.  

A "hobby" has no assurance of pecuniary gain.

Likewise, there is no assurance your wine or fine art will appreciate in value in either price or adjusted. The price of a Monet depends on perception, immediate 'taste', and availability of others willing to place a greater 'price' on the painting than that paid by the present owner. Neither is actually "value" - which is a more complex assessment that mere dollars, pounds or euros.

Coin collections depend on the same qualities as your other collections, and have similar limitations. in the end, the old rule of buying quality applies. However, you can drink the wine - if it has not turned in the bottle. The Monet can be enjoyed for it's beauty. A coin can be enjoyed for its history and possibly appearance.

This is not to neglect that sale of collections cannot be profitable. But that is a business or investment decision that must be taken aside from collecting. If you want to "invest money to make a profit" in rare coins, then toss aside your preconceptions and look only at the market potential. To begin that, the various price guides and related are just ink on paper.

[bernard55]

I must admit that after speaking to this group and to many of the dealers at the LBE show earlier this year I'm thinking that spending > 1k on a coin just isn't a smart move.  I love the hobby--but I'm also a business guy that hates to make bad investments (in food, in cars, in homes, in anything regardless if I'm ever going to sell it while I'm alive).  I dig in financially for ROI on anything I invest $ in -- even our new washer and dryer :-)  -- you all have me perplexed (if I love the hobby, spend some money to fulfill my desire, just don't spend money that is not discretionary).  That is good/sound advice--just disappointing. 

[VKurtB]

Every attempt in this hobby, throughout its history, without apparent exception, to make coins a vehicle for “investors” has yielded a similar outcome - temporary success, yielding a temporary asset bubble in coins, followed by a slow but steady collapse of the frothed up prices to a point below where they were before the whole exercise began.

Edited June 11, 2020 by VKurtB

[kbbpll]

44 minutes ago, bernard55 said:

I collect rare wine--it goes up in value. I collect fine art--it goes up in value.

Those are interesting examples. I know nothing about either, but it seems to me both are in the "show off" category. For wine, you have to drink it to impress, don't you? Every bottle of the latest impressive wine someone drinks, means one less bottle on the market, hence the price goes up. Maybe I'm completely off here, but what's the point of having an expensive bottle of wine other than to drink it? With fine art, each piece is unique, and there will never be another one. The drive to "impress" goes up, the more wealthy people there are, but the supply (for dead artists anyway), is fixed. Coins - some things in common with wine and art, but not much. Each coin is different, but not unique (except for very few examples). Coins don't get "consumed", unless they get melted. Of course the "show off" factor exists in coins too, but I don't perceive it on the same level. You walk into someone's house, greeted by a Monet. You sit down for dinner, the $1000 wine comes out. And then... your host whips out their coin collection?

[MarkFeld]

45 minutes ago, bernard55 said:

I must admit that after speaking to this group and to many of the dealers at the LBE show earlier this year I'm thinking that spending > 1k on a coin just isn't a smart move.  I love the hobby--but I'm also a business guy that hates to make bad investments (in food, in cars, in homes, in anything regardless if I'm ever going to sell it while I'm alive).  I dig in financially for ROI on anything I invest $ in -- even our new washer and dryer :-)  -- you all have me perplexed (if I love the hobby, spend some money to fulfill my desire, just don't spend money that is not discretionary).  That is good/sound advice--just disappointing. 

You’ve been given good information. If you’re going to buy coins, it’s best to do so for the enjoyment of collecting, not in order to try to make money. Sure, you might make a profit, but the odds are against it.

Sadly, over a period of forty years, I’ve dealt with a lot of disappointed buyers. On the plus side, I’ve also worked with a good number of passionate collectors, who truly love their hobby.

[RWB]

RE: "... LBE show earlier this year I'm thinking that spending > 1k on a coin just isn't a smart move."

Spending $1,000 in a nice coin, preferably scarce and in choice condition, might be a smart move if virtually identical pieces are selling for $1,500. But the plastic and cute stickers are meaningless - you must use your own skill of visual examination to make a decision. To actually "invest in rare coins to make a profit" your individual purchases might begin at $50,000 to $100,000, but using even tighter discrimination to get the absolute best quality -- that is where price appreciation might be found.

Coin sales are also subject to considerable, sometimes unintentional manipulation. The total coin market is very small, and this makes it very volatile. There are no controls or regulations. A great rarity might have sold for $2 million 10 years ago and sell next week for $1.7 million....or $2.2 million - both a considerable loss in time-value of money.

 

Edited June 11, 2020 by RWB

[bernard55]

MarkFeld - You are correct.  This is all great information. Especially for someone considering getting back into the hobby in a much bigger way.  For seasoned collectors its about the thrill of the hunt and not about the value of the hoard of items they have stashed that they love. 

Thank you all. 

Makes you wonder why pricelists exist, why grading companies exist and why public companies exist around these services if its not about the value (https://finance.yahoo.com/quote/CLCT/financials?p=CLCT).  Hard to imagine being a dealer in a market where inventory is depreciating.

I guess this leads to another question--Why do people pay $65+ to grade a coin--is it because they think it's about the value (but it's not and that is our little secret) or is it to prove to themselves that they were right--it was an MS 66 (kind of expensive just for that)... or is it just that they like the neat holders... (also expensive).

[World Colonial]

Regulating coins isn't going to change the economics.  Nothing can go up forever.  This is particularly true for coins because no one other than a collector derives any actual utility.  That's why prior bubbles like 1989 in the US shortly after TPG became mainstream and in South Africa after TPG also financialized this market are unsustainable.

The US "hobby" first became widely financialized in the 1970's.  This attracted a large number of far more affluent buyers who were both willing and able to pay much higher prices but enough of them were also sufficiently interested in real collecting where it has lasted to the present day, unlike in South Africa where this much smaller market collapsed after 2011.

The difference now though is that the price level for the coins most collectors and affluent buyers want the most are astronomically higher.  This is evident in the PCGS 3000 index.  The price of this coinage cannot perpetually increase at a rate faster than the incomes and asset bases of those who buy it.  The only way this is sustainable now is if the collector base includes a much larger percentage of more affluent buyers who treat their purchases as widget buying as a replacement for mainstream asset classes.  Most of this coinage isn't remotely interesting enough to most collectors, unless they aren't losing a noticeable proportion of their outlay.

[World Colonial]

1 minute ago, bernard55 said:

I guess this leads to another question--Why do people pay $65+ to grade a coin--is it because they think it's about the value (but it's not and that is our little secret) or is it to prove to themselves that they were right--it was an MS 66 (kind of expensive just for that)... or is it just that they like the neat holders... (also expensive).

Multiple motivation involved with this question.  There is a financial element to it in that TPG grading improves marketability.  For others, it's registry competition.  There is also the real reason TPG existed in the first place which is to authenticate.  That's a bigger factor now due to harder to detect counterfeits but though I never hear it from anyone else, it should also be evident that the inflated price level makes it a lot more profitable to fake coins that never would have been previously.

[bernard55]

Registry I get (a bit expensive for that, but it makes sense). Counterfeits I get too (I know that market well given some past roles)--but you really have to be motivated by the value of what you own to a certain degree to care to test your ability to not recognize a fake--but I respect your point here and for the most part agree.  The item on your list that's interesting is "improves marketability" -- this is all about selling and you sell to get an appreciated value of what you collected.  That seems to go against the momentum of what everyone is saying--don't get into this if you (or more likely your heirs) want to get money back out of it someday.   Forgive me if I'm being a pain.  For me, these are important questions that I am finding it hard to get honest answers.  I really like this hobby but not enough to lose money.  Maybe for a guy like me--it's just a bad idea or maybe I'm not savvy enough to make below market purchases to ensure I don't lose money.

[Conder101]

6 hours ago, bernard55 said:

RWB --but why would anyone invest time and money in a hobby if they knew each dollar would be worth less in the years that come? 

People invest time and money in a hobby because they enjoy it and it gives them entertainment value.  Example golf. Can be quite costly, and pretty much NO ONE gets back out the time and money they put in.)  There are very very few hobbies that will return to the hobbyist the money they put into them.  That is unless you put a monetary value on the entertainment they get from their hobby over the years.