Numismatics during economic downturn... 1 1

[The Neophyte Numismatist]

As we get into choppy territory in today's stock market, I am left wondering the impacts of economic downturns on the hobby.  Obviously, the economy plays into discretionary purchases and generally places more rigor around buying decisions.  Therefore it stands to reason that the coin market will cool (and indications are that it already has (slightly)).  Like equities, a pullback in coin prices could present buying opportunities.

In studying coins, economic downturns have also led to coin scarcity.  The coins of 1921 come to mind as scarce coins that were impacted by the economic conditions.  More recently, 1982 is a tougher date in modern coins (note: this is also driven by lack of Mint sets in 1982-83).   Some even consider the coins of 2009 to be tougher dates.  All of these coins occurred during times of economic challenge.  Granted, not all of these coins are "rare" and some are still quite common, but these years certainly stand out in my head as I talk to other collectors.

What do you think future economy plays into coin prices and how could future economic conditions play into coin scarcity itself? 

 

[DWLange]

In recent decades the U. S. Mint seems to have been running on auto pilot, creating more coins than were needed and striking every denomination at every mint. The only time in the past 60 years or so that the Mint reduced production in response to the economy was 2009. The dip in mintages that year prompted speculators to hoard all they could get, with the result that coins of that date are seldom found in circulation. The only exception were the quarters, the mintages of which seem to have been unaffected. Whether they were actually needed for commerce or were overproduced because of their commemorative designs is uncertain.

[The Neophyte Numismatist]

@DWLange Thanks so much.  That is very insightful.  So, do you think that the economic situation (or situations in the future) will have very little impact on minted due to the "autopilot" nature of there mint?  From your experience, have slowing economies caused pricing pullbacks in coins.  I realize this is speculative, but I do not have the span in the hobby to understand how boom/bust follows the market.  

I like connecting the dots.  But, I don't want to connect dots that do not exist. 

Edited June 22, 2022 by The Neophyte Numismatist

[VKurtB]

On 6/22/2022 at 8:29 AM, The Neophyte Numismatist said:

I like connecting the dots.  But, I don't want to connect dots that do not exist. 

Like planetary astronomers decades ago when they looked at Mars and saw canals? The dots existed but the connections were pure pareidolia. 

[The Neophyte Numismatist]

On 6/22/2022 at 10:05 AM, VKurtB said:

Like planetary astronomers decades ago when they looked at Mars and saw canals? The dots existed but the connections were pure pareidolia. 

That's exactly what I do not want.  I don't mind drawing conclusions based on facts and real trends... however, I was not around in the hobby during the dates mentioned, so it would be irresponsible of me to draw these types of conclusions with my very limited experience.  So, I thought I would toss this out to the group to get some opinions on the future horizon (but based on past performance*).

*Please remember that past performance may not be indicative of future results. Different types of numismatics involve varying degrees of risk, and there can be no assurance that the future performance of any specific coin, collecting strategy, or product made reference to directly or indirectly in this post, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your collection. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this post serves as the receipt of, or as a substitute for, personalized collecting advice from the Neophyte Numismatist.

[USAuPzlBxBob]

I checked my Puzzle Box Gold collection yesterday and it had fallen in value by $250 overnight. (NGC Price Guide)

I searched within the collection — one advantage of having a small collection rather than thousands of coins — and was able to find the coin.

My $20 1876 CC MS 60 was the culprit, down $250.  Curious, I then checked all of the prices for this coin in neighboring grades, and they all were higher as of yesterday.

Then I looked at other neighboring years and mints for $20 double eagles and there's a lot of "red ink" to be found, but a lot of "green ink," too.

"Luck of the draw," I thought… or for me… it seems these days, just my "dumb luck."

[The Neophyte Numismatist]

Gold in general has been pretty interesting to watch.  Many collectors and experts have considered gold to be a hedge against inflation.  Also, some people think in terms of gold as a counterbalance to a sinking equity portfolio.  In 2009, gold soared in economic uncertainty.

Today, we have record inflation, economic uncertainty, a war in Europe... and while gold has made some gains, is not behaving quite like we would expect.

[VKurtB]

When economies go south ALL assets decline. It’s what happens NEXT that makes some “flight to safety” assets appreciate. 

[zadok]

On 6/22/2022 at 12:32 PM, USAuPzlBxBob said:

I checked my Puzzle Box Gold collection yesterday and it had fallen in value by $250 overnight. (NGC Price Guide)

I searched within the collection — one advantage of having a small collection rather than thousands of coins — and was able to find the coin.

My $20 1876 CC MS 60 was the culprit, down $250.  Curious, I then checked all of the prices for this coin in neighboring grades, and they all were higher as of yesterday.

Then I looked at other neighboring years and mints for $20 double eagles and there's a lot of "red ink" to be found, but a lot of "green ink," too.

"Luck of the draw," I thought… or for me… it seems these days, just my "dumb luck."

...MS60 coins r almost always borderline coins except when they r the finest known....

[USAuPzlBxBob]

On 6/22/2022 at 6:24 PM, zadok said:

...MS60 coins r almost always borderline coins except when they r the finest known....

I needed the coin, and it was the only one I could find at the time.  It fit a narrative I was working on, and it helped me to accomplished my objectives.

I knew at the time that I didn't like the MS 60 "in-between grade," but when I got the coin it was visually very appealing, and it photographs wonderfully.

Just now, I compared what an MS 61 would have entailed.  An MS 61 $20 1876 CC would have cost around $20K back in 2014, and back in December 2020, they fell off a price cliff.  I'd be out far more money had I located an MS 61 and held onto it.  My MS 60 grade coin stays in a narrow price range, it is a favorite of mine to own, and since I'm not in it for the money, it was easy for me to commit to buying it.

That's what it comes down to… can you live with the coin?  Will you have serious regret at a later date?  If the answers to these two questions are in your favor, then it's "buy time" and don't look back.

[Conder101]

On 6/22/2022 at 9:16 AM, DWLange said:

The only exception were the quarters, the mintages of which seem to have been unaffected.

The quarter mintages were affected too.  In 2008 the average mintage for EACH design was in the 500 million range.  In 2009 the HIGHEST mintage was the first design at 170 million.  By the third design it was down to 87 million, and by the last design it was 72 million.

[GoldFinger1969]

On 6/22/2022 at 12:48 PM, The Neophyte Numismatist said:

Gold in general has been pretty interesting to watch.  Many collectors and experts have considered gold to be a hedge against inflation.  Also, some people think in terms of gold as a counterbalance to a sinking equity portfolio.  In 2009, gold soared in economic uncertainty.  Today, we have record inflation, economic uncertainty, a war in Europe... and while gold has made some gains, is not behaving quite like we would expect.

Gold and the foreign exchange market traded $1 billion daily in 1980.  Today, gold trades $50 billion a day.....and foreign currencies (led by the dollar) trade $5 TRILLION a day.  That's where folks go during times of economic stress and uncertainty....to the dollar generally, more specifically, U.S. Treasuries.

[GoldFinger1969]

On 6/22/2022 at 9:09 AM, The Neophyte Numismatist said:

What do you think future economy plays into coin prices and how could future economic conditions play into coin scarcity itself? 

I don't think that the minting of modern coins -- gold, silver, or otherwise -- will be impacted by any economic circumstances.  That's something that is pretty constant, I would think...we're always minting new currency.

OTOH.....demand for numismatics and bullion will be impacted by any negative wealth effect that hits the middle-class, the upper middle class, and the so-called "working rich."  These are all distinct from the truly wealthy and ultra-HNW types who are worth hundreds of millions or billions and aren't impacted by a 20% or 40% drop in the stock market, falling bond prices, or even real estate drops. 

The folks who earn $50,000 to $500,000 are big buyers of coins, bullion, numismatics, and commemoratives. Even the working rich -- the small business owner worth $5 MM or $10 MM or even $20 MM -- who buy with large discretionary sums will be impacted by a drop in stock/bond prices.

A guy like Bob Simpson or those like him will be unaffected.  The folks who login to HA or GC and/or goto a LCS or a regional or national coin show will feel the pinch and cut back.

Comparisons to previous times are pretty much useless as the 1970's were a unique time period (e.g., floating currencies in 1973, gold price no longer fixed, inflation, etc.) as my trading volumes post above shows.  You also had some unique variables as people got caught up in 2 bubbles in 1980 and 1989 in the last 40 years.  A perfect confluence of events and circumstances -- gold going up 20-fold in 10 years, silver going up 40-fold in 10 years, inflation, floating currencies, Doom & Gloom types dominating via TV and newsletters with no financial information available like today -- led to great mispricing of numismatic assets.  "Get Rich Quick" schemes with coins and bullion were everywhere from outright scamsters to legit commentators using hyperbole to grab "shelf space" like Howard Ruff's "Ruff Times" newsletter.

Still happens today....but on a MUCH smaller scale.

Edited July 9, 2022 by GoldFinger1969

[Ray Tatum]

At least the coin hunting improves when the people break out their jug change in harder times; there are more home-wraps and coins in the cash box down at the PetroMart. Hersh separates me the home rolls and overflow from the cent tray for his convenience, now. 

 

[World Colonial]

As long as circulating US coins continue to be minted, none in the future will be even close to scarce, absent a collapse in the economy to outright destitution.  As big of a bear market as I expect coming, even I'm not that pessimistic.

As for the prices of numismatic coins, big drops in the early 80's, early 90's, and somewhat after 2008.  It depended upon the coin or series.  Early 80's was tied to both the recession and the precious metals crash.  Early 90's I think more from the end of the TPG bubble.  As for GFC, I never heard that coin prices fell that much but I have never seen specific data or researched it myself.  I heard that it was more stagnation and persistent than a "crash", once again depending upon coin or series.  Some series like classic commemoratives have (mostly) been on a one-way trip lower, in this case since the end of the TPG bubble.

As to the future, to get what I would describe as a big decline is going to take extended unemployment and tight financial conditions.  In the first phase of the upcoming financial markets bear market (which may or may not have started), I'd expect much (but not all) of the post-COVID run-up to be reversed entirely.  An example would be ridiculous run-ups on common as dirt Morgan and Peace dollars.  Same thing for the premiums on bullion coins and to the extent it applies, on common collectible NCLT.

Longer term is another story.  I 've written about my expectation in prior threads, but this post is long enough.

[World Colonial]

On 7/9/2022 at 12:07 AM, GoldFinger1969 said:

OTOH.....demand for numismatics and bullion will be impacted by any negative wealth effect that hits the middle-class, the upper middle class, and the so-called "working rich."  These are all distinct from the truly wealthy and ultra-HNW types who are worth hundreds of millions or billions and aren't impacted by a 20% or 40% drop in the stock market, falling bond prices, or even real estate drops. 

735 US billionaires last I checked and along with something like 20,000 worth $100MM+ according to the Ultra-Wealth Report.

I don't know how many are coin collectors but would guess somewhere in the vicinity of 1%.  Depending upon where they have their money, I expect to see a much higher percentage of this group get totally body slammed financially versus the past.

Aside from the much higher overvaluation and leverage, look at what most of these people actually own, not what it's worth.  I don't know what these people exactly own in every instance but of the ones where it's public knowledge, many own assets that I'd describe as a bag of hot air.

So, what I am telling you is that there aren't (or weren't) 735 billionaires in 2021 versus 13 in 1982 because the country is that much richer.  It isn't primarily because of inflation either.  It's substantially or primarily because assets that used to be worth relatively nominal amounts in the past now sell for ridiculously inflated prices, like professional sports teams or commercial real estate.

[RWB]

Real numismatists have no difficulties during such times. Others might suffer and then blame everyone except themselves.

[World Colonial]

On 6/22/2022 at 12:48 PM, The Neophyte Numismatist said:

Gold in general has been pretty interesting to watch.  Many collectors and experts have considered gold to be a hedge against inflation.  Also, some people think in terms of gold as a counterbalance to a sinking equity portfolio.  In 2009, gold soared in economic uncertainty.

Gold was correlated with other asset classes at that time.  It wasn't a hedge.

On 6/22/2022 at 12:48 PM, The Neophyte Numismatist said:

Today, we have record inflation, economic uncertainty, a war in Europe... and while gold has made some gains, is not behaving quite like we would expect.

You know what's "interesting" about these expectations?

First, gold had a big run up to August 7, 2020 ($2072).  Someone might claim it was in anticipation of something but whatever.  The point is, it already rose a lot (from March) and it was (and is) very expensive historically (and has been for a long time) versus the things that people need and want to buy, especially other commodities.  While I think (and attribute) this consistently high price to a higher risk premium, in no way is it remotely "cheap".  So, given this historical relative valuation and run-up, why would anyone think it unusual?

Second, gold isn't an inflation hedge like "metal bugs" claim.  It's entirely dependent upon when you bought it.  If you bought it in 1980, you're both underwater and had a huge opportunity cost.  Same story for 2011 but just less.  OTOH, if you bought in 1999/2001 or October 2008, you're up big.

My explanation for it?  Simple, people aren't robots but human beings, they have agency, and can act contrary to the expectations of "metal bugs".

Nothing hard to understand about it.

[GoldFinger1969]

On 7/9/2022 at 8:51 PM, World Colonial said:

As for GFC, I never heard that coin prices fell that much but I have never seen specific data or researched it myself.  I heard that it was more stagnation and persistent than a "crash", once again depending upon coin or series.  Some series like classic commemoratives have (mostly) been on a one-way trip lower, in this case since the end of the TPG bubble.

We had a 12-year decline from 2008 into 2020....then once Americans had all that extra $$$ apparently thgy bought many coins in the index (silver and gold also rose, too).

https://www.pcgs.com/prices/coin-index/pcgs3000

Still WAY down from 1989 and even 2008 highs.

[GoldFinger1969]

On 7/9/2022 at 9:03 PM, World Colonial said:

So, what I am telling you is that there aren't (or weren't) 735 billionaires in 2021 versus 13 in 1982 because the country is that much richer.  It isn't primarily because of inflation either.  It's substantially or primarily because assets that used to be worth relatively nominal amounts in the past now sell for ridiculously inflated prices, like professional sports teams or commercial real estate.

No doubt general and asset price inflation impacts billionaire totals and other income/wealth levels.

But there is also REAL income/wealth growth, particularly from U.S. dominance of certain key export sectors where we can not only sell to Americans but service the global community.

The net worths of folks around in both 1982 and today certainly outstrips inflation and even stock market returns for many.

[GoldFinger1969]

On 7/9/2022 at 9:29 PM, World Colonial said:

First, gold had a big run up to August 7, 2020 ($2072).  Someone might claim it was in anticipation of something but whatever.  The point is, it already rose a lot (from March) and it was (and is) very expensive historically (and has been for a long time) versus the things that people need and want to buy, especially other commodities.  While I think (and attribute) this consistently high price to a higher risk premium, in no way is it remotely "cheap".  So, given this historical relative valuation and run-up, why would anyone think it unusual?

No disagreement.....I would call gold "fairly valued" myself and certainly LESS OVERVALUED than cryptos, certain stock market sectors, and other non-liquid assets (art, high-end real estate).  But all assets, including those that are the playthings of the super-rich, tend to have some price inelasticity to them.

Let's see how they all handle quantitative tightenting and a Fed Fund rate closer to 4% from the conditions of the last 14 years. 

On 7/9/2022 at 9:29 PM, World Colonial said:

Second, gold isn't an inflation hedge like "metal bugs" claim.  It's entirely dependent upon when you bought it.  If you bought it in 1980, you're both underwater and had a huge opportunity cost.  Same story for 2011 but just less.  OTOH, if you bought in 1999/2001 or October 2008, you're up big.  My explanation for it?  Simple, people aren't robots but human beings, they have agency, and can act contrary to the expectations of "metal bugs". Nothing hard to understand about it.

Gold was the ONLY way to hedge or diversify in the 1970's as inflation soared.  That's why gold did well and new-trading in currencies (and falling Treasury bond prices) made the trading volumes more or less the same.  Today, currencies (and Treasury bond trading) dwarf gold.

[World Colonial]

On 7/10/2022 at 10:01 AM, GoldFinger1969 said:

No doubt general and asset price inflation impacts billionaire totals and other income/wealth levels.

But there is also REAL income/wealth growth, particularly from U.S. dominance of certain key export sectors where we can not only sell to Americans but service the global community.

The net worths of folks around in both 1982 and today certainly outstrips inflation and even stock market returns for many.

Not saying there isn't any.

I'm telling you it's mostly caused by credit expansion where this "money" went into (financial) assets instead of consumer goods and services, so it doesn't show up in the CPI and fools practically everyone into believing it's real wealth when it isn't.

Look at outstanding credit today and recently versus 1980 or even worse, 1960.  The wealthiest don't hardly ever own large amounts of fixed income directly, but it's still predominantly why they are so much wealthier, as all debt shows up as someone's "wealth".  

I gave you the example of commercial real estate but let me draw an analogy with my grandparent's prior house, located on one of the best streets in Buckhead in ATL.  Built in 1940, they sold it in 1962 for $60K or so I was told.  It sold this year for about $1.1MM with 1.2 acres instead of the original six, long ago subdivided.  Some of this increase is explained by population which makes living closer to the city core more valuable and some of it is due to more real wealth.  Most of it is due to credit inflation, the vast majority.  It's the same house (updated) with no incremental utility other than a closer commute.

It's the same thing with commercial real estate.  Office buildings that would have been worth $10MM to $50MM (maybe) in NYC in the 60's are now worth hundreds of millions to over $1B.  Much higher rents now but this is also due to credit inflation and artificial prosperity, not real wealth.  It's the same building it was then with no incremental utility either, other than what I just told you for the house which doesn't even come close to explaining the price increase, even accounting for CPI.

[World Colonial]

On 7/10/2022 at 10:06 AM, GoldFinger1969 said:

Gold was the ONLY way to hedge or diversify in the 1970's as inflation soared.  That's why gold did well and new-trading in currencies (and falling Treasury bond prices) made the trading volumes more or less the same.  Today, currencies (and Treasury bond trading) dwarf gold.

Only way for the typical person, other than maybe real estate.

Gold exploded because its price was fixed for so long.

[GoldFinger1969]

On 7/10/2022 at 11:34 AM, World Colonial said:

I gave you the example of commercial real estate but let me draw an analogy with my grandparent's prior house, located on one of the best streets in Buckhead in ATL.  Built in 1940, they sold it in 1962 for $60K or so I was told.  It sold this year for about $1.1MM with 1.2 acres instead of the original six, long ago subdivided. 

Wow....$60,000 for any home in 1962 -- let alone Atlanta area or Georgia -- was damn pricey.  Homes in the NY area when my parents and relatives bought in the LATE 1960's were only $30,000 or so.

Edited July 11, 2022 by GoldFinger1969

[RWB]

On 6/22/2022 at 10:05 AM, VKurtB said:

Like planetary astronomers decades ago when they looked at Mars and saw canals? The dots existed but the connections were pure pareidolia. 

Not quite. A "face on Mars" is pareidolia. Giovanni Schiaparelli and Percival Lowel's "canals" were largely the product of image blending produced from insufficient image resolution. This is similar to the effect of printed photo halftone dots that merge to form a full-tone image. (This relies on a basic optical illusion: when the halftone dots - or surface markings - are small, or not resolved, the human eye interprets the patterned areas as if they were smooth tones.)

[EagleRJO]

I am a newer member/collector who is missing quite a number of less common or rarer coins for some sets I am working on, so I have been watching prices pretty closely and I noticed that starting around the beginning of this year to February the Greysheet values for those coins (mostly US dollar coins) have been dropping.  Don't know about the overall coin market, but it would stand to reason that as there are downturns in the economy, and pull-backs on discretionary spending, that coin values in general will drop.

Just my 2 (indian head) cents ;-)

[World Colonial]

On 7/10/2022 at 4:11 PM, GoldFinger1969 said:

Wow....$60,000 for any home in 1962 -- let alone Atlanta area or Georgia -- was damn pricey.  Homes in the NY area when my parnets and relatives bought in the LATE 1960's were only $30,000 or so.

That's what my mom told me, but she might be wrong.  I didn't confirm in the county records.  But keep in mind, it was a 4BR house which now has 4000+ SQFT of living space with a finished basement and then maybe close to 3000.  It was large for its day.  The property also had nine acres originally until three acres (so my mom told me) were sold under eminent domain to build I-75 through ATL in the 50's.  When the property last sold in 1996, I think it sold for several million because of the additional acreage.

My grandfather wasn't rich but one of the "working rich" per your definition at the time.  Nothing left of the family money on our side though.

On another note, when Ferdinand Lundberg published "The Rich and the Superrich" in 1964, there were about 60,000 millionaires which was rich at the time.

How many are there now?  10MM? $20MM?  The table below only goes to 1988.  Hard as it is to save $1MM, it isn't even close to rich.

Summary of millionaire materials (oregonstate.edu)

[RWB]

The "coin market" over long term is unreliable - the market base is very small so minor fluctuations or condition changes can have large effects. Look back at the late 1980s.

[GoldFinger1969]

On 7/10/2022 at 7:32 PM, World Colonial said:

That's what my mom told me, but she might be wrong.  I didn't confirm in the county records.  But keep in mind, it was a 4BR house which now has 4000+ SQFT of living space with a finished basement and then maybe close to 3000.  It was large for its day. 

Yeah, the houses on Long Island and the NY/NJ suburbs were closer to 1,200 - 2,000 square feet.  I think the house I grew up in was 1,800 (49' High Ranch).

On 7/10/2022 at 7:32 PM, World Colonial said:

My grandfather wasn't rich but one of the "working rich" per your definition at the time.  Nothing left of the family money on our side though.  On another note, when Ferdinand Lundberg published "The Rich and the Superrich" in 1964, there were about 60,000 millionaires which was rich at the time.

How many are there now?  10MM? $20MM?  The table below only goes to 1988.  Hard as it is to save $1MM, it isn't even close to rich. Summary of millionaire materials (oregonstate.edu)

Yeah, I don't know if millionaire would mean EARNS $1 MM...or has a net worth of $1 MM (including homes)...or a liquid financial net worth or easily-liquidated assets that comfortably exceeds $1 MM even if given a haircut.

You could also include PENSIONS which are worth millions for many public sector employees (and some private sector) if they are young enough and get a certain annuity for life.

I estimate the value of many teacher, firemen, and police pensions in New York State as worth about $1.5 MM - $2.5 MM.  Some as high as $5 MM !!

[GoldFinger1969]

On 7/10/2022 at 7:32 PM, World Colonial said:

How many are there now?  10MM? $20MM?  The table below only goes to 1988.  Hard as it is to save $1MM, it isn't even close to rich.  Summary of millionaire materials (oregonstate.edu)

I have a link somewhere I'll look for, but if you go by total net worth (including primary residence equity) I'm going to say it's close to 20 MM households.  Liquid financial assets, probably 10 MM.

I could be off, I'll circle back......