Top Collections Sold - Are they really profitable?
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I like to look at the images of some of the top collections in the world.  Many of those coins I can never afford, so enjoying them digitally is my only option.  I consider myself a collector, and not an investor in coins.  That said, I still pay very close attention to my cost of acquisition to ensure that I am (at the very least) market competitive.

We hear about the greatest collection being sold (Pogue, Partrick, etc), and the millions that these collections bring at auction.  However, I have never heard anything in regard to the cost of acquisition of these coins.  Are we thinking that all of these top collectors are pulling profit on these coins?  Or, are these famous collectors simply wealthy and compelled to buy the coins they need at premiums that they cannot recoup?  

Obviously, it is in the best interest of the auction houses to only speak of the value in terms of auction sales.  But, I think it is very plausible for a well heeled collector to spend $5M and sell for $3M.  We hear $3M and think, "Wow, I wish that was me." But, I would think that some of these collectors are taking some tremendous losses also.

I am not trying to imply that wealthy collectors are not wise with money.  I also understand that uber-rarities typically outperform scarce and common issues.   But, I am simply thinking that some coins win and some coins lose... and when the coins lose value, the percentage of loss represents a greater whole.  

It is very difficult to get collectors (big or small) talking about their losses.  Everyone seems to want to talk about gains.  But, no one is immune to losses on a group of coins, and the adage "The bigger they are, the harder they fall." could certainly play into the scenario.

Thoughts? 

Edited by The Neophyte Numismatist
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Posted (edited)

@J P Mashoke I think you are exactly right - get what you like and enjoy it.  I don't collect to make profit; it's all about fun and education.  Like you I am frugal to be able to afford more/better coins.  I am not claiming that I have some secret sauce to profit except to try to make your money when you buy as @VKurtB said (and that is difficult to do with runaway auctions today).  

I think @gmarguli hit the nail on the head.  Everyone likes a good deal, and no one wants to talk about the bad ones (especially BIG bad deals).  Auction houses want/need to tell the good side of the narrative to promote themselves.  In this way, collectors remind me of my friends at a blackjack table talking about the $100 they won (but leaving out the part about the $500 they spent to get there).  

This thread became a little bit of a #truth session, and that wasn't really my intent (but still neat).  All of my losses remain unrealized, as I have not sold coins, but I suspect my own profitability to ebb and flow with cycles in the hobby.  Honestly, if I broke even (or even took a small loss), I would be okay with that.  I have had hours of fun, met some cool people and have learned a ton (with much more to go).

However, when I read threads about these collections selling for millions...  I cannot help but to think about the untold stories - what they spent.  There is one notable collector that has his name on many slabs today.  They are great coins.  It is clear that he consistently buys and upgrades his collection.  I fail to believe he is pulling a profit, and the consistent upgrading strategy is almost surely a loss leader.  And yet, when the day comes that he sells his collection... he will be hailed for his numismatic prowess.  The auction houses will talk about record prices for the collection, and I will think about the balance sheet.  It's just the way I am built.  

Edited by The Neophyte Numismatist
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...Neo its a little bit of everything u mentioned, not any set absolute...there r certain US coin rarities i have tracked for decades, everytime they have sold n the prices r as expected, up n down a modified rollercoaster....in several of the multi-million dollar collections sold over the past decade there have been some idividual coins that netted significant loses, in the tens of thousands, but overall the net results of the collections have trended upward...there r many diversified factors to consider though...the length of time the collection was held ( buying into the heat of the market n selling quickly once a collection is completed usually is ill-fated)...there is the relative value of the dollar to consider as well, $5 then can be $50 or $500 now...collections of a very narrow section of the market can often get sold in a time of death for that section of the market, i.e. as vkurt stated timing is important both in buying n in selling...n then as u surmised most of these high rollers simply r not concerned if their coin collections make or lose money, its more like them buying rare vintage cars, not a question of profit or loss more an issue of ownership....after seeing the Tyrant collection in person n surmising the costs incurred i cant imagine this collection if sold can realize a profit, nor do i surmise it was assembled with that thought in mind.....

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On 6/22/2022 at 5:59 PM, The Neophyte Numismatist said:

@J P Mashoke I think you are exactly right - get what you like and enjoy it.  I don't collect to make profit; it's all about fun and education.  Like you I am frugal to be able to afford more/better coins.  I am not claiming that I have some secret sauce to profit except to try to make your money when you buy as @VKurtB said (and that is difficult to do with runaway auctions today).  

I think @gmarguli hit the nail on the head.  Everyone likes a good deal, and no one wants to talk about the bad ones (especially BIG bad deals).  Auction houses want/need to tell the good side of the narrative to promote themselves.  In this way, collectors remind me of my friends at a blackjack table talking about the $100 they won (but leaving out the part about the $500 they spent to get there).  

This thread became a little bit of a #truth session, and that wasn't really my intent (but still neat).  All of my losses remain unrealized, as I have not sold coins, but I suspect my own profitability to ebb and flow with cycles in the hobby.  Honestly, if I broke even (or even took a small loss), I would be okay with that.  I have had hours of fun, met some cool people and have learned a ton (with much more to go).

However, when I read threads about these collections selling for millions...  I cannot help but to think about the untold stories - what they spent.  There is one notable collector that has his name on many slabs today.  They are great coins.  It is clear that he consistently buys and upgrades his collection.  I fail to believe he is pulling a profit, and the consistent upgrading strategy is almost surely a loss leader.  And yet, when the day comes that he sells his collection... he will be hailed for his numismatic prowess.  The auction houses will talk about record prices for the collection, and I will think about the balance sheet.  It's just the way I am built.  

...the DLH collection is a work in progress n a bit diff to evaluate as such....im sure some of the dups have been sold at a loss but equally some have netted pluses due to time held, i see those sales mostly as recouping overall expenses but not paramount to the overall collection goal....

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Posted (edited)
On 6/22/2022 at 6:16 PM, zadok said:

...i see those sales mostly as recouping overall expenses....

I have my doubts.  But in relation to your (and my) point above - I do not think they care in the same way that I do.

Edited by The Neophyte Numismatist
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The classic coin collections that were sold in the 1970's, 1980's, and later.....were the beneficiaries of being purchased pre-WW II and then benefitted from the Baby Boom and the Coin Boom.  Some of the returns were fantastic, Eliasberg and John Jay Pittman among them. 

I estimate that JJP's return on coins was about 20% a year, which is outstanding and beats stocks and other assets over that time.  But again, Pittman benefitted from buying coins in the 1950's and 1960's....AND....focusing on gold & silver coins whose price was artificially kept low and reaped huge profits in the 1970's. 

Forget the bubble-spike prices.....if you use $20 (silver) and $500 (gold) as the 1980 price, these assets returned about 26% and 28% respectively in the 1970's.  The prices rose and fell over the next few decades and this hurt returns (no capital appreciation + no dividends).

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On 6/22/2022 at 5:59 PM, The Neophyte Numismatist said:

There is one notable collector that has his name on many slabs today.  They are great coins.  It is clear that he consistently buys and upgrades his collection.  I fail to believe he is pulling a profit, and the consistent upgrading strategy is almost surely a loss leader.  And yet, when the day comes that he sells his collection... he will be hailed for his numismatic prowess.  The auction houses will talk about record prices for the collection, and I will think about the balance sheet.  

Not sure you are talking about Bob Simpson, but just as an example.....he is worth a few billion dollars so even if he spends $100 million on his coins it's like the average person here spending a few thousand or so.  It won't impact his life.

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On 6/25/2022 at 1:49 AM, GoldFinger1969 said:

As I have posted elsewhere, coins tend to be POOR INVESTMENTS that you should not count on appreciating.  Even for coins where the heavy-hitters play and prices are less prone to declines -- like the 1933 Double Eagle or the 1908-S Norweb Saint -- the annual gain is 5-7% tops for such coins.  And the time periods involved are pretty lengthy, so timing bias is eliminated.

You'd have to be VERY LUCKY to buy at a depressed time period (harder where ultra-HNW coins are bought) and then sell at a good peak to make a return comparable to stocks or even quality real estate.  Of course, a mid-single digit return is NOT horrible -- comparable to bonds decades ago but considering the illiquidity and lack of dividends/income, a bad risk-reward play.

...and yet my coin collections far exceed the value of my brokerage portfolio...one possible factor, coin values r more reliable or stable if bought sensibly than stocks/bonds n r subject to less variable outside unfluences?...just a thought....

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On 6/25/2022 at 9:18 AM, zadok said:

...and yet my coin collections far exceed the value of my brokerage portfolio...one possible factor, coin values r more reliable or stable if bought sensibly than stocks/bonds n r subject to less variable outside unfluences?...just a thought....

You may have bought very smart...some people are good at timing or just get lucky.....did you buy coins pre-1973........if you could buy in size in the 1960's or earlier, you would have made a killing on those coins even after they came off their highs. 

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BTW...in answer to the OP....the vast majority (maybe all) of the NEWER collections are probably money-losers for their owners.  And I doubt they care. xD

We have a Trophy Collector here on these forums....who owns the 1933 Double Eagle.....we should ask him a few questions, maybe he'll give us a general response.

Edited by GoldFinger1969
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Posted (edited)
On 6/25/2022 at 2:07 AM, GoldFinger1969 said:

Not sure you are talking about Bob Simpson, but just as an example.....he is worth a few billion dollars so even if he spends $100 million on his coins it's like the average person here spending a few thousand or so.  It won't impact his life.

I was more thinking of DLH, as I see much upgrading in that collection.  But, a similar situation financially, and I agree that maybe it's just "no big deal" to lose at that level.  When I see that much upgrading, I know that the coins in these sets are not being held long.  This means that DLH would have to buy undervalued coins over and over (and quickly).  I think there is something to be said for what @zadok said regarding a few big profit coins offsetting some smaller coin losses, but that collection in particular has a lot of rapid churn,

It completely makes sense that older, raw collections will be more profitable.  The time value of money, no/less competition with registries, no/less internet shopping competition, and TPG coin inflation itself are all considerable factors.

Pittman and Eliasberg are clear cases of a profitable top collections.  Both of those collections had a few very strategic large purchases, and Pittman was also able to take advantage of Farouk's demise (and mortgaged his house to do it).  That was risky, but probably Pittman's most shrewd move.

I think those types of moves would be very difficult to do in today's age of numismatics.  

 

Edited by The Neophyte Numismatist
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Just to use Saints as an example because I know some deep historical pricing....if you go by ultra-rare Saints in top condition (i.e., 1929-32).....annual return from the late-1940's is about 10% per year....11-12% if you pick them up for under $100 in the 1930's.

Even an MCMVII picked up for $25 in 1922 only works out to about 10% a year if you have a top coin.  Less if it's Top 10'ish or thereabouts.

What hurts coin returns over long periods of time is the lack of dividends/income.  As you might know, 30-40% of the stock market's total return comes from dividends.  Without them, coins -- and other commodities -- struggle over long periods of time, even if you buy low and sell high.

Edited by GoldFinger1969
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On 6/25/2022 at 10:35 AM, GoldFinger1969 said:

Just to use Saints as an example because I know some deep historical pricing....if you go by ultra-rare Saints in top condition (i.e., 1929-32).....annual return from the late-1940's is about 10% per year....11-12% if you pick them up for under $100 in the 1930's.

Even an MCMVII picked up for $25 in 1922 only works out to about 10% a year if you have a top coin.  Less if it's Top 10'ish or thereabouts.

What hurts coin returns over long periods of time is the lack of dividends/income.  As you might know, 30-40% of the stock market's total return comes from dividends.  Without them, coins -- and other commodities -- struggle over long periods of time, even if you buy low and sell high.

When the time comes for me to find a Saint for my son’s gold page addition to his 7070 album, what year(s) should I target? Looking for a year with nice luster and minimal premium over bullion value. 

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On 6/25/2022 at 12:40 PM, VKurtB said:

When the time comes for me to find a Saint for my son’s gold page addition to his 7070 album, what year(s) should I target? Looking for a year with nice luster and minimal premium over bullion value. 

Well, of course you have the common years.  Question is what grade you want ?

A 1923-D is a great-looking coin....in AU-58 it might look 65'ish but you avoid the premium to bullion. 

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On 6/25/2022 at 8:24 AM, The Neophyte Numismatist said:

I was more thinking of DLH, as I see much upgrading in that collection.  

 

Hanson is a unique situation, remember that he owns a part of DLRC and having all those so-called extras with his name on them is simply a marketing thing.   I guess it is/has been working, and I suspect there must be some deal with PCGS to have coins put into his brand of holder/label for less than normal fee.   Then those coins are sold using the label as a selling point even though many of the coins were never actually a part of the core collection.   Which is actually against the policy as set out on the PCGS website, but it seems there is some flexibility on the rules for the right customers.

Personally I don't own any of those slabs, but if I did ever buy one I would figure in the cost to have the coin reslabbed without his name on it.   I think savvy collectors are onto this scheme now and see those coins for what they are rather than what they are not.   However some people are very easily influenced by a name, be that Hanson or Kardashian, for those folks these items may be highly coveted.   And I think that when the core collection is sold many of those items have the potential to set record prices and will be highly desired, not for the name but simply because the coins are incredible.  Now will that result in a true profit after all the holding costs and other financial factors are included is another story.   But this again is the type of collector that does not have to worry about the price of a meal or a gallon of gas like a normal working person does, so profit or not is really not a big concern I suspect.

But back to your original question, sure some coins do sell for a profit even after taking into account things like the holding cost and all.   But those situations are not the normal, most collectors (if they are honest) would be happy to recover their original purchase cost, however most will not.   Barring some unusual fluke market (somewhat like the past two year covid market) being able to "profit" from a coin sale happens when the coin is bought not when it is sold.

And to be fair most hobbies have a zero chance of recouping any of the monies we spend on them.   Golf, nope you get the good times and memories but those green fees are gone forever.   Travel, again good times and memories but airlines and hotels are not giving money back to travelers.   So if you can get 50% or more of your purchase cost back in the future you are doing well, that is why coin collecting should be done with disposable income, not the income you need to live on or retire on.   Clearly my comments are geared to collectors and not dealers.

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On 6/22/2022 at 1:56 PM, VKurtB said:

. He worked with Angel Dee’s. 

Yes Andy is one of the foremost experts in small change.... Indian cents, buffalo nickels, and lincoln cents.   one of my favorite to work with.

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On 6/25/2022 at 5:16 PM, Coinbuf said:

Hanson is a unique situation, remember that he owns a part of DLRC and having all those so-called extras with his name on them is simply a marketing thing.   I guess it is/has been working, and I suspect there must be some deal with PCGS to have coins put into his brand of holder/label for less than normal fee.   Then those coins are sold using the label as a selling point even though many of the coins were never actually a part of the core collection.   Which is actually against the policy as set out on the PCGS website, but it seems there is some flexibility on the rules for the right customers.

Personally I don't own any of those slabs, but if I did ever buy one I would figure in the cost to have the coin reslabbed without his name on it.   I think savvy collectors are onto this scheme now and see those coins for what they are rather than what they are not.   However some people are very easily influenced by a name, be that Hanson or Kardashian, for those folks these items may be highly coveted.   And I think that when the core collection is sold many of those items have the potential to set record prices and will be highly desired, not for the name but simply because the coins are incredible.  Now will that result in a true profit after all the holding costs and other financial factors are included is another story.   But this again is the type of collector that does not have to worry about the price of a meal or a gallon of gas like a normal working person does, so profit or not is really not a big concern I suspect.

But back to your original question, sure some coins do sell for a profit even after taking into account things like the holding cost and all.   But those situations are not the normal, most collectors (if they are honest) would be happy to recover their original purchase cost, however most will not.   Barring some unusual fluke market (somewhat like the past two year covid market) being able to "profit" from a coin sale happens when the coin is bought not when it is sold.

And to be fair most hobbies have a zero chance of recouping any of the monies we spend on them.   Golf, nope you get the good times and memories but those green fees are gone forever.   Travel, again good times and memories but airlines and hotels are not giving money back to travelers.   So if you can get 50% or more of your purchase cost back in the future you are doing well, that is why coin collecting should be done with disposable income, not the income you need to live on or retire on.   Clearly my comments are geared to collectors and not dealers.

...understand the logic of ur thoughts on returns on coins but just doesnt mesh with my experiences...if i were to sell my collections today there is only one coin in the entire collection that i believe i would lose money on, its a coin that i knowingly paid multiples of its realistic value for but i simply wanted the coin n bought it regardless of price...i do not understand where u arrive at the 50% expected return on most collectors coins?...r u saying that most coin purchases r made at or near twice their real resale value or that u believe that coin values have decreased by 50% in the past few decades?...the auction results dont support that premise...most of my close collecting friends certainly believe that if they sold their collections they would realize gains n not loses n the couple that have sold their collections in recent years have realized substantial gains, one of over 200% that i am personally aware of....

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On 6/25/2022 at 11:35 AM, GoldFinger1969 said:

Just to use Saints as an example because I know some deep historical pricing....if you go by ultra-rare Saints in top condition (i.e., 1929-32).....annual return from the late-1940's is about 10% per year....11-12% if you pick them up for under $100 in the 1930's.

Even an MCMVII picked up for $25 in 1922 only works out to about 10% a year if you have a top coin.  Less if it's Top 10'ish or thereabouts.

What hurts coin returns over long periods of time is the lack of dividends/income.  As you might know, 30-40% of the stock market's total return comes from dividends.  Without them, coins -- and other commodities -- struggle over long periods of time, even if you buy low and sell high.

...and yet the increase in value of my coins over the past 4 decades has surpassed the value of all the dividends in my portfolio by more than 200%...investments do not have to produce dividends or realize income to be highly successful....

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On 6/25/2022 at 9:40 AM, GoldFinger1969 said:

You may have bought very smart...some people are good at timing or just get lucky.....did you buy coins pre-1973........if you could buy in size in the 1960's or earlier, you would have made a killing on those coins even after they came off their highs. 

...i actually started buying "rare" coins in 1972, my pre '73 numismatic purchases were almost entirely bullion based, which i still own....

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On 6/25/2022 at 5:16 PM, Coinbuf said:

And to be fair most hobbies have a zero chance of recouping any of the monies we spend on them.   Golf, nope you get the good times and memories but those green fees are gone forever.   Travel, again good times and memories but airlines and hotels are not giving money back to travelers.   So if you can get 50% or more of your purchase cost back in the future you are doing well, that is why coin collecting should be done with disposable income, not the income you need to live on or retire on.   Clearly my comments are geared to collectors and not dealers.

Smart points...this is a HOBBY not an INVESTMENT. (thumbsu

Again...for anybody buying now or in the last few decades, you might realize low-single digit gains.  At least that's been the experience with trophy coins like the ones I mentioned above.  Coins tied to silver or gold prices will track those metals, depending on the grade/scarcity.

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There is so much money in private equity firms, I would not be SHOCKED if a firm decided to spend a few hundred million on numismatics, art, NFTs, baseball cards, etc.

Surprised, but not shocked.

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On 6/25/2022 at 11:44 PM, zadok said:

...understand the logic of ur thoughts on returns on coins but just doesnt mesh with my experiences...if i were to sell my collections today there is only one coin in the entire collection that i believe i would lose money on, its a coin that i knowingly paid multiples of its realistic value for but i simply wanted the coin n bought it regardless of price...i do not understand where u arrive at the 50% expected return on most collectors coins?...r u saying that most coin purchases r made at or near twice their real resale value or that u believe that coin values have decreased by 50% in the past few decades?...the auction results dont support that premise...most of my close collecting friends certainly believe that if they sold their collections they would realize gains n not loses n the couple that have sold their collections in recent years have realized substantial gains, one of over 200% that i am personally aware of....

I disagree that losing 50% of one's purchase price is expected.  Maybe CB meant after inflation, opportunity cost vs. owning other assets, etc.  He'll have to clarify for us.

But most collectors are not as savvy or as smart as you, Zad....nor did they start in the time period that you did.  So the returns you have are definitely an outlier.

I think I am ahead on my 50% of my collection....down on the other half.  I have lots of commemorates for gold/silver so those are very volatile in price.

The one thing that helps is if you are smart or lucky you can make 200% or 500% or 1,000% or even more on your winners.  But you can only lose 100% (and probably less) on your losers. xD

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On 6/25/2022 at 11:49 PM, zadok said:

...and yet the increase in value of my coins over the past 4 decades has surpassed the value of all the dividends in my portfolio by more than 200%...investments do not have to produce dividends or realize income to be highly successful....

I think you're an outlier.  Actually, I KNOW it. xD

Given when you bought and your excellent knowledge, if anybody could generate those returns, it would be you.  Congrats ! (thumbsu

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