Somebody tell me about the 1980 Central States show.

[MastaHanky]

That's the one where just out of the blue, everything stopped selling, right?

 

What was the atmosphere like? Was it panicked? Uneasy calm? What were people's reactions? Any interesting stories behind it?

[truthteller]

Great, great post. I was not there, but talked to many,many dealers who were there and related their stories. From what I remember of the coin industry in 1980, the market was flying due to the upsurge in precious metals. The west coast shows I attended were solid, business was brisk, nice coins were scarce, and to meet the demand, dealers were 'pushing grades'. There were only BU, Gem BU on the greysheet at the time, and many dealers were trying to sell BU and even AU55 material at Gem BU prices. That worked for a while. Money seemed endless.Then, Bammmm, Central States. The first day had high expectations, and coins were being sold, from what I have heard. Then , Whammmo, day two, the top buyers STOPPED buying. They said they were full on inventory, and didn't want to buy any further. More than anything, dealers with high dollar coins and high inventory began to panic, knowing that they could no longer flip the coins for a profit. By the end of the show, major dealers were cutting their high end coins, but keeping the affordable coins for clients. The news of the crash didn't hit the retail market until about 3 weeks later. By then, many smaller dealers knew the market was down, and held off buying, while the bigger dealers tried to sell the bigger ticket items to retail before the news caught up. I remember being at the Jack Tar show in San Francisco, when dealers came back from CS. They tried to push off material 'at a discount' off grey sheet, since greysheet had not caught up with the market. The next friday, the selloff was quite evident and dealers were stuck with MS60 material they bought at MS65 prices and had no where to go. Great piece of numismatic history.

 

 

I remember vividly the crash of 1989, I was there at Long Beach when it happened, but that's another story.

 

TRUTH

[Wihlborg]

Truth,

 

That was a great story. Please, do tell us what you remember of the crash of '89.

 

John

[braddick]

"That was a great story. Please, do tell us what you remember of the crash of '89."

--------------------

I SECOND THAT REQUEST. (Yes, I'm screaming.)

 

[truthteller]

The 1989 market was scarey and funny at the same time. PCGS grading turnaround time had grown from 30 days for standard rate in late 1988 to 90 days for standard rate. NO economy service, no midlevel services, just standard and express services. Express cost $125 at the time, so standard was the way to go. Well, prices on the electronic trading systems were begin to really pick up early 1989 on speculation that the wall street funds were 'imminent'. In retrospect, the wall streeters put less that $25 million in a market worth billions, so just a drop in the bucket. By March of 1989, the electronic dealers were placing bids higher and higher week after week. Coins were being graded conservatively, but the dealers were asking 30 to 50 percent premiums on the assumption that the coins would trade for that much more in a few weeks. The supply could not meet the demand. The market in MS63 and higher went ballistic. 50% increases in a matter of weeks. I had about 15 coins in the grading services at the time, by April, I had received them and held them for a while. By late April, coin prices were nuts. Any sane collector was driven out of the market, and dealers would only talk to serious investors, which, to this day, really makes the collector angry at some of the dealers(some dealers who were crying for business a year later). I looked week after week at the blue sheet, nothing but plus signs in every category of coin MS63 or higher. I told myself this was nuts. Two weeks before June Long Beach 1989, I sold 7 graded commems for outrageous amounts of money(I think I made $10000), then the monday before Long Beach, I sold the other 8 coins(again made over $20000), and told myself to wait. Something was amiss. I had heard that monday, that the electronic dealers were not honoring their bids. Several of the larger firms were posting high bids, but not paying for the coins. By Wednesday, the opening day of the show, the market makers were telling dealers they would buy, but not at the posted bid. The Long Beach show was triple the size of what it is today, so it was like a frenzy. I saw dealers running from table to table trying to unload, boxes and boxes of slabs, especially gold. By thursday morning, dealers were discounting off the sight unseen bids up to 30%. WOW. I went to the dealer who I had sold my coins that monday, and he was offering me my coins back at 20% less than what he paid me!!!!!!!!!!!!!!! I didn't buy one coin at that show. The dealers who used to pack up friday night were still there Sunday afternoon. It was a horror show. People were really scared. Several dealers had lost hundreds of thousands of dollars those four days. Other dealers felt that the market was correcting and would bounce back and held firm on their inventory. After the show, I talked to a local dealer and he told me the sight unseen market was crashing. One example, sight unseen sells for gold type LOWER that the sight unseen bids???? The electronic dealers were not honoring bids, so no one knew who to sell to. It was funny, because I came away happy as a clam, but was a financial tragedy for some. After about three weeks, the market calmed down, and bids were posted again, albeit 30-40% lower and many fewer bids. Several dealers eventually went out of business, and by mid 1990, the market recovered a bit. BY 1991, the 'great shakeout' had occured, whereby all the overnight dealers went bust, and the reputable dealers stuck around. I knew of one dealer personally who lost over $1 million because he had all his coins in the grading service during this period of time and he couldn't do anything about it.

 

I would post about the great crash of PCGS moderns in 2006, but it hasn't happened yet.

 

TRUTH

[braddick]

"I would post about the great crash of PCGS moderns in 2006, but it hasn't happened yet."

____________________

[kranky]

Fascinating stuff, Truth. Thanks! It would be great to hear from some others who were there, too.

[GP_]

great stories! thanks for sharing them!

[Wihlborg]

Thanks for sharing the stories Truth.

 

It was great to read about what went on at the shows from someone who was there to see it unfold right before their eyes.

 

John

 

[cladking]

It seemed to start off fairly normally when the doors opened. There did seem to be a little "slowness", but the crowds seemed normal and business was being coducted. As the morning wore on there was some quieting of the background noise and there were some people talking quietly. Fortunately I got out very early and didn't actually see things falling apart later in the day and Saturday. It was a fairly good show for me, but I wasn't into any of the high flyers at the time.

[Fairlaneman]

Any sane collector was driven out of the market and may I add some were driven out of the Hobby by the blatant over grading of coins, raw, that happened in this period.

 

Personally I started collecting in 1983 and through the years leading upto 1989 a collector could just watch the coins constantly going to lower quality for the stated grade. Cost of examples, even for a average collector, became completely out of reach and made enjoyment of the Hobby hopeless. In late 1988 I sold everything that was owned in total disgust with the state of the Hobby.

 

This was a period that hopefully will not happen again but again I am not so sure that we are not on the verge of exactly 1989 being repeated.

 

Every word Truth said is correct and newer collectors should take heed and use caution.

 

Ken

 

 

[IrishMike]

A friend of mine, Larry D and I got into BU Morgans in the 80's and on the side sold off hundreds of them to friends, business associates etc. I can tell you this it cost Larry and I around $150K to buy them back and resell them at a loss. We felt obligated to do this because we had got caught up in the "coins as investment phenomenom" of the times. Rather than hang the losses on our friends we ate it. The lesson learned was to enjoy the coins for what they are and not to expect to make money on them as investments. I still shudder when I think of those days.

[Beijim]

IrishMike,

 

Your sense of ethics and fairplay in this situation are the diametric opposite of the behavior exhibited by top executives at many of America's most prominent corporations. Witness the recent attempt by American Airlines brass to get away with cutting expenses everywhere across the company except in the area of their personal bonuses. The only reason they're foregoing the bonuses is because other company employees opened the outhouse door so the world could see them with their shorts around their ankles.

 

From your behavior (which is admirable), I conclude you are not CEO of a major American corporation?

 

Best regards,

Beijim

 

[TomB]

I was thinking the same as you, Beijim.

 

I got out of the hobby/business around the first crash in the early '80s. I was in high school at the time and had been buying and selling coins casually for several years. The prices started to move and didn't stop. This happened for perhaps two years solid. I was working part-time to save up money to pay for college and I had the choice; pay $90 in 1980s dollars for an Unc 1949 Franklin half, which, in today's grading would likey be MS61, or save the money for something else. I saved the money and sold everything I had just about the time it all imploded. I was nowhere near being a major player, however, it kept me out of coins until the early '90s.

[Beijim]

Whew - good call on your timing, TomB!!! It's all too easy to hold on in an upwardly spiraling market until you find yourself totally hosed. Glad that wasn't your experience .

 

Beijim

 

[CarlWohlforth]

Thanks! That must have been scary for anybody holding much "investment grade" inventory.

 

In a way I wish I had been there. Perhaps I would have learned a lesson about market bubbles *before* the tech stock bubble!

[Elcontador]

As an aside, I unloaded all of my silver coins a few months before the metals went bust in 1980. I knew it was time to bail when I went to the local coin shop & saw total insanity. It was a parody of a scene from Dante's Inferno circa 1980.

 

I forget exactly what I got for the coins, but I had about $50 face in silver & I got over 20X face value for this stuff. I'll never forget how people were lining up to get into the coin shop and buy bullion -- any kind of silver or gold bullion coin -- or if they were real suckers, Unc. St. Gaudens Double Eagles. They sincerely believed that they had to buy the stuff that day, or else it would cost more tomorrow.

 

There were at least several armed security guards to keep the crowd under control. The shop couldn't keep up with demand, so employees took people's money (100% of the purchase price), which was paid willingly. The 'buyers' thought this was great, because they were promised that they'd lock in the current day's prices on this material, and would receive it upon arrival. The question of how the shop owner could guarantee the current day's prices in a rising market when he couldn't get the stuff in the first place never was raised.

 

Keep in mind that interest rates were on their way to 20%, the economy was in the toilet and people were scared. Well, this merchandise never did arrive, all of those good faith customers were S.O.L., and the shop owner went B.K. Shortly thereafter, he re-opened the shop in the same location.

 

 

[Wihlborg]

Elcontador,

 

The shop couldn't keep up with demand, so employees took people's money (100% of the purchase price), which was paid willingly. The 'buyers' thought this was great, because they were promised that they'd lock in the current day's prices on this material, and would receive it upon arrival. The question of how the shop owner could guarantee the current day's prices in a rising market when he couldn't get the stuff in the first place never was raised.

 

A prime example that the old saying about a fool and his money is true!

 

John

 

[kranky]

I was working part-time in a coin shop at the time of the silver frenzy. (My qualifications were: could identify all types of US coins, could count accurately, was honest, and was available.)

 

Like El Contador said, it was a mob scene. I didn't see much buying, but the sellers were lined up out the door. In order to lock in the spot price we had to ship each day's purchases the same evening. The owner didn't want to take a chance on getting left holding the bag so we stayed an hour or two late every night running the coins through the coin counter and packing them up.

 

Many, many BU rolls of Mercs went into that counting machine, along with XF/AU Morgans by the dozens. It was killing me to not be able to go through the day's purchases to cherrypick the better dates, but everything had to go the same night and there was no time.

 

At least when the silver market crashed, he was only stuck with one day's purchases. I don't know if that shop owner is around any more, but I bet he could still be living off the money he made back then. That little suburban coin shop was probably netting $4K a day during that time.

[Flash]

This is a great thread. I'm curious, though. Who was buying the silver from the dealers who bought them from the customers? Who did the dealers send all their silver, junk or otherwise, to?

[cladking]

Ultimately the Hunts ended up with it until the price collapsed. They were buying silver on the futures market at almost any price it was offered. Normally these contracts are settled at their expiration by the trade of money to balance the buyers and sellers. The Hunts were taking the very unusual step of actually demanding the phsical silver. They were well aware that they had the cash to actually buy "all" the available silver and removing it from the market would cause it's price to explode. The exchanges changed some of the timing on the closings of these contracts at the behest of the feds which killed the scheme.

 

The actual movements of the physical silver is shrouded in secrecy and it is not known at least by me when the flow actually stopped.

 

It was the sellers of the futures contracts who had to pony up silver who were buying the physical silver from coin dealers and refiners in order to "pay off" the Hunts.