Numismatists short in supply?

[chinook]

Yes, mostly to auctions around the country. I know of one dealer who worked construction. Then, he dabbled in coins, then got really good at spoting crackouts and began upgrading. One year he netted $1million, but rarely could he afford to stay home. He gave up construction.

 

I guess the one thing that irks me about this crackout thing is that these people serve absolutely NO purpose whatsoever other than lining their own pockets. I mean, what service are they providing? Nothing. We all sit around here whining and crying about AT doctors and unscurpulous dealers but I see nothing in what a crackout artist does that is really any better.

 

jom

 

Very true. However, the same can be said for stock brokers, bond traders, equity managers or anyone else who deals in paper profits.

 

 

TRUTH

 

I dont think this is a very good analogy. A crack out guy buys the coin and upgrades and sells. He is creating something that didnt exist before--a higher quality coin. Even if it just says so on the holder.

 

A bond trader does not create higher quality bonds. He merely buys and sells what already exists. Money manages create wealth through inefficient information as does a crack out guy but the money manager is not the only one who benefits from the work as a crack out guy would.

[truthteller]

Yes, mostly to auctions around the country. I know of one dealer who worked construction. Then, he dabbled in coins, then got really good at spoting crackouts and began upgrading. One year he netted $1million, but rarely could he afford to stay home. He gave up construction.

 

I guess the one thing that irks me about this crackout thing is that these people serve absolutely NO purpose whatsoever other than lining their own pockets. I mean, what service are they providing? Nothing. We all sit around here whining and crying about AT doctors and unscurpulous dealers but I see nothing in what a crackout artist does that is really any better.

 

jom

 

Very true. However, the same can be said for stock brokers, bond traders, equity managers or anyone else who deals in paper profits.

 

 

TRUTH

 

I dont think this is a very good analogy. A crack out guy buys the coin and upgrades and sells. He is creating something that didnt exist before--a higher quality coin. Even if it just says so on the holder.

 

A bond trader does not create higher quality bonds. He merely buys and sells what already exists. Money manages create wealth through inefficient information as does a crack out guy but the money manager is not the only one who benefits from the work as a crack out guy would.

 

 

In my opinion, an upgraded coin is pure illusion of value. The coin itself has value, not the grade on the holder. If one were to crack the coin, the holder becomes worthless. A coin starts at MS63 and travels through the grading services until it reaches MS66. The coin is the same, it hasn't changed, just the holder has, so the creation of wealth is illusion. Stocks, for example, are the same. However, because some brokerage or analyst says the stock is great, super, fantastic, the opinion makes the stock worth more, an illusion which translates into financial gain. Coin opinion versus stock opinion, same coin, same stock, but worth more because of illusion.

 

 

TRUTH

[chinook]

I will have to disagree again. I had a long written rebuttal but wanted to edit it so I hit the back button and lost everything.

 

So I will just say that stocks prove themselves over time, just as an overgrade coin will prove itself over time. And as a money manager myself, I do not believe my clients think their portfolios are an "illusion"

 

I guess you just struck a personal chord.

[truthteller]

I will have to disagree again. I had a long written rebuttal but wanted to edit it so I hit the back button and lost everything.

 

So I will just say that stocks prove themselves over time, just as an overgrade coin will prove itself over time. And as a money manager myself, I do not believe my clients think their portfolios are an "illusion"

 

I guess you just struck a personal chord.

 

 

I understand your point of view. However, paper profits versus physical value are two different aspects, neither bad nor good, just different. Paper profits are not realized until the paper instrument is sold, profit is taken and money is disbursed. With physical value, such as gold and creation of collectibles, there is an actual process of creation. With gold, it is mined, refined and turned into a commodity. With collectibles, they are works of art, finely created, then sold. I appreciate the value of something by the actual physical appearance, not the dollar value. With paper investments, there is no "artwork" behind the value. Nothing to please the eye. That is primary difference in my eyes.

 

 

 

TRUTH

[jom]

I dont think this is a very good analogy. A crack out guy buys the coin and upgrades and sells. He is creating something that didnt exist before--a higher quality coin. Even if it just says so on the holder.

 

A bond trader does not create higher quality bonds. He merely buys and sells what already exists. Money manages create wealth through inefficient information as does a crack out guy but the money manager is not the only one who benefits from the work as a crack out guy would.

 

Oh boy...I don't really agree with either of ya. I disagree with TT in that a bond or stock trader CAN offer advice and/or services. So I see at least SOME value there.

 

I disagree with chinook in that the crackout artist does NOT offer a higher quality coin. It is the SAME coin so unless the crackout guy somehow magically re-mints the coin he/she offers little, IMO.

 

Now if a crackout guy ran around that took coins out of holders to put them in the CORRECT holder (either up or down grade) then that could be thought of as a service. However, we know only half of this actually happens...can you imagine a person in business to DOWNGRADE coins?

 

jom

[IGWT]

Why isn't a crackout artist who buys an undergraded coin like an analyst who buys undervalued stock?

 

I suppose one difference is that the analyst doesn't make any money unless & until the market as a whole agrees with his opinion (and the value of the stock increases), whereas the crackout artist benefits so long as one of the major TPGs concurs with his opinion. Hey . . . I guess that the TPGs are pricing services.

[Beijim]

I guess the one thing that irks me about this crackout thing is that these people serve absolutely NO purpose whatsoever other than lining their own pockets. I mean, what service are they providing? Nothing. We all sit around here whining and crying about AT doctors and unscurpulous dealers but I see nothing in what a crackout artist does that is really any better.

The crackout game is a form of arbitrage. Arbitrage opportunities, in which an asset is valued differently (but simultaneously) in separate transaction venues, exist in all free markets. They arise as a consequence of market inefficiencies. For example, large institutions routinely benefit from currency exchange inefficiencies by trading the same asset simultaneously in two different currencies on opposing positions, i.e. buy in one currency and sell an equal amount in the other. The gain on any one transaction may be minuscule but multiplied many times can become an appreciable source of profits.

 

Where coins are concerned, market inefficiencies are numerous. A crackout artist identifies coins that can be purchased in one venue (where the coin has been evaluated and holdered as grade N) and sold at a profit in another (where the coin has been [re]evaluated and holdered as grade N+X, with X some positive number of grade points). Arbitrage. The inefficiency is that the coin's intrinsic value exceeds what its current packaging commands. The inefficiency exists because of ignorance, i.e. lack of information regarding the asset's true market value.

 

As for arbitrageurs serving no purpose, I can agree in principle from a wealth creation perspective. However, markets operate better when efficient. An arbitrage artist, including your friendly local crackout dealer, identifies and eliminates market inefficiencies. Crackout artists remove incorrectly graded coins from the market. The logical end of the crackout process would be that all encapsulated coins are properly graded. Obviously, that won't happen in the real world, but the reductio ad absurdum illustrates that crackout artists do serve a purpose - increased market efficiency. It happens they're also compensated for it in the spread they identify between the incorrect and corrected asset prices.

 

Beijim

 

P.S. My comments ignore that some crackouts result in overgraded coins. This adds inefficiency to the coin market, rather than reducing it. Obviously, there's a balance. The underlying assumption is that a greater number of crackouts result in properly graded coins than not, regardless of the direction in which the grade changes.

[chinook]

I will have to disagree again. I had a long written rebuttal but wanted to edit it so I hit the back button and lost everything.

 

So I will just say that stocks prove themselves over time, just as an overgrade coin will prove itself over time. And as a money manager myself, I do not believe my clients think their portfolios are an "illusion"

 

I guess you just struck a personal chord.

 

 

I understand your point of view. However, paper profits versus physical value are two different aspects, neither bad nor good, just different. Paper profits are not realized until the paper instrument is sold, profit is taken and money is disbursed. With physical value, such as gold and creation of collectibles, there is an actual process of creation. With gold, it is mined, refined and turned into a commodity. With collectibles, they are works of art, finely created, then sold. I appreciate the value of something by the actual physical appearance, not the dollar value. With paper investments, there is no "artwork" behind the value. Nothing to please the eye. That is primary difference in my eyes.

 

 

 

TRUTH

 

Truth,

 

This comment is the one that is my biggest pet peave as I believe there is no distinction. However, paper profits versus physical value are two different aspects, neither bad nor good, just different. Paper profits are not realized until the paper instrument is sold, profit is taken and money is disbursed. With physical value, such as gold and creation of collectibles, there is an actual process of creation.

 

What is the difference if you have 100 shares of XOM or 100 ounces of gold? Can you go to Home Depot and buy lumber with either? Can you buy a car with either? Only when each is converted in "paper" money is it truely useful.

 

What is a PAPER PROFIT? I dont care what you have, you can not convert it into cash--good ole greenbacks, or loonies, or euros, unless you sell it. If you buy 100 ounces of gold at 300 and now it is 500 then you have a 200 "paper profit" If you buy a ming vase for 1 million and now it is worth 2 million then it is still a "paper profit".

 

There is definately a "creation of paper assets". Every time a company is started and sells stock then it creates wealth. There is no distinction. When GOOG went public, suddenly it was worth $2 billion. Where did this money come from? It was created!!

 

It always cracks me up when people say they have a "paper loss" or "paper gain". These comments are only made to appease human emotion. People have a loss on something so they say it is only on paper. For some reason it makes them feel better.

[chinook]

Jom,

 

I dont believe a crack out guy creates a "higher quality coin" Thats why I said "Even if it just says so on the holder"

 

The only similiarity I see with a crack out guy and a money manager is they both expose and utilize inefficiencies in their respective industries.

[truthteller]

Well, when I look at a gorgeous commem in MS68 with tons of color and beauty, I get an enjoyment at the work of art. Then, if I sell the coin and make money, . When I look at a piece of paper that says 100 shares of common stock of IBM, somehow I don't get the same feeling. Same with $20 High Relief, 1804 dollar, etc. I think the two financial instruments are very, very different.

 

 

 

TRUTH

[Beijim]

Every time a company is started and sells stock then it creates wealth.

I'm sorry but I disagree with this assertion.

 

The creation and sale of shares in an company is not wealth creation. It's a financing event. A company issues stock to raise money to finance wealth creation. The issuance itself does not create wealth. The company could also finance operations by borrowing money rather than selling equity.

 

Wealth creation occurs when the company produces value from the enterprise in which it's engaged. If it builds widgets, the widgets are the wealth the company creates. If it delivers intangibles such as services, those services and the value they deliver to the company's clients are the weath the company creates. A share of stock only represents participation in the created wealth; if the company fails to create wealth, the stock is worthless.

 

Beijim

[dorancoins]

Who in their right mind (or left one, for that manner) would want to work for the "evil empire" (and I'm not talking about the really well-known one called Wal-Mart?) If it were up to me, I'd rather work for Q. David Bowers' auction firm ANR!

[chinook]

Beijim,

 

If a company sells stock to the public at $10 and the first trade on the stock is $15, then where did the other $5 come from? I believe it was created. It has nothing to do with the products or services that the company produces.

 

Yes, if the company is mismanaged and fails, then all that wealth is destroyed, just a the value of a coin is destroyed when it is improperly handled.

[chinook]

Well, when I look at a gorgeous commem in MS68 with tons of color and beauty, I get an enjoyment at the work of art. Then, if I sell the coin and make money, . When I look at a piece of paper that says 100 shares of common stock of IBM, somehow I don't get the same feeling. Same with $20 High Relief, 1804 dollar, etc. I think the two financial instruments are very, very different.

 

 

 

TRUTH

 

I agree 100%. I believe thats why most of us collect...for the asthetic beauty and history.

 

However, I do get quite giddy whenever I sell a stock for a profit. Perhaps moreso than when I sell a coin, as I know I can buy the stock back at any time, however the coin way never come my way again.

[Beijim]

If a company sells stock to the public at $10 and the first trade on the stock is $15, then where did the other $5 come from? I believe it was created. It has nothing to do with the products or services that the company produces.

It has everything to do with the products or services that the company produces. Let me be clear that I'm discussing investment, not speculation. A rational person invests in a company because that person believes the company will create and deliver products or services whose sale results in profit. Ultimately, the long term profitability (or not) of those products and services is what drives the valuation of the company's stock on the secondary market.

 

In essence, stock represents the right to participate in a company's profits (or losses). The company sells this right (by issuing stock) to raise money to finance the business of creating those profits or losses. The profits or losses come from the company's revenue and expenses, which are driven by the creation and delivery of products and/or services.

 

The $5.00 in your example comes from the buyer, who evidently believes that the company's current financial situation and future prospects (i.e. creation and delivery of products and/or services) warrant a 50% greater valuation per share than assigned in the issue price.

 

The $5.00 is a transfer of wealth, to the extent that money represents wealth. No wealth is ever created in a sale of stock, it is merely transferred. Even the original sale in the initial public offering doesn't create wealth, it merely transfers previously created wealth (in the form of money) from underwriters and initial purchasers to the company.

 

The actual physical wealth underlying all these transactions is the company's assets minus its liabilities, plus its prospects for future profit. That's it. Money isn't wealth, it's a proxy for wealth because you can buy goods and services with it. The creation of the goods and services is what actually creates wealth, because wealth is those goods and services.

 

Beijim

[Merc]

Hi,

This post has come a long way from the job announcement from Heritage.

 

Would the job be good for someone who is good with coins but does not have the money to start up as a new dealer?

 

[EZ_E]

Why isn't a crackout artist who buys an undergraded coin like an analyst who buys undervalued stock?

 

 

I agree. An individual who can recognize an undergraded coin IS a numismatist since he/she has the knowledge and ability to do so. So, why should knowledge not be rewarded?

 

Hey . . . I guess that the TPGs are pricing services.

 

Now, you get it! That is why there is market grading. It does not necessarily reflect the true technical grade of the coin but sets a price based upon what the market will bear.

[truthteller]

Hi,

This post has come a long way from the job announcement from Heritage.

 

Would the job be good for someone who is good with coins but does not have the money to start up as a new dealer?

 

 

Heritage needs salespeople who are knowledgeable with coins. If you are good with people, filling want lists, accurately describing coins, then this might be for you. In general, you must be able to sell a net profit of three times your salary, which, in most cases, there is a 30% markup and a 10-15% net profit. So, if your salary is $40K, selling $120K profit of coins a year is a must. This means selling about $400K worth of coins. In this market, that is not unreasonable. In a down market, this is a great feat.

 

 

TRUTH