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interesting thread about pricing guides from a poster ats

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Thread Title: Why Price Guides Are Bad for the Coin Market

Created On Saturday April 07, 2007 8:17 PM







Posts: 525

Joined: Mar 2005

Saturday April 07, 2007 8:17 PM




Do the price guides help or hurt the market? I was wondering because the price guides seem to create temporarily artificially inflated prices without the market properly readjusting. I personally think it is a bad thing, and if people figure it out it could lead to some drops in value.


This is based on the following assumptions:

1. Collectors use the price guides to approximately determine the value for coins.

2. Price guides use coin sale information to set values.

3. The supply of graded coins is increasing.

4. The inflated population caused by crackouts is not being considered.

(A) Collectors value a graded coin as the price guide's suggested value unless it is a complete dog

(B) Collectors value a superb graded coin as higher than the price guide's suggested value.


Under these premises it would create a situation in which the collectors and price guides create a self-reciprocating situation where prices will continually rise due to the relation between the collectors and price guides. Even with the supply of coins increasing, which should drive down the price of the coins, the prices are still being set by the aforementioned relation. This results in prices staying the same, or increasing rather than decreasing as should be expected of a healthy market. The situation caused by the assumptions 1-4, are only aggravated by the additional premises of A and B. A and B would serve once again to drive the prices of a coin to an unhealthy high, due to the aforementioned relationship between collectors and price guides. In this scenario though, the suggested value is not being taken as an average value for the collector, because they are following the price guide unless the coin is exceptionally horrid. This would cause the average sale price to increase, treating the previous average as more of a floor price.


Now with that said my concern would be that the prices are artificially high, and could create the potential for a rapid drop in market value to occur. What do you think of the argument above, particularly with the assumptions I have made and your own general observations.



NOTE: I do not have good data on trends nor other such things, so I choose to base my argument off what I know and posted my assumptions as to clearly show what is being considered. I think I also might try making a post to explain the pros of AT and Conservation in the market of coins

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1. Collectors use the price guides to approximately determine the value for coins.
I prefer to use realized prices, not price guides. This is especially important if you are only focusing on certain conditions as the market becomes bifurcated. Of course, the realized prices I see can be determined by other people using price guides wink.gif


In general, I think it's safe to assume that the higher quality stuff which hasn't seen price drops may see some pullbacks in a recession. The overall economy has been doing well so it hasn't been an issue. When the economy does suffer a set back, I assume coin prices will as well, with the high fliers seeing some of the more dramatic pullbacks, if they come on the market at all during that time that is.

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Try to remember the word Guide. All price guides are just that, GUIDES. Nothing more. They are a necessity just as any guide is required for people to estimate anything. For example you go to used car lot. How much is a 5 year old Chevy worth? You look in the newwpaper, auto mags, auto blue book and/or check the internet. If you are smart you evaluate the price of the car on that research due to who really knows what a 5 year old Chevy is worth. Same at sales anywhere for a product. Note how many items have a manufacturers list price that no normal person ever pays. However, that is also a guide. Coin price guides are esential regardless of the fact they are usually thrown together by just a guess. Look at the famous Red Book for example. It was probably being assembled back at the beginning of 2006, being published at the end of 2006 so it could be distributed early in 2007 and has a date on it of 2008. Completely USELESS for coin prices but it is probably the most looked at for just that.

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