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jwither

What does a healthy numismatic market look like?

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jwither

The last several posts in “Scarce Coin Watch” got me thinking about this subject. Since I started posting on this forum in 2009, the lopsided proportion of comments have this concept completely or at least mostly backwards in my opinion. The reason for this is because a correspondingly lopsided proportion of collectors and “investors” in your country seem to be disproportionately focused on making money instead of real collecting. I admit that many of my posts are also financially related. However, I am one of the few who actually favor lower prices, not higher ones.

 

Given what has happened since late 2011 when prices peaked, I believe it should be obvious that what I describe as the prior artificially high prices is both not sustainable or desirable. Below, I include my list and assuming anyone else has any interest in this topic, I can elaborate later.

 

First and most importantly, there has to be enough variety available at price points where most collectors can actually afford something they actually want to buy. This has been the focus of many of my prior posts.

 

Second, contrary to what most apparently believe, it would be better if the supply is somewhat higher (as I believe it actually is) than is apparent from the census counts today, especially for many Union coins. I have also mentioned this before more than once. This should be somewhat evident in the relative pricing between ZAR and Union now as the ZAR counts are typically higher or much higher yet so are the prices.

 

Third, narrower price spreads between MS grades and especially lower MS and better AU. This is more true for Union but somewhat so for ZAR.

 

Fourth, more apparent interest in the scarcer Union coins in circulated grades, including below AU-55.

 

Fifth, an increased interest in RSA for both pre and post 1994 issues. In the US at least, many collectors start with moderns and then move to classics. In South Africa, it would be far more normal if more collectors had an interest in RSA and then “upgraded” to ZAR and especially Union.

 

Sixth, more interest in the coins themselves. I see little evidence of that on this forum and the lack of scholarship or research in South Africa is another indication of it.

 

Seventh, more pricing stability. It’s a “chicken and egg” argument but the wildly unpredictable prices between sales I think are a big turnoff for potential collectors, assuming they are even aware of it. This is especially true for the more expensive “investor” segment of the market where I have provided many examples.

 

To summarize, price appreciation is fine as long as it is both “reasonable” and sustainable. The experience for Union between 2006 and 2011 and for ZAR maybe from 2002 or 2004 wasn’t either, though I expect that many thought it was and still do. And not only do they believe it was “normal”, they want it to return. In actuality, it was a mania and this is aside from just the Mandela coins.

Edited by jwither

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Pierre_Henri

My brother-in-law is a cardiologist and I always ask him WHY he asks/tells his patients not to smoke, cut down on drinking and avoid fatty foods, etc.etc.

That is BAD business as he will get less patients if they actually listens to him and do what he asks.

If everyone is healthy, most doctors would be financially very unhealthy.

A healthy (or unhealthy) numismatic market would be the same DEPENDING on you being the seller or buyer (as a collector), seller or buyer (being a dealer) or seller or buyer (being an investor).

As a dealer my new year’s wish is that coin prices go UP for those coins I have in stock but for those I am about to buy, the prices actually drops and as a collector I would like an “unhealthy “ market and wish that ALL prices actually goes down.

What a confusing state of affairs! Whatever, I hope that everyone on our coin forum will have a prosperous numismatic 2014 lying ahead...

Pierre

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jwither
A healthy (or unhealthy) numismatic market would be the same DEPENDING on you being the seller or buyer (as a collector), seller or buyer (being a dealer) or seller or buyer (being an investor).

As a dealer my new year’s wish is that coin prices go UP for those coins I have in stock but for those I am about to buy, the prices actually drops and as a collector I would like an “unhealthy “ market and wish that ALL prices actually goes down.

Pierre

 

I don't think a healthy or unhealthy market is measured only by the price level. The price level is partly a reflection of it.

 

In a prior post, I believe you mentioned that the number of "serious" collectors where you live (Cape Town) is much less today than it was in the 1970's according to a dealer you know. If I understood you correctly, by any measure can this be considered healthy? I do not see it.

 

The prior post I wrote is my attempt to describe South Africa. If I were to write the same post for the USA, I think that market is healthier than yours but much less so than it was 40 or 50 years ago. This not despite but BECAUSE of the record prices for the better coins. More and more collectors are being priced out of too many coins that they could have bought up to the early 1970's and I believe this is reflected in the (apparently) reduced interest in collecting today. I do not see how this can be considered a good thing longer term for the hobby here either, regardless that some or many have made a windfall in the interim.

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Pierre_Henri

An acquaintance- friend of mine, John McKenzie told me that in the 1970s when his father Don McKenzie (who ran Don’s Coins next to Allen Jaffe’s City Coins in Tulbagh Square) thought that there were about 200 “serious” coin collectors in Cape Town.

That was 40 years ago when the numismatic market was healthy in any terms as there was also old Mister Zuck who ran his coin business from the 8th floor in the Volkskas building in Adderley street and Natalie Jaffe’s father (if I remember correctly) who sold coins on a fairly big scale from his flat on Sea Point.

There must have been others but I personally bought coins from all of these guys in the 1970s when I was still in school from my meagre weekly allowance (pocket money) I received from my father who was very supportive of my hobby throughout the years.

How 200 serious collectors could have sustained half a dozen coin dealers before the internet age is beyond me but that is what was told to me. Today, without internet selling, I think that not one brick-and-mortar coin business will survive in Cape Town. You either sell over the counter AND via the WWW or you go down very quickly.

 

In terms of buying coins (including Mandela coins) there must be thousands of “collectors” in Cape Town at the moment, but taking away the Mandela coins, there cannot be more than say 30 serious collectors (if even that).

So in that terms the numismatic market is not healthy in Cape Town, but turnover wise (sales) - it is BOOMING with how many people buying & selling coins on the internet (BOB, EBay, Gumtree. Etc)

Pierre

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jwither

I do not believe there is any one absolute measure of health. I consider it relative. The point I was making in my last post was that hobby wise, the price level is a poor measure. Obviously, from an "investment" standpoint it's the most important.

 

My guess is that the turnover you cite is partly a result of higher metal prices since I suspect that a significant percentage of it is the buying and selling of coins with gold and silver content, commemoratives and bullion. Another aspect of it is inflation since the 1970's. A third consideration is that it is easier to measure now than in the past.

 

In the United States, I suspect that there are somewhat more collectors now than during the "heyday" prior to the early 1970's. But that is primarily because the population is so much larger. It definitely appears to be less significant culturally. In South Africa, because the European population is probably not much if any larger than when I left in late 1974, I suspect that if the hobby is less popular as I understand, that there are now fewer collectors who are just spending more. Many of the collectors have also been replaced by "investors".

 

To elaborate on a point I made in my original post. the lack of liquidity is obvious. Just this week, I bought a second 1950 NGC MS-64 RD 1D. It cost me $41. Last year, I bought another one for $88. And in 2010, I sold two for $350 EACH. This is a collector coin by any definition. The census was probably four (or five) when I sold those two in 2010, maybe eight or 10 last year and now it is 16. I suspect that none are duplicates and probably at least another dozen exist if not a lot more. I do not see this coin ever returning to $350 in 2010 money.

 

In Scarce Coin Watch, Geejay mentioned the 1892 2/6 NGC PR-63. The 63 actually sold for $4700 which I think is a reasonable "ballpark" number. I do not follow ZAR as closely since I have never been a very active buyer of the series but it did get me to look through the Heritage archives. On 1/3/11, Heritage sold a PR-64 CAM for $18,400. On 4/19/13, the exact same coin sold for $5875. If it were to sell today, it would probably sell for somewhat more because I think that price is too low; but who knows how much.

 

The point of these two examples is that these wild price swings are a big problem and when I make this comment, I mean in BOTH directions, not just a subsequent price decrease. Most collectors aren't in the market for the second coin but the first is one that a large percentage of Union collectors can both afford and are likely to buy.

 

I do not mind that I lost 50%+ of the value on the first coin because its nominal. However, I'm not buying dozens or hundreds of such coins because its a waste of money. I believe that what I am describing is a common experience since the 2011 peak and that it reduces interest in the hobby. It would be better if if prices were a lot more stable.

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Cold Sea

Hi jwither,

 

As a hobbyist I tend to put the study of my fields of interest (not only numismatics) first. I agree that with numismatics it seems there is an inherent wish for making a profit, or being and accidental investor if you wish.

 

When you say that prices that hobbyists are prepared to pay is a poor measure, you must have your investor’s hat on. I have coins in my collection that I have bought as an investment, that have fared far worse than others bought casually going about my business in my fields of interest in this hobby. Maybe hobbyists are just the right tool to gauge the market sentiment for minor and medium items. There’s always the impulse buyer, but the correction is swift.

 

I think you are right about the higher turnover being due to metal content buyers, but those you can spot a mile away.

 

In your post you mention liquidity. I sometimes wonder whether any of the finance houses would lend you the money to buy the high end items, and if the answer is no, is the return worth the risk.

 

Derick

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jwither

Most of the comments I have made here are financially tilted because that is what most seem to use as the benchmark, whether on this forum or those in the USA. Obviously, given the prices paid for many individual coins, the value of many collections and the total sums involved collectively, its something that cannot be ignored but I don't think the non-financial aspects can be dismissed either and I consider them are equally important.

 

i consider them equally important because as I and a few others have commented here, ultimately for the "investor" to make a profit and have someone to sell to, there have to be enough real collectors who have sufficient interest to buy their coins longer term. Regardless of whether we are talking about the United States, South Africa or anywhere else, longer term prices are not going to go higher if there are mostly or entirely "investors" who are disproportinately buying them as they would any number of "widgets". I do not believe anyone can support that outcome at all.

 

In South Africa, the absolute price level is really not that high, but I think the financial capacity of a disproportinate number of buyers is weak, real collector interest is lacking and there isn't really a lot that most really both want to buy and can afford. I do not see this in dispute at all but if it isn't obvious, I can rehash what I have covered in some of my prior posts if necessary.

 

In the US, the price level is much higher and a large number of coins are not affordable. However, the level of interest seems to be much higher and because of the much larger variety, there is still enough available at "affordable" prices that most actually want to buy. The problem I see in this market going forward is that more and more of the money is going into fewer and fewer coins. Those who have the most money are buying the coins that most have traditionally wanted the most while younger collectors seem to be putting theirs into what I would describe as numismatic mediocrity. By this, I am referring to specialities such as "conditional rarities" for coins that are otherwise common as dirt, die varieties, "special designation strikes" and toned coins. The current trend I see is that in the future, the majority of material is not going to have much demand or interest at all, just as exists today with most Union.

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