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I N Collectables

The Depression in our Numismatic Market

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I N Collectables

The Depression in our Numismatic Market

 

Hi All,

 

I would like to explore the reasons for the decline of our numismatic market locally and the potential recovery timeframe and/or solutions that we as numismatists, collectors and dealers can put into place to benefit our hobby as a whole. The appeal of numismatics seems to be dwindling among the younger generation, and bearing in mind that it is this class of people who are going to be the economically active population in just a few short years, this is a worrying trend. Leave alone those persons who are termed as “investors and/or speculators” this post rather concentrates on people who have collecting and passion at the forefront of their numismatic pursuits. There just does not seem to be that many “classical” numismatists in our country, people who are actively engaged in producing numismatic literature, and academics in the field. What can we as numismatists, collectors and dealers do to encourage fresh and keen interest in our hobby? I have come up with a few points to which I hope all reading this could add.

 

i) Take numismatics online – The internet besides revolutionizing the way we gain information, has become a reference point for over 3.5 billion people worldwide. By tapping into this vast resource, I do believe that our hobby could gain extra exposure and hence increased interest. Although there are many website live as I write this, not many are focused on serving the needs of the South African collector/numismatist. There needs to be greater collaboration between numismatic societies, dealers, collectors and numismatists to found an all inclusive online web reference to serve everyone from the novice to the seasoned professional, with the possibility of this website having an online auction component similar to what we find right here on BidorBuy but dedicated solely to numismatics.

ii) Increase the number of numismatic conventions/shows that take place – This is one of the more vital aspects of my discussion. It is at these shows that the general public come into contact with numismatics in its most raw form, many of them for the first time. These shows need not be expensive, flashy, high end events but simply a getting together of like minded numismatists and collectors with the sole objective of the propagation of the hobby. Perhaps one every quarter, one in each of the four major cities.

iii) Produce more numismatic literature – Mostly on the academic side of the hobby. Also an up to date, more realistic catalog based on market and realistically projected prices for each grade of coin, similar to what Pierre Henri composed some time ago.

iv) Greater Marketing.

 

The above mentioned points are just some ideas that I have for the numismatic market in the long run, Like the saying goes “Rome was not built in a day” I believe that with a small persistent effort year in and year out, we can lead a resurrection in our market and improve the appeal of the hobby tremendously across the board.

 

Please feel free to add any comments, criticism and advice.

 

Best Regards,

Mohammed Jadwat – International Numismatic Collectables

Edited by I N Collectables

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jwither

I can add additional comments but generically, I think there are three reasons.

 

The first is because coin collecting has been displaced by numerous other recreational activities. This isn't unique to your country as it is equally true in the United States. To increase the collector (as opposed to "investor") base, your numismatic community is going to have to find a way to convince more people that spending their money and equally important their time on coins instead of something else.

 

Second, going by the historical comments on this forum, even current collectors don't seem that interested in coins. They are far more interested In profiting off of them by treating their collections as an "investment". I see little discussion on this forum about collecting but about what they are worth, what everyone hopes they will be worth, the TPG grade, the next auction....I think you get the idea. Obviously, most collectors want to get their money back eventually but when this dominates the mentality you have seen in your country is what you re going to get.

 

Third, there is a shortage of the coins collectors actually want to buy. A larger collector base will disproportionately only be able to buy circulated coins and RSA but today, if the sentiments on this forum are a reflection of collecting in your country generally, most apparently do not want them. So why exactly would you or anyone else expect the collector base to increase substantially when they cannot buy what they want because it isn’t available in sufficient supply and disproportionately, most collectors cannot afford it at current prices anyway?

 

Your first and third suggestion covering the internet and research, the two are related. However,it isn’t going to happen without someone in your country taking the initiative. I also don’t see that it is the solution to the problem you describe because most collectors elsewhere are unaware of it or not interested anyway.

 

Your second suggestion I don’t believe will make much if any difference at all. Coin shows are primarily about the business side of the hobby and it isn’t worthwhile to organize more of them without a sufficient collector base. To use this as a solution on a longer term basis is to put the cart before the horse. Coin shows can be used as a marketing tool but ultimately, the collector base has to be large enough to support them. Today in the US from what I know, a disproportionate percentage of the turnover at coin conventions is dealer-to-dealer. It isn’t to sell to the retail public and certainly is not for educational purposes, though the larger shows do have public exhibits, maybe occasionally public speakers and host coin club meetings. The primary purpose is to allow dealers to acquire inventory for their retail client base who disproportionately don’t attend at all.

I don’t believe conventions will work because dealers are likely to only recover their overhead by selling to “investment” buyers and non-collectors are no more likely to become a real collector later than the current buyers who prioritize the financial aspects (as evidenced by the posting history on this forum) already do now. Coin clubs which I understand already exist to some extent in South Africa are what will actually serve your intent.

Edited by jwither

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I N Collectables

My apologies for the late reply,

 

I agree to a large extent with your argument, which is rational. I think a lot of people like you said have other recreational pursuits but it is also true that many people have a wide range of recreational pursuits or hobbies, many well known collectors are also hunters, SCUBA divers and the like, I myself have many other interests. The main point is how we can encourage greater interest in our hobby. We need to find a way to encourage people to see what we see in a coin or banknote, its history, its character, its beauty. I think many people would be encouraged to look into numismatics if they knew that such a field existed or that it is a popular pursuit, many people who I have talked to about our hobby seem to have little or no knowledge that it even existed to begin with. In short we need to advertise, advertise the hobby, put it out there, and “in people’s faces.”

I agree that most of the people engaged in numismatics do so with a clear financial objective, but I think this is more as a result of financial constraint than anything else, because people would only pour significant capital into something financially worthwhile, there is a difference between this and using numismatics solely for profit. People are simply careful with their money but at the same time are enjoying the hobby knowing that they probably could make a profit in the long term.

Is there really a shortage of coinage that people would want to buy? I think there is a two sided answer based on subjectivity. If you’re looking for high grade coinage, there might be a shortage because many are in private collections and available only at a premium price, still it should be said that even if you pay a premium a long run profit is all but certain. Many people like to collect the best that they can. Lower grade coinage is common, but like you said many people do not tend to collect these, however people simply like to buy one quality coin instead of 100 lower grade ones.

Coin clubs , I agree that they are the most effective tool, however there does not seem to be active activities regarding advertising and trying to pull the interests of the wider population. More simply has to be done to promote interest and popularity.

 

Regards,

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jwither

Part 1

 

It is apparent that buyers with a substantial outlay want to get their money back and more.This is a given but this is not what I was talking about. I believe the comments on this forum are reasonably representative of the collecting psychology in your country, not for everyone obviously but in the aggregate.

Using this as an assumption, the comments here make it obvious those who buy the more expensive coins and in many instances even others, the financial aspects are more important than actual collecting by a lopsided proportion. If this isn’t true, then how is it that the observations I have made are so obviously apparent? The primary one is the obsession with the TPG grade (and it is exactly that) for trivial differences in quality which most here seem to think are so important when from the collecting perspective, this idea is a farce. This doesn’t have anything to do with collecting whatsoever and this is aside that in many instances, lower grade coins are actually better than their higher grade counterparts anyway. I don’t believe hardly anyone who posts here agrees with this comment but they just don’t care to say so and the few who have, they don’t have a better argument to refute this statement.

Another reason this should be obvious is the activity here since the 2011 or 2012 price peak. This forum is as active as a morgue. If money isn’t a lot more important, then how does anyone explain this behaviour? Notice no one else has provide a response to this topic?

I don’t believe you or anyone else are going to be very successful at what you describe. I was exposed to collecting at age 10 and was interested from the start. I do not know but generically, I believe those who like to collect are to a substantial extent born collectors and its also driven by the surrounding culture. This exists a lot more in the Anglo countries and many in Europe but much less so elsewhere. Maybe the efforts you describe will make a difference eventually but I don’t believe in any timeframe where it will make any difference to anyone reading our post exchange.

Aside from the far more numerous recreational alternatives, the other reason is what I included in my replies to Cold Sea’s other topic. I don’t believe the general public finds what is available in circulation interesting at all. I know they don’t in the United States. Take a look at this link http://boards.collectors-society.com/ubbthreads.php?ubb=showflat&Number=8491479#Post8491479. I don’t know if this is reflective of South Africa but here, the public is completely clueless about the coins used in commerce now, never mind having an interest in pursuing it as a hobby which is presumably known by a large segment of the population since it is far more pervasive here than in your country.

In the past, most US collectors started out of pocket change. A large number still do but since 1965 when silver was removed from circulating coinage, its only possible to assemble a “serious” collection by paying a premium and with both US and South African coinage, it’s a substantial one by the standards of practically every non-collector, regardless of whether you, I or others reading this post exchange think otherwise. I believe most South Africa collectors in the past started the same way and today they also don’t find what is in circulation particularly interesting either.

Edited by jwither

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jwither

Part 2

 

For those who do decide to become collectors in your country, it remains a fact there is a shortage of the coins most want to buy, especially in the Union series outside of maybe farthings, crowns and post-1946 proof sets. I don’t see how anyone can deny it given the prices of circulating coinage, the comments on this forum and the ridiculous price spreads between the highest grades and MS versus all others. Yes, someone can buy one of the more expensive or better grade coins as an individual but to grow the hobby as you describe, there aren’t enough of them even if more are willing to pay higher prices. In Union, there aren’t enough better coins for current collectors, much less many more. No one can buy what doesn’t exist.

 

It is true some or many can buy one of the better coins instead of numerous ones in lower quality. Many do this for both collecting and financial reasons. However, this doesn’t solve the problem I am describing because most are set collectors. If this isn’t true, then those in South Africa must be very unusual because I am not aware that collectors elsewhere are in the habit of buying coins in isolation or randomly without some form of completion in mind. Not when the variety is so limited as it is with ZAR, Union and RSA. In the US and maybe other countries, there is “type” collecting but I have yet to read even one post on this forum which indicates this is practiced in your country at all. Type collecting would go a long way toward alleviating the shortage I described,

 

In my prior posts, I have mentioned this contraint many times both here and on the NGC Message Boards. This isn’t a limitation in the United States because the variety and supply is so much greater, but it is in your country and practically all others where the collecting culture is much weaker. Because if this wasn’t true, the coins wouldn’t be nearly as scarce as more would have saved them in the past. I don’t believe anyone aside from me has ever considered this limitation.

 

So the questions I believe you and other need to ask are these:

 

Do current collectors find most RSA interesting? If they do not as I believe, then since most collectors traditionally start collecting out of pocket change, why would any of you expect many non-collectors to find these coins interesting either?

 

If most current collectors don’t find most circulated Union and to some extent ZAR interesting, why would any of you expect non-collectors to do so either?

 

Since there aren’t enough high quality Union coins for the existing collector base, how exactly is this collector base supposed to increase substantially?

 

Is the supply of ZAR coins which current collectors are generally willing to buy sufficient to accomodate a large proportional increase in the collector base?

 

Except for the last one, the answer to the others is self-evident.To grow the hobby as you desire, the attitude of existing collectors needs to change or else there is no reason to believe non-collectors will think any differently.

Edited by jwither

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jwither
I agree that most of the people engaged in numismatics do so with a clear financial objective, but I think this is more as a result of financial constraint than anything else, because people would only pour significant capital into something financially worthwhile, there is a difference between this and using numismatics solely for profit. People are simply careful with their money but at the same time are enjoying the hobby knowing that they probably could make a profit in the long term.

 

Regards,

 

I never provided a specific response to this part of your reply.

 

First, I don't believe most collectors (as opposed to "investors") place financial considerations first or as you put it, with financial objectives at all. Proportionately, I believe the percentage in South Africa is higher or much higher than in the United States and in my opinion, most everywhere else. The other country where I believe it might be equally true (as I have no direct knowledge of it) is in China because the prices of many modern coins are unusually high and TPG is preferred by some segment of the collector base. Generically, there is also a lot of speculation in practically everything.

 

I do agree with you that the larger the financial commitment, the more likely buyers are to prioritize the money aspect and it is also related to what is material to them but this is subjective and individual.

 

In the United States, there are many collectors who have much larger "investments" than practically any South African buyer who still don't think in the same context as the comments on this forum. This is evident in both the coins they buy and their posting history. One is a regular contributor on the NGC and PCGS forums and from what I know, his "investment" exceeds $1MM USD. i wouldn't consider him typical but it isn't like he is an abberation either. He isn't buying "grade rarities" and collects coins across the quality distribution. His posting history makes it apparent that fianncial considerations are important given the size of his "investment" but its evident that he isn't a collector to make money or maximize his profit. I can't tell you what proportion of his assets he has in coins but he has admitted in the past it is significant for him, as in maybe more than half.

 

Second, practically every collector has financial constraints, whether in South Africa, the United States or elsewhere. So I don't see this has anything to do with it at all. As i admitted in prior posts, obviously, most (probably all) who make a substantial outlay (as they define it) ultimately want to at least get their money back. And because they do, this also equally obviously has a big influence on the coins they buy. This is evident in the United States but still hasn't led to anything close to the lopsided price structure existing with Union and ZAR, even though the price level is much higher. It is a reflection of the cultural attitude toward actual collecting which is a lot stronger here than it is in your country.

 

This matters a lot to price stability because it should be evident that much (most in my opinion) of the price decline since YE 2011 is the result of speculators (aka, "investors") abandoning your market through a combination of a "buyer's strike" and dumping their prior holdings. I further suspect that a disproportionate percentage of these people who didn't dump their coins earlier only did so to avoid taking a loss (which currently supposedly only exists on "paper") but will do so when market conditions improve. Given the low number of buyers and the small size of the market, I believe correlation to economic conditions is essentially zero. It is relevant to specific buyers but doesn't explain why the many more who vastly outnumber existing collectors aren't buyers.

 

Anyone can see the result of what I describe with some US coins right now. Shortly after NGC and PCGS started, a speculative bubble developed in a wide range of series after which prices collapsed. Some or even many of these coins are still worth less (in nominal prices) now than they were in 1989.

 

Third, i reject that buyers with this mentaility are necessarily careful with their money. The examples I repeatedly provided support my claim far more than those who disagree with me. Because if they had been and are now, there is zero chance they would pay the exorbitant premiums I have described. This includes the "grade rarity" QEII proofs I profiled under "Scarce Coin Watch".

 

A much better description of this behaviour is a herd of lemmings collectively jumping over a financial cliff. To provide another example, a few years ago under the topic "SA Union coins of KGVI shine on eBay", I profiled a 1943 NGC MS-65 1/- which sold for $1035. Heritage has one up for auction closing tonight (EST) and I expect it to sell for $200 with buyer's fee or slightly more. The census count of eight today versus two at the time of the prior sale is part of the reason but then, I predicted at the time, before and since that census counts were destined to increase because there was no reason to believe otherwise. A similar line of thinking applies to the prior buyer of the 1892 NGC PR-65 RB penny which Heritage sold for $195,000. Today, I suspect this coin is worth less than 50% of this price and maybe a lot less.

 

On the other side, I also profiled a 1946 NGC AU-55 2/- which recently sold on BoB for R900. If what I describe isn't accurate, how is it that actually scarce yet decent coins sell for such low prices? This coin should easily be worth more than any 1943 1/-, regardless of the grade of the latter.

 

The only conclusion I can draw from the price data is what I have described here. In the United States, most common (circulated) coins are either losing value or going nowhere because collecting here is a mass market and actually dependent upon economic conditions which have not improved much for the average person despite the "recovery". But there is enough interest in real collecting where the prices remain firm for many of them and the same is true to my knowledge in other markets such as the UK, Canada and Australia.

 

Lastly, as I also explained before, I don't agree that buying the higher grade or most expensive coins has anything to do with enjoying the hobby but disproportinately with money. Its personal but the facts better demonstrate that any "enjoyment" is almost exclusively a one way street when prices are rising.

Edited by jwither

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