A detaled response to the recent investment topic

[jwither 11]

In the other recent topic as on the merits of coins as "investments", I wrote of the one sided commentary endemic on this forum. The purpose of this multi-post topic is to provide a comprehensive response not on the merits of coins as "investments", but to document the pattern of bias and one sided commentary since I joined this forum in 2009 so that anyone who reads this forum and uses it as any basis for this purpose can make up their own mind whether to believe it or not.. As usual, I expect no response since my comments contradict the overwhelming preference on this forum but for anyone who is actually interested in having a real conversation, I will certainly provide a reply, whether here on or on the other topic.

 

Conclusion

 

Given the trivial sums involved in the aggregate and the low number of buyers it takes to substantially increase prices, I cannot predict those who disagree with me wont be right. But what I am telling anyone who is reading this topic is that as a general principle, there is no basis to believe the unsubstantiated sentiments disproportionately expressed by others and I am explicitly telling anyone reading this topic not to be misled by these biased claims. For the reader of this topic, if you want the coin, can afford to buy and to keep it (not the same thing) and potentially dont mind losing most of your money, then I would buy it but absolutely not for financial reasons as advocated by these biased posts.

 

Distinguishing differences of opinion from hyperbole

 

Since I joined this forum, there has been a habit of hyperbole and financial promotion exaggerating the merits of Union and ZAR coins as investments. It wasnt just the content in the recent topic but the recurring pattern in most financially related posts. What else should I call it?

 

I cannot think of a single reason to agree with the numerous biased, unsubstantiated and exaggerated financially related claims I have read here. Every time I disagree with anyone here, I provide an explanation. If anyone thinks my posts are unsubstantiated and the opposing claims are so evident, you should have no trouble refuting my evidence and arguments.

 

For anyone who does not know it, I know that the primary basis of disagreement is due to the financial commitment some of you have in your collections. No one aside from me has ever disclosed it but I can infer it from the numerous coins many of you have posted and there is no other logical explanation for the one sided posting history on this subject. Anyone who is reading these competing claims should be aware that for those whose "investment" is potentially represents an outsized financial commitment, it taints any claim they have as an impartial observer.

 

The same is true of the lopsoded proportion of other contributors on this forum who have ever commented on this subject except that for most of you, the value of your collections almost certainly isnt what I would consider financially meaningful which makes it even more irrational. I also believe many who have commented on this subject either arent collectors at all or collecting is a distant second to investing.

 

To anticipate a response, there is a distinction between a difference of opinion or advocating a position and unsubstantiated hyperbole. I am agnostic on whether anyone reading my comments realizes a profit, never said they would not and yet concurrently know and state there is disproportionately no reason whatsoever to believe or agree with the sentiments expressed here because they are disproportionately unrealistic, illogical or both.

Edited December 6, 2015 by jwither

[jwither 11]

Collector versus "“investor"” financial behavior

 

Most collectors with a material financial outlay (as they define it) presumably want to recover it eventually. I am one of them yet don’t post comments remotely similar to others here because I have no intention of selling most of my coins in the foreseeable future. I can see why someone liquidating their collection or selling a particular coin wants to maximize its price. I know many here sell coins regularly but no one's posting history has ever indicated they are trying to liquidate their collection so it is illogical to prefer a profit on what is being sold while concurrently paying a lot more for the far more expensive coins that anyone who wants to complete their collection would buy and keep. That is, unless all of you rationalize it by the unsubstantiated belief that the more expensive coins are so compelling they are always going to increase proportionately more, no matter how astronomical the price level even though existing price spreads are already absurd.

 

It’s only “investors” with a profit maximizing mentality who want their collection to increase in value as much as possible all the time regardless of whether it increases the cost of completing their collection or prices them out of coins they want to buy to complete it. And if any of you claim this last statement doesn’t describe most here, I have yet to see a single post (except for mine) stating or even implying the lower prices of the last four years are better for collectors versus the perpetual “"cheer leading"” for higher prices which accurately describes the posting content here. To the contrary, those who comment here classify the “"weak market"” as "“bad"” news if not an "economic tragedy" and my disputes of the “"cheer leading”" as "“negative"”.

 

Why would I believe that anyone who places the collecting aspects first wants to pay more? Does that make any sense? And why would they write such biased comments to supposedly support their claims? The obvious self-evident answer is that they don'’t which proves that those who prefer perpetual maximum prices (which historical comments demonstrate is most here) place financial considerations first to a lopsided extent which is exactly what most everyone here apparently prioritizes.

 

This is why I know these topics and posts are financial promotion, regardless of what anyone claims to the contrary. Because if this were not true, logically those who remain active collectors would rather pay less and not more while concurrently using the lower price level to position themselves financially for the next advancing market cycle. In six years here, I have never seen even one post express this sentiment except for mine.

 

What I just described is also true on the NGC Message Boards and PCGS Forum. Its apparent from the posting content where many (maybe most) regular contributors stand on this subject. Yet those who want higher prices still do not remotely post the one sided commentary I see here. This is fact and not opinion. Below, I have included one link to the PCGS Forum covering this topic which is active right now. As anyone can see, there is a wide diversity of opinion and no "“cheer leading"” in contrast to the one-sided biased opinions expressed here.

 

https://forums.collectors.com/messag...&enterthread=y

 

Anyone here of course is free to continue your one-sided financial promotion which is exactly what I know you will do. At my discretion, I will continue to dispute and discredit your claims when I disagree to reduce the likelihood of anyone being misled by this biased commentary.

Edited December 6, 2015 by jwither

[jwither 11]

Coins in a portfolio and financial plan

 

On several occasions (Including the recent topic), it has been implied that coins are a viable option for someones "investment" portfolio. And when I make this statement, not in a limited sense which might under certain circumstances make sense (such as an alternative to bullion or as a business venture) but as an outsized position and replacement for traditional asset classes in far more stable and liquid markets.

 

I dont believe anyone should have the equivalent relative financial exposure I believe some of you have given the actual risk involved. I also know that the actual risk in buying the coins advocated here is much greater than any of you want your readers to believe. A risk I might add, which was disproportionately ignored in the other topic with the meaningless comparison to the company shares named as alternatives.

 

What I can certainly state is that I dont know even one contributor on the NGC Message Boards or PCGS Forum who would consider an outsized position appropriate and no, it isnt that most live in the USA and not South Africa which has been a rebuttal in the past. Its because they agree with me it is financially imprudent to have so much exposure to such a narrow and illiquid segment (Union and ZAR) in an asset class (coins) which is also relatively illiquid and they certainly wouldnt build their retirement and financial future around it.

 

The PCGS 3000 index data I presented in the other topic illustrating the outsized risk from buying coins at bubble level prices in the United States is also much better evidence refuting all of your claims than any of you ever have presented to support yours, especially considering the price performance for Union and ZAR since the late 2011 peak. It was one thing to buy the better Union and ZAR coins at market price or especially ungraded to arbitrage them over 10 years ago. It is entirely another to buy graded coins at pre-2012 bubble prices and those prevailing now. The consensus here would have everyone believe that the risk doesnt increase or the upside is disproportionately more favorable and probable, regardless of the price level.

 

To give everyone here an idea of the risk they are actually taking in such an illiquid market, my estimate is that the annual current turnover for Union is probably between $1MM and $2MM USD; maybe less but if not, only slightly more. Excluding patterns and other coins which effectively never come up for sale, the total value of all investment coins (whether listed in the census or elsewhere) might be worth slightly more than $10MM USD at current value unless the coins are a lot more common than both I and especially all of you believe. For ZAR, probably in the vicinity of $10MM USD and between $50MM and $100MM USD.

 

On the number of buyers, in the past I have estimated maybe slightly more than 100 for the mid and higher priced Union and 500 for ZAR, possibly excluding the veld and Burgers ponds. For coins valued at $10,000 USD or more, maybe 50 for all SA coins, once again excluding the veld and Burgers ponds per my prior posts. This out of my estimate of as many as 10,000 active (as opposed to casual) collectors for ZAR, Union and RSA excluding bullion "collectors". Some coins such as the 1892 1D might have dozens to several hundred looking for an AU to MS in relative close proximity. A few Union such as the 1923 MS 1D, maybe several dozen. As I explained in my prior posts, there is also limited foreign buying but mostly haphazardly, to a lopsided extent only for the lower priced coins, it doesnt usually represent recurring buyers and not at your local prices. But for the scarcer and more expensive which are the focus of most posts here, usually no more than a handful at what any of you would call the current market price using the most recent sale.

 

In the past, I have told everyone here that my collection is worth in the vicinity of $50,000 USD. I estimate this is more than at least 95% of all collectors in your country but if not, only somewhat less. My remaining Union holdings I currently value at somewhat less than $10,000 USD which is still likely more than at least 80% of all Union collectors. At one point in 2009, all my SA coins might have been worth as much as $50,000 when it exceeded the value of my remaining collection by a substantial margin. Despite the obsession on this forum with higher prices (which is exactly what it is), most holdings of both Union and ZAR are financially immaterial.

 

So now, which description is more accurate of this market, mine or all of yours from your prior posts? Your market isnt liquid even locally - never mind elsewhere - except using a liberal description and then possibly only for the most widely collected issues. If I were to provide a similar description in a context where none of you knew it was Union or ZAR, how many would want to "invest" with any meaningful percentage of your assets? My answer is no one. Whether my estimates are exact or not, this is why prices fluctuate wildly from one sale to the next, whether now or even during the bubble. Most of these coins have no market depth and little actual liquidity.

 

If any of you want to have an outsized position, then by all means do so. If any of you dispute my assessment, I have never seen any objection and there Is nothing new in my description. Personally, I consider it financially imprudent if not reckless to have an outsized financial commitment, possibly excepting a few dealers holding inventory. I wouldnt even recommend it to anyone with US coins even though I estimate the market is 200 times larger measured by the number of active collectors and possibly somewhat more by value. Financially, the only advantage yours has over the one here is the profit opportunities are higher but at the trade off of higher risk for similar priced coins due to the reduced liquidity and much lower interest in real collecting.

Edited December 6, 2015 by jwither

[jwither 11]

A summary of biased, unsubstantiated and exaggerated claims

 

As to why I claim a pattern of exaggeration and unsubstantiated financial promotion, below are the themes the posting history on this forum: There are also others but I intentionally left them out.

 

First, all of you disproportionately profile the most expensive coins in the highest grades. Since most Union and ZAR collectors cannot afford to buy the coins usually profiled and the available anecdotal evidence (on other coin forums where collecting and numismatics is actually discussed in contrast to here) overwhelmingly supports my claim that these other contributors don't discuss the top tier coins except in isolation and aren't particularly interested in them, I can only conclude it is done for financial promotion.

 

It should be apparent that the larger the collector pool, the more likely the number buying the more expensive coins will increase when their financial circumstances enable it, subject to supply limits. It should equally be obvious that the attitude expressed here which I also think is reflective of the higher end collector base and even many dealers will result in a smaller collector base which will later result in a correspondingly smaller pool of high end buyers and therefore, lower prices than otherwise might exist.

 

The obvious reason for this conclusion is that the United States has both a larger pool (absolutely and proportionately) who are (a lot) more interested in real collecting than what I see on this forum. This matters because they are much less likely to abandon it when prices decline which is exactly what I believe happened in your country since YE 2011.

 

Second, the lopsided percentage of comments who have ever expressed an opinion on the subject consider trivial (if not imaginary) differences in quality as represented by one point increments in TPG MS grades so important even though it disproportionately doesn’t have anything to do with collecting. The same equally applies to the lower MS versus higher AU grades. The only explanation for this opinion is an attempt to rationalize that the existing price level and price spreads for the coins all of you prefer are reasonable when from a collecting perspective, it should be obvious they are exorbitant and absurd.

 

Third, in the six years I have been a member here, I have never read a single post - NOT EVEN ONE - admitting that any Union or ZAR coin is overpriced, except in the context of the SA Coin Shop but never admitting that the market value is excessive, even though this was obvious in many instances using the common sense criteria and too numerous to mention examples I provided. To the contrary, leading up to and even after the 2011 price peak, there has only been "“cheer leading"” on this forum attempting to convince everyone else that coins which are and were absurdly overpriced somehow are and were reasonable if not compelling values. If anyone here actually was impartial, it defies common sense that none of you could find even one example especially at pre-2012 bubble prices.

Edited December 6, 2015 by jwither

[jwither 11]

Use of this forum as a tool of financial promotion

 

The most recent topic claimed it was started and these financially related posts are written to increase interest in collecting whereas in actuality, I know the posts I question are financial promotion first or exclusively because there is no reason from common sense and actual experience to believe that what is actually speculation (what all of you call investing) will motivate increased interest in collecting at all. In the US as I have explained, there are certainly many buyers whose motivation is primarily financial. However, their posting history shows they have a lot more interest in actual collecting and are nowhere near as biased as the comments here.

 

In the link below, I posed four questions asking why potential new collectors should show an interest when so few of you do now. As usual, no one could be bothered to answer or didnt have one. The non-response implies that even as the coins which most who participate here prefer should soar to the stratosphere, concurrently most collectors are supposed to find the leftovers compelling which few (if any) of you will ever buy except at nominal prices or discounts to the TPG price. That this outcome is a complete fantasy and is never going to happen should also be ignored in the quest for perpetually higher prices.

 

http://forum.bidorbuy.co.za/forum/bi...ismatic-market

 

To make a mild understatement, a solution to the obstacles posed by the four questions I raised would do a lot more to promote actual collecting. This as opposed to yet another attempt to convince more novice investors into buying the disproportionately overpriced coins preferred here which supposedly will transform them into future collectors later. But then, I already know that however much all who agree with the consensus here claim an interest in increasing the collector base, its mostly if not entirely to inflate the price level as much as possible. I know this and all of you know it, so why not just drop the pretense that its motivated by collecting when we know it is not?

 

Given the arguments I have provided before which are much better than anyone who disagrees with me here, it should be evident that the endemic financial promotion on this forum through these other topics and posts wont lead to any lasting increased interest in collecting but if successful, either create another bubble or turn your hobby disproportionately into widget trading. If by some miracle, prices increase to moon money levels which is what most here fervently desire, I already know hardly any of you whose posts I have read will care how many collectors are priced out or quit collecting as long as you realize your windfalls.

 

Do any of you have an answer to any of the four questions because if you do not, my reply is the exact one I gave in the link directly above. Given the apparent interest by existing collectors as evidenced by the price structure and historical comments on this forum, why would anyone here expect prospective collectors to have an interest in collecting when most existing collectors who participate on this forum apparently dont now? Or perhaps all of you think these prospective collectors should mostly be affluent and only have an interest in the coins you do so that they can send their prices to the moon?

Edited December 6, 2015 by jwither

[jwither 11]

A symmary of the factors leading up to the 2011 price peak

 

First, the end of apartheid and a perception change apparently initially benefiting ZAR, as these prices increased substantially first. This is an assumption of mine but regardless, since apartheid is never coming back in its prior form, its removal was a one time occurrence which won’t benefit your market a second time if this was an actual reason.

 

Second, the adoption of TPG. This has been the most significant factor since this practice has inflated the prices of all coins regardless of origin, with a noticeable difference between the coins preferred by US collectors and all others. Your market and maybe China has a current preference apparently equal to the US. This was also a one time occurrence.

 

Third, the Mandela mania, especially after 2008 focused on the 90^th BD 5R. Theoretically, this is repeatable but I don’t see a reason to believe it. Though I don’t know how many of these buyers bought Union and ZAR, I presume some did and given the limited collector base and available inventory, equally presume it was more than a nominal factor.

 

Fourth, the precious metals boom. Metals are in a bear market also since 2011 but it is temporary though of unknown duration. I consider the correlation unproven and weak but it might be greater than I believe. Therefore, I expect the next metals advance to benefit your market somewhat and possibly a lot. I still think any benefit will be temporary because there is no evidence that most of these buyers were or will be real collectors, but since I don’t believe most who have posted here really care one way or another, it will still give you what you want.

 

Fifth, an exaggerated belief in the scarcity of your coins, especially Union. This is related to TPG which has brought out a lot (in some instances maybe most) of the existing supply but I know it was a factor in both what was bought and how much was paid. I still believe most of you believe the increased supply is a negative. I consider it a positive even financially because it enables a larger pool of buyers to acquire what they want. For Union though, my prior comments still apply that there is a shortage of the better coins which will impede higher prices. It isn’t as much of an obstacle for ZAR but this is still subject to the caveat that no price level is sustainable if it prices out too many out of what they want. What this means longer term is that the ZAR price structure must still maintain “reasonable proportionality” or else we aren’t talking about collecting but “widget” trading.

 

[jwither 11]

Evaluating one of your coins as an example

 

If anyone were to provide examples, I am sure I would agree that some of them could double, triple or increase even more and I state this not believing that most (if any) of your candidates represent compelling value but because of your illiquid market which means one or a few buyers can increase the price of any coin substantially if only temporarily.

 

As one example, Heritage recently offered a 1930 NGC MS-63 2/6 which went unsold for $1175. Since I recall they sold one previously for more than twice this price, it is not inconceivable it can do so again next week, month, year or whenever. But though it certainly is a coin I would like to own, I don’t consider it a compelling value at this price (only a reasonable one) and don’t really believe it should sell for more today given its numismatic merits and what other comparable and better coins cost today. If it does increase substantially, I still expect it will be isolated, temporary or both. So while I can see the price of this coin (or others) increasing substantially at some point because of the minimal buying required to make it happen, as I stated in my prior post in the other topic, I still expect many coins the consensus here thinks are reasonable (if not compelling) values to sell for less years or decades from now versus 2011 measured in constant money.

 

[Pierre_Henri 25]

In 2013, I promoted a ZAR coin catalogue on BidorBuy and in my own words said...

 

"it will be clear from this catalogue that ZAR coin prices suffered a heavy knock during the past 12 months and in some instances, values more than halved ...".

 

Only the most ignorant collector or dealer will NOT have seen how the prices of SA coins (ZAR and Union) dropped from its peak in say 2010/11 in the following years but recovered somehow regarding true scarcities (I did a post on this on our forum a year or two ago)

 

The same thing happened in our sister-hobby, philately, when the SA Stamp Colour Catalogue (the equivalent of Herns SA coin catalogue) almost halved all prices (values) in I think 2012 just before the publisher was tragically murdered at his home in Johannesburg.

 

Hern admittedly never followed the same route and never corrected his prices (values) but just kept on increasing his values year by year. I think I also posted something in this regard on our forum a year or three back. I am thus dumfounded why you say that nobody ever said anything about this issue - check my past posts on this forum please.

 

I had a talk with a well-known stamp dealer from Cape Town (Cape Philatelics) about the correction of the stamp prices a few years ago and he was furious - . "the SASCC new issue is killing us" was his words meaning that when the stamp catalogue prices were lowered, the dealers suffered (not the collectors per se)

 

You are constantly using the term "cheer leading" as if everyone is drumming up support and clapping their hands for the dream-wish that the prices for SA coins are constantly raising -- they are clearly not.

 

Prices (values) have indeed been dropping in general (there are major exceptions) since the 2011 peak. The cheer leading have been for the exceptions - those coins that have been doing exceptionally well at auctions in the interim period.

 

In most cases of cheerleading, the sources (auctions) have been mentioned and the specifics of the prices realized and date of sale have been provided.

 

I cannot think of one person or post who have stated on this forum that the collecting of South African coins are a safe haven for investors (in the last 3 of 4 years on this forum).

 

Really - you have a bee in your bonnet about this whole issue that is annoying everyone.

 

The collecting of South African (or any other) coins may not be a good investment in the shorter term, but it provides happiness and bliss that cannot be calculated in monetary terms. Remember the old adage - go play golf if you want a financially worthless hobby. Or the better one. How does one make a small fortune from owning a boat? You simply start with a big fortune.

 

Maybe one's investment in coins will dwindle down in the shorter term, but over a longer period - the life-insurance period of 30 to 40 years that most people invest their money (savings) for - history has been good to our hobby.

 

Pierre

Edited December 6, 2015 by Pierre_Henri

[jwither 11]

I wasn't referring to you. And if you want to know who implies it is a safe haven, it is Geejay. Go read his posts, both the last one but especially where he claimed coins provide asset protection and wealth preservation. I was attempting not to single anyone out but since you insist, there it is.

 

As for my posts being annoying, I know you don't like them. You have your opinion and I have mine. And mine is a darn well supported one. You apparently think I am mischaracterizing the comments here or else are cranky because you thought I was referring to you.

 

You are also taking a literal interpretation of my posts, as you did at least once when you claimed my characterization of demand by foreigners was not accurate. I then provided a detailed reply in a subsequent post to this claim (primarily to Geejay's subsequent comments) and haven't heard anything from you since.

 

The sentiments expressed in this topic here undeniably represent the consensus on this forum, but if you want to believe otherwise, go ahead and do so. It usually isn't expressed explicitly but if you think I am wrong, perhaps you need to refresh your memory on the historical posts here. This was certainly the consensus prior to 2012. Since most no longer post here, I don't know what everyone who left thinks but perhaps you would have preferred if I singled out those who still do so.. But even since then, there have been numerous instances where it still happens and none to the contrary, not even one. I was trying to avoid singling anyone out and speak in generalities and this is what I get. I already know the only way to please everyone here is to mostly say what everyone wants to hear.

 

As for the example you used of yourself with that book, I was saying this before the price peak at YE 2011, not just after. No one else did and if they claim otherwise, it is revisionist history. I don't recall a single post of yours making such a claim. When did you ever make it? It sure is easy enough to say that after the price trend is obvious. And I am sure it was pure coincidence it didn't happen before, right?

 

The term I use ("cheer leading" ) I don't see that it changes just because the auction price was quoted. I am aware of that. It's more the mentality where there is one sided promotion of higher prices. I am aware those coins were "worth" those prices at the time if this is your point. I stated then that many of them were absurd and I specifically explained my reasons. Most here just disagree with my claims and I don't recall a single post of yours which acknowledged it either. On occasion, you also took the contrary position when I claimed certain prices were ridiculous, such as those two KGVI coins which sold on BoB.

 

As for your last paragraph on the financial prospects, someone buying a coin today and eventually profiting over a 30 to 40 year period doesn't change any of my conclusions but you are free to believe otherwise. Its the same rationalization used for other markets such as equities during financial bubbles such as for US stocks today. Since all currencies are depreciating toward zero and yours is even worse than the USD, obviously these coins will show a profit in those terms. Whether they will or not in "real money" or at an acceptable risk level is another consideration entirely.

 

I didn't even mention it but if global financial conditions deteriorate and metal prices more with it, I suspect all of you will really be surprised how far prices will fall.

 

If there is anything else specifically you want to discuss, by all means please do so.

Edited December 6, 2015 by jwither