How do coin dealers make a living?

Let me first say, I like ALL the dealers I do business with. Without them, I'd barely have a collection, they are my main source of Lincolns. They do a service for me and I happily pay them for it. I get my best value from dealers at coins shows and even the B&M's.

I spend a good bit of time at my favorite dealers store. It's a cool place to hang out and talk coins, with the owner as well as customers that walk in. I don't mind that he makes money from me, he has to eat and pay bills just like me.

Now, back to the topic...

My fav dealer takes in a LOT of material off the street. He buys almost everything.....gold, silver, coins, currency, etc. He offers well below melt and turns around and wholesales it for like 10-15% below melt to the big bullion companies. From what I've seen, about 95% of people that come in will take his offer and walk out with cash or a check. He REALLY knows exactly what he's doing, he's an all out pro.

Now, for other stuff he buys off the street, he cherry-picks for keys, semi-keys, conditional rarity, general collectability etc. Most people come in with a box full of coins and are clueless about what's in it....usually, they don't care. He looks though it in a matter of minutes, pulls out his calculator and tosses out a number at the end. At this point, he is treating it as nothing but a bulk purchace, coins good or better, regardless of actual grade. If he looks through it later and finds high grade coins, he just scored. I see him send in a LOT of coins for grading to PCGS and NGC. Once he has those slabs, the profit is locked in. They can be sold retail or to other dealers, usually the latter.

 

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do u guys do that for coins from india too?

 

Another thing I have not seen mentioned that a dealer needs is

CREDIT and CREDIBILITY

When you give your word on a deal, your partner MUST know that you will hold up your end of the deal. Down markets and up markets, once you " give a handshake" , either by email or in person, that has to be counted on, every time, without failure.

Even your mistakes and oop's, you have to be good to your word, or the supply line will halt and the opportunitys will cease. When a reseller cuts his supply, he also cuts his lifeline.

 

I am going to explain a tool that many succesful show dealers use, and will make my best effort to make it simple. The crackout game.

This will apply to any series you know, or in other words, your specialty. I will use mine as a demonstration only, because it is what I do and know best.

1st, learn the spreads, you must know the greysheet and the market to do this. You must also know and feel how the TPG's grade, and have a solid foot on the ground. I will admit, I have made more money doing this than I have ever made selling coins after buying them.

Lets take a 1909-S Lincoln for example.

What we will do is troll every show and every table at every show. Every 1909-S in the building in other words, in the zipcode, we want to see every 1909-S in the County.

If you seriously know how to grade, and have a reasonable expectation of how the TPG's grade, money is there to be taken. Look at the spreads:

This is straight off the greysheet:

1909-S MS-63 RB: $300 bid/ $330 ask
MS-64 RD: $460 bid/ $500 ask
MS-65 RD $1000 bid / $1100 ask

Your job is to find the liner 64+'s..........do you see the upside? the downside?

Your downside is $160 if you crack a 64 and it comes back a 63, but your upside is $540 if it comes back a 65

You must find the coins with the minimal spread at 63/64, and the max spread at 64/65......When you see a primo 64 that screams, you have a candidate for a crackout. Gobble up those primos, crack and resubmit......even if you only win one out of 3, worst case is break even. Best case? $$$ an a cpl upgrades.

There are many dates in the Lincolns that work like this.

Do you see a nice 1918-S in an 62 holder or a MS-63BN at $150? Well, you might lose the game and drop to $55 AU-58 or so, BUT, if you can 64 that coin your at $1500. It's a $100 risk for a potential $1350 profit.......

Believe me people, there are people who make a profession at this. In all series, in all coins, at every show , and every weekend.

1921-S is $155 in a 63RB, AU is $60, 64 is $2100.....see where I'm going?

Some may call this bad names and be resentful, I know many here that probably don't want to hear this. It exsists. It happens. Every show. Every series, every coin.

Learn your series, learn it WELL. Spot those undergraded coins and cash in. You'll make more than you ever did buying and selling #'s on a slab.

 

Very true. I know one dealer that cracks out and resubmits (if I remember the figure correctly) 12,000 to 15,000 coins a year. Some coins he will resubmit multiple times to get that bump. And he makes a VERY good living doing this - well into seven figures.

So when do we discuss 'gradeflation'?

 

I know my dealer makes a little extra with metal detector supplies and bullion. One thing I noticed some people say is that dealers are "ripping people off" or being "dishonest" by not disclosing to uninformed people what they are selling is worth and offering them 50% or less of the worth, or noticing a high grade or rare variety without paying that price. Get real, there is nothing wrong with that. An offer is just exactly that, an offer, the person doesn't have to sell for that and if they don't know what it is worth before they go in it is their fault if they get less for it. As far as I know no dealer holds a gun to someone to make them take less for their coins, they are always free to say no and walk out. Seriously, have any of you gone to buy a car and offered the dealer less than what it was worth? Less than what you would really pay for it? Were you being dishonest? Are you seriously telling me that if you were at a show looking through a box of dealers coins in 2x2's and saw a $10 43 jefferson that was really a 43/2 or a three legger for $50 you would tell the dealer, "hey I want to pay you alot more for that coin because you didn't catch that it was a variety? I seriously doubt it.

 

From Laura Sperber's Long Beach Market Report:

There are several things happening on the wholesale level that hurt dealers and even the over all market. They are:

*The grading services have tightened up and killed off several coin doctors and seriouly wounded the crack out game. The crack-out dealers typically are the strongest buyers at a show.

*Wholesalers always slow down long after retail dealers. They simply do not have as many orders to fill thus they cut back buying.

*Bad cash management. A few dealers have had their credit lines pulled. Or, they are in denial and refuse to sell inventory at the new levels.

*Two major “bottom feeder” dealers are having financial problems and can’t serve as a clearing house for low end material. For expensive “puke” as we all like to call it, there is no more easy outs at a profit. in fact even at a steep discount there is no where to go in dealer land with puke. That costs everyone money.

http://www.coinlink.com/News/commen...ng-beach-show-legends-market-report-feb-2009/

 

lol, gotta love Laura's frankness!

 

Ohhh, The ever popular crackout game!

I agree with everything stated there. I have made some good money on that game. It takes a lot of experience and fine tuned grading skills but done properly can be very lucrative. Its the risks I was talking about in my earlier post.

 

Let me explain this some. The crackout guy knows what he is doing and his reputation preceeds him when he is buying and selling. Therefore when he is selling he has 2 types of coins, his scores (upgrades that are mediocre for the grade usually) and his give-ups, which are usually very strong for the grade, so strong that when he bought it he thought it would upgrade; unfortunately it didn't and he has given up.

When he offers his giveups to another crackout dealer then his reputation for crackout success will dictate that he can charge a higher price for those coins because they are PQ and the spreads Jack was talking about come into play. If the upside is great, the downside limited, and the reputation of the crackout guy good then the coin could trade at a significant premium to the "normal" price.

This is true of normal dealers selling to crackout guys too. If you have a coin you think is nice for the grade and a crackout guy is looking through your coins and picks one out and asks the price, you know you can charge more because of his reputation for knowing a potential upgrade when he sees one. Remember, these guys aren't usually looking to fill a collector's want list, they are looking for upgrades to wholesale out later, so the numbers for them are a little different.

And Hobo's comment about 7-figure profits at the crouckout game are accurate. There are multiple guys in that category, but you gotta be a pretty good grader and master basically all series to work at that level. Jack has mastered a single series, until he decides to master all of them, and especially gold, he simply can't do the volume needed to get there. this is not a knock on him, it is simply a statement to let you know how talented these guys are and how difficult what they do is.

 

yes, this is where the Indian coins go that do not meet our minimums for the signature sales. They are usually included in bulk lots of world coins.

 

thats why we have the ANA so the arguments you are making cant be made by dishonest dealers. personally i dont buy from people i dont trust and anyone who is worth dealing with is either part of CT, mentors network or my network. I would suggest getting a copy of the ANA ethics

 

what????? oh my god no. well how do i get those then i cant get to texas you know

 

I don't need the ANA ethics book, I don't plan on being a dealer. I know several ANA dealers that lowball people on coins or try to make really low offers if they think they can get away with it. So your argument that ANA membership fixes all that is faulty. Definitely agree with you to buy from a dealer you trust, but heck, even my dealer (ANA life member) that I trust offers me a low price sometimes just because he knows I will always ask for more than his first offer anyways. I don't mind, its all part of the negotiation process. The only defense is to know what you have and know what is worth. A fool and his coins should have never gotten together in the first place. If a dealer works with knowledgable sellers he can't continue to make lowball offers without alienating the better clients. So I guess you are the person that has never offered less for something than what it was worth or what you were willing to pay? (car, house, etc) or were you being dishonest too? And you wouldn't buy that $40 3 legger cause its dishonest? Doubt it.

 

the vast vast majority of Indian coins have no value, let alone enough value to get into one of the big sales. that said, I can think of no way for you to purchase them if you can't go to Dallas.

 

Very informative and educative thread.
There is a secret ambition in me to become a world coin dealer someday.
Do we have any world coin dealer here in CT? It would be pretty interesting to know how to successfully run the biz in US where I guess the market demand is pretty low for world coins and coins sell not by catalog values but their weight.

 

This is important "icing on the cake" on the crackout topic... particularly the "talented" and "difficult" parts.

If it were easy, and undergraded slabs common, everybody would do this.

It's not easy. The vast majority of slabs are NOT upgrade candidates; they are either properly graded or overgraded. My guess-timate is less than 5% of slabs are crackout / upgrade candidates. (At least in the US series, which is closely scrutinized)

Dealers have looked closely at most of the coins in their case. If they spot an upgrade candidate, they usually submit it themselves.

So you must outplay the dealer, other would-be crackout guys, and the TPG to get an upgrade; the undergraded coin slipped past all of them.

IOW... the crackout game is a game of SKILL and EXPERIENCE. Don't think for a minute you can randomly grab slabs, submit 'em, and get a high batting average.

 

I am not a coin dealer but I would think the best way to make the most profit is to buy lots from estate sales and run ads saying you buy coins. I do both of these in my area and make some great money, I just turn around and sell each one on ebay and MOST coins I make 2-3-4x's what I buy it for.
There was a time when silver was low that I had a dealer I would buy morgans from for 5-6 bucks each and people on ebay were buying them for 12-19 each.
I think you just have to search for the bargins.

 

$5k is cheap! If you want to work on BMWs you can basically triple that!

 

VERY true. It is few and far between.