One thing that I have been doing lately is trying to apply economics to the coin world. I’ve been researching old price guides, and trying to get a better understanding of what causes a “Coin Boom.” From what I can tell (and read online) most of the booms have been directly reflective of high inflation. It does seem that there was a period of time in the late 80’s where a major boom in numismatics might have come from Wall Street trading, but in general appears as though there is a direct correlation with inflationary measure. I would love to hear any input on the subject, for I can only read what I read. Many of you lived through these experiences. Also what are your thoughts on the crash of 2009? Obvious reaction to the recession? Any books you would recommend on numismatic market trends? TYVM
QDB's The Experts Guide to Collecting and Investing in Rare coins has a pretty interesting chapter on market cycles. It honestly is one of my favorite books in my numismatic library.
Other than what's been suggested I can't really think of any books specific to the subject. But there are countless articles about it that have been published in the various coin mags over the years. I once had a stack of Coin World and another stack of Numismatic News, both over 6 ft tall - and I'm talking just the magazines, no book case no anything, just the mags stacked that high on the floor. You'd be amazed at what differences and changes you can see when start comparing articles and information from a resource like that. And that's only about 10 years worth. Some basic information that I have able to gather from studying the coin market for many years. The coin market is like any other market, it runs in cycles. It always has and it always will. No matter what there are going to be ups and there are going to be downs. As a general rule bull markets tend to last 3-5 years. Bear markets tend to last 8-10 years. The causes for each can seem to be widely varied, but in a nutshell it's pretty well always the same kind of thing - money looking for a place to go. In other words when the luster rubs off of one particular thing and people begin to worry about losing money they have invested in that thing, they look for something else to put their money into. Whenever that happens, coins are always going to get a certain portion of that money, or lose a certain portion of that money. And people have a herd mentality. When they see others moving in they'll move in right along with them. When they see others moving out they'll move out as well. That is because movement into or out of any investment is based on fear. Fear that you will miss out on a chance to make money, or fear that you will lose money if you don't get out. People always assume that somebody knows something that they don't, that's why they follow. It doesn't matter what the direction is, they'll just follow. That is human nature and it cannot be changed. Fear is the most powerful of all emotions and people will always react to it, they can't help themselves. Of course those directions are always greatly influenced by what is seen and heard in the media. And it has always seemed to me that the media will write and talk anything, when they have run out of something else to write and talk about. It is the job of media to get you to listen or to read. And you can only talk about 1 thing for so long before people get bored with it and want to hear and read about something else. So what causes the ups and downs in the coin market ? We do, it's just that simple. And that's precisely why it will never change.
After agreeing with Doug's post, I would also add inflation does not cause bull markets in numismatic items. Now, high PM prices can have an effect, but not always directly. During a run up, I see a lot of "commodity" coins, like proof sets and problem coins, getting dumped to raise capital to purchase more PM. However, once the PM run up has happened, I tend to see better coins get bid up by some newly flush dealers. Saying all of this, bottom line you always have to remember the collector. With all of the wheeling and dealing, in the end a coin is only worth more than melt or spending money to a collector who desires it. If the inflation is just general price inflation, I could see coin prices going up. However, ir high inflation is coupled with high unemployment, that will drop demand and could cause prices to decline due to former collectors selling coins to live. Like I lot of things in life, it depends. I have seen both types of higher inflation scenarios play out. This is for "normal" coins. The 6 figure coins really don't have any correlation to unemployment, but would correlate to stock market and bond returns, or lack thereof. Just a couple of opinions. Chris
Inflation causes the price of just about everything to go up. The problem, of course, is that the value of the dollar goes down at the same time, so it's a bit disingenuous to point at that as a "boom". Beyond that, coins (and other tangible assets, like bullion) tend to do well when inflation is high as investors fly to hard assets rather than paper ones.
I would really like to get my hands on any lot of pre 1950's numismatic price guides. As stated above it appears that the historic trends involving swings in the business cycle have become less dramatic since the 1950's. In otherwords when I study economics I see huge swings in business cycles pre baby boom, but did this make a leap to the numismatic world? If we are going into a phase of possible high inflation, wouldn't now be the time to promote numismatics/bullion more than ever? Just curious.
I don't think inflation has any effect on the true coin market. Sure, in tough times people buy up silver and gold in speculation, but thats not driving the coin market, just junk and bullion. Take a look at major auction records. Take the last six months as an example; many record prices have been set at auction for rare coins, but at the same time, just as many coins realized half or less of their expected bid at the same auctions. In relative terms, the same pattern has taken place for as far back as you could look. The coin market stays remarkably stable, as I think for the most part those who drive it are rarely if ever effected by inflation and recession. Guy
Inflation affects all investments...some positively, some negatively. I think the next big move in US Numismatics (a move motivated by inflation) will be the retirement of the Penny (cent), Nickel, and Dime and the creation of $5, $20, and $50 coins...assuming the counterfeiting problem can be solved....I can't wait!!
