I was looking at the "coin market index" for the Liberty Seated Half Dime in MS 63-65. It seems that in 1989(?), 1990 to 1992 the prices went nuts: $900 to $8,000 USD. Now they average just over $1,000. Anybody know about what was going on here?
In the late 1980s, if I remember the tale correctly, coins were being pushed really hard as "investment vehicles". That formed a bubble that collapsed around 1990.
I believe a hedge fund had some bright idea about investing in rare coins. They participated in a few auctions and were bidding stupid amounts of money for MS coins.
This a graph of the coin market as a whole since 1970 - - look at 1982 to 1989. It wasn't just half dimes, it was all coins. As for why it happened, couple of reasons, and one brought about the other. In 1986 PCGS opened its doors, quickly followed by NGC in 1987. And as you can see by the graph nothing too crazy before that, but the TPGs caused and created what some saw as an opportunity. Wall Street stepped into the action. The new concept of slabbing/certifying coins, along with the TPG hype and advertising, gave them the idea that coins could be turned into investment vehicles. So they, Wall Street, created funds based on slabbed coins. Huge amounts of money poured in and prices shot to ridiculous levels. But in '89 the bubble popped. The value of coins fell off a cliff, never to recover - still hasn't. Nobody could sell their coins fast enough. Tens, hundreds of thousands of people lost fortunes. This was quickly followed by a raft of lawsuits of course against coin dealers, Wall Street brokerage houses, and the TPGs. Many were settled. Wall Street was basically told to simply stay away. The TPGs and dealers were forbidden to ever use the term "investment" again, under threat of further action, when talking about coins. Of course our govt., authorities, and the people, have short memories and the word "investment" used in conjunction with coins, has again become quite popular. Why is it that people can never learn from the lessons that history teaches them ?
Thanks for that! I thought it had to do with TPGing somehow... Of course, it only makes sense that The Casino was responsible for the "over-exuberant" pointy spike there. Boy, those guys sure can bundle up something, slap some lipstick on it, and make the rest of us think that it's a good investment. The way to win at that game seems to be to trade on insider information (that I don't have, at least), and that legally, nobody else is SUPPOSED to, either. But people obviously do... I'm sure for all of those people who got hosed in this coin bubble, there were others who got away like gangbusters.
1990-1992 was a great time to be in the business, if you did not have to make a living selling coins, because it seemed like many great coins were on the market and it did not hurt so much to make a mistake.
Any time somebody loses money somebody else is making, or has made, money. But anybody who bought coins between 1987 and held them for 3-5 years or more - lost money. A lot of it. There are still (today) people who bought coins in 1988 and 1989, and still own them, and they are still so far underwater that they will never see the light of day.
That's what I was afraid of... This is living proof that coins as a whole are not a great investment, at least not in the past couple decades. When the market bottomed in '95 the index was around 48000. Based on a simple CPI calculation it would need to be at 72300 in 2013 just to break even with inflation, but it's still under 70K. However, compared with other hobbies people spend money on such as golf, boating, fishing, etc. it's a fantastic investment. After all, the value of an annual country club membership is guaranteed to be zero at the end of the year.
Then make doubly sure to never tell her that you shouldn't compare investments, not even what some call investments, to expenses in order to make a point Put another way - don't confuse hobbies with investments
I agree to some extent when you compare collecting coins to beanie babies, bottle caps, post cards, etc. However, when you compare accumulating items like coins versus experiencing/enjoying life on the links, water, etc., I think it falls apart (at least for me). Maybe coin collecting is the hobby of kings because it is possible to do both (collect and enjoy experiences). TC
I have to agree with both of these points. Comparing coins with fishing and golf could be apples and oranges for a lot of people. However, since I don't own any expensive toys I can justify spending a little on coins, and it is nice knowing that they hold some value even if they are a lousy investment. Also, I think it is safe to say that they have a lot more staying power than other things people collect, Beanie Babies being a prime example.
Oh I dunno, some sets of golf clubs cost many thousands of dollars. A boat - nothing but a hole in the water that you pour money into. I've got a cousin who races Porches for his hobby. I've got fly rods, that with the reel, cost over $1000 20 years ago- several of them. And I can't even use them anymore ! Sounds a lot like coins to me.
I do know that the word "boat" is actually an acronym that stands for "Break Out Another Thousand" and that the word "golf" came about because all the other four letter words had already been taken lol...
There were a couple other historically strong collectibles that experienced a big bubble then massive fallout around the same time (though a few years later): Sportscards, and Comic Books. For sportscards: In the '80s Topps/Donruss/Fleer massively overproduced (great for kids, bad for investors); but then they massively underproduced massively. (That is, they put out 10,000 specialty high-end packs at limited numbers, and 10,000 limited 1/100 inserts, etc.) They also priced kids straight out of the market. They changed the market to speculative investment. Comics: Also priced kids out of the range for "limited editions", variant covers, glowing metallic covers, etc. Also were trying to feature contemporary product as an investment for the future. Sportscards still are priced out of range and enjoy a specialty niche with 1/1 cards, $400 five-card packs, etc. But from what I see it's mainly the investors trading/selling with each other. There isn't a market for it as an investor outside of that clique. Comic books have settled down a lot; though not sure about current demographics of buyers. Of course, coins are different. Coins didn't change to limited editions or bling back then. But perhaps the common trend of the bubble for these collectibles were speculative investors. Not sure grading is such an apt correlation: Overstreet and other comic guides have illustrated grades decades before the first major grader, CGC came out in the late 90's. PSA for sportscards did start around 1990, but I was in minor collecting til around '97 and just followed Beckett, and shops I dealt with had no PSA-graded cards. Maybe the best thing to come away with is that the strongest investments of all of these have been steady historical examples. Action Comics #1, Topps T-206, 1916-D Merc. So basically, it's wiser to invest in older stuff, which has great value even at non-perfecft or even lousy physical states. Spending an extra $80 on a 9.9 Andrew Luck vs. a 9.8, or a MS-70 Hawaii quarter vs a MS-69, is imo pretty dumb. Unless you're going to flip it real quick for a profit. But as something to hold on to? No way.
