Do you account for Inflation when you are calculating the cost basis of your coins? Should you? Let's ignore the definition, cause, source, or political commentary surrounding inflation (I don't want to sidetrack this thread). Let's just take inflation as a fact. Inflation changes the value of money over time - A dollar in 1969 bought a certain amount of goods, a dollar in 2019 buys a different amount of goods. So, lets say I'm looking at the very first Capped Bust Half dollar that I ever bought, this gorgeous 1827 which I purchased raw in 2008. It later graded as VF-25, and is the O-140, R4 variety. I paid $200 for it in 2008. However, if you compare that to 2019 dollars.... that's $251. If I only tracked the actual price paid, I'd think I paid $200 for it - which is a significant difference. The spreads only get wider the further back you go. If you bought a $100 coin in 1985 (the year I was born), that's the equivalent of $231 today. Some of you have been collecting even longer than that - a $100 coin in 1970 is the equivalent of $642. I know many of us track our collections. Purchase date, price, and who we bought it from are important pieces of information that many of us keep a record of. But, does anyone else adjust that purchase price for inflation? The spreadsheet that I use updates it for me every year (I just plug in what year I bought a coin, and I have a table of inflation rates for each year. Based on what year it is now, it updates the price paid). This information is somewhat trivial if you're just holding onto your collection. However, the way I see it, inflation must be considered when you are selling a coin - you need to know how much you really spent on it (in today's dollars). You must also consider inflation when purchasing a coin. You have to consider the future value of the coin, especially if you are making large purchases. (This goes back to the "coins as investment" debate we've had a few times recently - but I feel that this is an important topic to cover that often gets ignored). You may say $200 to $250, not a big deal. But let's look at a second coin - this 1815/2. I paid $5315 for it in 2012. In today's dollars, that's $6154. For most of us, that's a lot of money. Assuming the inflation rate holds around where it has been (on average about 2% for the last 20 years), the price I paid for that coin will continue to rise exponentially. Will the value of this coin continue to rise at a commensurate pace? I don't have that answer - but when you're talking about expensive rare coins, I feel it is something that must be considered. I am first a collector and numismatist, but I absolutely have to consider the investment aspect of the hobby at the same time. This may be anathema to some of you, in which case please just ignore this thread. So, what do you think about inflation, and how much of a concern is it to you and your collecting strategies?
I think it's useful to think in inflation-adjusted terms, especially in the perennial "are coins a good investment" discussions. Hardly any coins honestly out-perform inflation consistently, and many, many lose significant real value over time. For accounting, though, you need to track nominal dollars (no adjustment for inflation), because that's what tax authorities insist you use when calculating capital gains.
I mean I think it really depends on what you buy. Just so I don’t need to do math $200 worth of Wheat Cents in 2008 adjusted for inflation should be worth $251. Right now, they would proabaly be worth, $200 +/- $10 I would say. Now, common date MS63 Morgans in 2008 went for about $30-40 and they now go for about $45-55. They, overall have kept pace with inflation pretty well. $200 worth of MS63 Morgans in 2008 would proabaly be right around $251 today. There might be coins out there that I can’t think of that have beat inflation.
I suppose you could have this conversation about anything we buy. My wife recently wanted a $5,000 couch. My argument against the couch was that the same $5,000 would be worth over $20,000 in retirement savings if added to one of our accounts. As I post this, I am enjoying the comfort of HER couch! Inflation will continue on and the couch will quickly depreciate and will probably have zero value in the future. It is on the same path as our cars, cell phones, televisions, etc. Coins are not a good investment vehicle but at least they are a better use for money than most of the other "stuff" we buy! Even if they dont keep up with inflation, keeping your money in money is only outranked by perhaps stocks, real estate, education, your kids, and pethaps a few other things! Any gains from your $5k half dollar purchase will be higher than that same money could have made sitting in your bank or spent on a depreciating asset.
There are plenty of coins that have beat inflation over particular intervals. All junk silver soared from 2000 through 2011; since then, not so much. Gold did the same. Certain popular key dates in higher grades (1909-S VDB, 1916-D dime) have done well over most intervals, but there's no guarantee that will continue.
But, meanwhile, you get the use and enjoyment of it. I'm sure it's much more comfortable than a pile of coins, or even a pile of IRA statements. At the extreme, food depreciates really quickly, but if you take all your food budget and put it into savings, you won't be alive to enjoy your retirement.
Yes, of course, you should track both. And I think that may be getting to some of what I'm saying about "coins as investments." They will generally hold their value better than many other purchases, but when we're talking about $5000, what is the "opportunity cost" of our purchase?
Food falls into non-discretionary. You have to eat to live. Purchasing coins, or saving for retirement, comes into the budget after the bills are paid for (I hope).
And what is the utility of each potential purchase, especially to your poor, long-suffering backside?
To be honest, you pretty much need something to sit on, too. But my family is definitely in the three-figure rather than four-figure couch market. (In fact, since we don't entertain and don't watch TV, we probably won't replace the couch when it finally goes out the door.) Similarly, you can eat rice and beans rather than filet and truffles, but you should think about quality of life.
You are talking about money for needs and not hobbies, investments, etc. I would actually get much more enjoyment if she would have let me decorate the way I wanted to.
Could you explain a little more? How does it need to be accounted for in day to day life? And why not in coin collecting?
I been collecting a long time. And even today when I could afford to do so I pretty much cap my coin purchases at about $2000.00. I did used to keep very detailed records on my coins. I kept the daily silver & gold charts on my computer desktop.... I also have a successful business. The last ten years have been good and I obsess over the daily, monthly, quarterly P&L’s, expenditures, tax implications, the daily health care changes imposed.... I could go on..... I reached a point several years back that I determined my business numbers were entirely enough stress for my mind/body to have to deal with on a daily basis. No longer do I keep detailed records of my coins. The silver & gold charts are long gone from my desktop.... And I have found I now enjoy my coins much much more. Only record I keep is a safe deposit box listing for my wife in case I don’t wake up tomorrow..... Perhaps if retirement is in my future I will reembark on a detailed record of my life’s collection.... Just to keep my mind sharp.
Since we have such a huge Credit Inflated Bubble that finally just got Pricked, the Price of GOLD and SILVER coins should start to increase into the recession and possible Depression. I know coin collectors are not all in it for the money or value, mostly the collect-ability. But, in the right market at the right time wouldn't it be nice to buy a lot of the coins you can't afford now because your Silver or Gold coins return 10x value over 5 years. It certainly is possible and could be soon. Many have been predicting this same thing going back 10 years now. When and if are always the question. I would suspect every coin collector would be in tune with the economy, the tremendous disservice the FED, the mega rich, our politicians have given us over that 10 years. You can't just rack up debt forever and hope it works out. Soon, something has to change. I hope they go back to the GOLD standard and reprice the asset where it should be, about 6K per oz.
Inflation costs us more for everything we buy to live, food, gas, housing, etc. We need to account for it to make the money we have last so we can survive. Coins are a hobby. The IRS doesn't care about inflation. You paid xxx amount for it and you sell it for xxx. Hopefully, inflation will be covered in the sales price as you hold the coin in your collection it should increase in value. Not always the case though.
I’ll try to avoid commenting too much on the current economic but I will say this in an attempt to help people out. Generally speaking when unemployment is low, inflation is high. So if you are planning on making a bigger, long term purshave, either do it now before the coin(s) get even more expensive, or wait for the economy to cool off a bit.
