Featured Do 21st Century Coin Collecting Methods Drive Prices Down and Hurt our Hobby?

Discussion in 'US Coins Forum' started by coin0709, May 4, 2018.

  1. NumisNinja

    NumisNinja Active Member

    Since a lot of brick and mortar dealers are on eBay too and play both sides of the fence, they would be more than happy to sell you a coin for $50 in person, rather than for $75 on eBay. With arbitrary auction prices and the PayPal and eBay fees and shipping hassles, they'll often just sell you the coin well under Redbook if they question how well it might sell online. That dichotomy in the coin marketplace can work to the advantage of a buyer or seller, depending on how you position yourself.
     
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  3. joecoincollect

    joecoincollect Well-Known Member

    I find good deals on ebay, at flea markets, and at shows. I collect lower-end stuff, and I get better stuff when i see it for a terrific price. Deals are everywhere, but you have to put in the effort to learn what's a good deal and to get out there and search. When you have very specific collecting interests, like trade dollars, or seated halves, etc., you're going to notice patterns and pitfalls at each venue. However, since my collecting interests are so varied, I always find great deals. Experience takes time. Online buying seems to me to be a boon to the hobby, allowing us to hunt, purchase and sell more conveniently. I'd think this generates more interest, and with that more demand and increasing prices.
     
  4. GDJMSP

    GDJMSP Numismatist Moderator

    Staying home and ordering it online - from a dealer's website - is what I was talking about doing. And as I explained, you have to look around, do some work ! You're not going to find the better prices at just any dealer.
     
  5. Don P

    Don P Active Member

    In response to the original question:

    I've been into numismatics and bullion collecting for about 10 years now. Not nearly as long as most of you, so I don't mean to disrespect or anything from my observation as a collector/seller:

    - When going a local coin dealer or coin show, I've noticed a lot of the same guys there selling the same coins. I've offered what I thought was a fair price, based on past experience and ebay sales. In return, most dealers take out the Red Book and knock off 10%. Now, I was born at night, but not last night ;). The prices these guys offer are retail and not many people, if any, buy any of the coins. After this experience, I went online and found similar coins with the same grade for 20-30% cheaper that what they were asking for. They need to be more realistic on their asking prices.

    - I've seen the value on a lot of high dollar coins drop throughout the years and I think it's caused by more coins entering the market through estates. For example, I remember 1928 Peace Dollars going for over $400, where you can get the same coin now for under $200. More supply. Will there be an abundance of coins in the future when the baby boomers start passing down their estates to their kids, who aren't interested in the coins, who knows?
     
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  6. -jeffB

    -jeffB Greshams LEO Supporter

    Yeah, but coin collectors have always been dying, along with non-collectors.

    1928 Peace dollars are a good example of a particular coin that has cooled off. The overall trend over the last five or ten years has been downward, but that issue is a stand-out. (Oddly, though, at a January show I overheard a dealer saying that he was looking for 1928 Peace dollars, but couldn't get rid of 1921 examples.)
     
  7. coin0709

    coin0709 CT Supporter

    I could not agree more. Unfortunately I think we will see a similar trend, but not as drastic, as what we’ve seen with sports card values. The baby boomer’s heirs dumping these in the online market has killed them as collectibles. Not apples to apples but worth noting.
     
  8. GDJMSP

    GDJMSP Numismatist Moderator

    A few comments about your comments. There are some basic things that collectors need to be aware of, to understand, about the dynamics of the coin market, how it works, why dealers do what they do - things like that - so they can understand the pricing structure of the market.

    First, think of the coin market as a whole. Think about all the sales that take place each and every day in the entire coin market - all sales anywhere, anytime. That means all sales from collector to collector, collector to dealer, dealer to collector, dealer to dealer, auction venue to collector, collector to auction venue, all sales at coin shows, etc etc etc. If you think of all those sales as 1 large number - approximately 80% of all sales, every day, day after day, are dealer to dealer transactions.

    What this tells you is that it is the dealer market, and only the dealer market, that actually determines the real world value of coins at any given moment. Everything else that occurs with any and every sale of a coin is based on that.

    Next, you say you see the same dealers at coin shows. Well, that's completely normal. No matter what coin shows you go to, whether it's the small local one, the larger regional ones, or the big national shows - you're always going to see the same groups of dealers at those shows. That's because most of the business that dealers do is done at coin shows. And that 80% number, it applies to coin shows as well. Meaning approximately 80% of all sales at coin shows are between dealer and dealer. That's how dealers make the majority of their money, by selling to other dealers. You could put it this way - dealer to dealer transactions are the meat and potatoes, dealer to collector transactions are the gravy. And it has always been that way.

    This brings us to the prices when dealer to collector transactions are involved. Pretty much all the dealers realize that other dealers know how the market works just like they do. But they also realize that the majority of collectors do not know this. They know that the majority of collectors do not know how prices are determined, do not know what is a fair price at any given time, and to a large degree do not even know which coins are common and which coins are not. The dealers also know that a whole lot of collectors think the prices listed in the Red Book, or any of the other numerous price guides - are accurate. And that these collectors base their buying habits upon these listed prices.

    So ask yourself, if you're a coin dealer, somebody who makes their living buying and selling coins, when a collector comes up to you and wants to buy a coin - what are you going to do when you have to tell him your asking price ? And remember, these transactions are what puts the gravy on your meat and potatoes - literally !

    It is this point that separates the dealers into two different groups. One is going to be the ones who ask for as much as they think they can get. They gamble in other words, they play the odds. And they do this because they know that most collectors are among those who don't have any idea what a fair price really is. Then there is the other group of dealers, the ones who will almost always ask a fair price to begin with. They do this because they'd rather not gamble, they'd rather not play the odds. They'd rather do whatever they can to make the sale and let the chips fall where they may.

    So your job, as a collector, is to learn all these things. And, to learn what the real world value of coins actually is, at any given moment. It is only by doing this that you can learn how to recognize which dealers fall into which group. And thus know which dealers to deal with and which ones not to deal with. And you also have to realize there is always going to be a markup. Dealers are not going to sell you coins for the same amount they pay for them - they have to make a profit. So you also have to learn what kind of percentage is a fair markup and what kind isn't.

    And, learn that those percentages are different for different coins. Sometimes those percentages are low and sometimes they are high - but in both cases they are fair. For example, the percentage of markup on a high dollar coin might only be 5%, while the percentage on a very low dollar coin might be 50% - and yet both of them are completely fair !

    It isn't. The number of coins that exist is and has been the same for many, many years. In most cases many decades. At any given time, the numbers of any given coin being on the market rarely changes by any significant number. The only thing that changes are the prices, and those rise and fall just like they do in any market, all markets. And they always have, and always will. Are there exceptions ? Of course, but we're talking generalities here - what is most often true.

    So what makes coin prices rise and fall ? Perceptions mostly. And those perceptions are influenced by outside forces, other things happening in the world. Often things that have nothing to do with the coin market. Granted, the number of collectors can change over long periods of time, and that can influence the market one way or the other. But like I said, those changes in the number of collectors tale a long time - years, decades. They don't just happen overnight. But yet the coin market often, almost always in fact, changes rather quickly. Sometimes just a few months or even weeks can bring drastic increases or decreases. And in just a few months or weeks the number of coins sure didn't change, nor did the number of collectors. I've seen high dollar coins lose half their value in just 2 or 3 months - half, 50%, and sometimes more. And this is not uncommon. Other times it might take a few to several years. And it's not always just high dollar coins.

    For example, some years ago it was reported in the numismatic press that common date, common grade Kennedy half dollars increased in value 300% between 1998 and 2004. That's what ya call a huge increase in a pretty dang short time. And it sure wasn't because the number of coins on the market increased, and it wasn't because the number of collectors suddenly increased. It just happened, and nobody seemed to understand why - but happen it did.

    Of course at the same time the coin market as a whole was moving upwards, but few increases were as large as that one. So why ? Simple, perceptions. People saw the market moving, it was being reported in the press it was moving, and people jumped on the band wagon. Of course they jump off just as fast when the trend reverses. And that is exactly what happened just a few years later in 2008. And they are still jumping off today - 10 years later !
     
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  9. coin0709

    coin0709 CT Supporter

    Thank you for this. This has been really enlightening. I certainly fall under the second dealer category you outline above (tend to price fairly to start to unload and reload and move on), which makes me very stingy on the 'buying'. The only coins I've sold in recent memory to a dealer were clad proof and mint sets because they have a buyer pool that I don't. Thanks again for helping us navigate our hobby a little easier.
     
  10. calcol

    calcol Supporter! Supporter

    Doug, thanks for the analysis. However, I don't see how the majority of dealers can make most of the their profit selling to other dealers. I can see how it can account for most of their cash and inventory flow though. Dealer-to-dealer sales/purchases must be a zero-sum game. Some dealers will profit in these transactions, some will lose, and probably the majority will break-even or come close to it. If you're going to toss-in dealers buying from non-dealers and then selling to dealers, that's different and goes beyond dealer-to-dealer.

    With regard to dealer-to-dealer sales setting prices for sales to non-dealers, it's an interesting question. In the US coin market, collectors expressing their demand at auctions is a big factor for more expensive coins (slabbed coins going for a few hundred $ and up). For less expensive coins, I dunno. You may be right that dealer-to-dealer sales prices are the determining factor.

    Is there any way to know the distribution of retail sales (auction or dealer-to-collector) by coin value? Put another way, on a total sales dollar basis, how does the retail market for lower-end coins compare to that for higher-end coins?

    Cal
     
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  11. GDJMSP

    GDJMSP Numismatist Moderator

    Your making a false assumption here Cal. The majority of the buyers in virtually all auctions are dealers - not collectors.
     
  12. coin0709

    coin0709 CT Supporter

    This is very surprising to me. Is this true of eBay auctions too or are you primarily referring to the Heritage/Stacks/Sothebys type auctions?
     
  13. calcol

    calcol Supporter! Supporter

    I don't know the mix of dealers versus collectors winning auctions. Is there data on this? I know plenty of collectors, including many on cointalk, who are successful bidders. So, I have to think collectors do have a significant role in setting prices in auctions.

    Cal
     
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  14. C-B-D

    C-B-D Well-Known Member

    I'm actually with Doug on this... For the better part of the last 5 years, I've seen this happening more and more. Namely: Collectors, like me, have turned into dealers. Even if in the most general sense of the way, such as:
    1. Not ever paying retail, even if they need it, or,
    2. Not being willing to sell their coins or upgrade them unless you can make a profit on them.

    Maybe it's just smarts, or frugality, but gone are the days when collectors pay by the price guide. Now they all want to pay 10-20% back of graysheet.
     
  15. baseball21

    baseball21 Well-Known Member

    Heritage/Stacks types but many of those dealer buys are done on behalf of a client or moved quickly to a client. As the internet has expanded and the number of buyers comfortable using it direct buyers are playing a much bigger role in auctions than in the past.

    It also greatly depends on what price level you are talking about.

    While dealers will source material from eBay the majority of sales there are to collectors
     
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  16. savitale

    savitale Well-Known Member

    Some very good information in this post. One should be careful not to generalize too much though. SOME dealers make all of their money buying from and selling to dealers, these folks are called wholesalers and they make small margins transferring coins from dealers who can't move that material to those who can. SOME dealers are essentially all retail, they source material from dealers, wholesalers, collectors, and consignments, and their bread-and-butter comes from higher-margin sales of that material to the retail public.
     
  17. GDJMSP

    GDJMSP Numismatist Moderator

    Sure some dealers buy stuff they find on ebay, but I'd say they are few and far between because they simply know better.

    I can't give ya exact numbers Cal or even a reasonable estimate of a percentage. And no there is no actual recorded data. It's more of something you simply know and learn by observation and conversation. Go to a live auction, most of the people in there are dealers, and consistently. Same thing for the online auctions. The majority of buyers are dealers, always have been.

    As for collectors setting the prices ? Nahhhhh, doesn't happen. Sure, collectors win some of the auctions, but do ya know why ? Because they over-pay. The dealers attending, or bidding online - they know the real world value of the coins. So if the bid exceeds that - the dealers simply stop bidding. And that's when the collectors win.

    But their winning doesn't change the prices nor even affect the prices - it's merely considered an outlier. The next time the same coin or similar coin comes up the dealers pay what it's worth and no more. And the price remains the same.
     
  18. -jeffB

    -jeffB Greshams LEO Supporter

    LOL. I don't suppose you've been following the "under $50 purchase" thread, and particularly @C-B-D's finds there...
     
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  19. C-B-D

    C-B-D Well-Known Member

    It's true that 80-90% of what I buy is off eBay.
     
  20. GDJMSP

    GDJMSP Numismatist Moderator

    Actually it has more to do with how I define a coin dealer. And unless I am mistaken, he doesn't fit the bill.

    To me a coin dealer is one who makes his living buying and selling coins - and only by buying and selling coins.
     
  21. coin0709

    coin0709 CT Supporter

    I think many collectors see themselves as dealers and are only willing to pay 'dealer' prices or close to them.
     
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