Do price guides run the market?

Discussion in 'Coin Chat' started by TypeCoin971793, Dec 9, 2019.

  1. TypeCoin971793

    TypeCoin971793 Just a random nobody...

    I think this would be a fun little thought experiment.

    I have wondered several times how dependent the market is on price guides. Are most notions of value “because the price guide says so”?

    What would happen if all price guides were removed, and all previous knowledge of values were forgotten? Assume that the internet, shows, etc. are otherwise unchanged.

    Would prices stabilize with demand at current values, or would a lot of prices fall dramatically as it is found that supply actually exceeds demand? Would baseline prices be set by dealers believing coins should be worth a certain amount and seeing if collectors would be willing to pay that amount?

    With ancient coins, there are no price guides, and collectors/dealers are generally the ones who set the price records which define the market. I’ve found it to be far more volatile as a result. So I believe that my second scenario would be the most likely.

    I’d be interested in hearing your thoughts.
     
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  3. medoraman

    medoraman Supporter! Supporter

    I view the US collecting world much more dependent on price guides, and more of a commoditized market, than all other collecting.

    However, one has to realize some MAJOR differences between modern coins and ancients. For moderns, every coin is supposed to be identical. In fact, if they aren't, that is a big deal. For ancients, every single die is unique. I have a coin that got listed for sale that looks just like my mother, (listed a few days after she died). I think I paid $300, (Roman Republican). I have not seen another of that die ever for sale, though you would see other examples (different dies) go for around $180-$240 nowadays and say I overpaid. Ignore the fact it looks like my mother, it is of much higher style than your comparative sales. That is the rub, STYLE. Given they are all hand made, style has a massive effect on price, one not easily judged in a price book or only looking at a Sear number and comparing sales.

    They estimate there are around 750,000 ancient coins "types" This number ignores most things that would create a "type" for modern collectors like mints, control letters, varieties, etc. If you included them, I would estimate maybe 4 million ancient "types" (maybe dramatically low, just lets say). Now, include STYLE, (also something that would justify a new "type" amongst modern collectors), and your listing of "types" for ancients is in the tens if not hundreds of millions. Just for the one RR issue I described earlier, since that coin got me interested in this subject I have seen at least 15 different styles over the years. Other issues, like Alex III tets, if you include style, mints, and control marks and you are talking about tens of thousands of coins by itself.

    Given this, one looking at sales prices of a certain RR denarii and think the prices are all over the board. Layer in all of this other information, and they become less so. Sure, sometimes you can get a good bargain, other times overpay because a person just had to have THAT coin, but I do not think ancients are as wildly unreliable as you think, for the reasons I have stated.

    Btw, to answer your question directly, I think price guides DO rule the US market in particular. I have bought world coins with a KM "value" of $300 for $10 so commonly so as to not really mention it, as well as paid $200 for a coin listed as a $20 coin. Most dealers here in the US would never sell a coin with a "book" value of $300 so cheap. I think price guides artificially prop up US prices. I think US prices would become more realistic and lower for collectors in most instances without price guides. Rare coins will sell for high prices, ignoring price guides. It is the common stuff artificially propped up with price guides.
     
  4. longshot

    longshot Enthusiast Supporter

    I look forward to this discussion. IMHO and observation, though, the coin market cycles. Price guides always seem to be straining the high side, the publishers want to go up. Yet they have had to adjust lower in many areas than they were a few years ago. Coins are just selling for less.
     
    TypeCoin971793 and Doc J like this.
  5. GDJMSP

    GDJMSP Numismatist Moderator

    Do price guides run the market ?

    I'm tempted to say that for the average collector answering questions like this are kinda like trying to work your way through a minefield - while wearing a blindfold with your hands tied behind your back. Getting through the minefield successfully under those conditions would probably be easier.

    Why would I say that ? Because I believe that most folks don't realize the correct answer is a resounding no !

    In the first place price guides, all of them are worthless. They're worse than worthless, they are even harmful because they are chock full of bad information. In the second place price guides only have any effect at all on about 20% of the coin market. That's because the only people who ever even look at them are collectors. Every purchase and sale that is made by a collector, in all venues combined, only comprises about 20% of the coin market.

    The other 80% of the market, is composed of dealer to dealer transactions - and dealers don't ever look at the price guides because they know they're worthless. The only things dealers ever look at and pay any attention to is the electronic dealer market.

    That's what runs the coin market ! That's what determines whether prices go up or down.
     
  6. -jeffB

    -jeffB Greshams LEO Supporter

    As you magically erase everyone's memory of previous prices, would you also erase their memory of mintages, survivorships, population information? Inventory levels? Series popularity?

    Do you believe that there's a functioning market for coins? I see a lot of evidence that there is. If there's a functioning market, dealers will price coins at a level that lets them turn over their inventory. Sitting on coins doesn't keep the lights on.

    Price guides can certainly be a negotiating tool, but I don't see them "controlling" much of anything.

    Dealer: "I'll sell you this coin for 5% under Greysheet bid!"
    Customer 1: "No thanks."

    Dealer: "I'll sell you this coin for 5% under Greysheet bid!"
    Customer 2: "No thanks."

    [...]

    Dealer: "I'll sell you this coin for 5% under Greysheet bid!"
    Customer 12: "No thanks."
    Dealer: "(sigh) Fine. 10% under Greysheet."
    Customer 12: "Hey, if Greysheet is supposed to show the prices dealers ask, why haven't you just sold it to another dealer for full bid? Is there a problem here you aren't telling me about?"
    Dealer: "FINE, 20% under."
     
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  7. PlanoSteve

    PlanoSteve Well-Known Member

    Uh oh...(he said while putting on his hip waders)...:D

    At the exact moment that they disappeared, someone would post (probably on CT) that "Did you see what that "xxxxx" sold for on the "xxxxx" auction?" Presto, that's a new price guide.

    Without a "price guide" of some sort, the whole system would become constipated & chaos would prevail. After all, we are merely human. Auction/sales results would become the "de facto" price guide, & it would happen fast! We need to know...look at how many people disagree on grading (moderns)! And even with the current guides, people grossly over pay or under pay, depending on their current "predicament".

    That would entirely bog down the system, as the number of dealers would at least quadruple if they though they could lead the lambs to the slaughter. People would be reluctant to buy from dealers...they mostly think they're being ripped off now (they're mostly not). :smuggrin:

    Perhaps not published as such, but auction/sales results are a "de facto" price guide. Ancients collectors are a different breed than "modern &/or US" collectors, and they figured it out. (Before I get a lot of backlash, yes, I realize many do both, but they flip a brain switch when they change threads. It's like in the 1950's, when most of my group of friends claimed you could not be a Yankees fan AND a Dodgers fan at the same time...I knew you could!)

    Back on topic...I'm fond of recalling a story about some friends of ours, because it's so profound. We've known this couple for over 20 yrs, and each time they move to a new house (3x so far), they hire an interior decorator (the same one!) so someone can tell them what they like!!! (The decorator did the last 3 all different! :p:smuggrin:)

    So yes, "price guides" will always evolve...if for no other reason than figuring out when we grossly over payed or grossly under paid (a very euphoric feeling!)

    At least all of us here on CT recognize the shortcomings of these guides (Red Book, etc.)...:D:D:D:smuggrin::p:p:p:joyful::joyful::joyful::eek:;)
     
  8. TypeCoin971793

    TypeCoin971793 Just a random nobody...

    I disagree. They are all addicted to the Greysheet.

    Nope. Just values. That would hit some issues hard like the 1903 O and 1884 CC Morgans or key dates of popular series which are artificially kept at high values.

    And I already have said such. But what I am talking about is a single entity (eg. Greysheet) that will say x is worth $y. The single entity operates as a feedback loop: it tells dealers what to sell for and buyers what to buy at. That is a recipe for artificially propping up the values.

    The reason why eBay auctions tend to sell much more cheaply than greysheet is that the supply is over-saturating the demand. But the Greysheet does not reflect this.
     
    longshot likes this.
  9. TypeCoin971793

    TypeCoin971793 Just a random nobody...

    Good points. Special coins will always sell at special prices. It just takes a trained eye to recognize them.
     
  10. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    The last two coins shows I walked into, I was handed a price guide at the entrance. Most of us begin our numismatic journey by way of the Redbook, yet another price guide....... To me as a businessman, it rather confounds me because I have always functioned on the concept that price is established based on my replacement cost. That concept wouldn’t be remotely workable in a numismatic sense though. Good thing I don’t run a coin shop.
     
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  11. Derek2200

    Derek2200 Active Member

    For Slabbed Mexico second republic silver coins there is no greysheet, holder game, CAC. These tough locate in slabs let alone Unc . Cost plus or how bad the buyer wants it rules the day. One dealer I know has a slabbed top pop one with only 2 graded. It’s very easily a $2000-$2500 coin and still very less than it’s much more expensive than its much higher pop US counterparts many then bumped up in price bc of a sticker.

    when you get into coins with single digit pops which are truly scarce price guides meaningless.
     
  12. Doc J

    Doc J Mr. Brightside

    I never trust a dealer for honest information.

    They are all talking their book. They hope to make a lot of money from you.

    It's best to deal with other guys that enjoy the hobby as you do.
     
  13. Collecting Nut

    Collecting Nut Borderline Hoarder

    In my opinion, no they do not run the market but they do help establish prices for market areas.
     
  14. Santinidollar

    Santinidollar Supporter! Supporter

    Interesting, Doug.
     
  15. baseball21

    baseball21 Well-Known Member

    The majority of US dealers rely heavily on grey sheet which I would certainly call a price guide. Only a small percentage of dealers understand having to pay up for top quality stuff that is actually hard to locate just as the majority of collectors will balk at the prices for such stuff.

    Go to any show especially regional or local shows and the first thing the majority of dealers will do is pull out their greysheet if you try and sell to them.
     
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  16. GDJMSP

    GDJMSP Numismatist Moderator

    Yup there is ! The Greysheet aint what it used to be ;)

    There was a time, but not anymore they're not. The collectors however still are, because they don't know any better - yet.

    Yup, you bet they will. Do ya know why ? Because for many decades the Greysheet was based solely on the electronic dealer market. But a few years ago that all changed. Ever since then the Greysheet has been based on a wide mix of things just like all other price guides are.

    But here's the kicker, ALL the dealers know that. But the vast majority of collectors don't know it - they don't have a clue ! They think things are still like they used to be. And since they got used to seeing dealers pull out the Greysheet to determine their buy/sell prices - they think that's what the dealers are still doing when they see them do it today !

    Meanwhile the dealers know that they have the collector at a disadvantage and they can buy and sell at prices that are higher/lower, sometimes substantially so, than what the current electronic dealer prices are.
     
    imrich likes this.
  17. baseball21

    baseball21 Well-Known Member

    They think that because that’s what the majority of them are actually doing and you know that because you can see the numbers too or ask to and they’ll show you. You’re giving far to much credit to most dealers. While more might start paying up for CAC now that they have a price guide, the dealers that buy outside of sheet based on quality are in the minority.
     
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  18. The Eidolon

    The Eidolon Well-Known Member

    I've been trying to think through what effect a price guide has on the market:

    1) If accurate, a price guide should reduce the transaction costs of buying and selling coins, by reducing the amount of time and knowledge required to know one is buying a coin at the fair "market" price.

    2) A guide should flatten the supply and demand curves by making buyers less willing to to pay much more than the stated price and sellers less willing to take much less. Individual coins are unique and can deviate from the expected price, but it should reduce selling price variation in the market as a whole.

    3) A less than accurate price guide does not control the market in the long term. In the short term, it may be able to move prices a little bit until the market accumulates enough sales data to adjust to the disparity. The more thinly-traded the coin, the larger and longer lasting this deviation could be. It may be possible for a coin to have multiple potential equilibrium price points due to quirks in the supply and demand curves or imperfect buyer and seller information, and an inaccurate price signal could nudge the price out of one equilibrium point and into another. I think this is not particularly likely in the real world, though.

    In general, the market leads, price guides follow. Not the other way around.
     
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  19. green18

    green18 Sweet on Commemorative Coins Supporter

    Nothing turns off this old sod more than seeing a dealer run for the grey sheet when I inquire (at a show) about the price of a coin he has in stock. I know Doug would disagree, but I just can't stand it.......
     
  20. johnmilton

    johnmilton Well-Known Member

    I think that the leading grading companies have more influence on the U.S. coin market than anything thing else. Before a price can be assigned, most collectors are tied to the number on the holder. After that the price guides and auction results kick in.

    So far price guides are concerned, I am not as dismissive of them as some people are. They have a purpose, and collectors ignore them at their peril.

    For example, there are a few dealers who charge prices that are well over the price guide numbers. This might be legitimate for rare items that are seldom traded, but for most “vanilla, run of the mill coins,” the price guide (and it is a guide and not a number carved in stone) is something you need to consider.

    For example, if a dealer is asking $950 for a 1926 quarter eagle in a PCGS MS-63 holder that is on the Grey Sheet for $400, the chances are very high that you should pass. The only way a deal like that can work is if the piece is massively under graded.

    There are dealers at the shows who price their material in this way. I don’t know how they stay in business, but they do. Collectors need the guides to protect themselves from getting stuck.
     
  21. Derek2200

    Derek2200 Active Member

    Yes greysheet basis for US coins. These are wholesale dealer to dealer prices. CPG is their market price based on greysheet bid - a fair price for collectors to pay. CAC market report their FMV price guide for CAC. Considering current market conditions many dealers offer blue sheet to walk up buyers if that much. For me CPG = Sell, Grey = Bid, Blue = Buy.

    This data available to me in my CDN phone app allowing make quick bids / offers / concise pricing.
     
    Last edited: Dec 11, 2019
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