How Does CAC Make Their Money?

I am curious about the CAC business model. Other posts have said that the grading fee represents a small portion of the income of the company, and that most of the company's money comes from the purchase and trading of CAC designated coins.

If that is true, do they participate in the usual coin market to get these coins or is there a side market that they and certain dealers have access to? I'm assuming that they wouldn't approach individual collectors to purchase coins directly.

Does anyone have any insight into how this works?

 

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Keep in mind, CAC isn't somebody who decided to get rich by offering their service. CAC was started by a man who was involved with the founding of both PCGS and NGC, a very high-level dealer who has far more lucrative revenue streams. They're a consortium of dealers like that - people who ship each other five-figure coins sight-unseen, who decided they couldn't trust TPG consistency well enough to send each other those coins and expect their customers to like what they got.

I'm reasonably sure that, by comparison to other things they could be doing with their time, CAC is actually costing them money in the form of unrealized income.

 

They make the sacrifice because:

"I love you man" ???

 

They make the sacrifice because the alternative - losing business to poorly-graded slabs - was costing them money and reputation.

 

Why make the sacrifice at all if there are other things they could be doing with their time?

 

Because I'm sure they're making money in the long run. And I bet they turn a profit. Tho not a big one. And they do it for the good of the business which be idiots everyone except the coin doctors people who buy the slab not the coin and the dealers in poor quality merchandise Tho that being said there's a LOT of nice coins that for one reason or another do not have a cac sticker. I just sold some freshly graded beauties that didn't have a sticker and most would have easily. They just never went

 

I'm not sure how to explain it more clearly. If one of them calls the other up and asks for ten PCGS MS66 Saints, they couldn't be sure that what they received would be what they called "MS66" because PCGS sometimes puts MS64's in MS66 slabs.

That's not good for business.

 

Forget it.

 

Why are you getting angry longnine? They're just trying to answer your questions. It's actually good for buisness overall even if they are taking a loss from this specific entity. Think of it as a loss leader and on top of that it's also a great general service for the community. Plus a tax break

 

No different than a meat market selling chicken for .39 cents a lb. to get you into their store to buy things you really did not go shopping for.

 

Dave didn't say CAC was losing money. What he was saying is that the people working there could be making more money doing other things in the market. Put that group out in the market full force and yea I am inclined to think they would be making more.

 

Mainebill: <<Because I'm sure they're making money in the long run.>>

CAC is profitable in the short run, too. There are occasional losses on a specific coins. There have not been annual losses.

Mainebill: <<I bet they turn a profit. Tho not a big one.>>

As a percentage of revenues, CAC profits are not large. In absolute terms, such profits would be thought of as 'a lot of money' by most people, including by most coin dealers.

Since CAC was founded in 2007, CAC has sold more than $400 million worth of coins, perhaps much more. Admittedly, I do not precisely recollect recent data at the moment. In the past, I had clear permission from JA to cite such data in my published articles.

Mainebill: <<Tho that being said there's a LOT of nice coins that for one reason or another do not have a cac sticker. I just sold some freshly graded beauties that didn't have a sticker and most would have easily. They just never went >>

I like Mainebill's informational points and perspectives.

PCGS was founded in 1986; NGC was founded by JA in 1987; and CAC was founded by JA in 2007. So, of course, there are expensive coins that were certified in the past but have never been to CAC. Moreover, for inexpensive coins below a certain threshold, it might not be cost effective to send them to CAC. Would it make sense to send a PCGS or NGC "MS-63" 1881-S Morgan to CAC? Also, if most of the coins in an auction consignment from a collector would be likely to fail at CAC, the auction firm may not send any of them because bidders might wonder what is wrong with the coins without stickers and may not be excited about the whole collection that was consigned.

Please Click: How will Coin Collectors Interpret Certified Coin Grades in the Future?

 

Interesting discussion - thanks everyone.

To go back to an earlier point: Could a collector - not a dealer - who owned coins CAC had accepted call CAC and ask them to make an offer on those coins? Or would the collector need to go through a dealer or sell them on the market through usual channels?

 

Making some progress with my microscope but not sure it's going to work. It may be to powerful. In the meantime this is a picture with my iPad of one of my dads coins. I'm thinking he got it from a pawnshop. He never let on he had any coins. Would this be a good example of a heavily cleaned coin?

I have sent for individual holders for the Morgan's and peace dollars which are in a safe deposit box or I'd give you all a picture of one of those. Couple of days before I can get to the bank.

 

Attaching stickers is a classic example of a loss-leader. The benefit to them is that they get to see a lot of very nice coins, and they are active bidders on those coins and run a huge dealer-only coin exchange system devoted to the exchange and trade of CAC stickered coins. They are not losing any money on the business as a whole...quite contrary, they are likely raking in the dough big time.

Don't worry, there is nothing altruistic about the CAC business model. They aren't really doing it "for the hobby" or "for the collectors" -- they are doing it to make money and make sight unseen transactions of coins between dealers similar to unregulated commodity trading.

 

You are making great progress with the scope. Now work on your lighting.