Wall Street Money

I had a situation just this morning that is relative to this post. Having several 09 SVDBS, I sold one of my MS65RB's on ebay. Granted, to sell this back to a dealer, would have reduced any profit that could have possibly been made. Instead, I chose to sell back to retail, through ebay. And, in turn made a few hundred dollars on the sale, over what I had paid only a month ago. I decided to sell it since Im only holding "reds" now.

One thing for certain, I sleep better at night, being out of the market and in coins! THAT alone has a 'value'.

And, with the way things are going, at least with coins you never run into a "1930-S ENRON MS65", if ya catch my drift!

 

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I see both points, but I hope you're not suggesting that fraud is not an issue in the coin market.

Also, part of the reason stocks are as volatile as they are is due to the liquidity. We erroneously believe coin prices to be more stable than they are because daily prices are not readily observable.

 

You make a very good point that I'm well aware of. However, I'm not talking about investing in rare coins in this context and I'm not talking about the short term - or the intention of 'flipping' them. I'm talking about converting some of my assets from securities into rare coins to keep for the LONG term. You've heard of 'buy and hold' investing, consider this to be 'buy and die.'

And I'm not saying that this will be easy. Just like investing in the stock market, assuming you're an active investor, it requires time and study and patience and this will too.

peace,

rono

 

Hopefully that 'buy and die' will be for a protracted period of time :smile

I feel the same way. All I know is that I have coins which have been in my possesion for forty, fortyfive years. Ive managed to keep hold of them, enjoy them, and watch them gain in value. Just a glance at my 'kid' Redbook, from 1968, 1909 vdb matte proof, $350....1914D BU, $585. etc etc. (not that I had these goodies back then, but you get the idea)

I dont know if I have 40 years left, but I can almost guarantee what I own now will only go up.

My formula for buying....Buy nothing other than PCGS. Buy coins which sell for the most part only through major auctions. Buy top pop coins, concentrating in Keydate and condition rarity (MS68 Morgans, MS67 Saints), cameo proof Buffalos. Buy coins on ebay that attact LOTS of bids, but only if they are Top quality low pop coins, again only PCGS. Buy only "red" lincolns.

Enjoy them, look at them with the loupe, and appreciate their perfection.

Take frequent looks at CNBC and see how lousy the market is doing, enjoy 'not' being there. Read the yahoo message boards of the stocks I used to own, and relish the feeling of 'not' wanting to jump out the third floor window!

 

There are people who feel that way. I think it's incorrect thinking to believe that anything that doesn't generate cash flow has no value or can't be valued. It's often easier to put a value on something that generates cash, but that doen't mean things like raw land, oil, gold, and commodities in general are valueless. The other unknown factor with something like a bond is what the fixed number of dollars will mean in purchasing power at some future date. A discounted cash flow analysis can tell you how many dollars it is worth, but won't necessarily tell you what the future purchasing power will be. In the end, you are in the same position as the coin owner in guessing what someone else will give you in exchange for a fixed number of dollars.

Regarding bid/ask spreads, Ebay and other auction mechanisms are making this less of an issue than in the past, but you are correct in pointing out that the spread is high.

I just think it's incorrect to say that a coin has no intrinsic value.

 

These are two very different statements. From a pure finance theory perspective, any asset (coins, stocks, etc) is worth the present value of expected cash flows, whether those flows are from dividends or an eventual sale. By definition, since coins, oil and similar assets do not produce cash, their value is inextricably linked to what someone else will pay for it.

That is very different than saying it has no value. To the contrary, these assets can be extremely valuable. However, that value is dependent upon what the market will bear.

 

You beat me to it. Coins and stocks can't possibly be compared in the same way, because as "investments" they are complete opposite performers. Like Mr. Coin said, coins, regradless of buy/sell spreads, do not generate a cash flow situation in the same manner as stocks, which rely on concrete success rather than supply and demand like metals.

Stock can be bought and profitted on by doing research and observing hard facts based on performance, whereas metals is anyone's guess and metal trends are as slippery as they are unreliable in the best of times.

Those who invest strictly in coins, I'm affraid, will someday wish they'd listened to those who knew better. Collect for fun, but don't plan a retirement life based on their future "success".
Guy~

 

My original post was in response to a statement by troyheights that collectibles do not have an intrinsic value. I stand by my statement that they do. But as you have pointed out, financial theory is not much help in putting a value on this asset class. Just because something is difficult to value doesn't mean it doesn't have value.

Edit: Off topic, I was doing research a few years ago on discounted cash flow models as they apply to venture capital investments, and almost accidently "solved" the problems involved in forecasting cash flows and choosing a discount rate under conditions of uncertainty. The new model, which doesn't require either, provides results comparable to the traditional model without the guesswork, and uncovers application errors from improper input variables in the traditional model. I ran the idea past two other investment professionals who agreed with the findings. I'm not sure if anyone else has made the same discovery, but I've never seen it in print. Anyway, not really relevant but it was nice to personally plug this hole in accepted financial theory so I thought I'd mention it.