Why do price guides overvalue everything?

This is something I struggle with very regularly. I frequently pay well outside my comfort zone just to be the middleman for what I think is a great coin. My instincts seem to always be validated, but it can sometimes take over a year to find that right buyer for such a coin.

 

And from a dealer's standpoint - 1 year or 20 years, you lost money on the coin. Even if you sold it for more than you paid for it.

I say that because you lost out on all the money you could have made if your money had not been tied up in that coin you were waiting to sell. You might have been able to sell 5, 6, 10 or even 100-500 coins, and made a profit on each over that same period of time.

Of course the same thing applies to collectors, only it happens a lot more often to collectors than it does to dealers.

 

Quite true, but then you also have to consider the source, or perhaps I should say sources. This is what I mean by that.

Let's start off with the price guides. Do you what they base their listed prices on ? Almost all of them tell you if you take the time to look. And almost all of them will list what they refer to as "dealer asking prices" as at least 1 of their sources. But they don't tell you what dealer or dealers they are quoting.

Here's why that's important. Pick any coin you want, in any given grade, slabbed by any given TPG. Then search for them and you'll probably find at least a half a dozen different dealers offering to sell that same coin, all in the same grade, same TPG. But the prices will vary, sometimes greatly. It is not at all uncommon for dealer A to ask X dollars, and another, dealer B, to ask double that amount. And the rest will asking anywhere in between. Same kind of thing happens on the electronic dealer networks - you have high Asks and low Asks.

So when the price guide decides on what number they want to use - from whom did they get that number ? We don't ever know, and no they don't ask everybody. So if they are using the number from the guy who is asking double what another is asking - then how accurate, how reliable, is that number ? And that's my point it isn't because you can go elsewhere and buy it for half that much.

Now the price guide might also say that we use a mix, dealer asking prices and realized auction prices. But again they don't tell you exactly where they got those prices. They might be using the highest asking price they can find - including those on ebay - and the highest realized auction price they can find anywhere - including those on ebay. And no, you cannot assume that they take averages because they don't. And if you dig in and do the work you can prove that they don't because their listed price will quite often match the highest realized auction price ever recorded. Even if it occurred years previously before the market dropped for 10 years running.

You might say - they wouldn't do that. But some of them do do that ! They do exactly that ! And they do it all because they stand to gain as a result of doing that. They are not out to help you, they don't do what they do for the good of the hobby. They do what they do because it is their BUSINESS ! And the nature of a business is to make money. And the best thing they can do to make money is to make you think that your coins are worth more than they really are.

And then you have the vicious circle. Some of the asking prices that price guides use come from ebay. And some of the asking prices on ebay come from the price guides. Same thing happens with some dealers. Their asking price comes from the price guides, and the price guides get their numbers from the dealer's asking prices. Does anybody not see a problem with this ?

This is why you should take price guides and throw 'em out the window - all of 'em !

 

Sorry, but that just isn't true.

This is what the Grey Sheet basis their listed values on -

The pricing of coins and currency in our publications is derived by our team using an informed mix of data values from online trading networks (CoinPlex, CoinNet), auction prices realized, dealer feedback, wholesale buy lists, dealer sell lists and more. Our system is proprietary and we cannot share any information on any specific items, but we welcome feedback on any item where you feel the price is incorrect.

That info is found on the CDN website - https://www.greysheet.com/About/Faq


As for the Red Book, and I quote from the Red Book -

Coin values shown in this book are retail prices figured from data supplied by the listed contributors approx 2 months prior to publication.

 

"Sometimes", as in ". . . sometimes take over a year . . .", is not often, but it does happen occasionally. I don't have the luxury of being able to buy at "street" prices like B&M shops do, and buying more generic coins to keep my buy prices closer to generic cost doesn't serve my business model well, so it's worth it to me to pay more for coins I'm sure I can sell for more.

Buying special coins for resale reinforces my reputation in my chosen niche of the market. That in itself is a form of advertising, and helps justify some of the additional cost too.

Also, handling better than average coins for a given issue gains me more exposure to the exceptions, as opposed to those who will buy only those coins which warrant paying nothing more than generic money for.

Remember ToughCOINS is a very part time venture. I work 50 hours weekly at my full-time job and, unlike other retailers with a more conventional business model, can't manage 12 or even 6 complete inventory turns annually, even if I tried, so I haven't really missed out on all that much.

Try as I might, there's not enough material in my area of the type I choose to deal in to support that many turns.

I daresay mine is a special case, but will also say that, generally what you have written is quite true for most.

 

I didn't mean to imply that it did apply to you Mike, merely that it is a scenario that does apply to a lot of dealers.