HOW IS THE MARKET AS WE APPROACH THE ANA?

Monday, July 13, 1998

        How is the coin market doing lately? The answer appears to be quite obvious. It is and has been improving for the last two years. Only most dealers may not have recognized this until the last six months. More dealers are selling more coins, which tends to make these same dealers very active buyers. Many dealers believe that the overall improvement in the rare coin market is a direct result of the highly profitable stock market. This is mostly true as profit-takers spend millions of dollars in profits to diversify their holdings. However, many of these buyers did not just jump in with both feet to buy coins unknowingly. They have studied the coin market and more importantly relied on their positive relationships with their favorite coin dealers. In addition to this conviction, I am convinced there is something else at work here.

        Over the last ten years we have seen much improvement and considerable progress in the marketing of rare coins. With the advent of certification, especially PCGS, NGC, and ANACS, we have seen somewhat of a stabilization in the overall grading of rare coins. Prior to 1986, grading of coins was left to the individual coin dealer. Grading of coins was generally all over the board. Grades could vary from three to five points from dealer to dealer and this was just the Mint State issues. The circulated grades might vary 10-20 points. Dealers made much of their profits by efficient and knowledgeable purchasing of the material that they bought. The more astute the dealer was when it came to grading capability, the more likely he was to make a larger profit on the coins he/she bought and sold.

        Now, certification may not make for a perfect world, however, it does give all coin buyers at least a sporting chance. Moreover, the dealers and collectors who study numismatics, the ones who are the most diligent, are the ones who usually do the best job within their specific area of expertise. Again, certification may not be perfect, but it serves to improve one of the two main elements in the marketing of rare coins-quality. The other main element is pricing. For well over one hundred years, rare coins were traded between two knowledgeable numismatists, most often, on a sight basis. Even in the early years when coins were shipped through the mail, the buyer had a return privilege. Nonetheless, along with certification came the idea that rare coins could and should trade like stocks, sight-unseen. However, just because one hundred 1881S Morgan Dollars all grade MS65, it does not mean that they all have the same value. Yet, this is what the industry tried to adapt to for the next ten years. We have allowed the worst quality coins to measure value for the entire spectrum of coins in a specific grade and denomination.

        Even now, some dealers still believe that rare coins can trade sight-unseen. Maybe 5%-10% of the more generic coins can trade sight-unseen. Though, would you want your high-end coin to be evaluated as a result of a sale for the worst example of the same issue? Certainly not! This is the main reason why a bid-based trading system does not work. Dealers bid what they would like to pay for a coin that only exists in their mind. Obviously, you would like to buy the best coin for the money. While the seller would rather sell his low-end coin and get the most he can from the potential buyer. This idea of a bid-based system has totally torn down the value structure of rare coins over the last ten years.

        How do we correct the disaster that has transpired? Simply by assessing the value of coins based on 'a real coin for sale'. One that is accurately graded and not a low-end coin for the grade. A coin that most knowledgeable numismatists can agree on quality. An Asked-based system is exactly what the coin business used before certification came along. It is how the coin market has performed best and it is how it should be allowed to function in the years to come. Why not take the best of certification and team it with what a seller wants for his/her coin? An Asked-based system is the only way to evaluate the market for rare coins. You must have a coin for sale and the seller must determine the price. Competition will dictate if that price is too high or not. If others are willing to sell the same quality coin for less money, then it must be priced too high.

        So how is the coin market doing? Fine, thank you-and improving everyday!