World Colonial

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Everything posted by World Colonial

  1. Correct.. I would like to see the financial markets become more a lot more reasonably priced without the economic damage, but that isn't an option. The fake prosperity which the global economy experiences today and at least the prior few decades cannot survive the end of the bubble.
  2. The economic and financial damage isn't caused by the virus, YET. What we see now is a psychologically triggered political response to the pandemic. In the past, this event would have been allowed to run its course, regardless of the human consequences. Society is better organized now to respond to it due to much improved communication and increased economic resources but this doesn't change the psychological component. There have been several recent pandemics (SARS and Swine Flu) where the scientific establishment didn't know the potential danger beforehand. Nothing close to the current response was even attempted. I'll grant you that if a large meteor actually hit the earth, I would agree it is the direct cause. Short of that, it's always psychological. Go compare this event to prior history and look at what happened in the financial markets. Sometimes there is a correlation and sometimes there isn't. But even when there is, it's not proportionate to the event. 9/11 triggered a mini-crash. The 1987 crash which was noticeably bigger wasn't associated with anything. No one has been able to find a "reason" Many excuses have been made up but that exactly what it is. The 2011 (or 2013) "flash crash" had no external event associated with it. External events don't explain October 28 and 29, 1929. If I showed you a chart which included Pearl Harbor day without the dates and possibly even with a price reference, you might not be able to identify it. (The Dow fell 3% to 107 bottoming at 92 on December 28, 1942.) If you could identify it,. almost no one else can. The Mutually Assured Destruction (MAD) threat didn't disappear with the end of the Cold War. People just aren't afraid of it but Russia still has enough TNT to blow the US off the face of the earth. When the psychological mood is ready for it, the fear will reappear since the weapons certainly aren't going away.. More recently this past Thursday, the weekly jobless claim of 6MM was DOUBLE "expectations" and the worst ever, yet the market action ignored it with the Dow rallying 3%+, The rationalization was the supposed pending agreement to cut oil output by 10-15MM barrels but that was (and is) just a rumor which Russia later denied anyway., Trump just made it up. There was no actual "reason" other than psychological, just as is always the case. Believing in an external cause is the biggest fallacy in financial markets. It's the optimism or pessimism of financial market participants.
  3. My explanation is moral hazard and in part, financial intermediation. Governments create the moral hazard which gives institutional buyers (I don't think it is individuals except very occasionally) the motivation to do so. Financial intermediation because those who are making the decisions to buy these overpriced and low quality assets are mostly doing it with someone else's money. There is diversification but if financial market participants didn't feel safe buying it, they would act differently. This is what has changed mostly starting in 1982. It turned into a full blown mania around 1999 and has been one ever since.
  4. You did a better job of being more concise than I was in my post below yours. What you are describing about the interplay of debt levels and interest rates is dead on. This is the best evidence of the approaching "end game". If interest rates rise noticeably now but still to lower rates than previously, the whole world will become insolvent. It won't be evident immediately with developed country sovereign debt but none of these countries will have much leeway because exploding interest payments will eventually consume most and then the entire current budget. It's a function of the debt maturity schedule and future deficits. Same concept applies to corporate credits, as many won't be in immediate trouble now because of extended maturities but eventually, rising interest payments will eat into earnings on the way up juts as it was a benefit on the way down. And to be clear if I was not, I don't think things are going to "fall apart" now and or in the next few years either, even though I expect economic conditions to be very poor. I think the US and other developed governments probably have enough leeway to borrow and "print" a lot more first. I am predicting though that most people are going to be poorer or a lot poorer later than they are now. No one can do anything about that.
  5. Where did you get that and which market are you talking about? If you are talking about the US (or any) stock market, there are many indicators. The most commonly used is the P/E ratio which is one of the worst and always has been The P/E ratio using "forward" earnings is even worse. Just exaggerate earnings forecasts and then adjust it downward with few remembering. (It's all about earnings management and expectations.) P/E is also one of the worst because earnings aren't even real money but an accounting number. (Anyone who doesn't believe me can try to spend it at the grocery store.) It's an estimate based upon management's application of existing accounting standards which change over time and aren't consistent between the US and elsewhere. (Wasn't consistent elsewhere until the introduction of IFRS either.) Change the accounting standards or how it is applied and earnings changes drastically, even though the economic position of the company doesn't change at all. (Both change regularly.) It's also a bubble because earnings and the P/E ratio are inflated in multiple ways versus the past. First, artificially low interest rates have inflated profits through lower interest expense. Second, it's enabled massive stock buybacks since 2012 ($4.5 trillion according to one source). Third, it has inflated sales by enabling customers to buy more than they otherwise could afford. Increase in real GDP since 2009 is mostly or entirely the result of incremental deficit spending versus 2007 and prior. That's why it's fake and unsustainable. The three that I consider best are the price/sales ratio, market value to GDP, and dividend yield. All three were at or near record levels. Market value to GDP was 80% at the 1929 peak and I think 140% recently. It's somewhat distorted due to international trade but price/sales which accounts for it isn't much if any better. Warren Buffet seems to think the MV to GDP is relevant if that makes a difference. The dividend yield in the DJIA at the September 3, 1929 top was 2.89%. The DJIA fell form 381 to 41 on July 8, 1932. As I write this post, the yield on the DIA ETF (couldn't find one for the index directly) is also 2.89% after a 29% decline. I think it was 1.6% at the January 2000 peak but prior to the late 1990's, only below 3% just before the 1987 crash. I prefer the dividend yield because it's a real number. Dividends can either be paid or not. Many don't or at least didn't care about dividends but earnings are either paid out as dividends or reflected in the equity section of the balance sheet. Almost no one (literally) cares about corporate equity either, except during 2008 and now when most companies are at risk of becoming insolvent. The rest of the time , it's leverage up frequently as much as possible including stock buybacks with debt. If few or most don't care about dividends and hardly anyone cares about book value, why would these people care about earnings either? The financial environment since 2000 has been priced to excess versus 1929 or any other period practically the entire time. I'm not just referring to US stocks but global debt and real estate since these three are the largest and most important. Not all stock markets, real estate markets or debt markets are the most overpriced recently or at the same time versus the past, but collectively it's an accurate representation of what existed at the 2/19 peak. This is most evident in the ridiculously low yields on the majority of debt, no matter what currency you are talking about or the lack of creditworthiness of the borrower. Recently, there has been $11 to 17 trillion of sovereign negative yielding debt, even though the credit quality of these countries must be the worst since at least since WWII if not earlier. There is also 100 year (relatively common recently) and in one instance 1000 year (Austria) bond maturity, at fixed rates. (Argentina issued 100 year debt right a few years ago after exiting the IMF program and is defaulting again. Shocking that happened since it's only the 8th time they have done that.) ) There is "covenant lite" (in other words, practically no covenants) corporate debt which is even worse than pre-GFC. Despite the 2008 mortgage debacle, mortgage standards since can't be called anything other than lax, versus the actually restrictive standards of the past. Practically anyone who can fog a mirror can get a large credit line on a credit card. (My sister did shortly after filing bankruptcy even in 2011.) Auto finance allows you to roll negative equity into your next loan. See what I mean? So when I tell you this is the biggest bubble of all-time, there is a reason for it, in the aggregate.
  6. What existed at the February 19 peak was the top of the biggest bubble in the history of civilization. It's the same bubble which never ended in 2000 and 2007. Most people don't see it because they have no idea what a bubble environment actually looks like. Working at home I have had CNBC on and so many professional economists, market analysts and money managers act as if the current financial circumstances are similar to prior declines, like 1987 or even 1973-1974. It's somewhat similar to 2007 but the distortions which existed then never ended and have only been made worse in the last 12 years. The economy (here and most elsewhere) is ill equipped to handle a depression. Most Americans are flat broke and a lot less self sufficient than the 1930's. Distorting the pricing of risk (monetary policy) and spending money out of an empty pocket (fiscal policy) doesn't come without costs. Demand has been pulled forward for decades through increased borrowing and "kicking the can down the road" again will ultimately only make it worse. The long run is going to be irrelevant to most people as they experience declining or crashing living standards. To believe otherwise not only contradicts economics and common sense, but physics. It's a belief in something for nothing. Here are two financial indicators to look for that will probably give the best indication it's about to get much worse. First, interest rates on US and/or other developed world sovereign debt increasing "noticeably" despite central bank QE. Second, the exchange value of the USD or other major currencies taking a dive. When either of those happens, there will be nothing central governments or central banks can do to prevent much lower living standards. I expect it to get a lot worse elsewhere (all or parts of the EU, Japan, China, or UK) before it happens here.
  7. One of the primary points of our disagreement is that you keep on insisting that the non-collecting public has a much greater propensity to collect than the evidence demonstrates. Of course demand is partly contingent upon willingness to buy but no, I never said it has anything to do with buying common stocks. Where did you get that from any of my posts? Those who aren't collectors now in the United States overwhelmingly know the hobby exists. If your claim is correct, why aren't a multiple collecting now regardless of the format (face value or otherwise)? The only answer is because they don't want to. Being stuck at home under a shelter in place isn't going to change hardly anyone's attitude toward collecting.
  8. My recollection is gold fell a lot more than that. It bottomed at $680 but I don't remember where it peaked. Pretty sure it was over $1000. Silver fell from around $21 in May, 2008 to $8.39 in October, 2008. It hasn't fallen as much yet because the selling has almost certainly just started, in all assets. If you are not aware of it, this is the fastest decline of this size in this amount of time in history, literally. Faster than the 1987 crash, 1929 and even the English South Sea Bubble. It took each of those occurrences about 55 days for the initial crash. (To the exact day for both 1929 and 1987.) This one took 33 days, from February 19 to March 23rd.
  9. There is and will be some of that. Sales of mint and proof sets have collapsed over the last few decades but there are still large numbers of circulating coins being sold in bags and boxes. I noticed this when I checked the sales records in the last month or so. When enough people need the money badly enough, I expect huge numbers of this coinage to get dumped into circulation which will make it easy to find high quality examples at FV.
  10. I'm not saying no one does it now or will in the future. I know they do and presumably many still do now. What I am saying is that, as a recreational activity, it isn't anywhere near as competitive now and in the recent past as it used to be. There aren't ever going to be millions of new collectors coming into the hobby collecting in this manner due to limited disposable income. I don't know what the number is now, but whatever the number, it is going to be (a lot) lower later than it is now. The overwhelming percentage of people who did or might have done this in the past will just do something else. There are plenty of other activities (like wasting time on smart phones or the internet) available for free that provide a lot more variety. To most, this is almost certainly even less appealing with (set) collecting which isn't at FV, like the IHC example I gave in my prior post. You either buy it at a noticeable percentage spread from a B&M (if one is even available in your area). Or, pay almost as much or even more for the shipping as for the coin buying it on eBay. Then when you go to sell, either no one wants it or you get a very low fraction of the amount you paid. It's affordable as a recreational activity but it's evident far fewer find it sufficiently interesting or else more would choose it.
  11. I wasn't. Gold is one of the most liquid assets which is one reason it was heavily sold. Silver somewhat less but it's irrelevant to the financial system since the market size is immaterial. I see a lot more of that to come which is one reason I am bearish on it for the short to intermediate term. As for mining stocks, I haven't paid attention to it in a long time but it's not a viable substitute for the physical metal. My recollection is other than in the 1970's, this sector has been a horrible investment. Even when the spot price has been rising I don't recall it performing that great. Some of the individual stocks have presumably done very well being a leveraged play on one or both but in general, anyone would have been a lot better off just buying other stocks because that's how I recall this sector behaves anyway. Owning a mining stock is just owning another piece of paper.
  12. Maybe, but that is not the future. It is the past in the sense that this type of collecting must have peaked years ago, just as with sales of US mint and proof sets. I bought my first Red Book in 1977. I don't have it anymore but if I did, I'm fairly confident that the value of many lower grade coins is less now than then. Other than eBay, I presume you can buy this stuff from dealer "junk bins" but paying more than it's worth. As one example, I remember buying an IHC for 95c in 1977. This was the VG Red Book price at the time. With "gradeflation", it might be a "fine" but I've seen coins in this series sell for less than $1 in similar quality on eBay on the few occasions I have checked. The coinage collectors used to buy to fill albums and folders in the past exists in huge number and it must be a lot less marketable. It also isn't nearly as interesting to (prospective) collectors since it has to compete with so much more due to the internet.
  13. I'm positive on metal prices longer term but I don't think the decline from the 2011 peak for both is over. I expect both to sell for noticeably less first before going much higher. What you are describing about collectors crossing over from bullion buyers presumably has been happening for a long time, starting in relatively large numbers in the 1970's and then accelerating in the 80's and 90's with TPG and widespread issuance of NCLT. However, I don't believe these buyers have an interest in "real" collecting to anywhere near the same extent as those who buy other coins. It's also a negative for the general price level because they presumably mostly bypass this coinage completely. Rather than non-collectors getting into coins due to insufficient recreational alternatives, there is likely to be a lot more forced selling in the future by those who desperately need cash. Not only will most collectors not be able and willing to pay current or higher prices, they are going to find out how much more common practically all coins are than they believed. The supply is higher or a lot higher than they think. As an example, I was looking at the 1790 Austrian Netherlands Insurrection TPG data yesterday. I own six of the eight in MS-63 to MS-65, excluding the 3 florin and 14 florin. The crown sized 3 florin has a current count of 42 in MS-60 or better and 24 more in AU-55 or AU-58. (Mintage is reportedly 44,000.) The more common of the two florins has 18 MS right now. This isn't particularly scarcer for this type of coin and the supply is almost certainly noticeably larger. The 3F and 14F seem to have held value so far, the others all seem to be worth noticeably less.
  14. There is little if any analogy between now and the 1930's on this aspect. 1930's was predominantly collecting out of circulation at FV. No noticeable proportion of the population who aren't collectors now are going to go out and start spending any of their predominantly limited discretionary income on coins. If they do so at FV, it will do nothing to support the price level. They have no affinity for collecting whatsoever which is why they aren't collectors and the number of recreational alternatives is a multiple of the 1930's.
  15. Current events are in no way positive for the coin price level. Any such inference is ridiculous. Coins are a combination of a collectible trinket which serves no functional purpose and an "investment" which is relatively illiquid even under much better circumstances. The very bottom end of the coin market may hold during this period but then that's because it's overwhelmingly a substitute for alternative forms of low budget consumption. If anything close to courrent conditions persists for any extended period, I think the range which will be affected is much broader than included in above posts. In US coinage for sure, probably 95%+ is available anytime, so there is certainly no reason to rush and buy into a (potentially falling market. The higher end will hold up if the financial duress is temporary as it was in 2008-2009. It won't if it's like the 1930's even if the economic environment is better. Where it isn't a substitute for consumption, the only reason (and I mean it literally) most coins sell for current prices is due to the buyer's belief they can get most or all of their money back and only a low proportion of the supply is offered for sale at any given time. If it gets to the point where a noticeable proportion have to sell whatever they have to raise cash, many coins are going to crash. The first candidate is common US 20th century key dates in the most widely collected series.
  16. The 1980's high was the result of the TPG bubble. It was a one-shot deal and unlike the financial bubble (which is almost certainly bursting now), it's never coming back unless someone intentionally corners the market.
  17. This is an example of what I was referring to in my last post. I don't know what most of these coins cost now without looking it up but it's an example where the probability is at least 95% that most of this coinage will go nowhere financially. Most Barber coinage in circulated grades (including fine) isn't considered particularly attractive. Circulated coinage in general increasingly appears out of favor (and has been) because an increasing proportion of the collector base would rather buy higher quality coinage. It isn't particularly common but isn't scarce either, I consider common nice Barber quarters in MS-64 at a cost of $250 to somewhat more to represent good collectible values (among the best in US coinage IMO) but I wouldn't buy it with the expectation of making any money. Even if I thought the foreseeable future was positive for the US price level (which I don't and it has nothing to do with COVID-19), I wouldn't buy hardly any US circulated coinage with the expectation of appreciation. Maybe from the series up to capped bust, a limited number of the scarcer or rarer dates from later series, and a few common but widely collected key dates.
  18. Common Saints are bullion coins, just like the common dates in the predecessor series. US collectors may not like to hear this but that's how much scarcer but less preferred "world" gold has been priced for decades. Going by the TPG data and unless the collector base is a noticeable multiple of my estimate, the vast majority of these coins are owned by bullion stackers and not collectors. Some collectors will buy it for the reason you gave (as a hybrid "investment") but the overwhelming majority of the base cannot remotely afford it and won't ever own a coin in this price range for the rest of their life. As for the prior posts, I already know without even reading all of it again that most are simply what the poster either likes or already owns. 95%+ of such claims are going nowhere financially unless the entire coin price level moves up noticeably. I'll take the "under" on that outcome.
  19. Yes, only the ASE, Peace dollars and a few pre-1933 gold have comparable populations to the Morgan dollar. As a proxy for potential ungraded populations, I have looked at PCGS Coin Facts estimates for a reasonable cross section of US coinage. On numerous occasions, I have also read comments that a much larger proportion of even more expensive US coinage is not graded. These estimates support these claims. As one example, the estimated survivors for the 1802 half dime is believed to be 35-40 based upon research performed about 75 years ago. The combined TPG data (excluding PCGS Genuine which I haven't bene able to confirm) was 14 the last time I checked and this might even include duplicates. (All three NGC coins are AU-50.) Existing estimates (regardless of source) are also probably usually understated, especially for non-US coinage. (I believe PCGS Coin Facts is vastly overstated for practically all US 1965-1998 MS-65.)
  20. It's my opinion that the TPGs are going to have a real longer term problem with submission volume that isn't fixable. I have never seen a breakdown but my assumption is that a substantial minority or maybe even majority now and in the recent past is modern NCLT. I expect a noticeable decline in the intermediate term since I concurrently expect silver prices to be much lower for several years. World coinage aside from NCLT? In most countries, there isn't enough supply worth grading because it doesn't exist. In countries with longer term traditions of collecting where it does, it will take a culture change toward a preference for TPG. Even if this happens, much of this coinage is so common that it isn't worth grading even at lower grading fees. US coinage? Same problem. The largest supply outside of NCLT is in 20th century classics and moderns. Most of this coinage apparently financially viable now will never be graded, as any noticeable increase in the populations would send the price level crashing, even from its supposedly low current level. Decades from now, I expect most of it to sell for less than the grading fee even where it sells for a noticeable multiple now. The problem for the TPGs is that a stagnant US price level (purportedly since at least 2008) and limited growth elsewhere combined with continuously increasing operational costs doesn't "add up". I first submitted in 2005 and grading fees have increased noticeably which makes it uneconomical to submit coins I previously did. This is also going to negatively impact prices as many coins aren't very marketable if sold outside of a holder. As for this quarter, the buyer paid most of the price for the label.
  21. Expected outcomes depend upon individual assumptions. For those who believe this will blow over and nothing else will change significantly, no reason to expect any adverse impact on prices. This event might be the trigger, but even if it isn't, if the economy rolls over (led by the financial markets first as always) and it's noticeable (as it should be given the 10 year artificially induced expansion), it's going to effect practically all coins noticeably. The lower end (especially US) has other longer term issues that aren't related to this incident and aren't going away either. "Lower end" is subjective but I'd describe it as the coins the lower 80% (budget wise) of the collector base buys. As an example, I'm looking to sell a 17th century MS Spanish silver coin. Somewhat comparable coins on Heritage sold for less than I paid for this coin (ungraded) 15 years ago. This isn't some extremely common coin like practically every 20th century US It's presumably primarily collected in Spain but with a very small collector base. On the most elite US, I'd expect most of this low number to be held off market assuming the buyer can afford it. It's very unusual for this coinage to sell at a loss since I have been a collector because the long term trend has been mostly up. For one level below, I probably wouldn't consider most of it to be "elite" while most other US collectors do. Here presumably we are talking about coins with a preferred eye appeal or (near) the top TPG grade that are otherwise not that difficult to buy. Or, something which is actually rare but is considered more esoteric. Under extended adverse economic conditions, I expect the not really rare but very expensive coin to lose noticeable value. I've seen it on occasion even without an extensive search. Most of this coinage isn't really that interesting given the price. Agree with the above post. Buy what you like within your financial means for recreational purposes, not as a quasi "investment".
  22. I wish I could find a way to take equivalent pictures with my phone. That's really good.
  23. So true. I also left out a fourth and most important reason. A belief in something for nothing. That's what a belief in a permanent never ending bubble represents. Absurdly overpriced asset prices, lowest aggregate credit standards in history and artificially cheap credit.
  24. Several reasons for this common belief. One: Lack of historical context. No, history does not repeat itself exactly since people aren't robots but it's relevant because enough people (including decision makers managing others money) believe it and act on this belief. Two: Hubris and false confidence in the ability of governments and central banks to prevent falling living standards and market declines. They can't. Three: Per the above post, it has been going on for so long that it's considered "normal". I date the origin to August 13, 1982 and "lift off" to either April 20, 1994 or November, 1994. I think you're right about the level of optimism but to a point only. Market participants have been conditioned to "buy the dip" due to FOMO but concurrently, the two market crashes in the prior decade have also conditioned enough of them to sell under the theory that it's better to panic first and beat the rush. It's easy enough to think of market declines or crashes having no real world consequences until it actually happens. Those who managed to recover from 2008 or prosper since have 12 fewer years now. This matters, except to those who ignore reality. Coming back to coin prices, I keep hearing how weak the US market has been since 2008. Considering that this is the 10th year of an economic expansion (an artificial one mirroring an increase in government spending but still in process anyway) with these bubble conditions, if coin prices are weak now, what's going to happen later? (This is a rhetorical question.) It isn't just US coins either. Of those I follow, South Africa had it's own bubble which flamed out at YE 2011 or in 2012 and has since crashed. Coins in other series I own or occasionally follow have also gone nowhere or lost value going on 15 years, despite that many (maybe most) seem to think that world coin prices are doing great. Some have, but it depends upon what you collect or follow. I'd guess a low minority have (the ones collectors want the most or been subject to financially motivated buying) since most collectors have no idea what most of these coins are worth, now or previously. In this coinage, what I have seen is that a minimal increase in known supply weakens prices noticeably because there is little demand. It's anecdotal but it isn't uncommon when I check a coin, it's selling for less or about the same as it was years ago.
  25. I'm with you except that I consider the current environment the biggest bubble in history. Didn't have a proper opportunity to answer the last time someone else questioned this claim (was using a terrible Spanish language keyboard while out of the country). However, this opinion is easy to support, whether the bubble is over now or not. I don't remember a specific event coinciding with a major market top. (Psychology - the real driver behind market movements - usually leads and never.) But given the exorbitant historical relative over valuation, I agree with you. As for coin auctions, I don't think this event is a particular factor either way. If it's negative, I would expect it will be at the higher end due to falling asset prices.