Coin and Banknote Markets Strong Amid Global Crisis 0

[Matt G]

All NGC and PMG locations remain open to serve collectors and dealers by providing liquidity and confidence to the global collectibles markets at a time when those qualities are more important than ever. Read more

[GoldFinger1969]

Matt, illiquid items like coins and currency notes are not Treasuy bonds.  They don't trade that frequently and if anything, there WILL be weakness in a few months as the effects of the plunge in income and GDP filters through.

The U.S. Coin market has been falling for years and for all we know this could be another one of those boom-and-bust cycles with the emphasis on bust.  I don't expect a collapse, but I don't expect prices to be flat or strengthen, either.

That said, I am a buyer on weakness.

 

[cladking]

6 hours ago, GoldFinger1969 said:

Matt, illiquid items like coins and currency notes are not Treasuy bonds.  They don't trade that frequently and if anything, there WILL be weakness in a few months as the effects of the plunge in income and GDP filters through.

The U.S. Coin market has been falling for years and for all we know this could be another one of those boom-and-bust cycles with the emphasis on bust.  I don't expect a collapse, but I don't expect prices to be flat or strengthen, either.

That said, I am a buyer on weakness.

 

People are home and most of them have computers.   They are apparently buying a lot of coins so if you're looking for weakness you might have to wait until the stock market gets back to 30,000.  

[Crawtomatic]

47 minutes ago, cladking said:

People are home and most of them have computers.   They are apparently buying a lot of coins so if you're looking for weakness you might have to wait until the stock market gets back to 30,000.  

There's also the possibility that more older collections enter the market within the next 18 months due to a mortal loss of collectors.  If that occurs then there will be more supply of the under bread & butter coins that most dealers rely on but also a great opportunity to see some of those key items to re-enter the marketplace.

Edited April 2, 2020 by CRAWTOMATIC
forgot to proofread

[GoldFinger1969]

2 hours ago, cladking said:

People are home and most of them have computers.   They are apparently buying a lot of coins so if you're looking for weakness you might have to wait until the stock market gets back to 30,000.  

Maybe...but the last thing I think you'll see is people not making a paycheck, or losing part of their paycheck, or worrying about their NEXT paycheck....and then saying that it's good to spend a few hundred (thousand ?) dollars on Ebay or HA on coins or currency.

[Revenant]

2 hours ago, GoldFinger1969 said:

Maybe...but the last thing I think you'll see is people not making a paycheck, or losing part of their paycheck, or worrying about their NEXT paycheck....and then saying that it's good to spend a few hundred (thousand ?) dollars on Ebay or HA on coins or currency.

It kind of depends. My wife and I are in a good, stable spot for now. I wont be spending extra on coins but I'm also not cutting back for now. With eBay bucks certificates coming out I probably will be dropping some money on eBay soon - probably a few hundred on a gold coin. But we're unusual - we both worked from home before this and our incomes are safe for the moment.

Edited April 3, 2020 by Revenant

[cladking]

3 hours ago, CRAWTOMATIC said:

There's also the possibility that more older collections enter the market within the next 18 months due to a mortal loss of collectors.  If that occurs then there will be more supply of the under bread & butter coins that most dealers rely on but also a great opportunity to see some of those key items to re-enter the marketplace.

The 60% of people still working or drawing a paycheck dwarfs the number of collectors who might die.  A lot of people have had to hugely curtail spending on things like expensive restaurants and many will spend it somewhere.  Certainly putting it in the stock market right now requires courage.  

 

Collecting coins surged and became a widespread hobby for the first time during the Great depression.  God willing this won't last so long but collecting coins is a pastime for those stuck at home for any reason.  

[Coinbuf]

High end coins and top pops will continue to see strong results for the foreseeable future, the whales have more than enough money to keep that area going strong.  Inexpensive hole fillers will also not likely see much effect as people may move from mid level registry coins to less expensive album type coins, and there isn't much room to fall on these anyway.  But the mid level coins those in the say $500 to 5k range will be the area to watch for signs of weakness.  In the last Heritage auction I was watching a coin that in the past has routinely brought around $900+/- for the last ten or so to hit the auction block.  However this most recent coin sold for $650ish all in, only one tiny data point so I'm not running around calling for the sky to fall.   Under normal circumstances I would have bid on this coin as its one I've been wanting for some time, but due to the economic hit my business is taking coins have to take a back seat until things get settled and business picks up again.  Its very possible buyers like myself who might have been buyers may be sitting on hands temporarily due to the loss (albeit paper loss so far) of wealth from the market swoon and lost wages/income for a period going forward.   If there is a summer ANA the floor and auction action will be interesting to see.

[GoldFinger1969]

I see very few weak prices on Heritage (or Ebay or GC for that matter)....and yet....the PCGS 3000 index continues to languish.  Entire sets of classic American coins continue to stagnate, some 25-50% below prices of a few years ago.

The bidding on those sites is for a specific coin and a limited number (1) of them.  Plus you have the behind-the-scenes hanky panky which I am not an expert on but which others who are insist amounts to a form of bid-rigging.  I wouldn't go that far, but it's highly unusual to see VERY FEW coins or bills go for below recent sales prices or estimated prices. 

And I'm not dissing the sites, they make buying coins light-years easier than 20-30 years ago, and nobody puts a gun to my head.  But it is very strange to see prices in many/most auctions stay "high" when it seems overall the U.S. Coin market languishes.

Again, that's just an observation.  My coins aren't an investment -- they're a hobby.  Personally, if my coin prices fall for a few more quarters or years it'll allow me to buy more in the next 5-10 years before I probably start dwindling down my buying.

[Revenant]

12 hours ago, cladking said:

Certainly putting it in the stock market right now requires courage.  

I think it's also about time and pain tolerance.

A nice thing about being in my mid-30s right now:

1) I don't have an over hang of bad memories from 08.

2) I don't have a big retirement account to mourn right now.

3) I can afford to be patient and have a distant time horizon.

I came to an agreement with my wife a month ago and we're both investing nearly equal sums in stocks - nothing we worry about losing or having tied up for 3-5 years. So far my picks are doing better than hers and she's regretting some jokes she made about making it a competition - she's down 56% at the moment and I'm down about 2-3%.

Edited April 3, 2020 by Revenant

[World Colonial]

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.  

[physics-fan3.14]

1 hour ago, Revenant said:

3) I can afford tp

Accidental typo highlight of the thread. Congrats!

[World Colonial]

12 hours ago, cladking said:

The 60% of people still working or drawing a paycheck dwarfs the number of collectors who might die.  A lot of people have had to hugely curtail spending on things like expensive restaurants and many will spend it somewhere.  Certainly putting it in the stock market right now requires courage.  

 

Collecting coins surged and became a widespread hobby for the first time during the Great depression.  God willing this won't last so long but collecting coins is a pastime for those stuck at home for any reason.  

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.

[GoldFinger1969]

54 minutes ago, World Colonial said:

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.

Well-said.  The only knock-on effect I can envision is people getting into gold bullion (and maybe silver bullion) and then finding out about gold coins like Saints and Liberty DE's (and maybe if into silver taking up MSDs).

But you'd need a seismic change in attitudes and the investing environment for PMs like happened in the 1970's.

[World Colonial]

3 hours ago, GoldFinger1969 said:

Well-said.  The only knock-on effect I can envision is people getting into gold bullion (and maybe silver bullion) and then finding out about gold coins like Saints and Liberty DE's (and maybe if into silver taking up MSDs).

But you'd need a seismic change in attitudes and the investing environment for PMs like happened in the 1970's.

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.

[Revenant]

11 hours ago, World Colonial said:

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.

True! But you could see an up-tick in interest in Whitman and Dansco Albums. And I suppose there's always the QVC suckers.

 

[Revenant]

7 hours ago, World Colonial said:

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.

I was quite shocked by the hit that Gold and Silver spot prices took (at least in the paper contracts market, premiums for physical are insane at the moment) and by how much some of the major, established Gold mining stocks took a hit even as the FED was cutting rates to zero and announcing massive stimulus and the government was announcing massive new deficit spending. I probably shouldn't have been and felt silly for being shocked afterwards. Everyone is so levered up on average and there was so much panic selling around the middle of the month. The last crash hit in 2008 and it took 3 years for the metals to power to the peak, after initially declining. Nice to know we're consistent.

[World Colonial]

3 minutes ago, Revenant said:

True! But you could see an up-tick in interest in Whitman and Dansco Albums. And I suppose there's always the QVC suckers.

 

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.

[Revenant]

2 minutes ago, World Colonial said:

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.

They may not be "the next thing," they may not be "the future," and they may not be "investments," but I wouldn't count them out completely yet.

When I came back to collecting in my early 20s after years away / at school in 2006 one of the first things I did was try to fill some albums / folders up by buying lots of wheat pennies and searching coin rolls I got from the bank. It was fun - in some ways more enjoyable than the registry. There was a taste of childhood in it - I used to look at change with my mother and check dates while we rolled them up to take to the bank. I fully intend to try that with Ben when he gets a little older - He just needs to know his numbers a little better first.

[World Colonial]

9 minutes ago, Revenant said:

I was quite shocked by the hit that Gold and Silver spot prices took (at least in the paper contracts market, premiums for physical are insane at the moment) and by how much some of the major, established Gold mining stocks took a hit even as the FED was cutting rates to zero and announcing massive stimulus and the government was announcing massive new deficit spending. I probably shouldn't have been and felt silly for being shocked afterwards. Everyone is so levered up on average and there was so much panic selling around the middle of the month. The last crash hit in 2008 and it took 3 years for the metals to power to the peak, after initially declining. Nice to know we're consistent.

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.

[World Colonial]

3 minutes ago, Revenant said:

They may not be "the next thing," they may not be "the future," and they may not be "investments," but I wouldn't count them out completely yet.

When I came back to collecting in my early 20s after years away / at school in 2006 one of the first things I did was try to fill some albums / folders up by buying lots of wheat pennies and searching coin rolls I got from the bank. It was fun - in some ways more enjoyable than the registry. There was a taste of childhood in it - I used to look at change with my mother and check dates while we rolled them up to take to the bank. I fully intend to try that with Ben when he gets a little older - He just needs to know his numbers a little better first.

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.

[Revenant]

4 minutes ago, World Colonial said:

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.

To the extent that it happens, now and in the future, I think it's mostly going to be current issue coins from circulation / that you get from the bank in rolls, bags and boxes. I agree completely that you're not going to see a lot of people trying to build albums of circulated or mint state mercs by going to shows and dealers and online shopping.

[GoldFinger1969]

Gold has held up much better than in 2008-09.  Then it declined 25% peak-to-trough.  So far, the decline was closer to 10% and it's bounced back to retrace most of those losses.

Edited April 4, 2020 by GoldFinger1969

[World Colonial]

5 minutes ago, Revenant said:

To the extent that it happens, now and in the future, I think it's mostly going to be current issue coins from circulation / that you get from the bank in rolls, bags and boxes. I agree completely that you're not going to see a lot of people trying to build albums of circulated or mint state mercs by going to shows and dealers and online shopping.

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.

[World Colonial]

3 minutes ago, GoldFinger1969 said:

Gold has held up much better than in 2008-09.  Then it declined 25% peak-to-trough.  So far, the decline was closer to 10% and it's bounced back to retrace most of those losses.

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.

[GoldFinger1969]

Oh, trust me, I'm aware of the speed of the decline.  Been watching the markets 24/7 for 30 years. 

You could be right on the gold decline in 2008-09, I just glanced at the first chart that gave me a decent scale.  But the decline was bigger then and so far gold is holding up.  We'll have to see what happens going forward.  

Edited April 4, 2020 by GoldFinger1969

[cladking]

10 hours ago, GoldFinger1969 said:

Oh, trust me, I'm aware of the speed of the decline.  Been watching the markets 24/7 for 30 years. 

You could be right on the gold decline in 2008-09, I just glanced at the first chart that gave me a decent scale.  But the decline was bigger then and so far gold is holding up.  We'll have to see what happens going forward.  

I've been watching the markets since the '50's.  Not as closely as you but one thing I'm pretty sure of is that almost all movement is noise.  It's possible the current drop is signalling a recession or the possibility of severe economic trouble ahead but if you look from a broader and longer term perspective even a depression would be little more than noise.  There are far greater concerns that are driving the markets and will drive the market over the next generation than anything the corona virus might do.  Even now the market isn't responding to the issue at hand so much as our reactions to it.  

I don't know what gold and silver will do either but they were headed higher before this all started and nothing occurring now will change this equation other than an economic collapse.  Even here a very sudden onset inflationary depression could be the form it takes.  

Young people are not sitting home twiddling their thumbs.  When they're at home they are doing things so all activities that take place in the home are likely to increase.  Of course most people can't secure coins from the bank now but they can go through the change jar and surf.  It seems almost nobody in the hobby has any idea what they'll find in their change jars.  Most of us on message boards probably think there's nothing but roadkill in it.  The reality is there is a virtually random sample of almost everything made by the US government over the last 55 years that has randomly circulated and undergone almost no sorting at all by collectors.   

The world will go on and underestimating our resiliency and tenacity has ruined more investors than any sort of noise.  

[cladking]

On 4/3/2020 at 9:07 AM, World Colonial said:

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.

This better than about anything shows our disparate attitudes about collecting and the nature of the interplay among supply and demand. 

Demand isn't created by the willingness to buy a share of stock at $50; it is manifested thereby.  First someone has to believe the stock is "rare enough" to be worth $50.  They have to believe the stock has sufficient growth potential or dividend rates or some intangible that makes it a good deal or a good store of value.  

People who don't collect coins will never plunk down more than face value or bullion value.  It's the interest in coins that turns otherwise normal people into coin collectors.  

[World Colonial]

3 hours ago, cladking said:

This better than about anything shows our disparate attitudes about collecting and the nature of the interplay among supply and demand. 

Demand isn't created by the willingness to buy a share of stock at $50; it is manifested thereby.  First someone has to believe the stock is "rare enough" to be worth $50.  They have to believe the stock has sufficient growth potential or dividend rates or some intangible that makes it a good deal or a good store of value.  

People who don't collect coins will never plunk down more than face value or bullion value.  It's the interest in coins that turns otherwise normal people into coin collectors.  

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.

[World Colonial]

3 hours ago, cladking said:

I've been watching the markets since the '50's.  Not as closely as you but one thing I'm pretty sure of is that almost all movement is noise.  It's possible the current drop is signalling a recession or the possibility of severe economic trouble ahead but if you look from a broader and longer term perspective even a depression would be little more than noise.  There are far greater concerns that are driving the markets and will drive the market over the next generation than anything the corona virus might do.  Even now the market isn't responding to the issue at hand so much as our reactions to it.  

I don't know what gold and silver will do either but they were headed higher before this all started and nothing occurring now will change this equation other than an economic collapse.  Even here a very sudden onset inflationary depression could be the form it takes.  

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.