Fractional ownership... of baseball cards... ? This can't be good. 0

[GoldFinger1969]

1 hour ago, World Colonial said:

I understand your point but it doesn't change anything I wrote.  The mechanics of the instrument don't change the fact that the coins in this fund have to sell for perpetually higher prices as "widgets" since it is obvious that prices cannot exceed the financial capacity or willingness to pay of real collectors who are the only ones buying it as a collectible.  

Yes....and it doesn't matter if the Coin Partnership is comprised of dedicated coin collectors or folks with no interest in coins who are simply out to make a buck.  Though the FORMER is better (see below, i.e., "strong hands").

1 hour ago, World Colonial said:

In my subsequent posts, I clarified that maybe those who are buying coins for "investment" now (primarily generic pre-1933 gold and Morgan dollars) would instead use this format but that's more like switching money from the left to right pocket..

 

I think the partnership format has appeal only to folks who have interest in high-end ultra-rare coins.  I don't think you'd create one of these partnerships to pool assets to buy generic 1924 Saints.  You want a 1927-D or a 1931-S or a 1932.

WC...what makes you think "investors" are buying pre-1933 gold ?  Have you seen articles or heard from dealers to that effect ?  I take it you consider these flows more akin to SPECULATION than a long-term "investment", am I correct ?

1 hour ago, World Colonial said:

Your post still don't explain why anyone who would want to buy it.  What you have been trying to tell me isn't any different than what you wrote before about the plausibility of some Chinese buyer wanting the 1794 SP dollar.  If this is credible, when and how often has it happened and why would this format make much if any difference?  Where is the evidence that the prospective returns will be better even as the liquidity is much worse?

Yes, and this is because if you want prices to hold up and/or appreciate you have to have STRONG HANDS as we say in the trade.  That means folks who have a COMPELLING reason to hold the investment.

A partnership with 50 people in it only to make $$$ who will bail at the first headline saying "Coin Prices Plummetting" is not what you want.  You want folks who are in it for the long haul and/or won't be shaken out to sell into a decline for panic-like reasons.

 

 

Edited November 2, 2020 by GoldFinger1969

[World Colonial]

20 minutes ago, GoldFinger1969 said:

I think the partnership format has appeal only to folks who have interest in high-end ultra-rare coins.  I don't think you'd create one of these partnerships to pool assets to buy generic 1924 Saints.  You want a 1927-D or a 1931-S or a 1932.

For the non-collector, I believe pooling funds would work best for "widget" coins such as pre-1933 gold (not the 1933 Saint) and Morgan dollars, as these are the coins I infer from the population data that they are buying for the largest aggregate $$$ anyway.

Not sure it would accomplish what i surmise, but if it did I could see that it would have the most appeal financially.  The total amount "invested" still wouldn't be meaningful (maybe a few hundred million).as anything noticeably more would run up the price of the component holdings and make it uncompetitive with alternative metal options.

For the collector, I think you are right.  However, I still think this has very limited appeal, as most of the most expensive US coins are only condition rare and not prominent.

31 minutes ago, GoldFinger1969 said:

WC...what makes you think "investors" are buying pre-1933 gold ?  Have you seen articles or heard from dealers to that effect ?  I take it you consider these flows more akin to SPECULATION than a long-term "investment", am I correct ?

Apparently, I wasn't clear.  I was referring to common US gold dated before 1933, as opposed to modern NCLT.

34 minutes ago, GoldFinger1969 said:

Yes, and this is because if you want prices to hold up and/or appreciate you have to have STRONG HANDS as we say in the trade.  That means folks who have a COMPELLING reason to hold the investment.

A partnership with 50 people in it only to make $$$ who will bail at the first headline saying "Coin Prices Plummetting" is not what you want.  You want folks who are in it for the long haul and/or won't be shaken out to sell into a decline for panic-like reasons.

I agree.  Regardless of the format, I don't see any practical difference in the outcome with the prior LP from Merrill Lynch and Kidder Peabody if it has any scale at all (even in collecting terms) and isn't primarily directed to collectors.

If it's a professionally managed fund, I'd guess the annual costs would be at least 2% of the fund's net assets, maybe somewhat less.  If it's a real small fund, maybe noticeably higher, both depending upon whether it must comply with securities regulations.

Look at the substandard performance reflected in the US coin price level since at least 2008.  Sure, it can be better in the future but it's a much tougher sell to the non-collector now versus then.  The CVX comparison was only an example but no rationalization can get around an 8% to 10% annual yield differential out of the gate.  The "hobby's" financial promoters can pretend this doesn't matter but no knowledgeable financially motivated buyer is going to believe it.

This poor performance also occurred during two big run-ups in gold and one in silver and the loosest credit conditions in history, the latter being the real cause behind the increase in all asset classes over the last 4+ decades.

Buying it for mindless diversification (diversification for the sake of diversification) doesn't necessarily improve risk-adjusted returns either.  I'd argue it increases your risk since it's a potentially more volatile asset.

[GoldFinger1969]

43 minutes ago, World Colonial said:

I agree.  Regardless of the format, I don't see any practical difference in the outcome with the prior LP from Merrill Lynch and Kidder Peabody if it has any scale at all (even in collecting terms) and isn't primarily directed to collectors.

My understanding was those funds NEVER came into being, it was their pending likelihood that drove up prices bigtime in 1989 and/or 1990.  I may even have an old article on it saved somewhere.

45 minutes ago, World Colonial said:

If it's a professionally managed fund, I'd guess the annual costs would be at least 2% of the fund's net assets, maybe somewhat less.  If it's a real small fund, maybe noticeably higher, both depending upon whether it must comply with securities regulations.

Depending on how it is marketed...and to WHOM....and how many investors....accredited or not....you might have heavy 1-time and recurring annual fees.  Is this a bunch of loosely-connected coin collectors or the public at large ?  What if it is just family members ?  Are you advertising ?

OTOH, if you know 20 wealthy people and you just do it amongst yourselves, nothing to involve the state or federal regulators.

Clearly, ML and KP were looking to create mass-marketed investment pools with hundreds if not thousands of investors.

 

50 minutes ago, World Colonial said:

Look at the substandard performance reflected in the US coin price level since at least 2008.  Sure, it can be better in the future but it's a much tougher sell to the non-collector now versus then.  The CVX comparison was only an example but no rationalization can get around an 8% to 10% annual yield differential out of the gate.  The "hobby's" financial promoters can pretend this doesn't matter but no nowledgeable financially motivated buyer is going to believe it.

This poor performance also occurred during two big run-ups in gold and one in silver and the loosest credit conditions in history, the latter being the real cause behind the increase in all asset classes over the last 4+ decades. Buying it for mindless diversification (diversifiation for the sake of diversification) doesn't necessarily improve risk-adjusted returns either.  I'd argue it increases your risk since it's a potentially more volatile asset.

Agreed....you have to buy these because you LOVE COINS and/or you aren't really banking on appreciation (obviously, no interest or dividends).

In my opinion, you have to ask yourself:  if the coin investment loses 90%, will I suffer material harm ?  If the answer is YES, then you can't do it.

[World Colonial]

10 hours ago, GoldFinger1969 said:

My understanding was those funds NEVER came into being, it was their pending likelihood that drove up prices bigtime in 1989 and/or 1990.  I may even have an old article on it saved somewhere.

Not 100% sure either way.  I later read that one was liquidated at a loss.  But yes, you are 100% correct that someone else "front ran" these funds to run up the prices of the (potential) target coins.

If this is ever attempted on any meaningful scale, it will happen again.  There is no scale in "investment" eligible coinage, except in the context of a low number of somewhat affluent individuals.

There isn't even a unified coin market, even within US coinage since collectors don't collect this way.  Within the collector base, some coins have broader appeal than others and will be bought at a believed to be favorable price but it's not the same.

[World Colonial]

10 hours ago, GoldFinger1969 said:

Depending on how it is marketed...and to WHOM....and how many investors....accredited or not....you might have heavy 1-time and recurring annual fees.  Is this a bunch of loosely-connected coin collectors or the public at large ?  What if it is just family members ?  Are you advertising ?

OTOH, if you know 20 wealthy people and you just do it amongst yourselves, nothing to involve the state or federal regulators.

Clearly, ML and KP were looking to create mass-marketed investment pools with hundreds if not thousands of investors.

True.  If it's a small circle of individuals who know each other, the primary difference I see is formalizing what is a current informal arrangement.

If it's going to be treated like a fund, I don't see how it could be much less than the numbers I gave, as there would be no motive for any financial professional or financial services firm to bother with it.  Earlier posts referred to a fund as small as $1MM.

Is it likely that such a fund (even noticeably larger) would have annual expenses of 50 to 100 bp?  For a $1MM fund, seems hard to believe it could be done with professional management for $5K a year.

With marketing, whatever the format, it would be a drag on returns.  Except under what I would describe as highly optimistic expectations, anything similar to the Stanley Gibbons brochure would make it even less appealing.

The trade-off here would be between lower returns from increased fees and varying levels of liquidity.  

[World Colonial]

10 hours ago, GoldFinger1969 said:

Agreed....you have to buy these because you LOVE COINS and/or you aren't really banking on appreciation (obviously, no interest or dividends).

In my opinion, you have to ask yourself:  if the coin investment loses 90%, will I suffer material harm ?  If the answer is YES, then you can't do it.

The primary point I was trying to make here was that it's easy enough to assume a different reality by attributing motives to people they obviously don't have or don't demonstrate.  That's what I see from posts which disagree with me, both here and with claims that non-collectors want to buy any mega-priced coin.  They literally almost never do because if they did, they would be doing it now.

It's credible that a low to very low number of existing collectors might find this arrangement appealing because they are already collectors.

It's credible that non-collectors might also be interested in buying metal substitutes (pre-1933 gold and Morgan dollars) as it's evident from the population data that most of this coinage isn't owned as a collectible.

A third option I didn't mention before is institutions.  There is a lot of dumb money buying all sorts of garbage, both now and in the recent past.   This is the only realistic possibility where anyone would buy coins as "widgets" while ignoring the behavior of actual collectors.  A fund manager may do it because it isn't their money if they believe they won't get fired and it won't put them at a competitive disadvantage by underperforming their benchmark.

Other than these three reasons, there isn't any realistic reason to believe this is going anywhere.  Maybe a handful to low number of funds will exist but there is no reason to believe it's going to make any long term difference to the price level of hardly any coins which is the entire purpose for doing this in the first place.

[GoldFinger1969]

5 hours ago, World Colonial said:

Not 100% sure either way.  I later read that one was liquidated at a loss.  But yes, you are 100% correct that someone else "front ran" these funds to run up the prices of the (potential) target coins.

If this is ever attempted on any meaningful scale, it will happen again.  There is no scale in "investment" eligible coinage, except in the context of a low number of somewhat affluent individuals.

There isn't even a unified coin market, even within US coinage since collectors don't collect this way.  Within the collector base, some coins have broader appeal than others and will be bought at a believed to be favorable price but it's not the same.

I am 99.9% sure the investment pools never even made the funding stage.  The sharp appreciation was front-running and when word got out (ironically, I believe the ANA or Central States Coin Show was about to commence) the air came out of the balloon.  MS65 Saints had almost tripled in like 2 years or so.

And back then, it was still newspapers and the old FNN (predecessor to CNBC).  No internet...no social media...no email...no websites....no 24/7 news except CNN.

[GoldFinger1969]

This was from an article in 1993 so it's 4 years later than the prices he quotes but you get an idea of the wreckage:

"One of the basic realities is the undeniable fact that most coins are worth considerably less today, in the spring of 1993, than they were four years ago, as the market approached its last big peak in May of 1989.

A check of the Certified Coin Dealer Newsletter, or Bluesheet, confirms this all too graphically.  On May 26, 1989, the Bluesheet assigned a value of $555 to an 1880-S Morgan silver dollar certified as Mint State-65 by the Numismatic Guaranty Corporation of America (NGC). Today, that same coin is valued at only about $75.

On May 26, 1989, the Bluesheet value for a no-motto Liberty Seated half dollar graded MS-66 by the Professional Coin Grading Service (PCGS) was a whopping $39,000. Today, that coin is listed for only about one-third that amount.

o On May 26, 1989, the Bluesheet assigned a value of $4,060 to a Saint-Gaudens double eagle graded MS-65 by NGC.  Today, its value has dropped precipitously. My book, The Insider’s Guide to U.S. Coin Values, lists it at only $1,200."

Edited November 2, 2020 by GoldFinger1969

[gmarguli]

1 hour ago, GoldFinger1969 said:

And back then, it was still newspapers and the old FNN (predecessor to CNBC).  No internet...no social media...no email...no websites....no 24/7 news except CNN.

While no internet, I believe there was the teletype system that was in use with many dealers. 

[GoldFinger1969]

1 hour ago, gmarguli said:

While no internet, I believe there was the teletype system that was in use with many dealers. 

I believe you are right, Gmarg....and it is still around (or its successor) today.

But think about what you could do if you weren't sure about the prices on that dealer network back in 1989-90.  All you could do was read articles in weekly/monthly newsletters....faxes.....phone calls.

Today, you can see actual live auctions (Ebay, HA, SB, GC. etc.) in real-time or check what happened yesterday or over the weekend.

[World Colonial]

On 11/2/2020 at 1:01 PM, GoldFinger1969 said:

This was from an article in 1993 so it's 4 years later than the prices he quotes but you get an idea of the wreckage:

"One of the basic realities is the undeniable fact that most coins are worth considerably less today, in the spring of 1993, than they were four years ago, as the market approached its last big peak in May of 1989.

A check of the Certified Coin Dealer Newsletter, or Bluesheet, confirms this all too graphically.  On May 26, 1989, the Bluesheet assigned a value of $555 to an 1880-S Morgan silver dollar certified as Mint State-65 by the Numismatic Guaranty Corporation of America (NGC). Today, that same coin is valued at only about $75.

On May 26, 1989, the Bluesheet value for a no-motto Liberty Seated half dollar graded MS-66 by the Professional Coin Grading Service (PCGS) was a whopping $39,000. Today, that coin is listed for only about one-third that amount.

o On May 26, 1989, the Bluesheet assigned a value of $4,060 to a Saint-Gaudens double eagle graded MS-65 by NGC.  Today, its value has dropped precipitously. My book, The Insider’s Guide to U.S. Coin Values, lists it at only $1,200."

This episode is also evident in the PCGS 3000 and component indexes, even now where prices have not fully recovered for many of the target coins.  Some of it is presumably due to "gradeflation" where a prior MS-65 may now be an MS-66 but even accounting for this, many and maybe most of these coins are still big losers, certainly adjusted for purchasing power which is what actually matters to individuals (as opposed to institutions).

Edited November 3, 2020 by World Colonial

[Crawtomatic]

On 10/29/2020 at 12:24 PM, Revenant said:

It's like owning gold or something else that just sits there.

In a way, isn't that what a gold ETF is?

[World Colonial]

31 minutes ago, CRAWTOMATIC said:

In a way, isn't that what a gold ETF is?

Structurally, yes it is but this doesn't indicate anything about who will buy a similar paper substitute (coin or otherwise) and hold it.  The difference is psychological and cultural.

[Revenant]

1 hour ago, CRAWTOMATIC said:

In a way, isn't that what a gold ETF is?

I suppose so. The gold ETF in principle is supposed to be an alternative to owning physical gold but you're still betting on the price of gold, but the Gold ETF is seen as being more liquid and easier to get out of than physical metal. This thing with the fractional card owner ship (or with coins) seems like it would be a lot less liquid than a Gold ETF and far more speculative.

I don't own gold ETFs though - I opt for gold mining stocks and physical metal.

 

[World Colonial]

48 minutes ago, Revenant said:

This thing with the fractional card owner ship (or with coins) seems like it would be a lot less liquid than a Gold ETF and far more speculative.

I don't own gold ETFs though - I opt for gold mining stocks and physical metal.

 

I infer you are attempting to be nice about it but there is no "seems" in the equation.  It's theoretically "possible" one of these fractional arrangements "could be" as liquid as GLD but no actual reason to believe it and no actual evidence that it would be. 

GLD is a multi-bullion dollar ETF (77.1B as of today's close) tracking one of the more liquid assets in the world (somewhat less recently).  As I write this post, I see a bid of $178.30 and an "ask" of $178.35.  There isn't a reason to believe any fractional collectible instrument will ever trade for a remotely comparable spread or at anywhere near an equivalent buy-sell commission ($0 for listed ETF's where I have my account) either. 

Except maybe the one exception I provided holding pre-1933 US generic gold and common Morgan dollars, no such instrument would have any realistic possibility of trading on an exchange.  It would never meet exchange listing requirements and no firm of any significance would likely act as a market maker for it either.

What this combination means is that it would have higher recurring management fees + higher transaction costs + higher buy-sell spread if it had one.  Not just a little higher but a lot, both proportionately and absolutely.

As for volatility, GLD has a 52-week range of $136-$194.  This isn't exactly stable but potentially a lot less volatile than any coin fund.  The only reason I can see it would not be is that the coins held may sell so infrequently that no one really knows what it's worth at any point in time.  This isn't unusual for other funds (real estate or bonds as examples) either.

Another risk with a coin fund is that if bought at a (substantial) premium to NAV, everyone would take a hit upon liquidation, even assuming it was accurately valued.  This isn't an inconsequential factor given that higher than average expenses would require it to either intermittently sell more shares or regularly pick winners it would periodically sell to have cash on hand.  Even in a decent market, there is no guarantee either option would be available.

If anyone wants a coin themed investment, wait for a favorable entry point to buy CLCT.  Or if someone has the connections, buy into a successful coin dealership.  Both should or will more consistently make money than the vast majority of coins.

[World Colonial]

To the prior posts on the Teletype System, I saw it at one dealership in 1977 or 1978, World Numismatics in metro Atlanta.  It sounded like a dot matrix or similar printer which it probably used.

My understanding is that it was the predecessor to the CCE but not sure what coins were covered, since certification was limited and this was prior to NGC or PCGS..

[GoldFinger1969]

FYI.....recent sales for the 3 coins are about $125 for the 1880-S Morgan....$2,000 for MS65 Saints (generics).

Is the No Motto Liberty Seated MS-66 for a generic common year (no date was given) ?  I couldn't look up a price without a date.  If grading is easier today, then maybe it pays to also get a price for an MS-67.  Would show less of a price drop I presume.

[World Colonial]

9 hours ago, GoldFinger1969 said:

Is the No Motto Liberty Seated MS-66 for a generic common year (no date was given) ?  I couldn't look up a price without a date.  If grading is easier today, then maybe it pays to also get a price for an MS-67.  Would show less of a price drop I presume.

To my knowledge, yes.

This also highlights the difficulty of pricing the fund and valuing any fractional interest.  Probably need to use a combination of CCE and Greysheet for generics and CAC for everything else.  There isn't a standing third party bid for anything else anywhere else that I know.  This limitation would potentially noticeably limit what the fund could or at least would likely own.

Otherwise, there would be constant "slippage" in both directions every time a fractional interest transferred.

[1917]

this smells of fractional stock ownership... I'm not joking, it's literally now possible to buy a small sliver of a stock... a stock of stock, if you will

[World Colonial]

8 minutes ago, 1917 said:

this smells of fractional stock ownership... I'm not joking, it's literally now possible to buy a small sliver of a stock... a stock of stock, if you will

Yes, I have read that. I presume it's primarily directed at stocks such as Amazon and BRKB which trade for thousands since low or no fee commission stock trading has reduced or eliminated most if not all of the motivation for stock splits.  Either that, or companies finally woke up and realized it's a waste of money to attract this type of stock buyer.

This indicates that the existing long term financial mania has plumbed new depths.

[GoldFinger1969]

3 hours ago, World Colonial said:

To my knowledge, yes. 

Do you have any knowledge about No Motto Liberty Seated Half Dollars that was referenced above ?  

Some NM LSHD went from $39,000 down to about $13,000 acording to the article.  I am totally unfamiliar with the coin and pricing.

[GoldFinger1969]

19 hours ago, Revenant said:

I suppose so. The gold ETF in principle is supposed to be an alternative to owning physical gold but you're still betting on the price of gold, but the Gold ETF is seen as being more liquid and easier to get out of than physical metal. This thing with the fractional card owner ship (or with coins) seems like it would be a lot less liquid than a Gold ETF and far more speculative. 

Gold is actually "fairly" liquid relative to the ETF.  The SEC, Fed, and financial commentators have noted the problems in having a liquid ETF holding non-liquid assets (thinly traded junk-bonds, small cap stocks, corporate bonds, etc.).  Needless to say, during a downdraft in prices -- or even if 1 or 2 or 3 big holders (or a large number of holders, if they each own equal stakes) want out -- you could have a selling vortex.

Holding tangible assets like art or baseball cards or coins would probably result in bid-ask spread multiples higher than anything you see now.  I could see a 5-7% spread between the Bid and Ask to compensate the market makers and/or holders of the assets to make a market in the underlying ownership.

Edited November 4, 2020 by GoldFinger1969

[World Colonial]

27 minutes ago, GoldFinger1969 said:

Do you have any knowledge about No Motto Liberty Seated Half Dollars that was referenced above ?  

Some NM LSHD went from $39,000 down to about $13,000 acording to the article.  I am totally unfamiliar with the coin and pricing.

No, not this coin or even the series specifically.  Only that I have seen similar reports for numerous coins over the years across different series.

There was another thread here several years ago linking a Coin Week article where apparently, dealer Scott Travers still had a Barber quarter in a similar grade he bought at (or near) this time that used to be worth over $30,000 more recently worth about $6,000.  This is my recollection though I may not have the exact specifics.  The article mentioned the coin but didn't comment on the grade.

[GoldFinger1969]

1 minute ago, World Colonial said:

No, not this coin or even the series specifically.  Only that I have seen similar reports for numerous coins over the years across different series.  There was another thread here several years ago linking a Coin Week article where apparently, dealer Scott Travers still had a Barber quarter in a similar grade he bought at (or near) this time that used to be worth over $30,000 more recently worth about $6,000.  This is my recollection though I may not have the exact specifics.  The article mentioned the coin but didn't comment on the grade.

Name sounds familiar, I may have the article.  I'll look around and report back. 

[World Colonial]

1 minute ago, GoldFinger1969 said:

Holding tangible assets like art or baseball cards or coins would probably result in bid-ask spread multiples higher than anything you see now.  I could see a 5-7% spread between the Bid and Ask to compensate the market makers and/or holders of the assets to make a market in the underlying ownership.

I agree with you, assuming anyone would even make a market in such an instrument at all.  If anyone would, other than the hypothetical generic US pre-1933 gold/Morgan dollar fund, it's not going to be any financial services firm (hardly) anyone knows.  Likely, it would be some metal dealer or firm in the coin business.

Look at the spread in bullion coin silver like ASEs since late March.  It's down noticeably from the peak but still a lot more than this now (well over 10%) and this is for an asset that is traditionally easy to sell.  I believe the spread would be much larger, since it should be a lot less liquid.

[GoldFinger1969]

7 minutes ago, World Colonial said:

There was another thread here several years ago linking a Coin Week article where apparently, dealer Scott Travers still had a Barber quarter in a similar grade he bought at (or near) this time that used to be worth over $30,000 more recently worth about $6,000.  This is my recollection though I may not have the exact specifics.  The article mentioned the coin but didn't comment on the grade.

The appreciation during The Bubble for the pure-numismatic coins like Barbers, Liberty Quarters and Half Dollars, Morgans, etc.....seems to have run up and down far more than those tied to bullion, either wholly or in-part like Saint-Gaudens gold coins.

[zadok]

fyi...the fractional purchases of stock shares available at the moment is not limited to just higher dollar stocks e.g.  Amazon or Berkshire, one can buy a fractional share in any stock on the exchanges, u can buy $1 worth of a $5 stock if u so desire...time will tell how this falls out but at present its gangbusters...

[GoldFinger1969]

5 hours ago, 1917 said:

this smells of fractional stock ownership... I'm not joking, it's literally now possible to buy a small sliver of a stock... a stock of stock, if you will

I think that is what RobinHood App lets you do. 

[GoldFinger1969]

2 hours ago, GoldFinger1969 said:

Name sounds familiar, I may have the article.  I'll look around and report back. 

I did have the Travers article, link is here:

https://www.usgoldexpert.com/articles/selling-those-investment-coins/

[World Colonial]

39 minutes ago, GoldFinger1969 said:

I did have the Travers article, link is here:

https://www.usgoldexpert.com/articles/selling-those-investment-coins/

The one I saw was by Charles Morgan in Coin Week where they referred to or quoted him.  It's in the OP in a thread on this forum a few years ago.

I did read part of the link.  If anyone held a losing positions for a bubble coin they had then, there is good chance they are still deeply underwater now.  I don't buy coins as "investments" but if I did, I'd still cut my losses when I conclude I was wrong.  That's what I do with anything else.  In the past when I haven't, I usually ended up losing even more.