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During the first half of the century, the value of coins was
determined by both public auctions and the annual fixed price
lists of the leading dealers of the day. B. Max Mehl's Star
Coin Encyclopedia, listed his selling prices for the entire
series of U.S. coins and served as a reference work during
the 1920s and '30s. By the late 1940s, several independent
publishers and issued "official price guides" for
U.S. coins. Most successful was Whitman's A Guide Book of
United States Coins, or "The Red Book."
By the 1960s, the market was exhibiting price moves on a
weekly basis and active wholesale trading had necessitated
a newsletter to monitor this activity. For the past 25 years,
the price reporting mechanisms of choice in the numismatic
marketplace has been The Coin Dealer Newsletter (P.O. Box
11099, Torrance, CA 90510). Begun in 1963 as a weekly teletype
report of price trends in the then fast moving BU roll market,
it has evolved as the unchallenged pricing authority for the
entire numismatic market.
As a reporting agent, The Coin Dealer Newsletter for years
faithfully monitored activity on the teletype circuit, reporting
the highest offers, or bids, for a particular coin or series.
However, the teletype did not report the success or failure
of the bid, the number of coins purchased, if any, or more
importantly, the number of coins rejected. The dealer making
the bid could declare any coin sent to him for purchase to
be of an inferior grade, thereby invalidating the offer. As
the judge and jury of material submitted for purchase, the
bidding dealer could, in essence, set the grading standard
wherever he wished. This fact, more than any other, must be
considered particularly when tracking price levels over extended
time periods.
The rapid market expansion of the late 1970s saw the circulation
of the "Greysheet" spread from exclusively dealers
to large number of collectors and investors, thereby changing
the complexion of the listed prices. These new classes of
buyers represented a significant portion of the available
funds flowing into the market and, armed with the "insider
knowledge" contained in the Greysheet, became reluctant
to pay much over wholesale "bid" to obtain items
of interest. Consequently, trading among professionals was
forced down to levels below those listed in the sheet in order
to maintain the margins necessary to continue in business.
Due to this change of meaning behind "bid" levels,
rates of appreciation typically found in numismatic studies
or investment comparison charts tend to overstate the case
for coins by incorporating this wholesale to retail drift
into the statistics.
Finally, remember that the bid and ask levels published in
the "Greysheet" represent the highest price that
a particular dealer will pay for an item, provided that he
still needs it, and that it will pass his personal criteria
for qualifying at the listed grade. These levels should not
be taken as guaranteed liquid values that apply uniformly
across the market.
It's important to grasp the interplay between the marketplace
and grading since, in reality, the grade is more of a function
of value than vice versa. The real meaning of this concept
is that coin values fluctuate more than one might suspect
from tracking pricing guides, and the risk/return tradeoff
is greater than published statistics indicate. Contrast this
with the Certified Coin Dealer Newsletter, which is far less
subject to manipulation. Prices reported are, consequently,
far more volatile, exhibiting changes on a week-to-week basis.
In the past few years, several dealers have brought out pricing
newsletters similar to the Coin Dealer Newsletter, which list
their own bid and ask prices for selected coins. Two caveats
should be noted:
- Read the fine print which accompany these sheets. Make
certain that their "bid" price represents an actual
offer to buy. The price will still be contingent upon their
acceptance of the grade, as offered to them.
- The reliability and strength of those pricing guides cannot
exceed that of the issuing dealer. These guides represent
a very limited market, which is subject to evaporation virtually
overnight if unfavorable circumstances suddenly arise. This
would be especially costly if the price spreads are unrealistically
high initially.
Other pricing guides published in major numismatic newspapers
or periodicals (e.g., Coin World's Trends, Numismatic News'
Coin Market, Coin Prices Magazine) serve as good retail pricing
lists for many local shops or small dealers. They have gained
little use in the investment arena today, and are unlikely
to do so in the future. The venerable "Red Book"
is also not a useful pricing mechanism in today's fast changing
market. Its longevity does, however, make it a useful source
of pricing history in the 1950 to 1970 period.
A final source for coin prices can be found in auction records,
summarized in Krause's Auction Prices Realized. Variations
in grading between auction companies often present wide price
ranges, making precise analysis of the more common coins confusing.
Auction results are most useful for great rarities (coins
over $10,000), since their trading on the open market is infrequent,
and they are often not listed in other pricing guides. Remember
that whatever pricing sources you use or subscribe to, they
are only guides. There is no substitute for interacting in
the real market, and talking to dealers.
Most experts advise that numismatic purchases be held for
at least five to seven years, and preferably ten years or
more. Like most tangible commodities, the prices for rare
coins are cyclical. While the long-term trend may seem generally
upward now, it doesn't mean that prices won't decline later.
Price movements arise from a multitude of factors, both internal
and external to the coin market. Internally, promotional efforts,
discovery and dispersal of large accumulations, and speculation
all play a part in the fundamental supply/demand equation
for coins. Externally, the price of precious metals, the rate
of inflation and interest rates all impact the components
of the pricing formula. More importantly, the anticipation
of movements in these measures must be considered, since the
psychology of the market is often the reality.
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