I have read a lot of posts and have gathered much insight on these LBC forums. In the past I was able to take advantage of some cheap eBay auctions which were first posted here and also to track some of the trends that were first presented here as well. FWIW, this is my take on the MCC market and the overall market in general.
On the MCC:
1. I think investors and collectors should understand they are speculating on numismatic premiums when it comes to new releases with limited mintage. New issues have no track record. For every winner there is a loser. To say that the limited mintage gold coins are iliquid is the understatement of the century. This is a very thinly traded market. With that being said, there are certainly opportunities to flip some coins for profit or to buy coins which quickly appreciate than level off and appreciate later at a more methodical rate.
2. CBB (China, Brass, Bronze) - Again I would be careful to not over invest in these coins which have high numismatic premium with essentially zero intrinsic value. The added risk is also that they are new releases and low mintage. In my opinion these are pure flips. I used to sell a lot of Casascius Brass Bitcoins. I've sold some for as high as $5k (the 2011 error coin) graded by ANACS MS66. I quickly converted my bitcoin (at the time around $800) into USD and bought gold and silver pandas. These Casascius error bitcoins can probably still fetch like $1500 so I'm glad I did not hold onto them. I think those who are selling CBB rather than those buying them will be the ultimate winners.
3. Overall market - I don't believe we have experienced deflation yet. I think precious metal prices will remain steady to weak as there is no catalyst to send them higher. US stock market will tread water and turn downward. If the Fed makes true on its threat to raise interest rates which I think is unlikely than we will be hit with significant deflation. Should they decide to go to QE4, I believe that will be the trigger for precious metal prices. As precious metals rise so will all MCCs but it will be the pandas that see the highest appreciation in prices. Even with QE4 announced and underway I still think it will take some time for PMs to move upwards. I believe MCCs will lead vs. PM prices.
I know my opinion is vastly different than many here so I welcome hearing the other view point.
I'm always multi-tasking so much that I think I missed writing up one of the replies I wanted to do for this post of yours, wafdawg. RhodiumPanda has inspired me to respond to your point #2, about the copper/brass/bronze (CBB) coins. There is one VERY important fact I have probably never uttered, because to do so would greatly stiffen the competition for myself in buying rare CBB coins. This fact will make perfect sense when you see how much native Chinese collectors talk about it, but it's not at all obvious from the point of view of a Western buyer. The fact is:
Many of the most advanced elite-level Chinese coin collectors have maintained a persistent habit of focusing on CBB coins.
Some of those collectors focus on CBB exclusively, and most of them have been collecting Chinese CBB since they were first issued 2 or 3 decades ago. Most of them are now at least modestly wealthy thanks to their coin collections and other wise financial decisions. A few of them have personal relationships with important figures in the numismatics of China. One particular fellow I'm thinking of is personal friends with Yi Shizhong, the mint artist that hand engraved the master dies for the goldfish and most of the designs for the palace lanterns. When you see photos of artists hand engraving dies, or photos of extremely rare coins that no one has seen in person before, they may have come from this collector I'm thinking of.
There are a few reasons why these top collectors focus on CBB that I have been able to figure out so far, and all of them are relevant to us as investors:
1. Communism. It is much easier to collect copper/brass/bronze (CBB) coins, and buy and sell them with other collectors, without drawing any unwanted attention from anti-wealth authorities.
2. Affordability. Silver and gold were just too expensive for many people in China to collect during the 1980's, even if they wanted to.
3. Rarity. While the silver and gold was minted by the hundreds and thousands in most cases, the mint artist's themselves seemed to enjoy getting a few CBB coins for himself and his friends. Mintages were almost never recorded, but rarity is almost always high. As a wild guess, I think mintages for many coins had to be in the hundreds at most, and sometimes as few as 10 or something like that.
Badon –
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Remember in late 2008-early 2010, precious metals moved up 50-80% in this period while MCC did squat (they started taking off in late spring, 2010 before exploding (along with silver and gold to a lesser extent the next year). If this cycle repeats you can get far more MCC later. It may not rhyme this time however (esp. with these ultra low medals that weren't around back then). I traded about ½ of my dad's (by then mom's) rare US coins in late 2008 early 2009 for precious metals after metals crashed because the rare US coins didn't drop at all and even the common ones dropped maybe 5% while silver and Palladium crashed 60%.
You missed my point about big money not in MCC yet and thus big gold MCC (even the 2010-2011 massive roundup was probably driven by 1/100 of 1% of US, HK and European investors (and an even lower % of Chinese investors). It was a cult movement. No one knew what the hell I was talking about locally; and only a couple of dealers finally understood, but long after I educated them and the run up already was done. They scoffed earlier. 1/100 of 1% of investors are in MCC, even now. 90% of investors have stocks. (Even Gold is maybe 10% and silver 5%) This bodes well for MCC in the future and particularly poorly for stocks (which is what is to be expected after a 41 year bull market in stocks).
When the big money gets into MCC – the gold pandas (esp. larger rarer ones) will have to join the run-up to absorb even 1/100 of 1% of the money in overpriced stocks. There is no way that a 10K mintage 1983 silver panda will go to $100K while a 68 mintage gold kilo panda will stay at $40K with 900 times the metal $ value and 150 times more rarity. They are too expensive for the common man and that is why they haven’t moved because only the fringe cult people like us (but closer to common man) are in MCC (so far). Big rare gold probably has as much potential going forward as (now) fully priced big silver and proof pandas. (Recent super low mintage medals will probably beat both, however in % terms – you have all convinced me of that). Big gold MCC is too much money in one chunk for me – but I can see it joining the party in the future.
When even the common 3000 mintage big gold pandas sell for a 50% premium (thanks for that alert – I have that coin although not with the box, etc. – I only paid generic bullion price for it); then you know the 68 mintage gold kilos can explode when billionaires get involved in MCC.
Nick Brown was the most effective promoter of big gold, and now that he's gone, big gold has suffered greatly. Actually, think of the Nick Brown era as a fluke that wouldn't be sustainable. Yes, the key big gold coins might have all the advantages that any other key coin has, but it's the common big gold coins that are a dreadful plague. And, if the gold is sufficiently big, even key status will not be enough to keep it stable with rising numismatic values relative to much smaller coins.
Although your analysis of billionaires and percentages seems to make sense on paper, in practice, it doesn't work that way. If there's one thing coin collectors love, it's nostalgia. How many of those billionaires have fond childhood memories of 10 kg gold pandas? Absolutely none of them, I'd bet. On the other hand, how many of them go bonkers whenever they see a nice, high grade brass coin that was possibly minted personally by the artist that hand engraved it himself? The reason those guys go bonkers is because they began collecting them in their younger years, sometimes as young as children or teens, and they could potentially hope to afford them back then too.
Your examples of the how resilient the mature American coin market was to a crash in precious metals is a great example of the "nostalgia effect" in numismatics. How many of those rare USA coins were gold? I'd bet my left pinky toe that the majority of them were copper, copper-nickel, or silver. What makes those rare coin values so stable is the nostalgia. Even if the coins were minted hundreds of years before the collector was born, they may have admired the keys in their youth, or they may feel some connection to its history somehow (often patriotic feelings). When these collectors grow up and start buying big boys toys in the coin market, they don't toss out their copper collection and replace it with more impressive $20 gold coins - instead, they just become much more aggressive with the coins they're already collecting!
Fundamentally, the nostalgia effect is the reason why copper and silver coins so often prove to be better investments than gold coins, even when the gold is much, much rarer. It's very difficult to match the investment performance of a copper and silver collection, as a collector of gold, and that includes both price gains and liquidity. One of the more unusual epiphanies I had about investing in rare coins was that I very often saw a strangely rich concentration of gold coins in government seizure auctions. It's because "new money" drug dealers and other shady-source money was going into coin collections. Basically, it was non-coin collectors trying to figure out what to do with all of their excess cash that they can't put in a bank account or use to pay for a conspicuous asset like a new house or car.
Of course, not everyone who collects gold coins is a drug dealer, but one fact is clear, there is much more money aggressively chasing the key coins that were familiar to the collectors when they were younger and wished they could afford them. A collection of gold coins is a great way to impress your friends with your new wealth, but the buyers of those coins, on average, don't have the diligent drive to spend decades trying to complete the entire set. I believe the same is, and will forever remain, true for the big gold coins.
Only 1 big gold coin has survived from ancient times, and it was discovered by accident only in the last 200 or 300 years. Certainly there were more of them minted, but why is there only 1 that survived? It's because they were the most vulnerable to melting, even when they were owned by kings who were coin collectors. I would definitely buy a big gold coin to complete a small set or series, but for the common pandas, I think even wealthy people will be uninterested in completing the entire set, with common coins included. You don't get to be wealthy by sinking $50 million USD in coins that could literally take decades to sell. No, people with that quantity of cash - if they're smart enough to earn it legally - will prefer something with a larger, dedicated collector base.
Knowing what I know about what the most advanced collectors in China are buying, I'm much more willing to sink $15'000 into a brass panda than I am in a 12 oz gold panda. Low liquidity is one of the biggest weaknesses in coin investing, so as a matter of caution, I have never had difficulty finding another smaller coin that is a better investment compared to whatever big gold rarities are available. There are many big gold coins that are probably a good investment, and maybe someday I will own a few of them, but I'm going to be cautious and conservative about it. Yes, it's possible billionaires might want to build a complete set of 10 kg gold pandas, but one of them wants to sell, I doubt they will find buyers with the eager zeal of China's most dedicated top class coin collectors.
The good news is that the CBB has only just now started to really get the attention of everyone who is in the modern Chinese coin market. It doesn't take $12'000 to get your foot in the door with a CBB investment, like it might with a big gold coin. You can buy a 2014 brass baby panda with a mintage of 200 for peanuts right now ($365 for NGC 69
161814262282). I think those are far more likely to double in value than a $12'000 big gold panda.
Incidentally, the 1 lone big gold ancient coin is thought to probably the most valuable of all ancient coins. Estimates of an auction sale price are almost in the millions of dollars. Right now, it resides in a museum. I seem to remember it was purchased for something like the equivalent of $700, because the owner was having difficulty finding a buyer...he would have gotten more money if he had cut it up into pieces and sold it bit by bit in more affordable quantities. So, you see, these economic factors that oppose big gold are so potent that they have been known to dominate for as long as big gold coins have existed.
Over the short term, big gold might be a great investment if you can separate new-money fools from their cash, but I would not hold them as a long term investor, unless they're keys or from small sets. You're better off with the cheapest bullion you can find, in the smallest portions you can find (1 oz bars or smaller), if what you want is a lot of gold.
Everyone is different, and thus everyone needs their own customized investment strategy. Maybe you can come up with a strategy that can work for you, with the big gold. You really need to know what you're doing though. Nick Brown was a very talented guy, and there's only a few people I know that might have enough savvy to be successful with big gold like he was...but those people have decided to stay away from big gold and focus on big silver instead. Me too (in addition to normal sizes, CBB, etc).
