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Author Topic: The different sides of coin market strategy  (Read 211 times)
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Batman
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« on: 2011 Jun 25, 02:54:38 PM »

Kona Jim recently offered his view and possible direction of the Chinese coin market. I would like to expand on his view since I see many sides this.  First I think that you have to define yourself into one of the following; 1) Collector, 2) Investor, 3) Dealer or 4) Something else.

The following are my definitions (not perfect, but how I see the world):

Collector - someone who purchases coins solely for their beauty and rarity and probably will never sell his/her collection.  The coins will most likely get handed down generations regarding of their increase in intrinsic value.  The collector relishes in the fact that they can at any time view their coins and admire their beauty. Many of us are collectors.

Investor - someone who sees opportunity in undervalued assets that have the  potential for a significant gain.  Every investor's time horizon is different, it could be anywhere from short term to long term.  Either way, they would be willing to sell very rare coins for a profit vs. a collector who never sells.  The line between an investor and collector can get blurry and sometimes both can crossover back and forth many times.

Dealer - someone who is probably only looking for small  profit margins but hopes for high volume.  They purchase coins in bulk, offer good value, make a quick sale, buy some more, and do it again.

Something Else - I think of this category as the sellers on eBay who have no idea what they are selling. In my mind, this category belongs to the antique dealers, pawn shops, consignors, etc. that stumble across very rare coins and have no idea of their worth. I also think of the coin flippers belonging to this category...you know the ones who think they can fool us by buying coins on eBay and then try and turn around and sell those same coins before they have taken delivery.

As a "collector" you really would not care about short term market fluctuations, state of economic conditions, interest rates, etc.  All you care about is purchasing the coin you want for your collection.  In your mind the rest will take care of itself. The collector will pay whatever price is fair just to own the coin.

Obviously, the "investor" is very concerned about short /medium/ long term market conditions since they are holding inventory, have certain goals they would like to achieve regarding profits, and like to capitalize on popularity when conditions present itself.  The investor is many times looking for good value.

The "dealer" is similar to an investor, however the dealer is concerned only with short term market conditions, what is hot today, and how can I turn over inventory the fastest to generate margins.

The "something else" I won't even discuss since they have no idea what they are selling and what the value is.

Many collectors have turned to investing in the Chinese coin market. Why? I think the answer is simple for several reasons.   First, there has been great increases in demand which has turned into profits ( just look at the pricepedia index). These returns have attracted many looking to make significant dollars in this market. Second, the Chinese market is unique given the risk/reward of turning ungraded coins in high quality graded 69's or 70's.  We all know that the value of a 69 can be at least 1 1/2 to 2 times the value of a raw coin.  The value of a 70 can achieve a much higher multiple.  The reason for this that many Chinese coins were struck with very poor quality controls. I have seen this first hand, many times, whereby a raw coin has certain flaws that would undoubtedly reduce the grade received.  Therefore, many collectors place significant premiums on high grade Chinese coins. This is significantly different than the US coin market where the US produces high quality struck coins.  The price multiple is not that great and therefore the risk/reward is not enough to attract "investors".  Yes there are collectors, and dealers, but I doubt many of us are investing in US coins (but I could be wrong). If you are, then the only thing you are hoping for is that the price of gold or silver increase, or you are looking to diversify your portfolio into something more stable than the stock market.  Many US coins are priced like bullion and rarely does demand seem large enough to drive significant price acceleration. In short the US coin market is boring.  

All this means is you have to decide where you categorize yourself and determine what is important to you. Is it economic conditions in China or the US, is it the movement of the dollar vs. yuan, or is it who cares what the market is doing, I need this coin for my collection!!  

For me, I have two strategies, one is to collect rare coins that will never see the light of day and pass on to generations, and two, have coins that I invest in (my investing time horizon is a minimum of 10 years).  I am sure many of us fall into this category.  
 
People keep talking about a summer slowdown, and I say so what.  For me, this is an opportunity to buy coins that normally don't come to market. Why? Short term/medium term investors are looking to sell to lock in profits and meet their goals.   You see, these type of investors can be the nervous type and try and read every little change in market conditions as impacting their strategy, just like the stock market.  Since everybody talks about a slowdown, then everybody believes we are in a slow down (herd mentality).  This makes investors nervous as they don't see an end in sight. Therefore they sell to lock in profits while they can, because they can't predict the future.   For me, this is an opportunity to either pick up coins for my "collection" or see good value in long term investments.

Speaking of value, I will just echo Jim's comments.  There is "significant" value available today.  You just have to know where to look.  Jim mentioned the 1996 proof panda.  I won't tell you exactly what I like or what I am buying, but I will say that many high graded rare coins are selling in the US at or below their ungraded value in China.  For me, this is a tremendous opportunity.  Do your homework and you will be rewarded.

Like Kona Jim said, pick a strategy and stick with it.  

Finally I want to talk about the fact that is seems like everybody "wants a good deal".  Every once in while I will sell a coin or two since I have doubles of something.  Before I list a coin for sale, I give a lot of thought to pricing based upon current market conditions and comparables.  What I cannot stand is the person that sends me a message and says "this coin sold last week for $100 less than yours, can you offer that price".  My standard answer is "no", "you should have bought the other coin".  I believe if you are looking for a good deal you should not shop at Neiman Marcus, but shop at Walmart.  

In my mind there are no "good deals" just the ability to purchase the coin is a huge opportunity.
« Last Edit: 2011 Jun 25, 09:01:34 PM by badon » Logged
GhostRider808
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« Reply #1 on: 2011 Jun 27, 09:43:33 AM »

Batman,


Good insight! 
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badon
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« Reply #2 on: 2011 Jun 27, 12:58:48 PM »

This is a very insightful article. I agree that generally there are no good deals in the best investment coins. Many nice coins are available right now for prices that will be envied in just a few months. I am buying all the coins I have wanted right now. There won't ever be another time to buy that is as good as this, ever again. The next slowdown will just be at higher prices.
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dobedo
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« Reply #3 on: 2011 Jun 27, 02:13:01 PM »

Yes, the coins look good, the cash flow looks bad. Maybe it's time to stop collect and start invest before it's too late.
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mazinger7000
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« Reply #4 on: 2011 Jun 27, 03:30:45 PM »

all of these insights are really helpful for beginning investors/ collectors like myself. thank you so much! i'm just wondering what you think are fair prices for god of war and wealth coins. i know that there won't be this many around in the future, but every week i see crazily random prices for them, and not too many sales. any wisdom to share on this?
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badon
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« Reply #5 on: 2011 Jun 27, 03:38:11 PM »

$1500 to $2200 for the clear claw
$5000+ for the super clouded claw
Estimate $3000 to $6000 for the clouded claw

All are for NGC PF 69 UC. There are no sales yet that I am aware of for the clouded claw. Current estimates are that it is as rare or rarer than the super clouded. There have been fewer of those offered for sale than for the super clouded. The most common one, the clear claw, has an estimated 69 population of around 800. $1500 is a real bargain for that coin, and I think it is the most underpriced of the 3 varieties. Coins seem to plateau around $5000, which the super and the clouded both seem to have reached.
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mazinger7000
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« Reply #6 on: 2011 Jun 27, 04:17:29 PM »

thanks so much for this badon. do you think clear claws are worth getting as 68s?
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badon
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« Reply #7 on: 2011 Jun 27, 04:30:40 PM »

I think you should prefer 69's while they are available. The overall estimated mintage is only 900 for the clear claw in all grades, so yes, it is probably one of the few coins that is still good enough to make it into my list in lower grades. The only reason I haven't included any 68's yet is because there are still a few 69's available. Once those have been gone for a while, then I will have to consider including lower grade coins.

However, a bargain is a bargain. If you can get a good price on 68 coins, you could turn a quick profit. Right now, the clear claws are probably even more underpriced in 68 grade (I haven't checked myself to be sure of that).
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