State of the Market - Post Long Beach Report

John Brush and I have just returned from the Long Beach show which was held last weekend. The show coincided with the events of one of the most bizarre weeks ever witnessed by the United States financial markets. And yet, dealers bought and sold coins during the show trying to pretend Wall Street wasn't actually crumbling around us! Even more strangely, gold surged over $80 during show hours on Thursday. A huge plasma screen in the corner of the convention hall allowed us to follow the numbers. For years, we've often joked that gold always goes down during Long Beach, and this was the reversal of a lifetime -- the single largest one-day gain of gold spot!

There's no lack of opinions about the severity of the bloodletting on Wall Street right now. We certainly seem to be paying the price of our excesses for the past 20 years. We all drank from the ample goblet of corporate (paper profits), house price increases and, of course, all that EASY credit.

Whomever you blame for the current conditions, the fact of the matter is, this is going to be a very painful pill to swallow. But I know why you're reading this. You want to know how Wall Street's woes will effect the the value of your coin collection.

As John and I walked the floor in Long Beach doing business with all our dealer friends, we sought answers as well. Before Wednesday's gold surge, the mood was mixed with some thinking prices couldn't hold while others felt the opposite. The price surge certainly shook things up a bit. Not everyone rushed to a quick judgment that the coin market would turn on gold-bug enthusiasm, but we ALL held our collective breaths. We (coin dealers) are constantly looking for positive arguments to support the fact that we carry large inventories whose value we'd prefer not to see decrease. So the gold surge felt good. But we all feared that the day's close would bring a quick correction. When that didn't materialize on Thursday everyone heaved a collective sigh of relief. In fact, gold even continued to post some gains over the next 48 hours!

So, perhaps the gold bugs are ready to assert themselves. This theory plays into the hearts of all numismatists. The logic is basically that gold (above all) will hold its value when government paper fails. In times of financial instability (anywhere in the world!) gold tends to benefit as folks wish to stuff their mattresses... and government coppers as well! If this is the case now, gold could be in for a HUGE run. And rare coins tend to run with gold; mostly because the greatest amount of value in the rare coin market is derived from rare gold coins. The rest (type coins, coppers, etc) will benefit from the "drafting" effect as they always do.

So there you have it. A simplified theory that gives us confidence that rare coins could be a wonderful hedge market in these turbulent times. Of course, I remain steadfast in my assertion that one should not buy rare coins as a pure investment play. One should buy rare (or not-so-rare coins) because of a passion to collect. However, I love that the rare coin market has been a wonderful investment for the past 2 decades. Many of our clients have seen their holding increase in value -- and they've benefited by physically enjoying their asset. I, for one, have learned more about world history through coin collecting than in any book, or class. And I see the same recognition in the next generation of collectors.

Is there a better career than being a coin dealer? Possibly not, I think. The longer I do this (20 years full time now), the more I love my job.

Until the next post, let's all hope that the financial markets shore up quickly (not likely) and the gold continues to shine.

Summer's Over...Let's Party!

I'm half kidding, of course, but now that Summer is over, we can all go back to concentrating on our coin collections. Collectors always find it difficult to concentrate on their hobbies during the summer months, what with kids out of school and nice weather to distract us...

I'm just returning from a short trip to NYC where I met with a client to specifically help him with his collecting strategy. We spent the better part of the day together and he was able to clean house of duplicates and upgrade his set where it makes sense. I used the second day to visit the US Open where Federer took apart his latest opponent...

The good news is the coin market is holding up extremely well against the overall economy. This is not all that surprising given that rare coins (as part of the "hard asset" class of investments have typically been a good hedge against during inflationary times. What makes our market even more resilient lately is the fact that the base of collectors continues to grow. Every new collector that joins our ranks helps to solidify the value base of coins in general. For example, if 10 new collectors decided to go after gem Barber quarters in September, the supply wouldn't be able to handle the pressure and prices would probably rise 25-100% from that small influx of demand. Morgan dollars have a much greater supply so we'd need a greater number of new collectors.

Gold, silver and platinum don't seem stable at all right now which is probably the worst drag on the market. Personally I like gold under $800 per ounce if it will stabilize. In fact $700 gold would be even better long term and would probably attract a lot of new buyers for better-date gold coinage as they started collecting. It seems to me that gold moves in step with oil these days, and oil has dropped like a rock in the past month.

Coming soon to DLRC...are some great new fresh collections. One of the collections contains over 350 freshly-certified DGS coins that are consigned to us from a client. All the coins are wonderful collector-grade material with a large amount of circulated Barber halves, Seated halves and the like. At DGS the most criticism we get is that we're too conservative -- and we love it! Check out these coins as they are graded accurately and fairly in our opinion and you will definitely find dates you need. The second deal is a fresh collection of world gold with some interesting US mixed in. Win and the boys seem to be getting more calls than usual right now as people are selling parts of their collections to trade up, or simply to raise money. No matter what side of that equation you are on, we want to hear from you. Nobody will treat you more fairly and we could really use the material.