ARE MARKETS FOR RARE U.S. COINS POISED TO SKYROCKET?
Profitable Coin Buying in An Age of Uncertainty
2020is the year of the coronavirus. A government-induced economic slowdown, dramatic changes in lifestyles, and major changes in job markets have compounded the difficulty. So far this year, there has been tremendous uncertainty regarding medical, social, political and economic conditions.
It’s now much more difficult to model forecasts of future prices than it was in normal or relatively stable periods. Predictions or forecasts of future prices are not included in this discussion, though profit-hopeful coin buyers should devote some time to considering future prices.
While this discussion is not about predicting market cycles, it must be noted that markets for rare U.S. coins may again skyrocket. They did from the middle of 1978 to April 1980, from late 1987 to early June 1989, from November 1989 to March 1990, and, of course, from late 2003 to early August 2008. From 2010 to the middle of 2015, markets for rare U.S. coins fared very well, though they did not skyrocket.
3 KEYS TO COLLECTING COINS FOR PROFIT
There are three major issues regarding collecting coins for profit: Market Cycles, Prices Paid in the context of market values when the transactions occur, and Picking Coins that have more of a potential to increase in value than other rare coins in the present. The last notion relates to relative prices. The ratio of the price of one rare coin, to the price of another, may rise, even if the values of both coins fall.
It’s not practical to fairly explore all three issues in one discussion. I am not here picking coins for the future. After putting forth some information about market cycles, this discussion will center on an approach regarding prices paid in the present. I am a believer in viewing future events in terms of chances, percentages and probabilities. In my opinion, it does not make sense to predict that something will occur in the future or estimate the likelihood of that something happening. There is an X% chance that commercial real estate markets in New York or Chicago will collapse in late 2020 or 2021. While it is obvious that X is significant, there is no easily explainable formula for estimating the value of X. Estimates of 5%, 30% and 60% could all be defended with logical arguments.
Why should one prediction be better than another? An answer to this question is outside the topic of the current discussion.
If there is a Z% chance that an upward swing in a rare coin market cycle will begin in a significant manner in 2021, would it make sense to cite an estimate of Z now? Suppose one intelligent and experienced coin professional theorized that there is a 65% chance, another determined that there is a 37% chance of an upswing, still another stated a 23% chance and a fourth found that there is just a 9% chance. What would such forecasts
Are Markets for Rare U.S. Coins Poised to Skyrocket?
mean to coin buyers? Such forecasts, to be educational, would need to be accompanied by long explanations with estimates about other events as well, not just estimates of the likelihood of an upswing in prices for rare coins.
Also, some coin professionals may not tell the truth about their thoughts. It seems likely that some coin dealers or even coin writers will tell people that rare coins will rise in value next year even if they do not really believe that this is so.
It is impossible for someone to know what is going on in someone else’s mind exactly. An individual may not even be consciously aware of the happenings and thought patterns in their mind. Without a great deal of evidence and logical arguments to support them, predictions of future prices have little educational value. It has been particularly difficult to make predictions during 2020 as there are more variables and unusually wide fluctuations in typical variables like economic growth, unemployment and retail spending patterns.
Those who buy coins during down periods and sell while coin markets are faring well are likely to profit if they selected coins that were part of the herd that marched upward. It is difficult, however, to time purchases and sales to effectively take advantage of market cycles. The coins that lead the way during one upswing might not increase in value, at the same level, in another upswing years later. Market levels for Superb Gem Proof Three Cent nickels, for example, reached highs in April 1980, and in March
1990 that they never again came close to realizing.
Rare date gold coins increased in value to a much greater extent from 2003 to 2008 than in the late 1980s. From 1987 to 1990, few speculators demanded rare date gold coins.
Gem quality Barber coins, Liberty Seated type coins, and Shield nickels were then far more likely to be pursued. During the late 1980s, type coins, representatives of the least scarce dates of pre-1934 U.S. coin series, were hot. From 2000 to 2015 or so, there were many collectors assembling sets ‘by date.’ Thus key dates and rarities were leaders during the bull market from 2003 to 2008. And again in the strong period dating from 2011 to 2015 or so. Some key dates and better date classic U.S. coins reached all-time highs between 2005 and the middle of 2008.
The immediate point is that when markets for rare coins skyrocket, coins of some types, dates, and grade ranges rise in value far more than others. No two cycles are alike.
Markets for rare coins are affected by both inside and outside phenomena. Outside issues include the overall economy, inflation-expectations, tax policies, and consumer trends. Inside the coin business, phenomena include collecting habits, policies of grading services, the marketing of coins to new or inactive collectors, the publication of books for experienced coin collectors, practices of influential dealers, and information available to coin buyers online.
Are Markets for Rare U.S. Coins Poised to Skyrocket?