I created a post earlier that seemed to garner some derision as an attempt to sell worthless junk, (just calling a spade a spade, but thanks) Well, I would like to open the octagonal square circle, and answer any rebuttals posters may have regarding numismatics as an investment. Please, it is best to keep it to genuine queries where I can really help. For this reason, and unlike Tyler Durden, there are a few rules. Keep it clean, keep it civil, and keep it real. Fair enough? Let's get reeeeaaaaady to debate. (Oh; PS I do have a job, so please forgive if replies are not instant.) My position: Rare coins are one of the most important assets one can own for a multitude of reasons. Numismatics ARE NOT an alternative investment, they ARE A PRIMARY investment. Two of my favourite reasons are here: http://seekingalpha.com/instablog/969455-madnumismatist/220427-rare-coins-in-need-of-a-few-good-men And put a little more poetically here: http://www.scoinsandbullion.com/blog/157-using-time-travel.html Yay or nay; silverstackers?
It depends on what you class as numismatics. It seems that if a coin isn't bullion, then it is automatically numismatic and therefore demands a massive premium. I would say there is a third class between bullion and numismatic, rubbish. So it goes Bullion, rubbish, numismatics. Much of what the mints churn out I would consider to be bullion or rubbish. Just because it has a coloured picture on it / is in a funny shape / is commemmorating 20 Years of the Wiggles / has a massive premium / comes in a cardboard holder or plastic box doesn't make it numismatic in my eyes. People who collect them are not numismatists, they are collectors. The hobby needs both to survive. Numismatists study coins, they grade them, they have a deeper knowledge of the production, use and storage of coins. With this knowledge they are able to have an understanding of what makes a particular coin valuable and they can invest in certain areas. A collector is happy to speculate on a coin hoping to get the next Redback spider which they can then sell to another speculator hoping to make even more money and they can both pat themselves on their respective backs and tell themselves that they are coin investors. Some coin investors I know will only make a few purchases a year and they might be for $50,000 a coin. They will fly to England to examine metal detectorist finds and will identify the coins for the local museums, then buy what they need for their investment portfolio. A numismatic will likely only collect one or two coins in a set, for example they may have the 1930 penny but none of the others. Collectors may well have all the others but not the 1930 penny. I think if you like the look of a coin then it doesn't matter if it is a good investment or not, buy it because you like it. I would rather be stuck with a coin I like than stuck with a coin I thought would go up in value, but didn't.
Call it what you like - Numismatics or making a buck from coins etc. Most people on forums such as SS that buy "modern" numismatics do so to make a profit, "some" do quite well. :| You don't have to be a coin guru to make a buck with modern numismatics, what you need is a good understanding of what will sell "now" and what has the potential to make a reasonable profit in the future. The modern numismatic speculator does not need the skill set to buy a $50,000 $100,000 coin but what they do need, is good IT, high speed broad band and access to coins on the day of issue and plenty of contacts to ensure their objectives are met. The average bloke is better off buying modern numismatic coins that he can flip or hold onto, if he can make a decent profit, large or small, commensurate with his life style that's all he needs to accomplish. Learn the basics first then, if you are good at buying and selling delve deeper, but analyse your self first and why you choose numismatics to make a dollar or two, perhaps you'd be better off speculating else where, they say backing the favourite is a good way to make a buck! :lol: Most will fail with modern numismatics or break-even, but it's better to loose a few hundred than to loose thousands on a single purchase; sure numismatics of old is intriguing but there's many traps that new comers should not expose themselves to until they are experienced. :lol: Having said that, the world is full of speculation and opportunity, so if you are young and can afford to lose your capital, so be it, you can always rebuild your wealth if you are young. Our Senior citizens should be very wary of investing in any expensive coin imo and those who have no idea about numismatics (young or old) should keep "some" of their money tucked away in an Australian Bank Account. Diversify, but only diversify in what you understand. Be careful. H
I've got a question on a modern numis coin. The Australian mule dollar. To my understanding it is estimated there are only 6,000 or so of these. It was a 2000 coin (minted in the year 2000) and as far as I know the only error $1 that there is more than 1 or 2 off (not a mistrike etc). The way I see this is in 80 years time (when our currency has moved on - possibly from decimal to something else) people will look at this coin like they do the 30 penny. I think they can be had for around $400 and I have been seriously tempted to look into buying a very high grade (if I can find it anywhere). I would appreciate if anyone could clarify if I am correct RE numbers and minting etc. Thoughts?
That is what I have heard on the $1 Mule, though I thought the prices were in the $500s for a not so good example. There are some people who have found around 30 of them by going to the casinos and sorting through thousands of dollar coins a night but I have not heard from them recently and the Casinos started getting a bit grumpy about it. The likelihood of a mint roll turning up is slim and I think any coins that get picked out of circulation now will be in poor condition. I would also like one, back 5 years ago I was seeing the wavy 20cent coin for about $250 or so, now I am seeing them offered for around $1750. There is money to be made in modern numismatics for sure.
It is bigger than most people realise. I wish I had gotten into it 10 years ago. I know I would not be were I am now. Numismatics, very broad and all covering. Even bullion still falls under numismatics. Brass Pandas yup etc... SO really IMO you need a better description to the field. At least three, as mentioned they are all very different strategies. My simple suggestion falls as - Numis Investor - He is the one with the key dates and rare items. Quite a small yet selective investment. You would say $100K+ min for this class. Some examples - Rare Sovereigns, Penny Proofs, Old Banknotes, Star notes etc... (Key MCC) Value of each purchase approx $10K - $50K+ Numis Collector - Alternatively this is what you would call the mainstream, the ones that have a full set of Pennies, but a hole in the 1930 etc... Some examples - $1 Mule, Old notes various cond, Mixed coins and cond Value of each purchase approx $100 - $500+ Modern Numis - This is your Lunar Dragons, General MCC's etc... Some examples - Complete Kook set, Full Koala set, S1 Lunar sets, now going into other weights and sizes ie: 1/10 Gold set. Left over Clown Fish It would be good to populate a little further with what you think as well. A simple heading in the For Sale with similar guidelines could be useful to stop me looking at the 3256 bumb for Modern Numis ! BOT - What should an investment do ? 1. I suppose it needs to grow in value that is obvious. Rare coin market has grown at around 14% so a Tick here 2. Needs to be liquid. With a dedicated group of people wanting new stock, rare and good quality Numis is very liquid. Tick again 3. Has some controls in place. A global standard is slowly developing with slabbed coins and the US system MS66 etc... Tick again 4. Privacy, if needed it can be a very anonymis exchange, small generally and easy to store. Tick again 5. Bring Enjoyment, owning a very rare or even one of a kind item is something very few get to do. Tick again We get the investment side, I am sure there are others but just a quick grouping. Next what is a Liability or an Asset ? Most simple term I have seen is an Asset adds income, and a liability takes income away. Numismatics, I would class as a Liability, the reason is that it has taken Money away, be it savings or loaned money. If it is loaned money you cannot claim it unless it is earning an income. So unless your 1930 Penny is being rented by CBA you cannot claim that way. Also if it is from savings then you are not getting any return, could be interest, dividends, etc... So to me it is a liability. So X on this one. Before people say, yeah but you get growth and you have it so it is an asset, I refer you back to my summary (agree or disagree) it is a Liability. It brings us to what is the next point. Risk ! The Numis has many risk factors, storage and protection being one. Getting insurance, damage to item and so on. What about price change, some back yard stash of 1930 pennies uncovered from old US sailor ? Yeah unlikely but not impossible. If you look at all of the other issues, I would think risk is minimal. So a tick here as well. Summary, from the key points I made, it is my opinion. That the field of numismatics can make a very solid part of ones investment strategy. In particular what I have classed as the Numis Investor, for long term growth you could do very well in this area. If short term gains are your goal then Modern Numis would be your area with quick flips of $20 - $500 possible in one transaction. What I do not like about Numis is that it does not create any passive income, to me and from most things I have read you need passive income to create real wealth. So at my stage I would not have a large portion in Numismatics, however I do have a portion. One that is slowly developing into a key field and areas that I enjoy. To me these are Pre Decimal (Notes, Coins, Sovereigns) and MCC. The rest is trade and flip as needed. I say yes to a Numismatic investment in some form
I guess i made 20% of my income off coins last year. So its sometimes lucrative and fun and available in your pocket change if you do decimal. But it isnt all happy sunshine days either. The Australian coin market is terrible at present. Some of my shockers this month. Gem UNC AU$1.00 coin (apex) 11 cents.. Gem 1977 5c sold for 1 cent. 11% and 20% of face value. So Numismatics, if you chose to trade in them, also carries risk.
@Jizlizard - I like the point of 3 categories including "rubbish". I would also suggest that everything coming out of the mints today's falls into the category. They essentially pump out junk by the bucket load and charge double the real (metal) value for a box and bit of paper. All dealers would love to be able to operate on such margins. I do not agree that you need both markets to exist- the so called collectors mostly do not realize a sophisticated secondary market exists and blindly buy off the mint thinking that is their only source. To be frank dealers do not make it easy either. Most of them are self aggrandizing conceited idiots that look down upon anybody without the right knowledge. The travellers you mention sound more like "vest pocket dealers" rather than collectors or investors. Most of our clients do not have the time, knowledge of inclination; that is what they pay us for. I have several clients that only buy a specific coin and they are hoarding them. This can be a profitable strategy, but can also be risky should the coins need liquidating fast. @ Holdfast. Excluding mint errors modern coins are the biggest rip off ever, as above, I can only class them as rubbish. The problem is the resale market. After paying the premium, the secondary market is very limited, with dealers able to locate quantities without any problem. When buying for the long term, which we all should, you want to have some kind of certainty that the secondary market will still be there. I believe, this is one of the main reason coins have a bad reputation as an investment, and why I decided to start this post. A lot of people are blindly piling into silver coins and paying a huge premium- sometimes over 10%, for coins that can only be sold for 10% below the metal price. In the UK silver is subject to 20% VAT. So a $34 coins sells for over $50, and people are buying them had over fist. It is insane and will only lead to tears and accusations of a rip off dealer. Also, speculating is a sure way to lose money. Saving/ hoarding coins is where the money is made. By consistently setting aside small amounts for the long, if not indefinite, term is the way to go. Only speculate if you are a dealer, and even then, I will only go for absolute safe bets. @ Elemental/Jislizard- error coins are a very active part of the market, I think it is almost a fetish for some to own a product that the mint screwed up- the bigger the screw up, the greater the value. The problem is that it is a relatively thin market and thus subject to swings. Right now, they are not popular and prices are down. 6000 coins sounds like an awfully large supply. Think about the size of the total collector base, and then how many specialize in error coins. This sounds to be me like a telemarketer's scam to sell hundreds of coins by telling each buyer they are unique. They do the same with "first strike" and coins that grade MS-70/ PR-70. They can sell for a lot of money, but it is the resale you should focus on. Ask as dealer what they are paying for the coins. By searching bank rolls is a sure way to make money without any downside risk- you will always get your money back. That reminds of a guy who became an air mile millionaire in the USA. The mint was promoting a $1 coin at face value with free delivery to get them into circulation. He started purchasing tens of thousands using his credit card and accumulating air miles. He would get the coins, take them down the bank and pay off his credit card bill. @ Austacker. I think your point is what I want to get across; the coin market is far bigger and more sophisticated than most people think. Also, I think it is fair to say that in all three of your categories, every single one of them is an investor. Even somebody collecting pocket change hopes to sell the collection for a profit. The main distinction is of course budget. I also agree that coins are not an income producer, but this is a prime reason to own them. You are taking money out of "the game" and saving it. Whether that a store of value is an antique, a Warhol, or a 1930 penny, it is money that is out of the system and secure. It is even better if that safe asset is un-taxable. If you have $100 and stash $10 in a coin, would the income on that extra $10 really make much of a difference? Yet if you have that $10 compounding at ten percent for twenty years, it will have a huge impact in retirement, or for school fees. IN SUMMARY: In summarizing my replies to the above comments, I would suggest keeping away from modern issues unless you can get them at bullion prices and are buying them for the bullion. It is highly unlikely that any modern coins will ever become rare, and that goes for the first strike, MS-70 type "bargains" too. They are primarily the construct of telemarketers and have little demand in the secondary market. Do not buy coins as an "investment" in isolation or as an alternative to buying something else. Collect them year in year out with a little bit of money and be prepared to hold them for decades not years and certainly not months. Even seasoned dealers do not speculate on what will be in favour at some point in the future. Your collection should become a way for you to take money out of the system and store it in a convenient form. It is like a casino; you have only won when you have cashed in your chips and walked out of the door. With investments, you have only won when you have cashed in your paper for a real asset.
This is amazing 8 posts and it still hasn't degenerated. I like your point about taking money out of circulation, certainly all assists in the money in circulation area. As to how much real difference it makes, I would think is negligible but we all do our part. I also agree about the return on $100 as you mentioned. However looking at what we are talking about in larger chunks it would be more like $10,000 returned PA say on $100K. That $10K over 5 years could make some further interesting purchases with further added cash flow + growth etc... and so on. Which is why I see it forming a part of the portfolio. Again the $'s probably don't matter as everyone's income is different, so the question is, what % could/should a Numis portfolio hold. If I look at my holdings I would think somewhere from 10 - 15% a mix of above categories is working for me. Another 20% is invested returning a small cash flow each month + tax breaks.
I will go for bullion for business for numismatic ... Oops I just drop it, back to bullion again :lol:
For me, numismatics makes up the majority of my stack - for the following reasons: 1. Cash loses value... inflation, QE, etc. (I think we all understand this concept) 2. Bullion keeps value... i. A one ounce silver bar 20years ago, generally only buys a one ounce silver bar today. ii. The cash value of the silver bar may increase over time, but the purchasing power of the silver bar pretty much remains the same. E.g. A 1966 Silver 50cent piece generally buys the same stuff if bought back in 1966 (a reasonable meal). 3. "Some*" Numismatics increase in value. i. Pick any silver Panda since 1989, it can today buy more ounces of 2012 Pandas (or silver ounces) today. ii. A 2009 1oz Silver Panda can generally buy/swap for 1.5-3x 2012 1oz Pandas today. iii. A 2000 1oz Silver Panda can generally buy/swap for 10-20x 2012 1oz Pandas today. *Some numismatic items don't do well. Like many things, homework is important.
@ Austacker. Let's say you have a $100,000 of liquid, investable wealth. If you "risk" it all and double it you have $200,000. A nice return. However, if you only risk $90,000 and double it, it is $180,000. Is it really that much of a difference? On the downside, if you lose half your $100K, you have $50 left, but if you have $10k stashed in coins, you will have $55,000 of assets, and as many are finding out today, more like $70,000+, as bullion and hard assets tick up. On balance, you have reduced risk but almost 50%. And again, if it doesn't happen, you still have the coin stashed away. I will be frank; it is the main part of our sales pitch: Risk. Not profit. If you really want to speculate for profit, you are better off elsewhere; silver, gold, futures etc. If you want to lower your portfolio risk, coins have a very important part to play. Also, if you think about somebody that has $10,000 to drop on a 200 years old ounce of silver, they are generally looking to preserve wealth, rather than make more. @ Alor- I know what you mean, I have done it ; ) in fact jut last week I knocked a few grand off a coin. Oops. @ Yennus. The thing about coins is that they are not a "fixed supply", they are actually declining (see my comment to Alor) coins are being lost damaged and taken off the market every day. Just with human population growth, prices will continue to rise. I often wonder what will happen when currency disappears altogether, and we have a chip implanted or a barcode tatoo. (After all, we must stop those nasty tax dodging, terrorist, drug dealers.) Will people stop collecting, or will they look upon these shiny discs of yellow metal in the same way we look upon Cowry shells and tally sticks today? Future generations will probably think how quaint. Why would they bother with such a cumbersome method? Yet; coins are unique works of art. Some of the only official portraits we have of Alexander, Caesar, or Xereses are from the coins of that era. Will they ever go out of fashion? I think not. I also think you can tell I have a passion for my job, and I really consider myself privileged to be able to handle some of the coins, even the ones I cannot afford ; ) We have so much to learn from coins. "Numismatics" is defined in the dictionary as the science and history of money. That is why I am loving every single disaster the banksters come up with. I hope Uncle Ben Bernanke stays in forever. He is doing our market a world of good
Here is my position: The word investment has many meanings so it depends on your definition. I use Benjamin Graham's version: An investment involves purchasing an asset that will provide a return over a period of time. Purchasing an asset with the expectation that it's value will rise in the future is speculation, not investment. Some shares are investments (eg: telstra) while others are speculations (an exploration company). Same with property - buying a building that pays rent is investing. Buying land for future development is speculation. Precious metals are a form of speculation, not investment, as gold and silver do not generate any income. They can, however, provide a hedge against inflation. This is because the world price of metals is largely based on what it costs to mine them. As the cost of labour, machinery, oil etc etc. rise with inflation, the metal prices will naturally rise as well. Rare coins are an asset class similar to antiques and art works. By (my) definition they are not investments, as they do not generate an income. By buying them you speculate that you will be able to sell them to somebody else in the future. Rare coins of a high quality will always be desired amongst collectors - the question is what they will pay. There is potential for very high returns if you manage to pick the right coin(s). But there are also risks - many out of your control. For example, in Australia, many rare coins are purchased through an SMSF. The govt could change the SMSF rules tomorrow and no longer allow coins/artworks. This would definitely have a large affect on values, as that source of funds would be closed. I think the ones that can do well out of rare coins are the true collectors that have the passion, skills and the money to buy. I'm not so sure about the so-called investors that buy rare coins for large sums under advice of experts. Same as people "investing" in art works when they know nothing about art - probably not a good idea.
I would agree, but I kind of find the debate about the definition of an investment, a little pedantic; anything we buy/ do in order to save or make money is an investment and a speculation. Changing electricity suppliers is an investment, car/ house insurance is an investment. They are both speculations on what may or may not occur in the future. Any decision we make concerning the future is a speculation; a gamble, because we have no idea whether Telstra will remain a dividend paying proposition: look at Cable and Wireless/ Global Crossing. Both Telco's with great business plans, at the time, but both are now in deep dodo. Let's forget about Enron, I mean surely everybody needs electricity, and would have safely predicted a steady income stream. Until they didn't. As one of the links at the head of the post posits; I believe that buyers of coins are preserving important relics for future generations. In return for that speculation, they are rewarded with an increase in price. That increase in price is not because the coins/ antique/ art work became any better. It is because paper became worthless. The reason I joined this forum was because somebody linked to an article concerning a widely used index showing $1000 invested in 1970 was worth $68,000 today. It is only when you look at the purchasing power of $1,000 in 1970 do you realise it was about three months salary. Today three months salary is about $12000, (roughly what the S&P 500 has returned WITH DIVIDENDS REINVESTED, AND EXCLUDING QE 1,2,3) so in purchasing power the coins have performed very well. (Set aside for a moment the odds of selecting the right coins, the index is 3000 coins, dates grades and denominations- quite broad). Looking forward another forty years, and assuming inflation/ money supply remains constant (if only) it is safe to speculate our children/ grandchildren will be earning six figures per quarter. The coins did not get any better; it is just that the future will have more paper to buy the same thing. The main thing I would like to point out, is coins are not Telstra/ Enron. One cannot treat them the same as the stock market or any of the so called traditional investments, although coin collecting/ investing has existed for far longer than any other asset class. Perhaps this is where the definition of investment becomes important, because if people do treat them like stocks, they are opening themselves to a whole world of regret. Don't speculate; hoard. PS: it is funny you use Ben Graham, I have a good post on Warren Buffet. Although he has never publicly admited being a collector I have long believed so. In the Snowball, he gives some strong hints. As does Ron Paul in End the Fed.
