Trichter said:
Hi Guys,
I'm currently accepting 1-to-1 swap offers, my 2011 pandas for your 1oz Lunar II dragons.
Over the long term, could the 2012 1oz silver Panda really outperform the 1oz silver 2012 Lunar II Dragon? Even with the vast differences in the mintages? What about Lunars in coming years? what are your thoughts?
And these are the type of questions that get me in trouble
In summary, yes, I believe that the 1oz silver 2012 Pandas may outperform the 1oz silver 2012 Lunars.
I am deliberately trying not to be inflammatory, so please be gentle in your responses. I AM NOT SAYING THAT DRAGONS ARE BAD COINS TO STACK. I AM NOT SAYING THAT DRAGONS ARE BAD COINS TO COLLECT.
Some quick reasons why I don't see 2012 Dragons outperforming 2012 Pandas (before I go on today's Panda Hunt).
1. Is it a bullion coin or a numismatic coin?
a) If a Dragon is a bullion coin, it really is selling for far too much at its release - hardcore bullion stackers are unlikely to stack these for "bullion" reasons.
b) If a Dragon is a numismatic coin, then there are too many of them available for their price to be astronomically high in the near term (less than 3years). But in the long term (more than 3years), who knows? Maybe... I personally don't think so, but I could be very very wrong.
2. Starting price of Dragons: It's too high. If we value the today's median Dragon purchase price to be around $80 or above, that places its issue price at double spot. If we measure the Dragon's future price appreciation in REAL* terms, the dragon is going to need a rather large following to get it to double in the next 1-3years.
*Here is how I define appreciation in REAL terms.
If you purchased a 2000 ASE when it was issued ($5-$6), and then sold it 11 years later ($40-$45), it would still only purchase ONE 2011 ASE. So there has been no REAL appreciation even though your FIAT appreciation was about 8x.
If you purchased a 2000 Panda when it was issued ($10-$12), and then sold it 11 years later ($400-$3000), it would purchase EIGHT to SIXTY 2011 Pandas. So there has been a REAL appreciation (1oz of silver now gets you 8-60oz of silver) and also in FIAT terms (at least 40x).
Why is that? Well, it takes time for something to double in REAL value, and the starting bar (issue price) is very high. E.g. It is easier for spot silver to double in price ($40 to $80) than for spot gold to double in price ($1700 to $3400).
E.g. Pretend for a moment that dragons were released in 2009 instead of 2011, and the issue price ($30) was double the price of spot ($15/oz), like it is today. Now fast forward to the present day, and imagine it needs to appreciate to double it's issue price worth in REAL* terms - just like the standard 2009 Panda has (issue price was less than $18 when spot was at $15/oz).
The dragon thus needs to perform at least 4x better than spot today. It must actualize a fiat price of $160. Up to now, no Lunar that I know has done that, achieve double it's REAL value in 2 years.
a) Do bullion coins generally appreciate so fast in just 2-3 years? Not many. Most people that are buying for bullion reasons would automatically reel away in horror at buying a 1oz of silver coin for double the material value. They would stick to the standard bullion coins (ASE,Maples,etc).
b) Do numismatic coins generally appreciate so fast in just 2-3 years? Possibly, but because there are still relatively large numbers of these dragons floating around, I don't imagine seeing their value going super high in the short term. (Long term perhaps, but I don't think so...)
3. Birth place of the Dragons:
Yeah, I've gone into this before, so I won't dwell too much on this point. The primary source of numismatic and bullion demand for most coins is from it's local population.
E.g. Chinese (i.e. Real Chinese people that live in China...as apart from Chinese people that live outside of China) people generally don't stack ASEs/Maples, because they can stack Pandas.
E.g. Canadians tend to purchase more Maples than any other group.
E.g. Americans tend to purchase more ASEs than any other group.
E.g. Australians tend to purchase more Koalas/Kooks than any other group.
E.g. As much as I want the Chinese to value a 1930 Penny, they don't value it as much as I do.
a) If the dragon is a bullion coin, it's too expensive for bullion buyers both domestic and international, to buy it for bullion reasons.
b) If the dragon is a numismatic coin, then it needs to compete with the Chinese dragons that are coming out of China. (I don't collect those either, but if I were to choose one, I would go with the Chinese dragon because of its wider support base, current undervalued coin sector, and future growth potential)
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Why I think the 2012 Panda will outperform the Dragon (in REAL appreciation).
1. Is it a bullion coin or a numismatic coin?
The Panda is first and foremost a bullion coin. It is released usually at less than 20% above the prevailing spot price of the day. Yet it does go on to have numismatic value quickly after release; at its release, it is a bullion coin (and often gets treated that way). That means that Pandas are often fingered, turned into jewelry, etc because they are bullion coins. Just like ASEs and Maples.
2. Starting price of Pandas is so low it's easy to double.
Because Pandas are issued as bullion this is an advantage (high demand). Because it doesn't have a high issue price, it can easily climb up the charts, and because of their high attrition (e.g. fingering, jewelry, etc), good quality Pandas quickly decline in population (lower supply), boosting the REAL value (of good quality Pandas) very quickly (price appreciation).
High Demand + Low Supply = Price Appreciation
Let's return to the 2009 Panda, which had a high mintage for its time of 600,000.
When released, they were only about 20% above spot. $18 per coin (it was actually less than this on release, but it's a good figure to start with), when spot was $15/oz. By early 2011, just two years on, its market rate was $90 (now is about $100). That's 5x increase in FIAT terms ($18 turns into $90), or a double increase in REAL terms (A 2009 Panda today is worth at least TWO 2011 Pandas).
This was fairly easy for the 2009 Panda coin to do. Its release price was low, and historically almost all Pandas have done better than spot since their release.
3. Birth place of the Pandas
There is so much local demand for Pandas, and with Pandas being in such small supply (mintages usually less than 6million per year, which is equivalent to just 1-2months production of ASEs), local Chinese demand is enough to drive the prices up, without even having to factor in international demand which is also very high.
Local demand, in my opinion, is the leading indicator for whether a coin will appreciate. If the Chinese don't want them, it's unlikely that the world will want them. At present, there is HUGE demand for them, so much so, that supply is tight, even for 2011s.
I see the doubling of the mintages from 2010 to 2011 (1.5million to 3million), and from 2011 to 2011 (3million to 6million) as a good indicator that demand is strong, and supply is tight.
We've been through the stats before, but lets quickly run through them again.
1,400,000,000 Chinese; 6,000,000 Pandas = 1 Panda per 233 people.
22,000,000 Australians; 300,000 Dragons = 1 Dragon per 73 people.
The supply of 2011 Pandas is THREE times tighter than the Dragons (not including worldwide demand for either coins). Or since this discussion is really about Dragons, there are simply too many Dragons. If Dragon mintage were cut to 100,000, then it is very likely we would see a greater appreciation of the Dragons in the coming years.
Of course, someone will say: "BUT the average Chinese person cannot afford Pandas like the average Australian can."
AND I would say "You are wrong." The average Chinese person doesn't go into debt, and tends to be a net saver - and could easily afford a Panda.
EVEN IF I agreed with you "Ok, the average Chinese person can't afford the Pandas." There are enough elite and middle class Chinese to adequately cover the Panda positions.
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There are a few more reasons why I think 2012 Pandas will outperform Dragons on REAL terms, but I think that's enough for the moment, I want to get to my hunt while spot is lower.
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In regards to the comment: "Pandas still have the problem of being pandas. Stupidly large number of knockoffs kicking around. I wont touch them with a 10 ft pole."
This is a typical response of a Pandaphobe exhibiting his Pandahysteria.
1. The counterfeit Panda issue is a NON-ISSUE in China. If you sell fake Pandas in China and get caught, you are likely to DIE. (If you sell them overseas, well that's different).
2. The local Chinese can recognize fake Pandas as well as we can recognize fake ASEs. (YES there are fake ASEs... at least 2 other Stackers have seen them now... I showed a fellow stacker the fake ASE being sold at the recent ANDA meeting in Sydney). If you are unfamiliar with ASEs you probably won't recognize it as a fake... same with Pandas, if you are unfamiliar with Pandas you probably won't recognize a fake. If you are familiar with ASEs, you'll probably notice it is a fake. If you are familiar with Pandas, you'll probably notice a fake Panda.
3. There is a reason why counterfeiters target Pandas - BECAUSE Pandas are profitable.
4. The more familiar people are with Pandas, the less of an issue counterfeiting becomes. E.g. People still accept $100USD even though this has been counterfeited many times.
5. The 2000 Panda is probably the most counterfeited Panda coin, and yet it still commands the highest price on average ($400-$3000). Why? Because informed people can distinguish between genuine and fake.
6. Do your homework. There are whole communities outside of Silverstackers dedicated to Pandas, and also identifying the latest bad bears (counterfeits). Peter Anthony's website has good writeups on bad bears, as does the China Coin Forum.
7. In my opinion the real source of Pandaphobia has nothing to do with Pandas, but is more of a heart issue, which is clearly recognized by this statement "Its hardly suprising. 90% of things coming out of china are fakes." This is a really very sad comment to make. Sinophobia cloaked with Pandaphobia.
how can they hope to compete against a Dragon?
