The Year Starts With A Bang

The recently completed FUN Show in Orlando, Florida was a smashing success based on most of the feedback I received by those in attendance. The bourse floor was buzzing with activity from beginning to end. Many of the dealers who had planned on leaving Friday afternoon either changed plans or had a hard time getting out the door. The FUN organization has instituted a new policy that deems having your bourse table open on Sunday as optional rather than mandatory. This year, dealers who held out to the end were rewarded with brisk business. The FUN Show has always been considered a bellwether event. Based on this year’s activity, the coin business has much to look forward to in 2013.

The bourse this year had over 600 tables set up, which I’m sure is a new record for FUN. At every convention, I make an effort to visit each table in search of new merchandise. With 600 tables, it was hard to know where to start. It could have been worse, as there were a couple of hundred ancient and world dealers in New York the same week for that part of the market’s annual convention. On Wednesday afternoon, I began the eternal search for new deals. I, and another 30 or 40 top professionals, began to scour the bourse floor looking for anything we could make money on. The first hour or two is very exciting and competitive to say the least. As I have mentioned in my articles before, “first shot” can be worth thousands and “second shot”—not so much!

After the dust settled, I had the good fortune of coming across a few great coins. I had spent over $100,000 with one dealer and around $65,000 with another. Soon, however, it was down to a few coins at a time. With over 600 dealers set up, you would think the bourse floor would be brimming with new and incredible deals. Unfortunately, that is not always the case. There are quite a few smaller dealers who take tables at the January show. Many of these dealers have a very limited inventory. Quite a few specialize in one type of coin, paper money or other numismatic–related items. It was not long before it seemed that I was circling the bourse floor in an endless loop. Most of my other competitors soon felt the same way.

Anyone who has been in the rare coin business for the last few decades can tell you that the make up of coin shows has changed considerably over the years. There has been profound consolidation in the rare coin business. However, this is not readily apparent as the number of tables has actually increased. The big change is that a handful of major players now have a majority of the rare coins at any given show. I would estimate that the value of the coins offered at the top 10 dealers’ tables surpassed that of the other 590 in attendance. Most of the top dealers are now heavily financed and carry a huge inventory of rare coins. Each of these dealers was extremely busy at this year’s edition of the FUN Show. The only complaints I heard came from dealers with light inventories. There is much truth in the old saying, “You can’t sell from an empty wagon”!

One of the reasons that some dealers are experiencing difficulty with inventory is the tremendous number of coins that are sold at auction. Heritage Auctions sold nearly 9,000 lots in Orlando last week for over $45,000,000! When my company, Mid–American Rare Coin Auctions conducted auctions at FUN in the 1980s, we were excited to top the $3,000,000 level! Kind of makes me wish I was still in the rare coin auction business. Heritage does a great job, but many of those coins would have been sold on the bourse floor in years past. Times have changed, but many dealers have been left behind. Quite a few have turned their attention to modern coins, or some other specialty with less competition.

The Internet probably has more to do with this new development than anything else. Thanks to the Internet, buyers from all over the country can purchase rare coins with ease. Heritage reported that they had 3,835 bidders by Internet alone in this year’s FUN sale. More coins were bought over the Internet ($13,859,981) than were purchased by floor bidders ($11,963,419). The nature of the buyer has also changed dramatically in recent years. Twenty years ago, rare coin dealers probably purchased 75% of the rare coins sold at auction. Today, that number is closer to 25%. Retail coin buyers now compete with each other for the rarities to complete their collections. This works great for consignors in most cases.

I’m sure the consignors of most coins were delighted with the prices their pieces sold for in the 2013 FUN sale. A few, however, were disappointed. This is not because the coins sold for too little, that would be hard to argue with nearly 8,000 bidders competing for their coins. The majority of retail consignors to the sale had put their coins up for sale unreserved. This is encouraged by the auction houses to entice bidders to bid aggressively, knowing that the coins will sell regardless of the price. The thinking goes that coins with reserves discourage action. The auction commission is also considerably less if the entire consignment is sold. What are the risks of this strategy? Sellers with large holdings must consider this question very carefully when consigning rare coins to auction.

The most obvious risk is that your coins will sell for considerably less than you had paid. This can be a huge problem if you have purchased super high grade coins in an area of the market that has recently seen less collector participation. High grade Lincoln Cents were extremely popular a few years and regularly broke price records when offered for sale. There were several very aggressive buyers. Unfortunately, a few of those buyers have dropped out, and prices have come back to earth. Most segments of the rare coin market remain strong, so this is not usually an issue. My best advice on this subject is that selling coins unreserved is best suited when offering a complete collection of a particular series. By placing reserves, you run the risk of ending up with a few coins that are now stale in most buyers’ eyes. If you are selling a handful of great coins, I think it is best to establish a minimum selling price to avoid “reverse sticker shock.” Sometimes it is critical to have a minimum established for how cheaply you are willing to sell a coin. Most auction houses will offer advice on this issue. Obviously, you should keep in mind that the auction house makes more money if your coins sell.

As I have stated in other articles, seeking the advice of a seasoned rare coin professional when making these kinds of decisions can be a very good idea. Behind most great collectors, is a group of dealers who have not only helped build their collections, but have been there when it came time to sell. With the amount of money that trades hands these days, sound advice is worth every penny!

Questions about the rare coin market? Send them to wmr@ngccoin.com.

Jeff Garrett bio