by Bruce Frohman
Speculators are looked at with disdain by some collectors in our hobby. The recent survey in Numismatic News displayed some heartfelt reasoning for the hard feelings.
Resentment does not improve hobby enjoyment.
A collector may appreciate the benefits that speculators bring to the hobby. As speculators bring in new money, positive consequences occur.
Production of New Mint Products
World mints annually produce many more coins than collectors can afford to buy. Speculators support mint profits when they buy more coins than the collector base would have acquired. Profits encourage mints to make a wider variety of coins for collectors to enjoy.
When mints produce more coins than collectors want, after-market values drop as speculators sell their holdings. For collectors, the drop in value can be good.
If a collector buys a new mint issue and speculators drive up values, the collector can sell during the short-term speculation and buy another coin later at a lower price in the after-market. Or, he can buy extra units from the mint, sell the extras at a profit and use the profit to pay for the coin he put in his collection. (The collector can temporarily join the speculator group.)
If a collector buys only one piece and the value drops in the aftermarket, then the collector holds a coin worth less than he paid. To offset the loss, the collector can speculate by buying more of the same issue at the depressed price to dollar-cost average, recovering the loss upon future appreciation.
If a collector waits to buy a new issue until the value has dropped in the after-market, he may acquire the coin for less than what the mint originally charged.
As an example, many U.S. Mint commemoratives currently sell for less than the original issue price. New collectors of the series are acquiring bargains. If speculators return to buying modern commemoratives or enough new collectors start acquiring the series, collectors will see gains in the value of their coins.
Is the Mint’s Overproduction of Coins Bad for the Hobby?
Some argue that overproduction of coins is bad for the hobby. After all, most modern commemoratives are worth less than the Mint’s original issue price.
Most collectors agree that modern commemoratives are beautiful coins. As values are depressed, the oversupply may attract new collectors to the hobby because the coins are affordable. Plus, existing collectors of other series who want to diversify into modern commemoratives can acquire the set for much less than they could when the Mint was originally selling them.
Speculators Help Support Coin Dealers
Any coin dealer who has been in business for a while thanks speculators for helping make his business profitable. Speculator support enables collectors to have a local place to buy and sell.
How Speculators Affect the Entire Coin Market
In the last few years, coin market values have been in the doldrums. Richard Giedroyc has written about this in the “Coin Market” column of Numismatic News. Prices have been weak for many issues of U.S. coins. Not enough collectors are buying coins to support recent price levels.
The greatest appreciation of values in the hobby occurs in periods when speculators are the most active. In the 1970s and early 1980s, the value of high-grade Morgan dollars skyrocketed primarily due to Wall Street speculators. Other speculators drove up values of lesser-grade Morgans. Collectors who sold holdings during the boom made big profits. Some dates of Morgans became unaffordable, a gripe repeated by collectors acquiring the series.
Who Likes Speculators?
If a collector wants his collection to appreciate, he welcomes speculators. If the collector does not care about his collection’s value or he is actively acquiring coins, he may disapprove of speculators. In the long run, most collectors benefit from speculator activities due to appreciation of assets.
In recent years, speculator/investor driven bullion values have increased faster than numismatic values of common date gold and silver coins, wiping out numismatic premiums.The bullion speculators are looking for a hedge against inflation without intending to impact the coin collecting hobby.
Example of Adversity from Speculation – Or Not
I recently tried to buy a limited issue U.S. Mint product, which sold out in less than 10 minutes. I did not blame non-collecting speculators for my lack of success. Instead, I saw the Mint deliberately creating a rarity. Despite my inability to acquire a new issue, I was happy that I still had $65 to buy coins elsewhere.
Looking for the sold-out Mint product on the after-market five days later, Pinehurst Coin Exchange was selling the $65 coin for $699 each, had already sold 71 coins, and still had 10 remaining to sell. Through a clever buying strategy, Pinehurst had many coins to sell even though the purchase limit was one per customer.
Most collectors get angry when something like this happens. After all, shouldn’t everyone have equal opportunity to buy a Mint product at original issue price?If the scheme draws speculators into the hobby, it is good for Pinehurst Coin Exchange and the hobby in general.But collectors need not be sucked into speculation fever. Instead, collect where speculators are absent. Plenty of beautiful coins exist that are without inflated values.
A weakness of some collectors is to dogmatically seek to acquire every single issue of a series. As a consequence, a collector may overpay for a date that is in play by speculators and resent them for it. This compulsion interferes with hobby enjoyment.
Why feel bad about missing out on something too expensive when so many attractive affordable coins exist?Why not branch out to a new series? Indian Head cents and Buffalo nickels are bargains right now, with few speculators. Enjoy putting together a set before speculators realize the coins are undervalued.
The smart collector admires attractive coins possessed by other collectors and speculators but it is wise not to envy them. Each collector has his own treasure to enjoy. Let the speculators boost market values so that everyone prospers.
This “Viewpoint” was written by Bruce Frohman, a hobbyist from Modesto, Calif.
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