Coins in the fast lane, even licking stamps

[sound 25]

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11502909/coins-stamps-alternative-investment.html

We have called it right according to this.

Mark

[Paulus 1,975]

For now, perhaps, with coins I feel a bubble has been growing at the top end which is in danger of bursting, but I hope that feeling is wrong! Mind you I don't have many coins worth more than £1k!

Somewhat surprised that rare stamps are buoyant again, might have to dust off my collection (I started with stamps when I was 6) and see what's what!

[sound 25]

Paulus,

I'm not sure about this bubble thing. Don't get me wrong having given investment advice all through my working life, now retired, I have seen several bubbles.

However it just strikes me that coins and stamps have just caught up. The thing is no one is reproducing them any more.

How much longer before coins are a thing of the past? Take a look at fountain pens. They are going up in price all the time. Why? Production numbers must be dropping.

Never good to be complacent but in a low interest rate economy, aside from the pleasure of collecting, this dosn't appear to be a bad place to park some cash.

Mark

[Rob 3,152]

You also have to bear in mind that the article quotes Gibbons when relating what the market is doing. Gibbons and Baldwins have been pushing coins as investments for a few years now, but that isn't the same as a neutral expressing an opinion. What do they use as the criteria for deciding where prices have gone? If they use their own FPL then prices are doubling with every issue. As with all statistics, it would be good if you knew the conditions under which the data was sampled.

[Paulus 1,975]

Paulus,

I'm not sure about this bubble thing. Don't get me wrong having given investment advice all through my working life, now retired, I have seen several bubbles.

However it just strikes me that coins and stamps have just caught up. The thing is no one is reproducing them any more.

How much longer before coins are a thing of the past? Take a look at fountain pens. They are going up in price all the time. Why? Production numbers must be dropping.

Never good to be complacent but in a low interest rate economy, aside from the pleasure of collecting, this dosn't appear to be a bad place to park some cash.

Mark

Mark, I always value your insights and you have far more experience than I.

Two observations though ...

• It is recognised that separating investment strategies from collection or hobby strategies is an intelligent approach
• Supply and demand will always win out, the fact that the supply of old coins, stamps and fountain pens has of course dried up (except as Chinese replicas) does not mean that values will increase over time, demand is far more difficult to predict!

These two points are of course obvious, but I make no apologies for restating them! I want coin prices to fall as a collector/buyer, and increase as an investor/seller - obviously!

My bubble point relates to high end coins going through auction houses such as Heritage ... there is a built-in spiralling price effect due to the hype and commission, with some coins the whole house of cards will just crash down, which might have a knock-on effect. I don't operate at that level, so it is, as I said, just a feeling, watching from the sidelines.

Edited March 30, 2015 by Paulus

[damian1986 142]

This isn't meant as a whinge but coming into collecting relatively recently it wasn't as an investor but as a collector. My desire to purchase coins isn't fuelled by how much I can make on them. When that desire is lost, or the motivations are replaced with an investor mentality, what happens then? If collectors aren't around to inform the investor market then they might aswell be trading in numismatic futures - devoid of emotion and personality and substance in the context of the history of our coinage.

I'm going overboard but two things that wind me up about that article - and I'll defer to you lot because you are the ones in the know, BUT:

1. Barring the odd blip, were coins ever a poor investment anyway?

2. "Companies can fail" - so what? Grow a pair and commit to something instead of sitting there drooling over your unresearched Triple Unite in VF.

Edit: a bit harsh the more I think of it considering how much money is invested in startups and other small businesses. Don't want to sound like tooo much of a prick.

Edited March 30, 2015 by damian1986

[scott 144]

everyone is too busy investing in every 50p and £2 they find atm.

[jaggy 528]

This isn't meant as a whinge but coming into collecting relatively recently it wasn't as an investor but as a collector. My desire to purchase coins isn't fuelled by how much I can make on them. When that desire is lost, or the motivations are replaced with an investor mentality, what happens then? If collectors aren't around to inform the investor market then they might aswell be trading in numismatic futures - devoid of emotion and personality and substance in the context of the history of our coinage.

I'm going overboard but two things that wind me up about that article - and I'll defer to you lot because you are the ones in the know, BUT:

1. Barring the odd blip, were coins ever a poor investment anyway?

2. "Companies can fail" - so what? Grow a pair and commit to something instead of sitting there drooling over your unresearched Triple Unite in VF.

Edit: a bit harsh the more I think of it considering how much money is invested in startups and other small businesses. Don't want to sound like tooo much of a prick.

Not at all the same thing. When you invest in a high risk startup you are looking for a return of 3-10 times your money in a roughly 5-8 year time period with a high risk of the business failing and losing all of it. With coins you generally don't have the same upside potential or the same downside risk over a similar time period.

Coins are not a good investment vehicle. First, the costs of buying and selling are too high. Second, the historical returns taking into account those costs are simply not there. When you are paying around 20% commissions on both ends (at auction) or paying the profit a dealer wants then that is eating your profit. Of course you can make money on coins. But it really requires a collector's knowledge (rather than an investor's knowledge) to take advantage of undervalued pieces and to get a level of undervalue that compensates for buy/sell commission is rare. Third, coins don't pay a dividend (like many shares) and you cannot live in them like houses. So there are no compensating benefits while you hold them.

Edited March 30, 2015 by jaggy

[Geordie582 18]

Hmmm! Never though of my humble collection as an investment, rather the reverse! But it will never realise much anyway. Still this sort of chatter spoils it for me!

[Rob 3,152]

If the top end does come crashing down the lower grades are still likely to see a reduction. When a £150K coin sells for only £100K, everyone will point it out. When a £30 coin routinely sells for £20, it will not be so obvious, but the change is the same.

Edited March 30, 2015 by Rob

[DaveG38 405]

It's probably fair to say that those of us who started to build or re-build our collections around the early to mid 1990s have done pretty well over that 20 year period. When I look at what I've had to pay in the more recent 5 years then I doubt there's any profit in it. I've just paid £1800 for a 1841 halfcrown in GF to NVF condition. I'm happy with that, but I don't expect to be able to sell it any time soon (not an issue as it's in the collection) for a profit, and may, even in the long term, make a loss on it. Compare this to a GF to NVF James II 1687 halfpenny bought in 1999 for £70, and likely to fetch around £500 now. And so it is with many of my early purchases, particularly the better or rarer pieces.

This all makes for a nice potentially profitable hobby but isn't my primary reason for collecting. Nice to know that I'll make a nice sum back when the time comes to sell, unlike my other half's dresses, which she claims to be an 'investment' but which mostly end up at the charity shop after a couple of years.

[jaggy 528]

I estimate that the value of my collection has gone up by 77% since I started collecting around 1985. But that is at retail. If I subtracted selling costs of, say, 20%, that reduces my total gain to around 41% over a 30 year period. Maybe at the right auction I could get a bit more. But I could also get a bit less. That introduces too much risk into the process for me.

By way of comparison, my retirement dosh which is placed in a 'moderately conservative' and pretty diversified portfolio with a well known manager has been doing around 7% a year. Needless to say, I am a collector and not an investor.

[sound 25]

I take the point that most collect for the joy of it rather than an investment. Perhaps in the same way some buy a house to live in, but in time, historically, they have done nicely.

However the fact is that serious money needs to find a home, and some of it has found its way into alternative investments, always has always will. Money is like muck, needs to be spread. Particularly during the recession money from new investors was diversified into alternatives, away from stocks & bonds.

Now this dosnt always suit the collector, it tends to push up prices. However collectors over a long period will not be complaining to much.

This may result in some collectors because of undersandable cash constraints being pushed into more recent eras for their collecting material.

As to the investment value of coins, well you can see the appeal. As a potential store of wealth they can be passed on to later generations. Of course everyone's tax affairs are different but nevertheless coins are convenient. There really is some merit in combining a hobby with investing for tax planning purposes. It may not be high on everyone's radar but it has merit.

As to the potential losses referred to earlier because of auction charges etc, while that is true, it could be said of many investments initially. But it is a factor and should be considered.

With stock markets high, both here and in America, we may well witness further diversification away from markets into alternatives. The low interest rate environment certainly encourages this for obvious reasons.

Of course as someone indicated earlier there has to be a balance of buyers and sellers, but then when has it ever been different.

Mark

Edited March 30, 2015 by sound

[declanwmagee 122]

I can even see the difference from when I was buying hard in 2008,2009,2010.

Quite often I look at a coin in my Collection and think "crikey, how did I get it for that?"

[Paulus 1,975]

I can even see the difference from when I was buying hard in 2008,2009,2010.

Quite often I look at a coin in my Collection and think "crikey, how did I get it for that?"

Same here, and I only started out in 2009-10. In fact I am quite surprised by Jaggy's comment: "I estimate that the value of my collection has gone up by 77% since I started collecting around 1985" - 77% in 30 years? - that's less than 2% per annum - is that borne out by the average change in Spink book prices since 1985, does anyone know?

[sound 25]

I can even see the difference from when I was buying hard in 2008,2009,2010.

Quite often I look at a coin in my Collection and think "crikey, how did I get it for that?"

Declan,

That must have been good time to buy hard, particularly 2008,09 just before prices took off.

Mark

[Rob 3,152]

Some prices have rocketed, but others have not increased a great deal. Sceats have not advanced a great deal since the late 70s due to metal detector finds for example. Prices only recovered very slowly from the early 80s slump until the later 90s, then started to appreciate more quickly. 2009-10 was the period where prices increased their rate of acceleration. Some things have increased 10-fold, others not.

[jaggy 528]

I can even see the difference from when I was buying hard in 2008,2009,2010.

Quite often I look at a coin in my Collection and think "crikey, how did I get it for that?"

Same here, and I only started out in 2009-10. In fact I am quite surprised by Jaggy's comment: "I estimate that the value of my collection has gone up by 77% since I started collecting around 1985" - 77% in 30 years? - that's less than 2% per annum - is that borne out by the average change in Spink book prices since 1985, does anyone know?

Bear in mind that this is a cumulative estimate and includes coins purchased recently as well as 30 years ago. To give a more specific example, I bought a James I sixpence in EF in 1993 from Buckland Dix and Wood for £156. I sold a very similar one in a private sale via Heritage quite recently for £278 net of costs. So for that specific coin, my profit would be 78% net of all costs in around 20 years (I still have the original coin).

Obviously, different coins will do better or worse. I have two 1878 Dritanniar sixpences both graded GVF. One cost me £62 in 1984 (Joseph Lepczyk) and the other cost £55 in 1992 (Glendinings). I would expect to net £250 for each (after all costs) today. So that is a pretty good improvement.

On the other hand, I bought a 1825 sixpence graded AUNC from Downie-Lepczyk in 1986 for £75 and another 1825 sixpence graded MS63 from Heritage in 2013 for £118. But if I were to sell it today I would get £118 less around 20% so £95; an increase of just 26% in 30 years.

As with any other investment category, you can make money on coins. But they have to be the right coins, the buying and selling costs eat into your profit and, for the investor, there are no dividends or other owner benefits while the coin is owned.

Edited March 31, 2015 by jaggy

[jaggy 528]

Double post

Edited March 31, 2015 by jaggy

[copper123 1,485]

Well to be honest , it's about time coins turned into an investment .

Many coins were sold as investments in the mid to late seventies and even into the early eighties , most all turned out a big losers .

At least in the last twenty years or so coins have not really been sold as an investment .

This accounts for the healthy market we have now and not the top heavy one like they have in the states which is vulnerable to fadish swings both up and down.

The only sign of this happening in the uk is the way the press has treated the kew gardens 50p and the undated 20p

[Colin88 54]

Whilst interest rates remain so low , almost non-existant ...I think there will definitely be a strong investor element in coins....and all things collectible. Things like classic cars and watches also have shot up in price in recent times as people put money into anything except bank accounts.

I also think that the lifting of restrictions on getting cash out of their pension funds will see people spending money on collectibles.

Personally I have never believed in pension funds and have always bought 'stuff' over the years....and 'stuff' has done very well thank you...

As I've mentioned before, the irony about banks is that they cant be trusted with money.

[copper123 1,485]

Interest rates look to be going nowhere fast prob for the next twenty or so years, looks like we in the Uk might suffer the effects of negative inflation and negative interest rates that japan suffered twenty five years ago (and are still suffering from now may I add) funny old world isn't it?

Coins i would expect to carry on their upward trend.

Like several folks have pointed out there is a wild variation in performance with coins , it does not take a genius to work out the investment potential of a mint grade 1967 penny is close to zero , but that of a gvf say halfpenny (or halfcrown) of William and Mary is a different matter.

With a static number of coins out there and a slowly growing number of collectors there is only one outcome.

Edited March 31, 2015 by copper123

[Peter 615]

Equitable Life have done me proud.....I have swapped funds and made a lot of money.

A good pot of coffee and a decent bit of meat in the oven sorts out a lot...plus the Sunday papers...Sunday sport excluded.....although the rump exposed has burnt off a few calories