Author Topic: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC  (Read 32411 times)

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Offline davidt3251

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Based on my thoughts posted on another forum...

I believe we're entering into a protracted period when PMs will remain weak. This weakness in especially gold and silver will continue to weigh on the MCC market. In the past, drops in gold and silver would affect the entire MCC market by weakening sentiment because sellers try to increase numismatic premium to sell their MCC without a loss. This creates an abundance of 'whale listings' on ebay for example.

But when I remind myself there is an entire MCC industry that is forging ahead, the only logical conclusion is that Copper/Brass/Bronze coins and medals will be on the rise, filling the gap created by MCC from PMs that have unrealistic numismatic premiums.

What we may be seeing is the early stages of the Copper/Brass/Bronze MCC market. Perhaps by necessity, the mints minted small quantities of certain copper and brass Nanjing medals and Classic Garden Series medals. But what if this turns out to be the start of the Copper/Brass/Bronze MCC market rally?

I think that with deflation caused by low oil (the largest traded commodity on the planet) it feeds into weak gold. Remember some oil producers love to buy US Treasuries and gold. The Saudis are borrowing like crazy, for example, as their government budgets have been ballooning under expensive oil. Less money to buy gold now.

With deflation and gold under pressure, the entire MCC market can play the numismatic premium game without the annoyance of volatile gold and silver. If someone bought gold MCC at the top, a 1oz gold Panda has lost about $800 of gold premium that is being added to numismatic premium when they sell.

For example lets say a 1997 1oz in 69 sold for $2700 with gold at $1900 and a numismatic premium of $800, now it should be a $1900 item. Thats what the August Pricepedia shows for a 1997 1oz SD or LD Panda in 69.

But the seller would be underwater at $1900, so the seller marks up the numismatic premium by $800 to try and get $2700, a 'whale price'. Items like these very rarely sell. The seller has increased the numismatic premium from $800 to $1600. In reality anything over a $800 numismatic premium is a gain for the seller and a loss for the buyer but the underwater seller doesn't see it that way, he wants a 100% increase in the numismatic premium, $800 to $1600. Noone would buy this item.

But lets say there's a new MCC art collector looking at he 1997 and he sees that numismatic premium, both the original $800 and the new $1600.

Then he looks at a brass baby panda. Now imagine a fraction of an increase for a brass baby panda. If you buy it for $160 from Lucky, lets say its $150 in numismatic premium and $10 in metals (I know the mint wouldn't agree as they have fabrication costs, but this is purely from the buyers perspective on base metal content which is what buyers do with silver and gold content). So if the gold panda seller of a fairly common 1997 1oz has marked up the numismatic premium $1600, then all the buyer has to do is look at the brass baby panda for example, and allocate just a fraction of the new premium-say 10% of the new (unrealistic) $1600 1997 panda premium or 20% of the original $800 numismatic premium on the 1997 (based on August Pricepedia)-and the baby panda would be $10 metal content+$150 original premium + $160 new premium based on demand = new price of $320. The price has doubled using only 20% of the original numismatic premium in the 1997 1oz.

I'm going to argue the tiny value of the metal content ($10) creates PURE NUMISMATIC PREMIUM on the upside for Copper/Brass/Bronze. Who doesn't want that?

This is also a deflation play. Buyers dont need to spend as much money to participate in MCC with PURE NUMISMATIC PREMIUM. $160 will do, and its conceivable that the 2014 brass could one day have an $800 numismatic premium, just like the 1997 panda, *but without the downside risk of precious metals weakness that gold, and to a lesser extent silver, MCC have*.

In the current market with weak PM conditions, Copper/Brass/Bronze MCC are MCC derisked by removing volatile and weak PMs from their performance. Everyone who ever made money or wanted to make money in MCC from rising numismatic premiums needs to be in Copper/Brass/Bronze for PURE NUMISMATIC PREMIUM upside.

Offline KeyDate1/2ozPandas

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #1 on: August 28, 2015, 02:29:16 AM »
Great post David and you are correct that purely numismatic medals will out perform most PM tied coins.  The challenge I have is liquidity for medals, if I buy 20x medals at $160/each and hold them for some time until the price gets to $320/each, I may only be able to sell 1-5 at the $320 price, the rest I may have to wait a long time to find a buyer, because very few people collect those medals.  On the other hand, if I buy 20x 1991 1oz silver pandas NGC MS69 at the same $160 and after some time they go up to $240 (half the return of medal), I can sell the entire lot without any effort at the new price, because many people collect silver pandas.  

From my point of view, if one is a small time investor, <$2K-$4K of available funds, then you are correct buying non-gold or silver medals maybe the best option to achieve the best return, because you are primarily investing in numismatic premium, but if you are medium size investor, $10k-$100K then the liquidity risk or the lack of ability to sell large lots at a new market price without cratering the market is too high to justify reaching for that higher return.   Personally I value liquidity more highly than price appreciation, so medals have been off the table for me, unless someone wants to dump on me at a great price that I can easily resell to other dealers quickly, because I simply don't have manpower to sell coins one off to achieve the best returns.  

Finally, another angle on the liquidity risk is type of collector base that exist for purely numismatic medals, which are primarily collectors.  What is the problem with having only collectors collect? Simply, if I get 100 medals graded, the PF69 and PF70 will sell nicely at a decent profit in small odd lot transactions to say 20-50 different collectors over a reasonably long period of time, but the PF67-68 or even PF69 with eye appeal issues they are dead, no buyers at any price (I have been there and it is painful), while coins tied to PM at least have their PM value to fall back on if they grade poorly or they grade fine today but later develop ugly toning/spotting.  

While I agree that purely numismatic items will out perform PM tied items over the next few years, the problem is these purely numismatic items have much greater liquidity risks compared to PM tied items, and that is why many more collectors, investors and dealers prefer PM tied items even with lower expected return.  

In essence what you are saying is taking more risk (buying purely numismatic coins) will lead to higher return, agreed - that is the basis of investment finance.  

andrewlee10

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #2 on: August 28, 2015, 04:45:40 AM »
Great post David and you are correct that purely numismatic medals will out perform most PM tied coins.  The challenge I have is liquidity for medals, if I buy 20x medals at $160/each and hold them for some time until the price gets to $320/each, I may only be able to sell 1-5 at the $320 price, the rest I may have to wait a long time to find a buyer, because very few people collect those medals.  On the other hand, if I buy 20x 1991 1oz silver pandas NGC MS69 at the same $160 and after some time they go up to $240 (half the return of medal), I can sell the entire lot without any effort at the new price, because many people collect silver pandas. 

From my point of view, if one is a small time investor, <$2K-$4K of available funds, then you are correct buying non-gold or silver medals maybe the best option to achieve the best return, because you are primarily investing in numismatic premium, but if you are medium size investor, $10k-$100K then the liquidity risk or the lack of ability to sell large lots at a new market price without cratering the market is too high to justify reaching for that higher return.   Personally I value liquidity more highly than price appreciation, so medals have been off the table for me, unless someone wants to dump on me at a great price that I can easily resell to other dealers quickly, because I simply don't have manpower to sell coins one off to achieve the best returns. 

Finally, another angle on the liquidity risk is type of collector base that exist for purely numismatic medals, which are primarily collectors.  What is the problem with having only collectors collect? Simply, if I get 100 medals graded, the PF69 and PF70 will sell nicely at a decent profit in small odd lot transactions to say 20-50 different collectors over a reasonably long period of time, but the PF67-68 or even PF69 with eye appeal issues they are dead, no buyers at any price (I have been there and it is painful), while coins tied to PM at least have their PM value to fall back on if they grade poorly or they grade fine today but later develop ugly toning/spotting.   

While I agree that purely numismatic items will out perform PM tied items over the next few years, the problem is these purely numismatic items have much greater liquidity risks compared to PM tied items, and that is why many more collectors, investors and dealers prefer PM tied items even with lower expected return. 

In essence what you are saying is taking more risk (buying purely numismatic coins) will lead to higher return, agreed - that is the basis of investment finance. 

Good say. Generally, fiat money (notes and coins) have more collectors and demand than non-fiat money (medal) regardless of type of metal.

Fiat money have ready market and collectors which Non-fiat collector base is much smaller. In additional, many new collectors believe fiat which is government backed BUT medal not. Same mints produce both fiat and non-fiat BUT collector still trust in fiat.

China coin (fiat) will not has high relief like medal which both have diff styles. I collect both fiat and non-fiat. However, I invest and sell non-fiat which is niche market. However, I did invest and sell fiat BUT less portion on it in term of quantity. China modern coins price up and down too fast so replacement cost is an issue except you are full time coin dealers who have more capital and time. The competition of fiat also high for new seller. Ebay selling price is unnaturally high (MCC except panda) for certain ebay famous sellers due to high ebay cost and other reason. Ebay has no good entry point for new seller especially you feedback is not many and 100%. It is not easy for you to sell high value items if you are new ebay seller. This is my experience as part time seller which might be diff with others. Regular customers buy off ebay and internal circle are more approachable for my case. 



barsenault

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #3 on: August 28, 2015, 09:54:16 AM »
David, you mean to tell me, Mr. Sinclair's call for $50,000 gold is proposterous??  N66:thumbup:  :lol: N8  :001_tt2:

Recorded a couple days ago.
http://youtu.be/u7tTdO6oxUA

Offline davidt3251

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #4 on: August 28, 2015, 07:11:34 PM »
Great post David and you are correct that purely numismatic medals will out perform most PM tied coins.  The challenge I have is liquidity for medals, if I buy 20x medals at $160/each and hold them for some time until the price gets to $320/each, I may only be able to sell 1-5 at the $320 price, the rest I may have to wait a long time to find a buyer, because very few people collect those medals.  On the other hand, if I buy 20x 1991 1oz silver pandas NGC MS69 at the same $160 and after some time they go up to $240 (half the return of medal), I can sell the entire lot without any effort at the new price, because many people collect silver pandas. 

From my point of view, if one is a small time investor, <$2K-$4K of available funds, then you are correct buying non-gold or silver medals maybe the best option to achieve the best return, because you are primarily investing in numismatic premium, but if you are medium size investor, $10k-$100K then the liquidity risk or the lack of ability to sell large lots at a new market price without cratering the market is too high to justify reaching for that higher return.   Personally I value liquidity more highly than price appreciation, so medals have been off the table for me, unless someone wants to dump on me at a great price that I can easily resell to other dealers quickly, because I simply don't have manpower to sell coins one off to achieve the best returns. 

Finally, another angle on the liquidity risk is type of collector base that exist for purely numismatic medals, which are primarily collectors.  What is the problem with having only collectors collect? Simply, if I get 100 medals graded, the PF69 and PF70 will sell nicely at a decent profit in small odd lot transactions to say 20-50 different collectors over a reasonably long period of time, but the PF67-68 or even PF69 with eye appeal issues they are dead, no buyers at any price (I have been there and it is painful), while coins tied to PM at least have their PM value to fall back on if they grade poorly or they grade fine today but later develop ugly toning/spotting.   

While I agree that purely numismatic items will out perform PM tied items over the next few years, the problem is these purely numismatic items have much greater liquidity risks compared to PM tied items, and that is why many more collectors, investors and dealers prefer PM tied items even with lower expected return. 

In essence what you are saying is taking more risk (buying purely numismatic coins) will lead to higher return, agreed - that is the basis of investment finance. 

Hi Arif

Thanks for that. Yes, I agree. Liquidity would currently be a problem for a dealer, and I should have noted that my perspective was from an individual.

That said, people collect because they like an item and to make money. So if enough good designs come out among base medal (BM MCC) or if a profit is made from BM MCC or even if PM MCC become more volatile/weak increasing the relative attractiveness of BM MCC, the liquidity could change for dealers.

But PM MCC liquidity while it is there may not reflect a numismatic premium. For example, my wife bought gold panda prof sets with a numismatic premium on top (but when spot gold was lower (as you know I had bought some MCC for her portfolio). My wife is starting a business this fall and last week she sold two sets of 1.9oz gold proof panda sets ungraded for $2200 each. Gold was over $1150 at the time. The sets included box, COA. The gold content was 1.9x$1150=$1185, leaving $15 for box, COA and shipping. I suppose there is liquidity but at rock bottom prices (ie zero numismatic premium). After shipping to the dealer she sold to, the net value was below the spot price of gold. The reason we sold to a dealer was that selling through ebay, after ebay and Paypal fees, resulted in a net value farther below spot. The additional problem is that Paypal requires us to transfer USD to CAD inside Paypal at horrible rates compared to getting a USD wire from a dealer and converting ourselves at a specialty Forex shop.

So its a bit unnerving to see the proof panda sets lose their numismatic premium that was there before. To me, that speaks to a kind of liquidity problem also.

So yes, BM MCC could be problematic on the liquidity front but PM MCC haven't escaped unscathed, in addition to losing on the spot price of gold for example (a big loss the past few years) the numismatic premium is also gone.

That can happen with BM MCC I suppose, but as the values are lower, the hit to the pocketbook (at least for a collector) might be less.

Cheers

davidt3251

Offline davidt3251

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #5 on: August 28, 2015, 07:16:06 PM »
David, you mean to tell me, Mr. Sinclair's call for $50,000 gold is proposterous??  N66:thumbup:  :lol: N8  :001_tt2:

Recorded a couple days ago.
http://youtu.be/u7tTdO6oxUA

HI barsenault,

I used to read Jim regularly. I stopped when his price targets, based on French Curves (IIRC) didn't pan out.

I don't know if I want to live in a world of $50,000/oz gold. In such a world, I imagine food, medicine, alcohol and ammo would be good investments as well, albeit with possibly a bit less confiscation risk.

I could put a higher probability on $5,000/oz gold though.

Cheers

davidt3251

Offline KeyDate1/2ozPandas

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #6 on: August 29, 2015, 01:32:45 AM »
I think it would be foolish to root for $50,000/oz gold.  That would imply the world's greatest economy and currency would have debased by a factor of 40x from current levels.  A happy meal at Mcdonalds would be selling for $200, a gallon of gas $100, this would be very dark times for everyone, including those that own gold, because everyone around you will be fighting for survival.  A nice steady rise in the price of the gold similar to 1999-2008 is the best back drop one could hope for.  Also, great prosperity for the America, Europe and Asia are in the best interest of owners of numismatic coins, rooting for a country or continent to collapse in this highly connected world economy is bad for everyone.   

barsenault

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #7 on: August 29, 2015, 06:57:52 AM »
I concur, and agree with you both David and KEYDATEPANDA.  I was a little tongue and cheek about the 50K gold priced.  Unfortunately, there are some psychos rooting for such measures, because they are clueless as to what that means for the world...or, perhaps they are psycho because they are hoping this scenario plays out for the world??  Who knows.  Dan Norcini is a another analyst who calls these folks kooks, who wish for 50K gold.  The world would not be a fun place to live.  I don't wish this upon anyone.  And I hope to God no one else does either. 

Offline pandamonium

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #8 on: August 29, 2015, 07:22:20 AM »
Not all are psychos.   Some are very intelligent people that are warning us of forces against the USD.   I hope $50k oz gold does not happen but the World financial markets are going out of whack again as it did in 2009.   All we can do is educate ourselves, hope for the best and be ready.......

barsenault

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #9 on: August 29, 2015, 07:32:33 AM »
Yeah, I guess a rephrase is in order.  To hope for 50K gold, is nuts.  To have some as protection against such times, is prudent.

Offline poconopenn

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #10 on: August 29, 2015, 09:49:54 PM »
Just a friendly advice.

Unless you are an experienced, knowledgeable coin/medal collector, with as much or more knowledge than your numismatic dealer possesses, investing in "numismatics premium" is a high-risk proposition.

If you want to invest in numismatic premium, learning as much as you can about coins/medals and about the dealers you do business with. Just remember, most profit earned by dealers is from numismatic premium, not the cost of metal.

Offline Birdman

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #11 on: August 30, 2015, 08:27:19 AM »
Just a friendly advice.

Unless you are an experienced, knowledgeable coin/medal collector, with as much or more knowledge than your numismatic dealer possesses, investing in "numismatics premium" is a high-risk proposition.

If you want to invest in numismatic premium, learning as much as you can about coins/medals and about the dealers you do business with. Just remember, most profit earned by dealers is from numismatic premium, not the cost of metal.


Wise advice. Some numismatic items can be quite profitable...for the dealer or manufacturer. 

A good cautionary tale is the Franklin Mint collectibles.  An older relative of mine bought a lot of such collectibles several decades ago.  There were all sorts of medals in his collection (mostly silver, but some base metals).  Upon his death, I was asked to help sell some of the material.  Wow, that was an eye-opener.  The base metal medals in the fancy display boxes were worthless and (with only a few exceptions) the silver medals with nice artwork, attractive packaging, and an interesting storyline were worth only melt value.  He had paid much more than melt value because of Franklin Mint's slick marketing about how they would be a great investment. 

A quick google search reveals a thread with an even more extreme story about Franklin Mint collectibles http://billhicksisdead.blogspot.com/2012/04/sucker-born-every-minute-franklin-mint.html 

This is not to pass judgment on any particular numismatic item or this thread in particular.  There are some base medal Chinese coins that sell for very high prices and were great investments.  My point is to emphasize the often-said advice of do your due diligence and don't just listen to the marketing.

andrewlee10

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #12 on: August 30, 2015, 09:09:52 AM »
Wise advice. Some numismatic items can be quite profitable...for the dealer or manufacturer. 

A good cautionary tale is the Franklin Mint collectibles.  An older relative of mine bought a lot of such collectibles several decades ago.  There were all sorts of medals in his collection (mostly silver, but some base metals).  Upon his death, I was asked to help sell some of the material.  Wow, that was an eye-opener.  The base metal medals in the fancy display boxes were worthless and (with only a few exceptions) the silver medals with nice artwork, attractive packaging, and an interesting storyline were worth only melt value.  He had paid much more than melt value because of Franklin Mint's slick marketing about how they would be a great investment. 

A quick google search reveals a thread with an even more extreme story about Franklin Mint collectibles http://billhicksisdead.blogspot.com/2012/04/sucker-born-every-minute-franklin-mint.html 

This is not to pass judgment on any particular numismatic item or this thread in particular.  There are some base medal Chinese coins that sell for very high prices and were great investments.  My point is to emphasize the often-said advice of do your due diligence and don't just listen to the marketing.

Can we say the person buy the silver pagoda set PF69 at 25K from member here is another case like this?

Offline BobW

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #13 on: August 30, 2015, 12:04:01 PM »
Unless one is in on the "ground floor", buying modern numismatic material can be a high risk proposition from an investment standpoint. Acquiring popular older collectibles typically has a much lower risk albeit lower potential appreciation. It is always prudent before making a purchase to ask oneself, "if I want to sell, who will buy, when, and at what price?". If one is acquiring primarily for the enjoyment of collecting, the question may not be relevant.

barsenault

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Re: Why Copper/Brass/Bronze MCC will outperform Precious Metals MCC
« Reply #14 on: August 30, 2015, 12:16:26 PM »
Who sold the Pagoda series for 25k.  Surely it wasn't anyone on this site who took advantage of another individual in such an unfair manner.  Wow.  I wonder if the seller was kind enough to ask the buyer, did you do you DD? 500.00 is one thing, but 25k? That's a
different ball of wax. When I bought the XIE set, I spoke with several of you on this site. A few of you said, are you sure? Even the seller said, are you sure you want to buy it for 2.6k.  I wrestled with it, and decided to roll the dice.  I hope the seller of that Pagaoda set tried to talk the buyer out of it. I'm all for making a profit. But if they were a part of this community, unloading that set, I hope they feel good about the transaction. Yes, the buyer is ultimately responsible. But this is a community of like minded individuals, whose passion is MCC's.  Wow! 25k
That's...well, I won't say what that is, in case it is in fact someone from this community who sold it.  I'd hate to get lambasted for being a truth teller.