Author Topic: The importance of Master Sets  (Read 2789 times)

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Offline eric

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The importance of Master Sets
« on: March 24, 2017, 04:14:32 PM »
I'm posting this in the Panda category, because I'm mainly interested in learning more about Panda master sets as they relate to the overall Panda marketplace. However, this topic would also be relevant to master sets in any coin series.

I wish I understood the importance of master sets when I started collecting in 2010. I would have bought more fractional pandas instead of 1oz. But even now, I'm still having a hard time understanding the impact of master sets on the marketplace.

I've researched the archives of this site and found a lot of talk about master sets, but some of it is confusing, conflicting, and not conclusive.

So I basically have several questions...

1) What exactly is a master set? I've researched it and found a few different definitions in the collecting industry. So what are we talking about here?

2) Do master sets include varieties? And if so, only major ones? My understanding is master set builders do not care about the minor varieties and mint errors.

3) What is the importance of grade for master sets? From what I've read here, it seems like MS68 is fine. Are most master sets graded, or OMP? Are some collected in lower grades?

4) Who is really buying master sets? I've read about the Chinese banks buying them for investors. Does that mean literally banks are buying these coins on the open market, and putting them into their vaults?

5) Where are most master sets bought and sold? Do master set builders also often buy complete master sets, or do they mainly assemble them coin by coin?

6) Would you classify master set builders more as collectors (who really care about the coins) or investors (who just care about making money from them)?

7) As an overall driver of demand in the Panda coin market, how influential are master set builders compared to other players? The impression I get is that the master set builders are by far and away the biggest factor in market pricing. Is that true?

8) What is the long term investment strategy and end-game for master set builders?

9) Does master set building only play a major role in the gold Panda market, or also other metals? And/or is there a different type of master set for say, silver Pandas, which don't have as many fractionals?

Sorry for all the questions (I have more, LOL) but hopefully this can be a helpful thread for others too, as it seems like master sets are of paramount importance to the Panda market.

Thanks!

Offline Birdman

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Re: The importance of Master Sets
« Reply #1 on: March 24, 2017, 04:44:14 PM »
Lots of great questions.  It is a good idea that you start a thread so that the information can be in a single place.  Master sets are an intriguing component of panda collecting that are important to understand.  I'll let some of our members who are quite involved in the process answer most of your questions.  I am continually trying to refine my knowledge and adjust my investing strategy on this issue.  I got part of things right in focusing over the past six years mainly on semi-key G1/2 pandas and some G1/4, but the people who really got it right were the ones who were buying the semi-key or key G1/2 in MS68 for lower premiums, when I was paying a higher premium for MS69/70 with a bias towards better varieties.  Some of the coins I paid a premium to get in MS69 and a better variety are now selling for the same amount as the common variety in MS68, owing to the master set influence.  Indeed, I wonder whether it might now be easier to find a "scarcer" variety for certain uncommon date/denominations, because so many (several hundred?) of the common variety have been removed from the market to fill master sets!  Alas, no one has a crystal ball, and my investments are doing fine overall.  But, we must always continue to learn and to hone our approaches. 

Offline Mirkkanen

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Re: The importance of Master Sets
« Reply #2 on: March 24, 2017, 07:31:17 PM »
"6) Would you classify master set builders more as collectors (who really care about the coins) or investors (who just care about making money from them)?"

I believe that the master set builders are not collectors, but rather one or more very deep pocketed investors who have been tasked by banks (or maybe they pitch the idea TO banks) to find and assemble the coins. These master set builders then ask friends (who may help for free to maintain international relationships/friendships) who ask their acquaintances or MCC dealers (who get a small percentage via arbitrage) to help locate these coins.

Let's say there are 5 levels of players in the master set game. The lowest on the totem pole are collectors/coin owners like us. Next, we have secondary dealers- dealers who buy and sell MCC, know about the master set game, but don't have direct access to THE master set builder(s). They sell their coins to primary dealers. Primary dealers may have direct access to THE master set builder(s), or they know the the master set builders' friends who help to collect these in-demand coins.

Imagine that THE master set builder needs 1995 1/2 oz gold pandas. He says he is buying at $20,000USD. If I (a collector) have one, I can probably sell it for $15,000 to a secondary dealer. He sells it to a primary dealer for $17,000. The primary dealer may sell it for $18,500 to a friend of the master set builder, or may get a higher price (up to $20K) if he knows the master set builder personally. The master set builder will include that coin in the set he builds for a bank at a value of $25K. So basically, the price a *collector* gets for selling his/her key date or "in-demand" gold panda coin depends on how well-connected he/she is, and whether he/she can skips steps on the ladder.

When 95 halves were skyrocketing, you had US-based dealers offering $15K, while someone in China (a forum member) was able to offer $17K. Why? He was able to skip one or more steps on the ladder and didn't have to pay as many middle men. That's my presumption anyway.


Offline Mirkkanen

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Re: The importance of Master Sets
« Reply #3 on: March 24, 2017, 07:39:21 PM »
"3) What is the importance of grade for master sets? From what I've read here, it seems like MS68 is fine. Are most master sets graded, or OMP? Are some collected in lower grades?"

Based on the last run up, it seems that the set builders' standard for coins was OMP/68+ for most/all coins, except for the rarest of the rare, in which case they might take nice looking 67s. For 67s though, the price offered might have been lower than the offer for 68s. Coins included in master sets are often popped out of their NGC or PCGS holders, which is why it doesn't matter whether the coins is a 68, a 69, or a 70. They just need a nice looking coin.


Offline eric

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Re: The importance of Master Sets
« Reply #4 on: March 25, 2017, 12:06:43 AM »
Coins included in master sets are often popped out of their NGC or PCGS holders, which is why it doesn't matter whether the coins is a 68, a 69, or a 70. They just need a nice looking coin.

Why would they take them out of holders? Are they displaying them in some sort of display?

Lots of great info, thanks!

Offline Mirkkanen

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Re: The importance of Master Sets
« Reply #5 on: March 25, 2017, 01:27:45 AM »
Yes, there's some sort of fancy, multi-level display case that we'very seen pictures of. Some member posted pics of a display within the past 15 months.

Offline KeyDate1/2ozPandas

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Re: The importance of Master Sets
« Reply #6 on: March 25, 2017, 01:51:41 AM »
Simplest explanation of how the master set (1982-2017 1oz, 1/2, 1/4, 1/10, 1/20, one of each coin from each date, varieties don't matter, coins at least ms68 quality) process plays out is:

1) Bank chooses several prominent mainland dealers to make certain number of sets with a fixed offer price
2) These dealers source coins from their own inventory, marketplace, online auctions and US/Germany dealers
3) Dealers sells the completed set to the bank in capsules and bank puts the coins in presentation case
4) Bank sells the completed set to their customers or customers buy the set to gift to someone - owners of the sets are investors, not collectors.
Repeat

The only variable is how many sets the bank orders in a given month.  If the number of sets ordered exceeds the inventory of coins available in the marketplace, prices rise for coins dealers are missing, because dealers are required to deliver the sets in order to protect their reputation. 

There are other set configurations beside the complete master set, such as a complete 1/10 series set, complete 1oz silver panda set, etc., some of these other sets are promoted not only in China but in Europe and US (telemarketing).

Nobody knows the end game, however, only 1000-2000 sets are possible so once they are all made then other configurations will become popular, trying to predict what those will be the challenge for the next 5-20 years.

There are two ways to make money, one is build your own master set and sell it to one of these dealers, second is buy up the coins that you think are difficult to find, buy them up and put them away until the price spikes on them. 

The more supply each of us takes off the market the faster prices will rise.  For now 1/2oz and 1/4oz are what limits how many master sets can be made.  There will come a day when other set configuration are made, say 1oz series set, then certain 1oz coins will limit how many sets can be made.

Choose who you sell your coins to carefully if are still invested in the market after you sell, ideal buyer is one that will put the coins away for a long time, rather than flip for quick profit.  I sell 85% of the 1oz, 1/10oz and 1/20oz, 65% of the 1/4oz and only 20% of the 1/2oz I receive in a given year.

Finally, once the market matures and supply is non-existent, then collector coins will become hot, 69s and 70s, varieties, errors, proof sets, etc.  I am holding my collection for this day, that is why I sell all ms68 coins to the master set builders.

Offline moosician

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Re: The importance of Master Sets
« Reply #7 on: March 25, 2017, 04:24:56 AM »
With ngc getting more and more popular in China, im surprised there is no demand for say a ngc69 master set(as yet)?

Is there currently demand for Silver panda master sets? Does a set  include the 83~85,87 proofs or just the ms?

Offline KeyDate1/2ozPandas

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Re: The importance of Master Sets
« Reply #8 on: March 25, 2017, 05:03:58 AM »
Includes 1 from each year so 1983-1985, 1987 is included.

Someday a ngc set will be in demand, but it is very hard to make with matching labels/slabs.

Offline KeepOnTrying!

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Re: The importance of Master Sets
« Reply #9 on: March 25, 2017, 11:12:41 AM »
Includes 1 from each year so 1983-1985, 1987 is included.

Someday a ngc set will be in demand, but it is very hard to make with matching labels/slabs.

One solution could be to first of all assemble the complete NGC '69 set (with different label designs and numbers) then send to NGC in one batch to get new labels and consecutive numbers. I don't know anyone who has done it but I can't see why it cannot be done.
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Offline KeyDate1/2ozPandas

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Re: The importance of Master Sets
« Reply #10 on: March 25, 2017, 11:39:51 AM »
I have done that many times, I even made 100 multi holder sets and then converted 30 of them back to single holder.  Every time you reholder you risk damage to the coin and it is expensive, roughly $17/coin, so to do it may cost you $3000.

I have been thinking of converting my 1/2oz ms70 collection to all core red holders, but don't want risk damaging the coins or worse they stop offering that holder in the future and now future purchase won't be matching. Also you need to submit 100 coins at a time to get special holders.

Finally it takes up a lot of space to store slabbed coins, which may be the biggest challenge, space in China is a luxury, while Americans live in large in 3000-7000 sqft homes, in china apartments are 500-1500 sqft so storing bulky collectibles is a challenge, same goes for safe deposit boxes. I don't know if Chinese trust banks to store their valuables.

I see Chinese collectors buying key coins or mini sets in holders, but entire master sets I don't if it is practical. Sets that trade at nice premium in holders are 12 piece lunar sets, year panda sets, silver panda set, proof sets, cultural coin sets, etc.

Offline eric

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Re: The importance of Master Sets
« Reply #11 on: March 26, 2017, 12:19:14 AM »
Great explanation Arif, thank you!

Offline baron88

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Re: The importance of Master Sets
« Reply #12 on: March 26, 2017, 10:14:57 PM »
1000-2000 sets are very rare. Does anybody know how many sets have been assembled so far?

Offline Rarityhunter

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Re: The importance of Master Sets
« Reply #13 on: March 27, 2017, 08:26:39 AM »
One master set will suck up a lot of cash, even for prominent major mainland dealers. Those guys won't be using their capital that way. As Arif demonstrated, haha, I guess those in mainland is more and less the same.

With semi key or key concentrated in market players' hand, which are harder to find, they can have more to say on the price.

Offline poconopenn

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Re: The importance of Master Sets
« Reply #14 on: March 27, 2017, 01:35:41 PM »
One master set will suck up a lot of cash, even for prominent major mainland dealers. Those guys won't be using their capital that way. As Arif demonstrated, haha, I guess those in mainland is more and less the same.

With semi key or key concentrated in market players' hand, which are harder to find, they can have more to say on the price.

Agreed. Major MCC dealers in China may have one gold panda master set as show case to attract collectors for other MCC. The popular master sets are lunar and culture coins. The key date/semi-key date yearly gold panda sets are also being bought by collectors, not investors.