1985-1989 Coin Market = 2000-2004 Comic Market?

[delekkerste]

If you think today's Bronze/Moderns are rare enough to be investment assets or if you think your precious Golden/Silver Age comics can weather any decline in the newer stuff, you NEED to read this article about what happened to the coin market from 1985 to 1989. It is an old article, but it makes its point, particularly as we comic collectors are probably most interested in what happened when slabbing was first introduced to the coin market and not what the coin market is doing today.

 

 

"When PCGS began certifying coins, the supply/demand scenario created high prices and lots of downside. Remember? Hype about PCGS, the solution to the grading problem, stories about big cash from Wall Street? Then later, NGC and electronic trading? The future of the coin market looked super, but for one thing.

 

Prices were extremely high and had to decrease. 1986 prices were the result of years of dealers running bids for coins and then not actually buying them citing grading discrepancies. As they bid more and more, they bought fewer and fewer coins. Grading standards had become insanely tight and it was the rare coin indeed which was actually tradeable at printed levels.

 

Then on top of that, the enthusiasm that surrounded the inception of PCGS caused PCGS certified coins to trade at gigantic premiums. Bought my first 1881-S Morgan, MS65, in Baltimore in April of 1986. Paid $875. They nearly reached $1,000 by June. Everybody wanted PCGS coins and few had yet been certified. Huge demand, low supply.

 

Then prices started to decline as more coins got slabbed. It was no longer special to have a PCGS certified coin. It got so there were more coins certified than uncertified. They were everywhere. Generics started to trade in hundred-coin lots. And people got used to having PCGS around. They were no longer going crazy to get their hands on PCGS coins. From mid-1986 to early 1988, prices declined.

 

Then there were two short but very powerful jumps in prices, each quickly followed by an even more severe decline. The first came in the Spring of 1988. The biggest movers were high grade Morgans. 1897-P in MS66 got up to $7,000. An 1881-S in MS67 was worth $4,500 - over five times today's level. The second mini-boom came in the early summer of 1990 as a result of news about the Kidder Peabody fund. The long-awaited Wall Street dollars were finally coming into the market [Gene - This is the history that JP The Mint is trying to repeat in comics]. It was a massive move, causing prices to increase more than 100% in less than three months. Virtually every market area was included.

 

But of course there is a price for that kind of appreciation and dealers and investors paid it for the next three years. In July of 1989 prices started to collapse. By the end of the year, all certified coins, on average, had lost 60% of their value. Prices continued to slide through all of 1990 and 1991.

 

By early 1992, generic coins were down anywhere from 70% to an incredible 90% - literally one tenth of their mid-1989 highs. They have never recovered - and probably never will. They simply aren't rare. PCGS graded their three millionth coin last month. 98 of every 100 pieces they have certified is generic.

 

No issues were spared in the long decline. If there is a single issue, any date, that is not down at least 40% from 1989 I am unaware of it. Commems dropped 60% to 80%. Early copper was down about 70%. More plentiful type coins like Indian cents and three cent nickels were down 70%. Even great Type coins like early dollars and no motto coinage was off 60% or more. Rare date Morgans lost an average of 70% of their value.

 

And today prices have not recovered at all. Trading is heavier than it was a year ago. The market is stable and active, but prices are almost the same as they were at the absolute bottom, which came in late summer of 1992. Since then, the market has gotten steadily better, but with negligible appreciation.

 

Consider where that puts us. If you want to buy a solid Type coin or a rare date Morgan dollar in MS65 or MS66, today it will cost you about one third of what it cost four years ago. A $10,000 portfolio in 1989 can be had for about $3,500 today. Coins that may have been out of reach, a $20,000 rarity, for example, run $6,500 or $7,000 today."

[lou_fine]

Gene;

 

An excellent article with a lot for collectors to think about. Can you repost the graph which you have on the coin prices. I want to take a guess at where we possbily are in the comic market.

 

BTW, do think think the various sectors of the comic market (GA, SA, BA, Modern 9.9's & 10's) would be at different points on this graph today? Do you also think this graphical scenario would apply to all sectors of the comic market or would it be less extreme for the GA and early SA market?

 

Thanks

[delekkerste]

As a rule of thumb, I think the newer the book, the more the analogy to coins applies. However, as the article states, NOTHING was spared in the coin market decline. Of course, more than a decade later, some of the best quality material is selling for much higher levels than before the Crash (witness the 1933 Saint Gaudens $20 gold piece that sold for $7.6 million in 2002). But, then again, the coin market had the benefit of the greatest accumulation of wealth in human history during the 1990s to help it rebound. If/when comics start declining seriously in value, will the markets/economy be there again to bail out the "investors"? I doubt it, though there is a lot more wealth out there now than there was when coins began their decline, so perhaps that will act as somewhat of a cushion, particularly for the very high-end market.

 

Here's that graph again:

 

[Zonker]

Gene, you mention this is an old article-- How old? I ask because several times in the piece there is a mention of prices still being depressed "today." I'm curious when today was from the author's point of view.

[AtomicPaul-migration]

Very true. And by following the history of the Coin and Sportscard investment market trends we can get a strong indication of one possible future of the Comic hobby by looking outside our own.

There were many other factors clearly responsible for the "rise and fall" of public interest in continuing to invest in graded coins, but you've hit on one major factor factor responsible for negative investor sentiment.

What's of further interest is that a number of the major players and driving forces in the coin markets during that period of rise followed by drastic decline are driving forces, playing a major part in the comic investment market of this decade.

 

Excellent post and thread!!

[delekkerste]

About 5 years after the Crash. However, for any Pollyannas hoping that the graded coin market suddenly got hunky-dory right after the article was written, the truth is that things actually got EVEN WORSE!! Here's an article from late 2001 with some additional insights (the author is trying to make the case for older coins, so this article is attacking the super-high grade post-1933 coinage, the equivalent of our super high-grade post-1968 comics):

 

 

DON’T FALL PREY TO MODERN DAY PT BARNUM’S

 

Barnum claimed… “There’s a sucker born every minute and two to take him”.

 

A few years ago most dealers wouldn’t bother grading cheap modern coins because it wasn’t economically feasible. However, when they noticed that a few bold sellers were asking (and getting) exorbitantly high prices for this material, their attitude began to change as good old fashioned greed set in. After all, it was suddenly possible to mark-up coins from FIFTY to HUNDREDS (or even THOUSANDS) of PERCENT because buyers had no meaningful price guides from which to compare. The industry standard CERTIFIED COIN DEALER newsletter (CCDN) and the COIN DEALER newsletter (CDN) do not provide dealer to dealer Bid prices for these modern issues in super grades. Without a source of timely, reliable and accurate pricing information it’s fairly easy for a seller to ask (and get) whatever obscenely high price he sets for a given coin. Just tell ‘em a good story, quote low population figures and bingo… a successfully consummated sale!

 

I can state without hesitation (and with some authority based upon my experience and past track record) that I believe these contemporary super grade uncirculated and proof issues are about to undergo population increases of unprecedented proportions followed by a cataclysmic price collapse. During a recent conversation with a dealer (who wishes to remain anonymous) that specializes certifying super grade modern singles he expressed dismay at the fact that “everybody” is now jumping on the contemporary rarities band wagon and submitting coins themselves, which dramatically impacts his volume and cuts into his profits. As this trend continues to expand, more and more product will find its way into the various grading services and will eventually flood the market with super grade coins, exerting tremendous downward pressure on prices. On the front page of the August 10, 2001 issue of the CCDN the editor made a very poignant observation. He was comparing “common” type coin Bids from August 1989 to today. MS67 Buffalo nickels touted as rare and undervalued at $2,275 in ’89 are now Bid at $185. MS67 FB common date Mercury dimes valued then at $1,150 are now Bid $40. He cited numerous other similar examples, but this is the point that really tells it all; referring to the huge losses incurred in the aforementioned examples, he said one point that is often overlooked is that coin certification by PCGS and NGC were still fairly new (they were started in 1986 and 1987 respectively) and no one was really sure how many MS67 Buffalo nickels or MS67 FB Mercury dimes were out there. The Population/Census figures were still extremely low. The editor went on to say that this SAME scenario may now be occurring with modern coinage receiving the ultimate grades such as MS68, PR69, etc. I wholeheartedly concur with his assessment but would change “may now be occurring” to “IS now occurring”! Whether it takes a few months or a few years, the extraordinary abundance of super grade contemporary U.S. coinage WILL be revealed. When that day arrives, the losses incurred when MS67 Buffalo nickels and MS67 FB Mercury dimes collapsed will pale by comparison after the smoke of the modern, super grade coin crash has dissipated.

 

The fact is that these contemporary super grade “rarities” are nothing more than ultra high mintage modern coins of which enormous quantities of pristinely preserved specimens still exist and are awaiting certification wherein they will receive the benefit of the world’s most valuable plastic! They have no meaningful, well-established or lengthy history of being highly prized and valued in the REAL numismatic marketplace. Moreover, they’re sure to rot (value-wise) just as the unsold tulip bulbs did in Holland following the 1637 market collapse.

 

KNOWLEDGE IS POWER WHEN YOUR HARD-EARNED MONEY IS AT STAKE.

[FlComicFan]

Great Post !

[metropoliscomics]

But from all accounts the coin market is on fire right now. Also older comics are, for the most part much more rare in high grade than coins. New comic market is susceptible (and has alredy cooled off duite a bit) but pre-1965 market is insulated.

Vincent

[Timely]

I do not think rarity is the answer to a crash.

 

Trying to campare comics to other hobbies is not viable. Sure you can learn about certain patterns of ups and downs but coins and comics are two different animals. Nostalgia in the coin market is almost nil. No 70 year-old person whips out a 60 year old Mercury Dime from his pocket and remembers with longing the day he spent it on a malt. As a former coin collector there is only so much fascination to be had with them. Sure they are shiny, made of precious metal and are historical in regards to the past, but there is little passion.

 

Comics are pieces of art. Each one is different. There are several ages and dozens of collecting sub-sets.

 

Timely

[Illiterati-migration]

I do not think rarity is the answer to a crash.

 

Trying to campare comics to other hobbies is not viable. Sure you can learn about certain patterns of ups and downs but coins and comics are two different animals. Nostalgia in the coin market is almost nil. No 70 year-old person whips out a 60 year old Mercury Dime from his pocket and remembers with longing the day he spent it on a malt. As a former coin collector there is only so much fascination to be had with them. Sure they are shiny, made of precious metal and are historical in regards to the past, but there is little passion.

 

Comics are pieces of art. Each one is different. There are several ages and dozens of collecting sub-sets.

 

Timely

 

That's great. Now try it from the coin collector's perspective.

[joe_collector]

Sure, but Sportscards are a much better comparison group, and they too experienced a horrific crash along a similar timeline. There were two things I collected as a kid, comics and sportcards, and each holds some nostalgic tie for me personally.

 

The different timelines are also worthy of study, especially concerning demographics. When I was young, coins were all the rage, so it's only natural that these were the first on the grading block. Vintage sportscards were also more valuable and collected more extensively than comics, when I was a kid, and I can remember going to card and coin shows, when comics were more of a sideshow.

 

What I see as the main cause of these boom/bust cycles in graded collectibles is simply an unrealistic market with highly inflated prices, along with a dearth of "new blood" entering the hobbies. This lack of new collectors is accelerated by the higher prices, and a few years down the road, even the grey beards wake up and smell the coffee, while the hardcore collectors can only price-support so many high-grade copies of the same issue.

 

I can't predict how deeply or how fast the inevitable market correction will hit comics, but to think that we're somehow immune to the same "mad money mania" and subsequent corrections experienced by graded coins and cards is quite laughable.

 

No one ever thinks disaster will hit their cherished hobby, and crashes are always "for all those other saps".

[AtomicPaul-migration]

Timely, you're missing a key element... pride in ownership. Who's to say if Lucy's finest, rarest, and most valuable Franklin is of any more or less importance to her than your finest, rarest, and most valuable Timely issue. It all comes down to pride, interest (for whatever reason), sentiment, and perception.

 

The comic market, regardless of the reasons why collectors collect, is a market of commodities. Non-essential items. There is no reason to believe that it is immune to Elliot Wave theories and rises/falls based on it being Nostalgic. When discussing trends, manipulation, cause and effect, outcome due to public perception, it's a marketplace based on dollars and cents, first and foremost, like any other commodities market in matters of investment.

 

And a coin may be very nostalgic to some. I'm quite sure that to many, a coin is as beautiful an artisitc object (take a look at the $50 Octogonal) to a coin collector as great artwork and story is to a comic collector.

[FlyingDonut]

I've asked this question before - what do you guys think about the regular ordinary raw market? I just happily move books all day long. Just wondering if there's historical data as well.

[joe_collector]

But from all accounts the coin market is on fire right now.

 

These "crash threads" have never been about the hobby drying up and blowing away. Coins and sportscards experienced serious market crashes, values plummeted, but there are still tons of collectors out there, buying, selling, and filling runs.

 

What has changed is the value these coins and cards trade at, with the vast majority selling at a fraction of their hyped-up, speculated highs. It's never about the hobby, but the fact that the mad money has to run out someday, and when the specs finally catch onto the grift, they head for high land en masse. Once that happens, speculator-based prices no longer hold sway.

 

It's funny, but in some ways, these "new markets" are healthier than the old, speculator-based bubble markets, and it's invigorating to see people collecting, who actually (gasp) appreciate and treasure the items for more than the $$$ they are worth.

[joe_collector]

I've asked this question before - what do you guys think about the regular ordinary raw market? I just happily move books all day long. Just wondering if there's historical data as well.

 

Coins and sportscards that were "flipper material", and therefore highly impacted by the graded collectible boom, were hurt bad. For example, high profile stars in NM+ raw were selling for greater-than Guide during the heyday, while the PSA 9.X to 10.0 copies were much higher.

 

Now I see those same cards selling for fractions of Guide, and many times it would take 10 (or more) Gem NM raw cards to even approach what a single card sold for during the zaniness.

 

Now, mid-grade vintage material wasn't affected that much by the graded biz, and therefore wasn't really that hurt by the crash. Prices did drop (collectibles crashes always filter down), but by nowhere near the same percentages.

 

It really comes down to historical reference. If Comic A was selling for $25 in VF pre-CGC, and is now selling for $30 in VF, then you won't take a bath.

 

What you need to watch out for are the books that sold for $20 (or less) in NM pre-CGC and are now worth thousands in CGC 9.6 or 9.8 condition. That's sucker bait, assuming you can't afford to lose the money.

[FlyingDonut]

So, the 98% of all books that are not slabbed are essentially OK then? Because that's what I'm seeing. This:

 

 

which Guides at about $18 (VG = $22) is going to sell on eBay for about $9, which is the same 50% discount off of Guide for mid- to lower grade books I've seen for the past 30 years.

 

That's my problem with all of these crash theories - while the crash theory is valid (those who think it is not are deluding themselves) for slabbed books, I just don't see it applying to the majority of comic sales. I also don't see it applying to comic stores as a whole - I go to comic stores all the time all over the country, and I can count on one hand the number of stores that have more than about 20 slabbed books in the store.

 

I think the "crash", if it comes, is only going to hit the high end market, and a VERY "niche" (for lack of a better term) part of that market. Sure, speculators are going to get burned. But how is that going to affect what the overwhelming majority of sales are? A speculator isn't buying my Journey Into Mystery 115 in VG - a collector is, and that collector, most likely, couldn't care less what happens to the prices of slabbed books.

 

Again, I agree with you and Gene on the crash for high grade slabbed books, but I think you're both widecasting too much. One great big tree falling down doesn't take out a whole forest. It may take out a few other trees, but the rest of the trees are fine.

[Aman619]

I dont know anything about coins. So the article was filled with foreign jargon to me. So I still dont know which "comics" got killed in the coin crash... Some of them were old and considerd rare (3-cent nickels??? no-name Morgans??) But what about the AF15 coins, and the Action1 coins?? Were the very best coins in the hobby ALSO affected? Or just Detective 44s and Batnman 13s or Cat America 21s?

 

In other words, SA and GA commons or keys?

I think we all agree the Modern and Bronze and late Silver got hammerred.....

[CentaurMan]

Again, I agree with you and Gene on the crash for high grade slabbed books, but I think you're both widecasting too much. One great big tree falling down doesn't take out a whole forest. It may take out a few other trees, but the rest of the trees are fine.

 

Exactly. Remember, even during the Nasdaq crash of 2000, a ton of stocks in other sectors (most anything not tech or telecom related) did fine, primarily because their valuations hadn't gotten out of whack with where they had traded over the past decades.

 

Pull out your 1996 Overstreets and compare those prices to eBay today, for your books. If the price has doubled in the past 7-8 years, that's fine. That equates to a normal annual rate of return. But if it's up 10x, don't say you weren't warned.

[joe_collector]

Again, I agree with you and Gene on the crash for high grade slabbed books, but I think you're both widecasting too much. One great big tree falling down doesn't take out a whole forest. It may take out a few other trees, but the rest of the trees are fine.

 

Keep in mind the audience and the forum Donut Man, as there are quite a few of those "trees" on these boards.

 

I totally agree with what you're saying about the effect of a graded collectible crash on the rest of the market. Since well before the crash and right up til today, I have been buying Xmas presents (vintage sportscards) for some of my relatives, and it's been business as usual.

 

The slow-and-steady price of a VG 1950's Gordie Howe card hasn't changed much over the years, and other than small incremental jumps, I doubt it ever will.

[fantastic_four]

Trying to campare comics to other hobbies is not viable.

 

I find it to be higly viable and more than worthy of the comparison, but there are two primary factors in the current comics market which fundamentally differentiates it from the 1989-1992 coin market--the Internet increasing collector liquidity, and less involvement from external investors. That second statistic is tough to measure, and I agree with Gene that JP has been trying to get external investors in since probably before CGC even opened its doors, but we haven't seen anyone like a Merril-Lynch suggesting comics as a viable investment, so I find that huge spike in the coin graph to be a minor exaggeration of what to expect from the comics market. The press has thrown out some articles, but that doesn't seem as legitimate as an investment firm making the suggestion.