First of all, I have no use for rare coins, but not because they aren’t collectible or beautiful, but because they are not a good investment. Coin shops work just like every other business. They have rent to pay, advertising, employees, and need a return on their capital invested for stock. My wife went to her favorite shoe store Wednesday, and selected four styles and colors which she wished to buy. They had none of them in either the size or color she wanted. The shoe store probably has three thousand or more shoes in stock, and of various sizes, colors and styles. Maybe more, I don’t know, as I am no expert on shoes. The large amount of capital tied up in that huge inventory, and interest, if money was borrowed to get the inventory, requires a return of at least 10%. If there are 3,000 pairs of shoes in that store, with an average wholesale cost of say $20, (probably a lot more), that means a cost of doing business outside of any other costs, is $60,000 per year, or about $240 per day, just to get a return on the invested capital on inventory.
Coin shops have the same huge inventory, and need to get a return on that inventory, or they might as well forget it. If a coin shop has an in inventory of $200,000 in numismatics, WHICH THEY PAID CASH FOR, they must get a return on their investment. Most retailers of all kinds, be they hardware stores, shoe stores, or just about any other kind of store or shop, mark up their merchandise from 30-50%, which is their gross profit. They need that profit to offset their costs of doing business, return on inventory, rent, employees, utilities, advertising, etc. This is NORMAL, and I have no quarrel with that. When you buy shoes, lumber, or computers, you have no idea of ever returning them to get a ’return on investment.’ With coins, everyone thinks they’ll eventually return them, or sell them back, and hope to get a nice return on their investment. The coin shop, as opposed to all other retail businesses, does two way trades in their merchandise. Coin shops, as is normal, buy at wholesale, and sell at retail, which by all laws of economics, is the way it should be and must be. In other words, they sold to you at retail, and buy back from you at wholesale, or probably at a 30% discount over whatever the current selling price may be. This is one reason why numismatics are an extremely poor investment. No business can buy merchandise at the same price as they sell it for, or they would quickly go broke.
As a precious metals BROKER, I have no inventory other than my own. I work out of my home, have no rent to pay, no employees, and mark up NOTHING over what I pay my supplier for the gold or silver. I merely charge a 1.5% commission, and this includes shipping to you. I am not a coin shop, and care not what age or condition anything is, because I sell BULLION type of stuff, which is the closest price one can get to actual spot. The most gold and silver for the least failing dollars, in other words. My supplier A-Mark, happens to be the largest distributor of gold and silver in the world, I believe, and they buy directly from the US and other mints. It can’t get any cheaper!
Like every business, coin shops and numismatic dealers, all have the problem with the fact that they must buy back for 30% less than they sell for, so they concoct all sorts of sales pitches, designed to overcome the obvious, unavoidable problems with being a retailer buying back what they sold. “These will never be confiscated,” is one of the ruses, even though they know damned well that gold and silver have never been confiscated. “This is a rare double eagle, for only $3,000,” which is what one coin shop tried to sell to one of my clients last week. $3,000 for .9675 oz of gold? A “rare” double eagle? There are hundreds of thousands of them around, including the fake ones made by the commies 25 years ago, which are real gold, but not authentic double eagles. If the gold was confiscated in 1933, how come they have it to sell? “Rare coins have gone up much faster than bullion coins,” which is a lie. “They’re good for barter,” and I don’t think we’ll ever have to barter. Most coin shops and numismatic dealers are almost like used car salesmen when they try to overcome the plain and undeniable fact that they have to buy wholesale and sell retail. How could they stay in business, unless they could buy for less than they sell? I don’t buy and sell from an inventory. I am a BROKER, like a stock broker, who usually never even handles the stuff. My gold and silver are shipped from a Brinks warehouse in either Los Angeles or Salt Lake City, under my label. How could I do it for 1.5% if I had to handle it, stock it, pack and ship it? I have no huge, variety of inventory which I must get a return on, like a shoe shop.
Coin shops and numismatic dealers have hundreds and thousands of all sorts of different sizes, grades, ages, and nationalities of coins, all displayed in those gorgeous cases…for sale… for which they have gobs of capital tied up, and which they must mark up 30% or more. Who cares how old a Gold Eagle or Krugerrand is? They’re ONE OUNCE OF GOLD! On the boob tube I saw, quite by accident, a Morgan Silver Dollar (less than one ounce of silver and un-graded) for sale for $700! A body would have to have a screw loose to buy that, or a $3,000 double eagle. One other thing: If you feel you must make a poor investment in numismatics, be absolutely certain that they have been professionally graded by either PCGS (preferred) or NGC, and in a sealed plastic box showing its grade. Before you buy, go to the PCGS web site to check the fair price…then buy…if you must. Have a great weekend!