Dealers

[MMMM]

I went to a coin shop today to sell some of my banknotes. I chose the place because they are the biggest sellers in the area for foreign banknotes. Everything they have is marked above the catalog price, I do not buy there, too expensive.

 

I did not think it was a bad lot; over 650 bankotes, most are common, and not expensive, and only about 80 where circulated. I totaled up the catalog price and it came in over 2,000. I was looking to get about 1,500. The lady at the store did not even look at the notes. She just looked at the box asked how many were inside and said she would give me $50 in house trade for the lot. I said no thank you, she did not want to negotiated. She probably sees so many of these boxes and it does not make that much of her business. Oh well.

 

So I left and I am now negotiating with a local coin collector who may buy them. But it is just kind of annoying. I wonder how many people get ripped off every day. Have you ever come across a dealer like that? I do know they are in business, but the Mylar sleeves are worth more than that. (I will have to take them out of the sleeves next time).

[ccg]

There's two things that come to mind:

 

1. The person you dealt with isn't the owner, but an employee / family member who is not familiar with world notes and is instructed to simply make a very conservative offer on anything they're not familiar with.

 

or

 

2. They simply aren't really interested.

 

---

 

In general, I would say that 10c / note (and for credit) is way too low of an offer. However...

 

---

 

A very common issue with coins and banknotes is that any individual item <$5 is a hassle to deal with, and items in the $2 to $5 range (lower value non junk) is very problemmatic considering that each item needs to be individually identified and priced.

 

If I value my time at $20/hr, and I'm pretty efficient and can identify and price 20 notes per hour (3 min per), then my time cost per note is $1.

 

I can't say for that store, but for me, anything that's valued at ~$2 or under would get tossed into the junk bin to be sold for $1 or less (in quantity). So for any of those, 50c would have to be the absolute maximum that I'd pay, and even then, considering the time to look them up and conclude that they're not worth pricing individually, I'd be taking a loss.

 

As for the rest of them ($3 - $5 range) you'd probably be looking at $1 each, and that would be a very reluctant offer and probably contingent on me having a previous relationship with the seller (had either bought from or sold to them before).

 

A huge part of the problem is that unc world notes with CVs up to $10, but especially in the 50c - $5 range can often be bought wholesale for 25% of CV, making them rather undesirable to the retail dealer when buying.

 

When keeping in mind that a store has overhead, and that they may discount an item perhaps 10%-15% for returning customers, the only notes that would receive an offer of 75% of catalogue would be a very easy to sell and desireable note.

[MMMM]

The “True value” of a banknote is therefore, the whole sale cost or about 25% catalogue value. If you are a collector and you buy a banknote above this price, then you automatically lose money in the deal. This rule would apply even if the banknote is valued in the thousands. And of course banknotes rarely go up in value, price changes are usualy caused by inflation. You are basically always forced to buy high and sell low if you buy from a dealer. The only one who makes money is the banknote dealer.

 

So you are saying, do not collect banknotes because it is a “Money Pit” and you will never break even when you try to sell them. Unless you sell the banknotes directly to another collector and bypass the dealer. I guess that is one good thing about sites like eBay, which explains why eBay prices are usually much lower than the CV and definitely lower the coin shop prices.

 

I get out of this experience these Rules for Collecting banknotes to minimize loss and hopefully break even.

 

1. Never buy a banknote that is less than $10.

2. Never pay more than 25% of the catalog value.

3. Never pay more than the wholesale value.

4. Never buy UNC banknotes.

5. When you are going to sell, do not sell to a dealer only sell to another collector.

[MADISON]

The “True value” of a banknote is therefore, the whole sale cost or about 25% catalogue value. If you are a collector and you buy a banknote above this price, then you automatically lose money in the deal. This rule would apply even if the banknote is valued in the thousands. And of course banknotes rarely go up in value, price changes are usualy caused by inflation. You are basically always forced to buy high and sell low if you buy from a dealer. The only one who makes money is the banknote dealer.

 

So you are saying, do not collect banknotes because it is a “Money Pit” and you will never break even when you try to sell them. Unless you sell the banknotes directly to another collector and bypass the dealer. I guess that is one good thing about sites like eBay, which explains why eBay prices are usually much lower than the CV and definitely lower the coin shop prices.

 

I get out of this experience these Rules for Collecting banknotes to minimize loss and hopefully break even.

 

1. Never buy a banknote that is less than $10.

2. Never pay more than 25% of the catalog value.

3. Never pay more than the wholesale value.

4. Never buy UNC banknotes.

5. When you are going to sell, do not sell to a dealer only sell to another collector.

I TOTALLY DISAGREE WITH YOU. ALL BRITISH COMMONWEALTH ARE TAKING OFF QUITE NICELY. NOTES FROM MALTA, SEYCHELLES, BELIZE, BRITISH HONDURAS, NEW ZEALAND, AUSTRALIA, CANADA, all AFRICAN COLONIES, FRENCH AND EUROPIAN COUNTRIES...NOTES HAVE TO BE BOUGHT IN 'UNC' GRADING IN ORDER TO CAPTURE THE FULL BENEFIT, TO SAY THE LEAST.

LASTLY, MY PORTFOLIO IS MORE THAN DOUBLE IN THE PAST FEW YEARS..BTW CATALOGUE PRICING ARE ALL WRONG SERIOUSLY...AND THIS IS MY OPINION....

[MMMM]

I TOTALLY DISAGREE WITH YOU. ALL BRITISH COMMONWEALTH ARE TAKING OFF QUITE NICELY. NOTES FROM MALTA, SEYCHELLES, BELIZE, BRITISH HONDURAS, NEW ZEALAND, AUSTRALIA, CANADA, all AFRICAN COLONIES, FRENCH AND EUROPIAN COUNTRIES...NOTES HAVE TO BE BOUGHT IN 'UNC' GRADING TO CAPTURE THE FULL BENIFIT, TO SAY THE LEAST.

LASTLY, MY PORTFOLIO IS MORE THAN DOUBLE IN THE PAST FEW YEARS..BTW CATALOGUE PRICING ARE ALL WRONG SERIOUSLY...AND THIS IS MY OPINION....

 

Oh, I understand. There may be some banknotes that increase in value from scarcity. But they are a rare case and you would have to wait a very long time. I was pointing out that if a Dealer buys at 25% of CV, you won’t break even selling to a Dealer except on rare occasions.

 

Taking things into account here is an example.

 

Remember inflation. If you went into a coin shop in 1990 and you saw a banknote priced for $100 USD CV, and then you went back today and saw that same banknote it would be priced at $165.83 CV. That’s amount of inflation in the last 20 years for the USD. If the banknote price did not go up, that means it actually lost value.

 

Now, if going by ccg’s pricing guide, you bought that banknote at a CV of $100 in 1990 from the dealer. Then in 2010 you go back to the dealer to sell the banknote the dealer would offer you $41.47. Which would be 25% of the 2010 CV value of 165.83. For you to break even selling that banknote back to the dealer (remembering the dealer would ask about 25% of CV). The Catalog Value of that note would have had to go up to $660 then the dealer would offer you $165.

[ccg]

A huge part of the problem is that unc world notes with CVs up to $10, but especially in the 50c - $5 range can often be bought wholesale for 25% of CV, making them rather undesirable to the retail dealer when buying.

 

The 25% that I'm referring to applies to modern (post-1950s) world notes in UNC with catalogue values that are generally <$10 (or <$20), and that are known to exist in bundles.

 

Generally speaking, many catalogues (whether it be banknotes, or postage stamps) tend to overvalue relatively common modern stuff, while undervaluing "classic" older items which are always in demand.

 

To use postage stamps as a further example, the Scott catlogue assigns a minimum value of $0.15 to all stamps. Is this because all postage stamps are worth 15 cents each? No. This is a value that reflect the dealer's time in indivudally sorting and identifying a stamp for individual sale.

 

The same idea kind of applies for notes value values up to $5 - part of the rationale for the catalogue value reflects not the actual value of the note, but the cost it would take if a dealer had to directly acquire a note individually from the source (country). Naturally, when multiples are dealt with, economies of scale bring the cost down considerably.

[ccg]

To sum it up, in any field of collectibles, the good classic (and usually 'big-ticket') items will generally hold their value, and those in exceptional condition (such as King George V commonwealth notes in UNC, to name one example) will generally see above average rates of value appreciation. Such desireable pieces also usually have a very narrow spread between retail and wholesale due to their desirability, and ease of selling.

 

Items on the lower end of the scale, especially those valued at =<$5, are considered to be lower end items, and that is usually so because they are very common and readily obtainable. As such, their demand is also relatively low. However, due to their low cost, they are a great place for a beginner to start collecting, and learn about the field.

 

There's also the stuff in the middle (say $20-100 items) that generally hold their value, and are okay.

 

Think about this: is it easier to buy something for $850 knowing that you could resell it within several days (with some phone calls) for $1000, or is it easier to buy 300x $3 items for $200 knowing that it would take several years to sell that that you would likely only receive about $600 or sold after giving quantity discounts?

 

If one were to take an older coke bottle with a $5 catalogue value to an antique store, it's quite likely that the store would turn it down as the hassle to buy it, write up the reciept, and put it into inventory (and wait for it to be sold) wouldn't be worth it, unless the seller was given an extremely low offer.

 

Business is about cash flow. Slow moving inventory items, due to their nature, can only be bought at a discount.

 

Slow moving and low value items, hence can only be bought at steep discounts.

 

Nothing in my above comments should be construed as investment or collecting advice.

[MMMM]

Even for a banknote that cost $850 in 1990 you would have to sell it in 2010 for $1,409 to break even.

[MADISON]

Even for a banknote that cost $850 in 1990 you would have to sell it in 2010 for $1,409 to break even.

If you put it this way, why invest money in government bonds, saving bank account. most of them do not catch up with inflation, but people still doing it. a big why?. Then collectable is a hobby, you are in it because you enjoy to be in it, the investment part of it is just the bonus part. the end result in this game is the enjoyment,failing that, it is a vanity.

[ccg]

Even for a banknote that cost $850 in 1990 you would have to sell it in 2010 for $1,409 to break even.

 

I hope you don't buy cars!

[MADISON]

I hope you don't buy cars!

I like that ! good remark!

[MMMM]

I collect for the fun, but someday someone else will have to get rid of my collection.

 

It is funny thing inflation. If you ever watch the antique road show, they always ask when and how much the person paid for it. Quick math gives you base for the current value. Then add or subtract how common, or rare. People are shocked by the number, but unless the item is really rare, the value is set by inflation. It is pretty cool how they do it.

 

My point to what is that you probably will not get a good deal if you go to a Dealer with a store front. Reason, they will tend to sell high, and buy low. If you buy a banknote from one then turn around a sell it back, I doubt you will get what you paid for it.

[MMMM]

I hope you don't buy cars!

 

Never buy new, always pay cash.

[KoRnholio]

My point to what is that you probably will not get a good deal if you go to a Dealer with a store front. Reason, they will tend to sell high, and buy low. If you buy a banknote from one then turn around a sell it back, I doubt you will get what you paid for it.

 

It's hard to run a (successful) business if they don't profit off their buy-sell spread.

[see323]

If you put it this way, why invest money in government bonds, saving bank account. most of them do not catch up with inflation, but people still doing it. a big why?. Then collectable is a hobby, you are in it because you enjoy to be in it, the investment part of it is just the bonus part. the end result in this game is the enjoyment,failing that, it is a vanity.

 

People still invest in government bonds, etc because it has a higher liquidity. They may need cash at short notice. In the case of investing in banknotes, coins and other collectiable, it will take a much longer time to liquidate. Of course, the fastest way is to bring it to a dealer. If your banknotes are common ones, you may not be able to sell them. Dealers usually buy-in banknotes and coins that they can sell easily such as the scarce and popular ones. They usually pay lower than the market prices. I do agree with Madison that it should be a hobby that you enjoyed. The investment part is only secondary. For myself, I have move on to the next stage of collecting. I need to sell in order to keep better banknotes for my collection. Thus, I felt more satisfied than what I was doing in my earlier stage of collecting. I usually buy 3 notes, keep one and sell the other two. In that way, I get to keep one banknote for free. Hopefully, this information will help many to move to the next stage of collecting.

[see323]

The "True value" of a banknote is therefore, the whole sale cost or about 25% catalogue value. If you are a collector and you buy a banknote above this price, then you automatically lose money in the deal. This rule would apply even if the banknote is valued in the thousands. And of course banknotes rarely go up in value, price changes are usualy caused by inflation. You are basically always forced to buy high and sell low if you buy from a dealer. The only one who makes money is the banknote dealer.

 

So you are saying, do not collect banknotes because it is a "Money Pit" and you will never break even when you try to sell them. Unless you sell the banknotes directly to another collector and bypass the dealer. I guess that is one good thing about sites like eBay, which explains why eBay prices are usually much lower than the CV and definitely lower the coin shop prices.

 

I get out of this experience these Rules for Collecting banknotes to minimize loss and hopefully break even.

 

1. Never buy a banknote that is less than $10.

2. Never pay more than 25% of the catalog value.

3. Never pay more than the wholesale value.

4. Never buy UNC banknotes.

5. When you are going to sell, do not sell to a dealer only sell to another collector.

 

I think your experiences did not accurately spell out your rules.

 

For Point 1, it depends on the popularity, scarcity of the banknote. One fine day, you are at the right time, right place, someone offered you a banknote which is supposed to be worth $200 at market price but he is selling it to you at $8. What are you going to do ? Don't buy it. Let others buy it and they should be in deep shit since your rule said that you should never buy a banknote which is less than $10. What is important is that you need to build up the knowledge on banknotes. This will help you to decide whether to pay $8 or $800 for a banknote. See more, learn more and understand more.

 

For Point 2, what happen if the catalog value is grossly inaccurate. Your 25% may be 200% overpriced. You are paying very much more than the market price. Again, the same rule apply. Go for the knowledge to help you to decide.

 

For Point 3, how do you know how much is the wholesale price. Unless, you have been buying at wholesale and actively involved in banknote market as a dealer. Even for experienced dealers, they too have difficulties in determining wholesale price since a number of them only specialised on certain areas of banknotes.

 

For Point 4, I fully disagree 100% on this rule. Modern world banknotes should be kept uncirculated. Most collectors whether beginners or advanced, usually go for uncirculated banknotes unless due to scarcity, there may not be many uncirculated banknotes for everyone to keep. If modern banknotes are kept below uncirculated grade, you probably keep them for face value and hope to gain on exchange rates. Your money changers will be your banknote collectors.

 

For Point 5, Again, this is not necessary true. If you need cash for some emergency needs, the quickest way is to sell to a dealer. You purchase a banknote from a dealer. After some time, the same dealer may want to buy back the banknote from you. He may offer you a good price. It depends on how passionate and your attachment to this banknote. You may want to sell it to make a profit and use the money to buy other banknotes. Otherwise, you just want to keep it for your collection. Dealers are there for a reason. If you have been buying and selling with a dealer, he/she almost become your long time friend. A good rapport with a dealer may lead you to better banknotes offer from him, At the same time, you may also offer him some of your good deals. I think it benefits both parties mutually.

 

The above are just my opinions. It is purely for exchange of views only and not to be taken as textbooks' facts and theories. Different people encountered different incidents. I believe they learned from them.

[MMMM]

It's hard to run a (successful) business if they don't profit off their buy-sell spread.

 

That is true, they would not be in buisness long.

[MMMM]

I think your experiences did not accurately spell out your rules.

 

For Point 1, it depends on the popularity, scarcity of the banknote. One fine day, you are at the right time, right place, someone offered you a banknote which is supposed to be worth $200 at market price but he is selling it to you at $8. What are you going to do ? Don't buy it. Let others buy it and they should be in deep shit since your rule said that you should never buy a banknote which is less than $10. What is important is that you need to build up the knowledge on banknotes. This will help you to decide whether to pay $8 or $800 for a banknote. See more, learn more and understand more.

 

For Point 2, what happen if the catalog value is grossly inaccurate. Your 25% may be 200% overpriced. You are paying very much more than the market price. Again, the same rule apply. Go for the knowledge to help you to decide.

 

For Point 3, how do you know how much is the wholesale price. Unless, you have been buying at wholesale and actively involved in banknote market as a dealer. Even for experienced dealers, they too have difficulties in determining wholesale price since a number of them only specialised on certain areas of banknotes.

 

For Point 4, I fully disagree 100% on this rule. Modern world banknotes should be kept uncirculated. Most collectors whether beginners or advanced, usually go for uncirculated banknotes unless due to scarcity, there may not be many uncirculated banknotes for everyone to keep. If modern banknotes are kept below uncirculated grade, you probably keep them for face value and hope to gain on exchange rates. Your money changers will be your banknote collectors.

 

For Point 5, Again, this is not necessary true. If you need cash for some emergency needs, the quickest way is to sell to a dealer. You purchase a banknote from a dealer. After some time, the same dealer may want to buy back the banknote from you. He may offer you a good price. It depends on how passionate and your attachment to this banknote. You may want to sell it to make a profit and use the money to buy other banknotes. Otherwise, you just want to keep it for your collection. Dealers are there for a reason. If you have been buying and selling with a dealer, he/she almost become your long time friend. A good rapport with a dealer may lead you to better banknotes offer from him, At the same time, you may also offer him some of your good deals. I think it benefits both parties mutually.

 

The above are just my opinions. It is purely for exchange of views only and not to be taken as textbooks' facts and theories. Different people encountered different incidents. I believe they learned from them.

 

All good points, thank you, There are a number of wholesalers that list their prices and will send to you if you ask. Also I track prices for banknotes I want, and compare the wholesale, store front, on line stores, eBay, eBid, and the catalog. I have a pretty good idea on how much they go for and what the pricing trend are. I can actually tell which on line store has a store front, just by the prices and which are just on line stores,

[MADISON]

All good points, thank you, There are a number of wholesalers that list their prices and will send to you if you ask. Also I track prices for banknotes I want, and compare the wholesale, store front, on line stores, eBay, eBid, and the catalog. I have a pretty good idea on how much they go for and what the pricing trend are. I can actually tell which on line store has a store front, just by the prices and which are just on line stores,

Thank you DERRICK for sharing your experience. It is good to have vision and understanding in any endevour....

[see323]

All good points, thank you, There are a number of wholesalers that list their prices and will send to you if you ask. Also I track prices for banknotes I want, and compare the wholesale, store front, on line stores, eBay, eBid, and the catalog. I have a pretty good idea on how much they go for and what the pricing trend are. I can actually tell which on line store has a store front, just by the prices and which are just on line stores,

 

Seems like you have a good feel of the market

[see323]

Thank you DERRICK for sharing your experience. It is good to have vision and understanding in any endevour....

 

I am sure you too have great vision and plan in your banknote collecting journey. I too love French printed banknotes but unfortunately, I have already started with my area of specialization. Do share your experiences with us.

[MMMM]

Seems like you have a good feel of the market

No, I stink at it. I am good at buying the banknotes. I keep track of the notes that I want in a spreadsheet and once a month check the prices from different sources. I am patient, and I can buy a banknote close to and sometimes below wholesale. Sometimes it takes years but sooner or later one shows up on the market.

 

Sometimes I have to buy a lot to get one banknote. The problem is selling off the extra banknotes. I know I can always sell or trade the banknote to other collectors (preferred), or even sell them on the internet (hassle). I am not looking for a profit. But it would be nice to go to at least one of the seven area coin shops and at least get a reasonable price.

 

But I tend to forget that coin shops are business and not collectors. To them banknotes are merchandise. I feel sorry for people who buy banknotes from these people.

[Hussulo]

No, I stink at it. I am good at buying the banknotes. I keep track of the notes that I want in a spreadsheet and once a month check the prices from different sources. I am patient, and I can buy a banknote close to and sometimes below wholesale. Sometimes it takes years but sooner or later one shows up on the market.

 

Sometimes I have to buy a lot to get one banknote. The problem is selling off the extra banknotes. I know I can always sell or trade the banknote to other collectors (preferred), or even sell them on the internet (hassle). I am not looking for a profit. But it would be nice to go to at least one of the seven area coin shops and at least get a reasonable price.

 

But I tend to forget that coin shops are business and not collectors. To them banknotes are merchandise. I feel sorry for people who buy banknotes from these people.

 

MMMM if your looking to invest I would say sell the notes you have on somewhere like ebay or a collector and use all the money to buy 1 or maybe 2 choice rare notes (or coins). Make sure you buy from a trusted dealer or one that has been graded and encapsulated by a grading service. This would most likely bring the most financial reward in the long run plus it would be cool to own a note worth $1000+.

[MMMM]

MMMM if your looking to invest I would say sell the notes you have on somewhere like ebay or a collector and use all the money to buy 1 or maybe 2 choice rare notes (or coins). Make sure you buy from a trusted dealer or one that has been graded and encapsulated by a grading service. This would most likely bring the most financial reward in the long run plus it would be cool to own a note worth $1000+.

 

No, not looking to invest. Just looking to break about even.

[KoRnholio]

No, not looking to invest. Just looking to break about even.

 

I'm not trying to pick on you, but it's likely too late for that on your previous purchases. You'll may be able to recoup most of the costs if you sell them individually or in small lots yourself on Ebay, but don't forget to factor in the time it takes to photograph/list/mail them.

 

Personally, I collect a wide range of coins. Everything from the 5 for $1 modern world coins in dealer bulk bins, to near high grade ICCS/PCGS coins. On the <$5 coins I fully expect to make little if anything back when I resell them. Yet I am still adding to the two very large binders (1200+ coins) of 1950-2000 world coins worth 10c-$1 each. I do it because I enjoy it.