In the first of a two part series, silverenthusiast.com talks with John Maben from ModernCoinMart (MCM) on the metals market, eBay, and the success of the hall of fame baseball commemoratives.
SE: Thanks for taking the time to talk shop with us, John. For me, the most obvious place to start is just to get your sense of what’s going on with the metals market. Silver and gold looked to be in full freefall prior to catching a bid on what’s happening in Iraq as of late . Since MCM launched in 2004, you guys have undoubtedly experienced a heavy dose of volatility in the underlying metals prices. In your experience, how does that impact what your average client – numismatist or investor – seems interested in?
JM: Well, not sure I would have called it full freefall but without question we have been in a down market for a prolonged period of time. Given the current conditions I have been somewhat surprised that we are seeing steadily increasing demand for silver and gold. I think this is twofold, first, more buyers have “discovered” MCM because even though we’ve been around for ten years, our push into precious metals is only going into its fourth year. Second, I believe those buying metals simply don’t buy into the notion that “all is well” in the economy and want to be prepared for when it becomes apparent to all that rising debt is a real issue. Today’s buyers are for the most part not expecting to turn a profit quickly, and are willing to hold until the tides turn. The down metals market has impacted our collector market as well but new buyers are still entering and the net result while significant, isn’t alarming by any stretch.
SE: I’m glad to hear that an authoritative source sees increasing ‘demand’, because that’s different than what the market analysts usually tell us. I think part of the story is that it’s just simpler to buy these things now relative to even a few years ago. I’ve written about what MCM is doing on eBay and it’s absolutely striking. We know that Amazon recently launched a collectible coins department that I imagine will evolve into a full-blown marketplace of it’s own. Is MCM going to be involved in that – and is it possible we’re heading to a point where we can just ignore what the COMEX paper futures say and instead look at the completed sales from any number of large e-tailers?
JM: The eBay marketplace is far more diverse than many realize. Of course the majority are average people of average financial means but you might be surprised at the number of deep pockets that enjoy the experience and once they develop trust with a seller are willing to step up purchases to a serious level. If you would have told me just two or three years ago that MCM would be consistently selling over a million dollars a week on eBay I probably would have politely excused myself from the conversation to go do anything else.Others, specifically Amazon and Alibaba, as well as some smaller players have taken note of what is going on and have already begun entering the space. They are generally not well informed of the obstacles they will encounter and for that reason eBay has a serious leg up for now. The coin and precious metals business is unique in many ways, even when compared to other vertical markets. From the outside looking in it may appear an easy target for new business development managers but it is not a business that can be built from the ground up without substantial insider guidance from multiple experts that represent the various cross sections of the market. And even then, a larger corporation’s culture, protocol, and multi level management will stand in the way of their own progress if they aren’t flexible enough to change policy quickly when and where needed. Trading in COMEX futures can be a nifty way for some to visit Las Vegas without ever leaving that comfort of their home or office. Speculation and manipulation can drive prices in any market. I think physical buyers that actually take delivery are more likely to be conservative knowing that all markets move in cycles and less likely to view their investment as a short term bet, but rather part of a strategy that requires patience. I don’t think you can ignore what’s taking place in futures at any given moment or the demand at e-tailers but ultimately neither will be a definitive predictor of where the market is headed.
SE: I think it’s safe to agree that most of us would sleep a lot better at night picking up metals on eBay than trying to trade these ‘Vegas’ futures. After all, we’ve been told in CFTC testimony that the futures markets are just a mess of crazy-levered paper with (US) regulators routinely toothless in policing. What you mentioned about well-funded buyers on eBay makes perfect sense in that regard – it’s the only place these guys are actually going to get delivery! But let’s switch gears away from some of the broader market stuff for a bit and talk about some coins. We know the Hall of Fame Baseball issue was a big success – the first real excitement we’ve had for US commemorative in some time. Lines forming to buy them.. the website crippled for the first few hours.. pre-orders running on eBay.. for a US Mint product? Collectors needed this to get engaged again. Are we looking at a redux of the 2001 Buffalo issue that still enjoys a very nice premium 14 years and 500,000 coins later? I’ve got a soft spot for collecting said US commemoratives, although I’m the first to acknowledge they’ve generally been an investment bust. In your opinion, what’s been the problem? Mintages too high? Designs not good enough? Or is there some macro ebb-and-flow trend I’m missing across numismatic products in general?
JM: The Baseball commemoratives have done exceedingly well. I think it was the perfect convergence of good timing, low mintages, a curved shape concept, and a variety of ways to buy the coin on the secondary market thanks to the many different labels offered by the grading services. The collector is alive and well, but these coins also brought the flipper back out of hiding as many saw opportunity for a quick turn and a quick profit. Right now, it’s looking like these will retain a high premium into the future but I would not be at all surprised to see prices retract (and to some extent they already have) in the near term as gains have been impressive to say the least and supply is still there, at least for now. Looking at all modern commemoratives as a sector of the market, they have traditionally followed a pattern of boom and bust and right now we’re more towards the bust end of things. History does have a tendency to repeat itself and I firmly believe this area will shine again.
In our final set with John, we’ll discuss price gouging claims, fakes, and a look into what MCM has in store for us in the future. Watch for that in the very near future.
Editor's Note - "SE" is silverenthusiast.com, a blog based website that publishes information for silver collectors. Permission was granted to ModernCoinMart (MCM) for the re-publication of this interview.