So Tell Me About This CAC Thing.

Yes, but their income is not derived from buying and selling between themselves. The ultimate impetus for CAC was their dissatisfied collector customers whom they couldn't reliably service because they were receiving coins unworthy of the grade. Even if you're sending them on approval, getting them back is not good for business. Do that to me twice in a row with a $10,000 coin, I'm likely taking my business elsewhere because you don't know what's "good" for the grade.

I would disagree with this, the average collector doesn't pay a penny unless they buy a CAC coin. Just being a collector doesn't fund anything for them. They also dont even charge a membership fee so even members only fund it through submissions.

@basebal21

I'm heading out of the office and will read on tomorrow.

To clarify that, "the average collector" will spend $12.50-$25.00 per coin for CAC to "validate" the grade on your slab. By utilizing their service, you are allowing them to cherry-pick your slabbed coin prior to its entrance into the market. Therefore, utilizing CAC, you are allowing them to cherry-pick your coin before you even sell it (and they are able to identify your exact coin at auction and through some sight-unseen exchanges), and paying them for this "service".

They will ultimately be the ones that determine exactly which coins they are going to target. If your coin is not one of the ones they target, then you are still at the mercy of the general market. I personally would not want to be at the mercy of a market where the "product manufacturer" is also a market-maker.

I would present that it would be akin to Sunshine Mint claiming that their bullion carries a premium when they are the selfsame ones paying that premium for their bullion they mint...but only purchasing select identifiable rounds that meet a particular criteria. The rest of the bullion that does not meet whatever criteria they are specifically looking for is subject to the general real market forces that be, whether the other market-makers jump on the premium bandwagon or not.

Thats only the ones using it. The average collector likely isn't using their service at all imo, theres a good number who use it or like their coins but if you took a poll of collectors I doubt youd even get within spitting distance of half of collectors saying they are CAC members.

Honestly Id bet its under 20 percent who do and thats probably generous, they do make you put a little effort in and control their number instead of just letting anyone sign up at will like the grading companies. Theres a heck of a lot of people who collect and have never sent a thing in in their life to anywhere and just let other people worry about those costs.




Without it youre at the mercy of the market anyway so I dont see any difference. Them setting the market implies that they would be outbidding the rest of the market anyway so again that would be a positive.

They only have the ability to set the market higher not lower. They cant buy a coin bidding less than everyone else. Personally I would be happy they were interested in it and driving up the price thats better for the seller.




Companies already do that with the difference prices they charge for different products. Ultimately the market decides anyway. If they do that and no one buys at the higher price they go under, if the market agrees those coins are worth a little more than their peers it works out.

That's the only thing which really bothers me about CAC. Their approval shouldn't generate the kind of premiums I'm seeing. If a nice version of the coin was worth $1000 yesterday, the same coin with a green bean should not be worth $1200 today. Especially at places like Heritage, where the demographic is pretty well-informed and the images are spectacular.

Sorry I didn't pop in yesterday. I got real busy as I am today as well. This is one reason I peruse the forum, but do not post that often.

I'll pop in from time to time to throw out a comment until I have time to be more winded.

@basebal21 wrote:



Real quick, I want to first make sure that we are communicating using the same vernacular. A market maker is an individual or firm that is always prepared to buy and sell assets (normally from their own portfolio) of a particular kind in a particular market in order to provide liquidity to said market. A market maker is not someone who makes bids or offers in the market. Playing the market in no way makes one a market maker.

A market maker in our industry would be one who will make available on a regular and continuous basis the asset(s) which a market is actively making bids and offers to trade. To give a clear example, a market maker in the wholesale arena will see a bids for Morgans and consistently make them available to the market when the market itself is not able to provide. Likewise, the market maker will also actively purchase assets that are available in the market in order to keep a balanced flow. Market makers are generally a good thing.

If we do not agree on what a "market maker" is, however, then the discussion will not avail much to either of us since we will be speaking different languages, so to speak. Now, I know we can both agree that the "market" is the wholesale sight-unseen numismatic market (which includes both the varied exchanges as well as auction venues). And CAC has stated that the company is a market maker for CAC "approved" slabbed coins (which by nature are U.S. non-bullion, non-modern releases).

Thus, by definition, CAC is a firm that is always prepared to buy and sell CAC "approved" slabbed coins from their own portfolio in the wholesale sight-unseen numismatic market in order to provide liquidity in the market.

Now, one should really contemplate the situation first before going on. Those involved in securities investment know that traditionally, the market makers are separate entities from the issuers of the security that they are making a market for. One would also realize that several market makers could exist for a single security, however, those market makers operate independent of each other (NASDAQ being an example).

Using securities as an example, consider three market makers for a particular security. Let's say this security normally has a consistent bid of $5.20 with minor fluctuation. The market makers would make their money by providing liquidity for that security, even with it's slight fluctuations. Not a very profitable endeavor, but it's what market makers do.

Now, imagine that these market makers create a holding company whose holdings are exclusively of the security in which they are market makers. Let's imagine that these market makers put bids and offers for the security and conduct the trades across from one to another at inflated prices. So, the securities of the holding company are now steadily trading at $5.70 a share.

Thus, these "market makers" now have a higher profit from the market making and their own holding company's securities rise as well.

There is a better analogy that could be made, but not without making implications that I personally believe are not true. As I said before, CAC has come up with quite a scheme. I personally do not agree with whatever ethical philosophy they are adhering to in order to run this scheme without second thought, but they are completely upfront about what they are doing (which surprises me that more people don't see it point blank).

Now, this should help explain why, for instance, a PCGS MS64 1879CC Morgan bid for $6,750 while one with CAC approval bid $8,250 earlier this month.

Realize these points:
* CAC is the issuer of the "security", so to speak
* CAC is a market maker for their own "security"
* CAC is comprised of a number of independent individuals/firms, thus making CAC able and susceptible to being a conglomerate of market makers making a market independent of market demand or need (ie, amongst themselves)

CAC is in a position to be a market manipulator, that is to say they are in a position to manipulate the price of their "security" since they are both the issuer as well as market maker.

The SEC recently had to debate whether to approve proposals from the NASDAQ and NYSE to permit sponsors of ETFs to pay broker-dealers for making a market in their securities. That is to say, to allow the issuer of a security to pay dealers to make their market on the issuer's payroll. To my knowledge, a Rule change to FINRA Rule 5250 excepts certain indirect payments.

However, in the Notice of Filing by the SEC, they state:


This concern was addressed in an SEC approval order which stated:



So, the question rests: Who is really making these bids and offers in the wholesale market? CAC's website today states that they have purchased over $275 million of CAC "verified" coins! Yet, I find no indication as to how much they have sold...

A market maker is one who buys and sells. If they are only buying and not selling back into the sight-unseen wholesale market, then I believe they are no market maker, but simply utilizing their position to "cherry-pick" for their individual inventories. If they are truly a market maker, then it would be very interesting indeed to compare their sales to purchases as well as overall market control.

A market maker does not control the market, they simply keep constant liquidity in the market.

Now, back to what I quote from basebal21. A market maker should not be manipulating the market so much as they should be making the market liquid. In other words, if the market is pushing to buy, the market maker should be selling. If the market is pushing to sell, the market maker should be buying. But, the indications of price variance in like assets we are seeing (like SuperDave referred) "should not" exist unless the market was being manipulated in a particular direction.

That is why I stated it would be interesting indeed to compare the data on CAC's purchases compared to the entirety of the market volume. As well, data on their successful offers would help to shape a better image of the actual market. If anything, we should be at the mercy of the market, and not the issuers. Imagine if the market for PCGS slabbed coins was controlled by the PCGS price list.

As we know, that market is not controlled by PCGS, but the individuals making bids and offers. Likewise, the market should be the controlling factor of CAC "approved" coins. But, that may not be the case since CAC is actively involved in the market making. Just as the fears existed with the SEC of a false illusory interest in the stock markets, CAC's presence as a "market maker" in the wholesale sight-unseen market for CAC "approved" coins makes the true interest in such coins rather questionable.

A market maker can indeed manipulate a maker either way, up or down, for better or worse. Whether they desire to or not is another question. But, one thing I noticed is the reference to "outbidding". The primary market where CAC is concerned (and which consequently drives the retail and secondary markets) is the wholesale market. The majority of the "average collector" will never be involved with the wholesale market. In fact, many do not even know of its existence.

This wholesale market is analyzed by the same analysts who derive quotes and pricing for the varied retail price lists. The wholesale market is used extensively by dealers in their own retail pricing. This market affects the secondary market as those "bidding" or offering privately utilize the latter two to help derive an expectation or pricing of their own.

This wholesale market does not necessarily rely on any form of "bidding" as in an auction. Often times, it acts much like the financial markets in that one may "bid" a desired price for their asset, while another may "offer" to acquire. Interested parties may then execute trades (or a market maker may execute a trade to create the liquidity in a stagnant market.

Indeed players in the wholesale market are able to buy for lower than anyone else, more often than not to and from market makers in stagnant markets. Even in very active markets, the possibility always exists. There are even times that an offer will be made for more than an active bid. These are anomalies...exceptions to the rule.

When this happens, the market analysts will usually "write it off" for what it is. However, with CAC, we are seeing a number of issues that are consistently showing the anomalous to be the norm.

The plethora of auction bidders are not market makers, they are players in the market. They are the ones driving the market either up or down (included here are speculative investors, and why there is so much fluctuation in some coin issues). Yes, market fluctuation (especially on the up side) is very good in such situations. However, I have a very hard time seeing it a positive thing when the indications are that the market may have been manipulated by the very issuer of the market asset.

Anyway, I need to leave for a while. I might be around to post tomorrow. But, no need to hurry the conversation. Take time to consider all things. And remember, just because someone "yammers the jaw" does not necessarily mean they know what they are talking about.

edit:
I felt the need to add just one thing before I leave with regards to my last statement.

Knowledge is key in numismatics. In fact, numismatics is both an art and a science. Take facts for facts and commentary with more than just a grain of salt. Opinion is good to help provoke thought and discussion. But the plain facts are what really matter. How you interpret them are up to you.

I agree with west and dont see the down side of CAC pre screening raising the quality.

But in response to NP I get what youre saying but theres a big difference when it comes to coins and commodities. CAC is still at the mercy of the market. Theres no actual need for what they have or provide and if the market doesn't like their prices they will ignore them, so their influence is limited. A commodity there is an actual need where they have the market at their knees if they were allowed to do whatever they wanted in unison.

Is CAC trying to create some premium, probably but I doubt theyre trying to do so to the extent of riping people off. The guy who runs CAC is well respected and has a lot of connections, he may just be buying when requests are put in to him from his connections I dont know why theyre buying. But he also runs a company that is not for profit and has gone after the third party slabbers and sellers who take advantage of people and has recovered some money for people so I dont think his intention is to just stick it to buyers.

I also dont have a problem with them buying it because it shows they believe in their work and are willing to invest in it just like anyone else. Their existence does make it easier for dealers to pick things up sight unseen which makes more things available to buyers as opposed to whats just in stock. That increased ability for people to buy is a positive in my book.