Why Did Coin Market Crash In 80s?

I guess there were more sellers than buyers.

Sorry Thundercoin. Just an attempt at a little light humor. If it wasn't received that way, I apologize.

Here's the extent of my knowledge as to what went on:
A lot of investors drove up the price on the rare coin market which also drove up the prices on generics. And at that same time, there was an attempt to corner to silver market by some family (I forget the name), which drove silver up to $50 an ounce. So you combine those two factors, and you have this super hot coin market, where generic MS64 morgans were selling upwards of $200, and other coins were even crazier. Eventually, the market started cooling off, and frantic investors decided to sell their large holdings of rare coins, flooding the market and crashing it.

Again, I could be totally wrong, and this is just my garbled view of things.

yep, hunt brothers ran out of money, nobody left to buy the silver so the prices fell very quickly, people committed suicide because they had lost their life savings

In 1978, the Salomon Brothers first published their Survey of Tangible Assets. For those of you who don't remember, Salomon Brothers were among the most respected of Wall Street investment firms, a firm of such reputation and size as to be able to move the market themselves by their endorsements and actions.

The Survey of Tangible Assets was a comparison study of the investment value of tangibles like rare coins, stamps, art, land, foreign exchange, and the like, compared to "traditional" investment vehicles like stocks and bonds. The conclusion of that first 1978 survey was that, over the last 10 years, rare coins had outperformed all of the traditional areas of investment, and appeared ready to continue to do so in the future.

Coming from the Salomon Brothers, that was practically a command to invest in rare coins. As you might imagine, rare coin prices shot upward. For the rest of this mini-article, reference the PCGS 3000 Index for the last 30 years, here:

http://www.pcgs.com/coinindex/indexallgraph.chtml

Note the initial spike immediately after the Survey was first issued, followed by a small correction when the wannabees realized that they weren't comfortable in the environment.

Now, remember, back then rare coins weren't even on the radar as an investment vehicle. Very few people collected for that purpose, unlike today.

Anyways, the Salomon Brothers published their survey every year after 1978. Stack's was chosen to handle the rare coin end of things, choosing a list of coins to be represented in the market basket and compiling data. Throughout the 80's, prices rose dramatically every year, as more and more investors competed with more and more ferocity for the same amount of coins. Note the huge upturn around May 1988, the result of the huge stock market crash of October 19, 1987 - the largest single-day drop on history.

Other forces were at play, also. The market acceptance of third-party grading and the subsequent scarcity of slabbed coins (in the beginning), the build-up to the First Gulf War, and, most of all, the entrance of the large Wall Street firms into the market on behalf of their customers, cause the amazing spike in 1989.

Wall Street's involvement didn't last long (there weren't enough coins to satisfy their cravings), the Gulf War didn't last long, and the FTC pressured Salomon Brothers to remove coins from their reporting due to unscrupulous telemarketers/investors hyping coins and abusing the market. The bottom fell out of the market.

Now, if you take all that into account with the PCGS 3000, and eliminate everything directly attributable to all this hype (and it was all hype and speculation), you'll note that rare coins have basically been an extremely solid long-term investment.

They always have been, and they always will. There will never be any more of them than there are today, which is the very definition of rarity, and in true rarity there is true value.

Lets not forget that the coin market is directly tied to income,, in the early eighties the US economy went into depression, many people lost everything ,job ,house, savings everything (I barely survived by doing bathrooms and a few kitchens every month) I was a self employed floorcovering contractor at the time. and with that type of economy one of the first things to go are hobbies, no money to buy coins or anything else outside of the necessities.

Rick

Here's another link that might be interesting.

http://www.numismedia.com/law/01-08-23.shtml

Also interesting is the John J. Ford auctions which I believe so far have realized 50 million, with more auctions to follow. Ford didn't buy into hype or fads or even federal issues it would appear. The shysters can't hype such things as Indian Peace medals. Hype is used on the *crowds.* What is being hyped has to exist in large quantities. Which makes the whole thing a contradiction. How can something be "rare" if it's limited to 10,000 per house hold?

Great information all... thanks for sharing, I found the replies to be very interesting! I had no idea about the Hunt's driving up the price of silver. That is one interesting story!

Thundercoin