Thursday, April 30, 2009

Coin Scalping? Buffalo Nickel Sells for $965 on Ebay


The 1913 S Buffalo Nickel ("Type 2" Near Gem BU++/Gem BU) pictured above just sold on Ebay for $965.

Face Value: 5ยข (Five cents, see top photo)

Market Value: $965

Question #1: Isn't that "coin scalping?, i.e. selling a coin above its face value?"

Question #2: What's the difference between selling a concert ticket above face value and selling a coin above face value? Why should one be illegal and one be legal?

14 Comments:

At 4/30/2009 9:04 PM, Blogger Tiger Coach said...

Hey Doc,

A coin has an antique value, a collector value, and a precious metals value.

Keep reading this blog, I enjoy reading it.

 
At 4/30/2009 9:35 PM, Anonymous Anonymous said...

The only lesson worth drawing from this is that the Federal Reserve has completely debased the value of the US dollar.

Why not talk about that Mr Free Market?

 
At 5/01/2009 1:57 AM, Anonymous Anonymous said...

You should check out the Australian 1930 penny. A proof copy is worth a cool million.

 
At 5/01/2009 2:39 AM, Anonymous Anonymous said...

The Coin's value is based on its lack of availability and its demand within the market. I am sure that if you were to sell it a few months ago the real value would have been below the $965.

Also a big difference is that the coin has appreciated in price thru time measured in decades no minutes or hours.

Scalping tickets present two social ills for society 1) inflation and 2) the artist and event promoter who take the majority of the event risk do not maximize the benefits, while a person who takes minimal risk (face value of ticket) can see an appreciation of income of up to 1000% in a matter of hours/days.
Although I believe in free markets, artificially manipulating the demand cycle is not free market capitalism but rather manipulation of capital markets via financial engineering.

Why should any sport/concert spend millions of dollars for other to take the profit? They are the real producers of value, not the scalpers.

If rules are set by which even the playing field for Scalpers, I would be in favor of legalizing them. However, uncontrolled markets with no rules is cowboys capitalism not our modern globalized economic system.

 
At 5/01/2009 5:00 AM, Blogger Craig Dennis said...

Can't let THAT kind of comment go unopposed.

Scalping is a sign of bad pricing. It is not a "social ill" for them to provide tickets at prices that people are CLEARLY willing to pay. Clearly the demand for the event is suggesting a higher ticket price, otherwise the scalping would not exist.

If the business is in the business of charity, then they can do that the way charities do it. Verify income and family size and connect tickets to identification.

Seeing as they are NOT in that business by choice, they should either 1. Price the tickets appropriately, or
2. increase supply of games/shows/events to the level of demand, which will bring the real value in equilibrium with the price they for some strange reason want to offer.

Free cowboy markets are awesome and do very much social good. If anything, the thing that is terrible and deserves sanction (which is provided by the market) is the inefficiency of bad pricing efforts by the stadiums. Shame on THEM, not the scalpers.

 
At 5/01/2009 7:15 AM, Anonymous Anonymous said...

The difference I feel is it is viewed as a collectable not an event with a finite life, , anyway if it is viewed at a collectable it should taxed as a collectable at 28% versus the long term tax rate of 15%,do you think that will happen?

 
At 5/01/2009 7:20 AM, Anonymous DiabolicalMechanism said...

I believe the point the Prof. is trying to make is that value is a subjective concept. I for one, would never pay that much for a coin because I am just not that into coins. However, if there was a band I really wanted to see and the tickets sold out before I could purchase them, then I may turn to the secondary market. Eitherway, its a voluntary transaction between two individuals that each expect to be made better off.

BTW, it is not a social ill because it truly cannot be. No one is coerced into paying an above face value price for the tickets or coins. In addition, artists are aware of ticket scalpers, so maybe there is a strategic/personal reason for pricing their tickets "incorrectly". Possibly, they would rather have their concert sell out extremely fast in order to create a buzz, which will serve to increase their popularity. Maybe the artists are in on the ticket scalping themselves because they realize there will always be individuals who can afford to pay more. The music industry is extremely complex and competitive, so I am just speculating.

The bottom line is that the Prof. raises a good point because there really is no fundamental difference between the two.

Peace yall.

 
At 5/01/2009 7:21 AM, Blogger Michael said...

I think that scalping tickets is very similar to this - there is a limited resource ('one night only!' or 'only 3 in the world like it') and demand for the item has increased resulting in a high price. There are a few important differences though...
The scaplers may have an unfair advantage to accessing the tickets. If only 5 people have all of the tickets and they choose to sell them for 1000 times face value it is no longer a free market.
Event promoters are able to control the supply and sign contracts that prevent competition. This too is against free-market principles.

I guess I think the main difference is that an artifact has a limited supply for a different reason than say a concert or baseball game. Artifacts (and antiques) have a limited supply by natural supply by no fault of their own. Ticketed events are closely planned and manipulated to keep supply limited.

 
At 5/01/2009 8:02 AM, Blogger Patrick said...

Question #1:
As far as I know the laws of the U.S. only establish a value floor for its fiat money while it is in circulation. Once it goes out of circulation it is no longer subject to any laws regarding its legal tender status. Then it's just an antique that may only be worth the value of the material it's made from. In the case of gold coins there is added value from the fact that the coin stock has been assayed so you know the purity of that gold. In the case or bars or ingots you would have to get an assay to confirm that it wasn't 20% silver or something else.

Q #2:
I view concert tickets or sporting event tickets as another form of advertising. If tickets were allowed to go auction style the artist or owner would get more immediate revenue from ticket sales but would lose the "soul" of their following. Corporations would be the major purchasers of tickets and use the draw of the event to market to potential clients. This expense can be deducted from taxes and the corporation doesn't really care if all the tickets are used all of the time or not. You would end up with a stadium full of people who don't really care about the event but about the spectacle of it. It seems like the artists or owners want to remain connected with the true consumers of their product and not allow third parties to control the make up of the crowd. In this way they ultimately make more money through a more loyal, merchandise-purchasing, fan base.

 
At 5/01/2009 8:59 AM, Anonymous AMATI NONYMUS said...

Long Term Capital Management

Will you live long enough to invest in baseball cards for your great grandson?

100*(e^((Ln(965/0.5))/(2009-1913)))
=
108.199325962 %/annum
=
100*
(
e^
(
(
Ln
(
965/0.5
)
)
/
(
2009-1913
)
(
)

 
At 5/01/2009 3:10 PM, Blogger Craig said...

"The only lesson worth drawing from this is that the Federal Reserve has completely debased the value of the US dollar.

Why not talk about that Mr Free Market?"
And just exactly what does the Federal Reserve have to do with the free market? You will know, of course, that the creation of the Fed was nothing but an attempt to get around that pesky thing.

 
At 5/03/2009 6:54 AM, Blogger Shebnik said...

there are bullion coins, that are sold for their gold/silver/platinum value - not for the face value. Even news one from the state bank. Like American Eagle.

http://en.wikipedia.org/wiki/Bullion_coin

But you can use it as a payment, for a face value.

 
At 6/20/2009 11:01 PM, Blogger anastasia869 said...

When a government puts a maximum price control on a "good" money, such as a silver dollar (pre-1930's circulated) and puts a minimum price control on a "bad" money such as government fiat paper, you have a natural market hoarding of the "good" money (either by melting, collecting or exporting) and the circulation of the "bad" by way of debt-payments. Gresham's Law, is the name of this economic concept.

Concert tickets and money are not even close to a rational comparison, since the the ticket has a single-use and is never again valuable in it's purpose, whereas coins can have value over time and even go up in value in an intrinsic sense.

Current nickels, because of their metal value, are actually worth $.06 intrinsically, yet they command still $.05 by law.

This is the hazard of allowing governments to set prices and values on money.

Take, for example, the silver dollar again. An ounce of silver, which was once the legal definition of a dollar, is not worth about $14 depending on the current market price per ounce. If the government were to issue a billion silver dollars and a billion paper notes, set with the aforementioned maximum and minimum price controls, you'd have only a billion dollars in paper circulated in a year and the coins were disappear.

Why should dimes be twice the market value of nickels, when they are nearly half the weight and the same metal? Because the government is idiotic when it comes to money... and that is the sole reason we are in the mess we are in today.

 
At 6/21/2009 12:13 AM, Blogger anastasia869 said...

I might also add: Whether or not you think the price is too high, has nothing to do with the choice of the buyer to pay that price, whether for a coin or a concert ticket. No matter how absurd, the consumer is not compelled by gunpoint or other coercion to pay that price, but makes that choice freely... which is the beauty of the free market.

A ticket scalper no more coerces the buyer, than the government manipulates price controls on money. Yet, the scalper's actions are illegal, but the fraud of governmental pricing continues unabated.

The question you should be asking is: Why are tiny dimes twice the legal market value of larger nickels, of the exact same metallic constituents, and why are silver dollars actually worth manifold times the "One Dollar" stamp upon them?

To me, the absurdity of "modern money mechanics" far outweighs (no pun intended) the behaviors of eBay sellers and buyers or the scalper.

The government sets prices by force and coercion, whereas the markets make offers and buyers transact voluntarily.

 

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