In contrast to the patterns of activity that have characterized the rare currency marketplace for the past decade, little of significance took place in the world of auctions over the past month. This gives us an opportunity to make some more generalized observations about the state of the market without focusing on specific transaction results.
Assessing the overall strength or vibrancy of the rare currency marketplace can yield substantially different views, depending largely on the patterns of involvement of the source being consulted. While there is no doubt that price levels have advanced substantially above those that prevailed immediately subsequent to the market correction of 2008, there is an increasing bifurcation of the marketplace. In general, auction activity is more robust and provides far greater liquidity than that of private transactions. In short, items simply sell faster, with greater certainty of a transaction actually taking place and closer to or more likely even above the overall perception of current market levels than when offered privately.
Auctions provide the outside reference of the presence of other contending Bidders and offer a sense of validation in the minds of each individual Bidder that their successive offers are reasonably related to the value perceptions of others.
Especially at auction, and to an increasing extent in private transactions, particularly for material of significant value, third-party certification by PCGS Currency or Paper Money Guaranty Corporation has become a virtually essential element in any transaction, with the imprimatur of one or the other of these firms adding demonstrable value to offered material. The value is added simply because buyers seek confirmation that the product they are buying is actually as represented with respect to grade. There is considerable irony here in that the presence of a PPQ or EPQ designation can and will be attached to material the condition of which has been skillfully enhanced by aesthetic corrective techniques applied to Notes after the process of their original production. For the time being, this does not seem to matter insofar as buyers and then subsequent buyers are sequentially willing to accept the certified grade as having near Papal infallibility. Whether that will continue to be the case into the future is a matter of speculation.
An additional factor, and a relatively recent phenomenon, is the entry of firms willing to finance numismatic purchases and/or make secured loans based on underlying numismatic collateral. Such firms inject additional capital into the numismatic marketplace, potentially fueling market advances. Conversely, in times of market declines, such reverses can be magnified and accelerated by calls from the financing entity for additional collateral and/or margin calls.
LARGE SIZE TYPE NOTES
Large Size Type Notes remain an important focus of buyer activity and attention. The now totally dominant importance of third-party grading – with only two real players, PCGS Currency and PMG, has created a growing tendency for material at the very upper end of the quality spectrum, i.e., Notes with certified grades of 67 or higher, to have substantially higher resale values than material one or two points lower that any rational person may have difficulty distinguishing one from the other. Again, however, so long as the current tendency to focus on the certified grade label rather than the actual state of the material in the holder remains of primary importance, this redefinition of the comparative relationship between price and condition will likely continue.
Buyers whose primary emphasis is on the investment/financial gain aspect of their numismatic activities and who are becoming increasingly important as a source of marketplace liquidity especially tend to place unquestioning faith in the certification label rather than conducting an independent examination of the underlying material. In the current interest rate environment, with returns for many traditional savings mechanisms having been essentially reduced to zero, it is inevitable that people will turn to alternative means of wealth storage. The Large Size Type marketplace has been an important beneficiary of this.
SMALL SIZE TYPE NOTES
Like their Large Size Type counterparts, prices here have substantially recovered from their 2008 lows, and buyers are once again making purchases in anticipation of future price increases. While the market for Small Size Type Notes is certainly not as robust as it was during the 2007/8 period, it is plain that more is going on than simply traditional collectors purchasing items to enhance their holdings and fulfill overall collecting goals. As in the Large Size Type specialty, significant price differentials are evident from one certified grade point to the next as one moves higher and higher up the scale that provides for no less than 11 different degrees of Uncirculated.
FRACTIONAL CURRENCY
Fractional Currency is perhaps the quietest of the specialty areas reported on here, with items in this field of any given certified condition and degree of scarcity remaining available for below to well below levels that Large and Small Size Type of comparable appearance and condition regularly command. In short, Fractional Currency might be defined as the field that most merits attention from the value or contrarian buyer.
NATIONAL BANK NOTES
National Bank Notes remain a series of marketplaces revolving around buying patterns focused on states or regions within a state. A scarce Note from the right area can command seemingly irrational prices, while an item of comparable rarity from an out of favor state can sell for what may appear a bargain. Perhaps the most important determinant of levels here, as indeed anywhere, is the money available to buy something. In the field of Nationals, where geographic specialization results in a relatively small number of people contending as serious buyers for anything, it can be especially remarkable how high prices for really scarce items can be driven by the competitive acquisition interplay of such a small population of potential interested parties. Conversely, the withdrawal of a single significant buyer can very quickly redefine values here in a downward direction.
MISCELLANEOUS
Colonial and Continental material, like Fractional Currency, remains available at levels well below those commanded by Large and Small Size Type of comparable scarcity. The Stock and Bond marketplace remains anywhere from quiet to somnolent, with the exception of issues of the federal government.