April 16, 2017

"Market Basket" price index, revisited

Back in February, I updated my "market basket" price index. That created some degree of interest, especially among European dealers who felt that things were different there. I concurred that it was possible, but I needed proof. To check whether our "feelings" were correct, I had to make two substantive changes to the chart and database.

The changes

First I thought it wise to increase the sample size from 43 varieties to 100. The basic idea was to start with certificates in the year 2000 that were mid-range collectibles, ranging in price from roughly $60 to $400. The selection includes a handful of popular autographed items.

Currently, the price index includes 4,377 definite prices of certificates that tend to appear for sale anywhere from three times per year. Scarcer inclusions may appear for sale only once every three or four years. In other words, none are particularly common nor overly scarce. They are all acquirable.

Of of the current 4,377 prices in the database for the 100-item Market Basket, there are a few valid, but decidedly abnormal prices. One item sold for as low as $2 in a multi-item lot and one sold for as much as $2,238 for no observable reason. The number of prices that go into the price index is always increasing because of new sales and the adding of sales from old auctions. There are a sufficient number of typical prices that oddball prices have no noticeable effect on the overall Index.

(A special thanks(!) goes to Mario Boone who is helping me acquire prices from his oldest sales and those of his father Erik before him. Can anyone help with sales results from old FHW, Gutowski, Tschöpe and other European sales?)

Secondly, I added a way to separate price origins by continent. That was a feature I had never seriously considered before. One of my original problems, and one that still plagues the project is that my records of European sales are thin prior to about 2003. While I have many prices from that period, I still have an insufficient number to calculate five-sample moving averages for all 100 certificates in the index.

The upshot?

Even a quick glance at the chart shows that there is a strong, obvious and definite difference in the price behavior of North American certificates in Europe. While certificate prices are currently twice as high in Europe, there are measurably more sales in the U.S. Consequently, the overall value of the Market Basket has been dropping, all the while prices in Europe were increasing.

Why are American prices so distressed. In my opinion, eBay!

While eBay sales are lower than any established dealer would like, they are nonetheless valid and genuine sales. Additionally, eBay prices are so low that they have dragged down prices in ordinary live auction house sales. The number of Market Basket certificates that sold on eBay before to 2005 were insignificant. However, more and more have been appearing there since that time. Because they are scarcer than typical eBay certificates, they tend to sell quickly. However, because advanced collectors do not necessarily look at eBay frequently, they tend to sell at prices below those found in live auctions. Because of the ever-increasing number of mid-rarity items that appear for sale on eBay, eBay prices now make up 25% of the total prices calculated.

I don't like that percentage anymore than mainline dealers and auction houses. I am sure professional dealers are selling at prices above eBay all the time. Sadly, dealers do not share their sales histories, so I have no valid proof of that belief. That means I must use whatever prices are available. With the exception of Archives International auctions, publicly-available U.S. sales results, discovering non-eBay prices is getting harder and harder. Yes, I can find hundreds, or even thousands, of certificate offerings on websites; I cannot possibly learn how many actually sell at stated prices.

It is interesting to note that very few U.S. certificates in this Market Basket have appeared for sale on eBay(DE) or eBay(UK). When they have appeared, however, they have always sold at prices drastically lower than even eBay(US) prices. European dealers have told me that their customers "are not buying on eBay." It certainly appears that is true for North American certificates! Is that because advanced collectors don't participate on eBay? Or is because European sellers don't offer many medium- to highly-desirable North American certificates on eBay?

One final point

Note that U.S. sales showed a slight uptick during the last half of 2016, while European prices dipped. As I have pointed out several times before, my index is based on a moving average of five sales immediately before each six-month calculation on June 30 and December 31. That means that the graph of the Index lags actual price changes by six to possibly twenty-four months.

I cannot possibly suggest that either of these latest dips or upticks are the beginning of longer-term changes. Nonetheless, we should probably keep an eye on them.

Well, maybe one more point

Another point that bears consideration is that the chart clearly suggests that desirable North American certificates fetch better prices in Europe. Currently twice as much.

The "race to the bottom" brought on by ultra-low eBay prices is not doing certificate collectors any favors. If things don't change, North American collectors will wake up some morning and wonder where the good certificates have gone. "Uhhh...Europe!" So, how are they going to collect such items? "Duhhh...Pay the price!"