July newsletter - Play fair...with your heirs

Collectors have this nagging habit of dying and leaving the task of selling their collections to their heirs. I've never been so lucky, but I've heard inheritance can be a good thing. On the other hand, it can be unpleasant to inherit a collection you know little about and then need to sell it. And we're not not even getting into the emotional issues.

Selling collectibles is not necessarily easy, even for the pros. If it were easy, everybody would be doing it.

The difficulty can be compounded, sometimes quite dramatically, if collectors give their heirs inflated expectations of value. In this issue, I talk about why it is so crucial for collectors to be honest with their heirs. They must go to great lengths to avoid exaggerating values.

You may see the latest issue at http://www.coxrail.com/newsletters/2009-07.pdf. (Or download to your computer by right-clicking on the link and choosing "Save Target As".) You may see all back issues at http://www.coxrail.com/newsletters.htm

(The number of) Sales on eBay are up

I have noticed a marked increase in the number of successful stock and bond sales on eBay in the last two or three weeks. Within this observation, I can imagine seeing a few possible indications. (I'm not saying they are there; it is merely a way to interpret activity.)

1) There seems to be a pent-up demand. Collectors seem determined to buy. Never mind that no experts are claiming an end to the recession. Never mind that the unemployment rate has not improved. Never mind that business managers say they expect more layoffs in coming months. Regardless of somewhat dismal news, collectors are buying.

2) Prices are NOT up. They remain flat to somewhat down.

3) There are substantial numbers of eBay offerings relative to the number of successful sales. Unsold lots outnumber successful sales by two to four times. This suggests sellers are still setting minimum prices above actual market prices. However, the high number of offerings suggests we may be approaching capitulation. The stock market encounters a point of capitulation when stock holders give up and decide they can no longer afford to sustain further declines. At that point, they sell regardless of price. When they capitulate, they show they are no longer willing to wait for an upturn. We may be seeing that happening among weaker eBay sellers. While bad for those sellers, the market cannot genuinely improve until a definite bottom is reached.

4) There has been a most definite shift among the days that sales close. Probably 60% to 80% of the sales of collectible stocks and bonds used to close on the weekend. Sales are now closing in almost equal numbers throughout the week. I think that is a very good trend for sellers, but I have absolutely no idea why it is happening. (By having the majority of sales close almost simultaneously on the weekends, sellers were previously forcing buyers to ration their bids. Sellers never seem to understand that buyers try to avoid winning too many sales at once.)

5) This same trend (no discernible price improvement but more sales) is happening in two other areas of collectibles I track.

Third Edition Schedule

Because publishing schedules always have a tendency to slip, including mine, I will NOT divulge plans for the third edition until I feel very confident things will move forward without delay. The text and cover design is finished, but I cannot afford the publishing risk right now.

My daily recording of prices unquestionably proves that average collectors are simply not spending much money on collectible stocks and bonds. Prices have been dropping for several years, and every time I think prices have hit bottom, I'm proven wrong. Demand for the rarest and most desireable items seems okay. Not strong, but okay.

It is the vast middle ground that has me concerned. Demand for all but the most desireable certificates seems very soft. Rightly or wrongly, this is my guidepost. My theory is that if average collectors aren't buying certificates, they probably have little desire to buy catalogs.

I think it unwise to risk a substantial amount of money on a new edition right now. Conceivably, if I can find compelling evidence of recovery - both in the economy and in prices of collectibles - I can issue a new edition in the spring or summer of 2010. Economists always disagree more than weather forecasters, but I am hearing few predictions of early recovery. Most predictions seem to indicate a longer recovery period. While I am aiming for a publishing date next year, I am giving only it a 50-50 chance.

I discuss this issue in more detail at Third Edition Schedule on the Coxrail site. In the meantime, I continue to collect prices and new information about certificates as I have for the last twenty years. As always, I update the online database every two weeks. That means that EVERY new certificate and every new serial number is listed online within no more than two weeks of discovery. Similarly, every new price is factored into my price estimates in the same schedule.