June 14, 2010

Spink Smythe auction 302

The latest Spink Smythe stock and bond auction catalog arrived today. The sale will take place in Dallas on June 29, but lots may be viewed at the Memphis show on June 18, 19 and 20.

This sale is most welcomed and I hope collectors respond favorably. There are approximately 868 lots comprising probably a couple thousand certificates, all from the Americas. Contact Spink Smythe immediately at 800-556-7826 if you have not yet received your 88-page catalog.

As expected, offerings from railroad companies (178 lots), mining companies (155 lots) and automobile companies (90 lots) make up the bulk of the sale. Spink Smythe has improved its indexing which makes finding desireable certificates easier.

Less than half the offered lots are shown in the catalog, but all catalog images are in high-quality color. Additional single-item lots are shown online at http://www.spinksmythe.com, but still not all.

For price guidance, Spink Smythe has changed from a "price-range estimate" (eg. $125-250) to a "single-price estimate" (eg. $175). I personally think this is a better approach for the company. Having recorded thousands upon thousands of prices from NASCA, Smythe and Spink Smythe, I am convinced that the majority of bidders always interpreted the low estimate as the lowest acceptable bid. That was not true, of course, but prices realized still tended to cluster around the low estimate. It will be interesting to see how prices will behave with this sale.

In recent auctions, Spink Smythe continued the Smythe tradition of establishing its minimum acceptable bid at 60% of the lowest bid estimate. This time, the introductory letter by Mike Veissid and Jim Fitzgerald states that collectors can bid any amount they feel appropriate. I have always been comfortable bidding that way but no everybody is. It leaves the door wide open for the company to decide whether bids are made in good faith or not. I hope the experiment results in higher sales percentages like those from the early 1990s. On the other hand, I can imagine bidders heavily trained by absurdly low eBay prices might be scared away by the uncertainy.

I never enter auction lots into my database until after sales close, so I don't have precise counts. It looks to me that there are 178 lots related to railroading, counting US certificates, autographed certificates and related certificates from Panama, Mexico and Canada. Of that number, 137 lots are single-item lots and 41 lots are multi-item lots. I always advise multi-item for collectors who are also part-time sellers.

Spink Smythe's buyers' commission is 20% for the first $2000 PER LOT and 15% thereafter. With rare exception, the days of 10% commissions are gone, simply because sales percentages are so low and production costs so high. Always be sure to factor in the costs of commissions and shipping when calculating your bids. Do not wait until your invoice arrives before thinking about those added costs.

June 09, 2010

What's it worth?

Every collector wants the answer to the #1 question in collectibles. It is terribly hard to answer because values are only established at single, short-lived moments in time.

The value of every collectible is what the next person will pay you. It does not matter what you or I think something is worth. No opinion matters except that of the buyer. Period.

Oh, sure, I can estimate value for you and I can back up my opinion with almost a million price records. But so what? Unless I am the guy buying from you, my opinion is nothing more than an educated guess. Nothing more. Nothing less.

It also does not matter one tiny bit what you pay for a collectible. Your ownership can certainly detract from value if you mishandle your collectibles, but your ownership can rarely add value. The amount you paid for something has no relevence except to you, your family, and potentially your heirs. Once you’ve purchased a collectible, the meaning of your expenditure disappears like mist in the sun.

It is difficult for me to explain this point clearly, so let me give you a real-life example from this past Monday.

I retruned from a trip to southern Colorado and began recording prices from eBay sales that had occurred over the previous four days. I saw one person had willingly paid over $150 for an unissued certificate. That might have been a fair price for an issued certificate, but I would have estimated its value as under $30 in its stated condition.

Did the buyer make a mistake? Maybe he or she did not notice that the certificate had never been issued. Maybe the buyer thought that unissued certificates were worth more than issued examples. Perhaps the buyer purchased the item as a gift and did not care about its competitive value.

Either way, how can we estimate what the certificate is worth today? We make that estimation by predicting what amount the next buyer will pay.

I personally predict the next buyer will probably be unwilling to pay more than $30. (Even if the sale does not occur for thirty years, we merely back-calculate and remove the effects of inflation over that period.) Of course, I can be wrong. There are certainly greater fools out there, but I think it is highly improbable that the next person will pay $150 to the person who purchased over the weekend.

Every collector has overpaid for something. Get over the idea that you are somehow immune from making mistakes. The goal is not to avoid mistakes, but to make fewer mistakes. Try to be clear-headed when buying. And please, please, please remember: just because something SEEMS to underpriced does not mean it really is. No matter how low prices seem today, they CAN go lower. Value is not set by you but by the person who ultimately buys from you.