Coin Economics 101 & The Cost of Money

-A personal perspective, By Rob Lehmann

Business college taught me about traditional models. I gained insight into how various businesses ran. I learned that the snapshot of success or failure is usually disclosed by examining their finances. The nuts and bolts of any business can often be dissected by disseminating a P & L statement, balance sheet and associated ledgers. I also learned that a traditional inventory-based business sells durable goods at keystone or double cost (100% mark-up) and perishable goods at double or triple keystone (200-300% mark-up). In ordinary terms, this means that a shirt that cost a retailer $10, gets sold for a minimum of $20. A piece of fruit that cost a grocer $1, gets sold for $3-$4. Let’s now apply this simplified model to my business, The Reeded Edge. By definition, I am a wholesale-retail business. Ignoring the wholesale facet for a second, this means that in a traditional retail business model, a coin that cost me $100 needs to sell for a minimum of $200, a 100% mark-up or a 50% gross profit margin (GPM = the percentage of total revenue that becomes profit).  The problem arises in the word traditional. There is NOTHING traditional about the rare coin business. In fact, we defy tradition at almost every turn. Let’s go back to the example of the coin that cost me $100. On average, I sell this hypothetical coin for $115, $120-$125 if I’m lucky. This mark-up (or lack of) miffed my accountant. He told me that it was impossible for a business of my nature to sustain with this model. He and I had that conversation 31 years ago! How then, does my non-traditional business do it? To simplify the answer, I will address two extremely important concepts: inventory turns and cost of money. As we will see, this is a symbiotic relationship, meaning one factor impacts the other. First, let’s look at inventory turns. An inventory turn can be simply defined as my annual sales divided by the value of my inventory. For example, If I sell five million dollars worth of rare coins in a calendar year and my average inventory is valued at one million dollars, in this instance I would have 5 inventory turns per year. In actuality, the target number I need to hit is 6.5. Without micromanaging, this can easily be monitored by keeping a handle on my inventory levels and staying cognisant of my sales figures. Let’s look at the second factor or my cost of money. This is a bit more abstract, meaning that its harder to measure or quantify. If I maintain 6.5 inventory turns per year, then every $1.00 spent on coins, without any profit factored in, has yielded me $6.50 at the end of the year. Now let’s apply my non-traditional mark-up of 15% and see what happens.  My one million dollar inventory yields me $6.5 million dollars of annual sales multiplied by 15% or an additional $975,000 of profit. In this hypothetical example, I now have profit which allows me to pay salaries, rent, insurance, travel costs, advertising etc, etc….which is known as overhead. If I turn inventory less often, this profit number would decline. If I turn it more often, obviously it increases. The direct correlation between inventory turns and profitability of my business should be readily apparent. Let’s now look at cost of money. I will apply this simple definition. Cost of money is what every dollar is worth to me at the end of a calendar year. In the previous example $1 invested in inventory at the beginning of the year, yields me an additional 97.5 cents at the end of the year. Every dollar I gain, yields me $1.97 per year in round terms, and every dollar I lose, cost me $1.97. Therefor my cost of money annually, expressed as a ratio, is approximately 2:1. Why is knowing this number so important? For one, it allows me to assess the liability of dormant inventory. Not every coin, sells 6.5 times a year. Some are still in inventory a year later. For every dollar spent on one of those coins, it has cost me almost two dollars. Awareness is very important in business. It is one of the reason I constantly monitor stock codes and how they translate to the age of a coin in inventory. When a coin gets to a certain age, it needs to go. I will discount it incrementally until I hit the sweet spot and it sells. The actual loss sometimes is the least offensive aspect of ownership. The dollars the coin has tied up by not selling, and the value of those dollars in sustaining my business, is the more integral factor. A second and equally important component of understanding cost of money, is loan value. What exactly do I mean by this? Let me use a simple example to illustrate. If a customer decides to purchase a coin but needs an extended period of time to pay for it, I have to understand what it will cost me to do this transaction. Let’s say that customer wants to buy a $1500.00 coin which originally cost me $1250.00, and needs two months to pay for it. On the front end, I am making $250.00 of profit, but in reality, I am only making $250.00 less the cost of money of providing 60 day free financing. I know that my cost of money annually is about 2:1, which on a monthly basis, would translate to about 8%. That $250.00 profit times 8% times two (the number of months that I am providing free financing) , is now reduced by approximately $20.00 per month, netting me an actual $210.00. Is it now apparent why understanding my cost of money is so important?

Contrary to popular belief, the coin business really is extremely challenging. The margins are some of the lowest for any inventory-based business on the face of the earth. Challenges such as a declining market, slow-pay accounts, economic or seasonal factors and rising overhead, just to name a few, impact my business even further. Understanding and interpreting concepts such as inventory turns and cost of money are really not electives. They are at the very foundation of my business, and what allow me to continue selling rare coins for the next 31 years.

Note: Throughout this article, I have used the first-person. It is not just I who runs this business. Robbie Jenkins is both a junior partner in The Reeded Edge and an equal partner in The Reeded Edge Reserve Equity Fund, a related but separate company. Without Robbie’s knowledge, dedication and work ethic both companies would be nothing more than namesakes. I don’t want any of my readers to think for a second that our business is a one-man operation, because that would be the furthest thing from the truth.

Busy Thanksgiving Weekend Launches 2019 Holiday Season

Xmas imageThe holiday is now officially underway. Retailers worldwide participated in Black Friday and Cyber Monday promotions, trying to lure customers to their respective businesses. The Reeded Edge was no exception. Historically, we use this busy weekend to launch promotions, establish new customer relationships and clear out some older inventory. Apparently, our efforts paid off. Monday was one of our busiest shipping days of the year, with almost one hundred parcels finding their way to new owners around the country. For those of you familiar with our annual holiday sale, this is probably old news. Our focus was on number of coins out the door rather than just profit margin. At the end of the day, there were plenty of losers, primarily coins that had been in inventory for an extended time. As we have said repeatedly throughout the year, many coins have declined in value. Not surprisingly, these also tend to be the coins that languish in dealers’ inventories. Although no business likes to lose money, it is a byproduct of maintaining an inventory. Now, it is on to the new as we put some of this money back to work restocking the shelves. Rest assured, there are plenty of deals in the works, with many new coins on the immediate horizon. Stay tuned.

Next week, we will close out our 2019 coin show schedule with The Annandale Coin Show in Annandale, VA (just south of Washington D.C.). Both Rob and Robbie will be on hand for The Reeded Edge. They will have hundreds of newer coins with them, spanning collector coins from a couple hundred dollars and less to five figure rarities. Diversity is always the name of the game with our firm, as we cater to collectors at every level. Annandale also marks our final BUYING push of the year, so please offer any fresh, numismatic items to the guys. They will be aggressive, with The Reeded Edge’s open checkbook policy in full effect. Just look for the giant BUYING, BUYING, BUYING sign immediately inside the front entrance of the bourse hall, and one of the guys should be close behind. Washington is one of the most beautiful cities in the world, especially so during the holidays when it’s fully decorated. Perhaps, consider an extended weekend in the D.C. area, taking in this active local coin show along the way.

We hope that everybody had a Happy Thanksgiving; we want to extend a special thank you for your business and patronage throughout 2019. Both mean a lot to us. Finally, we would be humbled and honored to continue serving you throughout the holiday season. May each of your holidays be filled with joy, health and peace.

Happy Thanksgiving from The Reeded Edge – Black Friday Webstore Sale Forthcoming; STAY TUNED!

Thanksgiving CoinIt has been another really good year for our firm, despite some very challenging market conditions. Fortunately throughout it all, there has been one constant. The collector has stayed in the game, and for those of us that service collectors in lieu of selling coins exclusively wholesale, there was much business to be done. But at the end of the day, we have YOU to thank. Your loyalty and patronage is what allows us to continue doing what we do.

We are fortunate to be able to serve a hobby that we love, and never do we take that for granted. But, numismatics is not just a common bond, it is also a lifestyle and an extended family of sorts. There are times that we see many of you more often than our actual families. So to all of you from all of us, Happy Thanksgiving!

In observance of the Thanksgiving holiday, The Reeded Edge will be closing our offices on Thursday, November 28th through Sunday, November 30th. Everybody here does a part to insure that our business runs smoothly. Although there are familiar faces that you probably connect with The Reeded Edge, there is no individual who is any more or less important than the others. Our people as a whole are at the very heart of our organization, and we are lucky to have them all.

Our annual Black Friday Sale and Cyber Monday Sale are both forthcoming, and this years’ events promise to be bigger and better than ever. If you love saving money on coins and collectibles, only days separate us from the biggest shopping weekend of the year. Rest assured, The Reeded Edge will be in lock-step with the rest of the retail marketplace, so stay tuned!


Whitman Baltimore Coin Show a Resounding Success-Wholesale Sector Still Shaky

Baltimore once again reaffirmed that it is one of the premier coin shows on the circuit. Although this show at times had a different feel, at the end of the day, it flat-out produced. Rob and Robbie arrived in Baltimore on Tuesday to start their usual array of  pre-show trading. They found some of their regular wholesale trading partners to be a bit more cautious and reserved in their buying patterns. Any initial trepidation seemed gone by Wednesday afternoon, as they concluded their wholesale trading with a regular client who in Rob’s words was “as aggressive as ever”.  Show setup however had that tentative feeling again. There seems to be a hangover in the wholesale numismatic arena that hasn’t entirely gone away throughout the year. Perhaps, this is due to declining values in the generic numismatic sectors causing a glut of stagnant inventory and associated cash flow challenges. The key to prospering in this environment is keeping inventory moving, a concept that seems to be alluding many dealers. We are pleased that the collectors seem totally oblivious to these challenges. For them, lower prices spell opportunity. We have noticed that many series seem to have hit their sweet spots and are selling again, with some vigorously. U.S. Commemoratives are a perfect example of a series that has experienced a renaissance. The guys also reported activity in U.S. Gold, and in particular, larger coins. There has been apprehension of late to buy $10 and $20 gold, a byproduct of the European bank hoards of U.S. gold that has been literally flooding the market over the last several years. We believe that collectors are finally coming to the realization that many dates are not represented in these hoards, and they needn’t fear the series as a whole. We sold several scarce date $10 and $20 pieces in Baltimore which is an encouraging sign, and hopefully signifies a shift in collector buying trends moving forward. It was argued by some of the dealers in Baltimore that the overall collector attendance was down. Although we can neither confirm or dispel this, we would comment that the quality of the customer attending this show was as good as ever. Friday was nothing short of pandemonium at The Reeded Edge’s booth, with collectors lined up two-deep for much of the day. By the end of Saturday, the guys were both exhausted and satisfied. Hundreds of coins were both bought and sold, and thousands of dollars of business transacted over the period of 5 days, the culmination of yet another very successful Whitman Baltimore Coin Show.

Coin Market Humming Along; Whitman Baltimore Coin Expo on the Horizon

Baltimore Conv CenterStatus quo can be a good thing. Although the coin market falls short of gangbusters, it is nonetheless very healthy. We have witnessed steady sales throughout the fall season, without any let-up in sight. There has been a definite shift to less expensive coins, and dealers from all geographic and demographic areas of the country are reporting this trend. There are several ways to interpret what’s happening. As a rule, coins are generally worth less than they were five years ago, so some of this is just plain market devaluation. The other component is price softening of more expensive coins. Although the registry collectors will still vie for that special coin, overall there is less demand at the high-end sector. We definitely are witnessing a generational passing of the torch. Older, well-heeled collectors are being replaced by a younger group of collectors. Although their interest level is great, they may lack the same resources for buying coins. This is not to say that at some point in the future, this group’s purchasing power may be greater than the one they are replacing-time will certainly tell. The positive aspect is that coins are selling, and the audience remains highly enthusiastic.

Up this week for The Reeded Edge is The Vienna Quarterly Coin and Stamp Show followed next week by the quintessential Whitman Baltimore Coin Expo. Given the state of the coin market, we expect good things from Vienna and GREAT things from Baltimore (fingers crossed). As we have stated repeatedly, Baltimore has turned into one of the finest coin shows in the entire country. The downtown location, collector and dealer demographic and logistical ease of accessing The Baltimore Convention Center all contribute to this show’s success. But what really separates Baltimore from the rest of the pack is the first rate job that Whitman does in administering and marketing this venue. Both Rob and Robbie will be on hand for The Reeded Edge at their usual location, booth #440, front and center in the bourse hall. Of course, the guys will be aggressively buying, so please be sure to show them anything and everything in quality numismatic material that you’re considering selling. Their open checkbook policy will be in full effect. They will also have their extensive inventory of certified United States coins in tow, so be sure to call or email them with your want list. Or better yet, stop by their booth and do it in-person. Hopefully Baltimore will be in your plans next week, as the guys would love to see you at the show.

A Successful P.A.N. Show Concludes a Consecutive Run of Coin Shows

Thankfully, we have two weeks back in the home office to come up for air. After a successful but grueling consecutive run of coin shows, Rob and Robbie are back, assisting the office staff in processing inventory, working on upcoming ads and price lists and some general clean-up. Although this hardly qualifies as glamorous work, it is the necessary byproduct of weeks on the road buying coins. P.A.N. was a brisk show, with steady activity throughout. The guys bought and sold quite a bit of material, although the beginning of the show proved to be the most active. The Reeded Edge has established themself as a buyer at all of these type of shows, and the flurry of material offered to us reflected that. Rob made the observation that the dealers lamenting about a slow show were the ones planted at their booths waiting for something to happen. In this business climate, you need to be creative. This could be as simple as putting a large sign up promoting your business or as arduous as canvassing every table in the room. The point is business is competitive at coin shows (and elsewhere, for that matter), and the dealer who expects that the old model of throwing out bird seed to attract the birds will work exclusively, is sadly mistaken. As we have professed time and time again, some shows are made from buying, others from selling and the remainder from a mix of a little of both; but, seldom is the success formula for any two coin shows identical.

There is a cute story that we like to re-tell about an outsider who accompanies his collector friend to a large coin show. The story goes that after a day of walking around the bourse, the outsider made the following observations: The dealers behind the tables resembled a retirement home, with the average age over 65. The collectors sitting in front of the tables were older yet. Where is the youth in this hobby? More worrisome, if this trend continues, where will this hobby be in 10 years? This almost exact scenario (although paraphrased) was published in the A.N.A.’s magazine The Numismatist back in the 1930s! This leads us to our next observation about the current trend of coin shows. Show attendance has been noticeably off across the board, but the market in general remains strong. How can this be? In our estimation, we are in a transitionary period, one which we feel will continue its path into the future. The coin show, as a medium for conducting numismatic business between dealers and collectors, is moving towards obsolescence. The shift that we have noticed with all but the most ardent club-supported shows and larger national shows is one towards a wholesale environment. In other words, dealers attend coin shows to trade with other dealers. Collectors still supporting coin shows are an aging demographic, much like the group still using print publications as their business medium. The internet is the wave of the future, and it is where the youth in our hobby has migrated. With the advent of digital imaging, the need to see items in person becomes much less important. Numismatics is moving in the same direction as the rest of retail commerce. For those who fear change, this is a scary proposition. However, for the forward-thinker, endless opportunities abound for the future of our hobby. Other hobbies, such as stamp collecting have been resurrected by platforms like eBay. We project the same for coins. The instantaneous ability to share information allows collectors and dealers to network like never before. The power and potential is limitless, and it is a prospect that we are excited about. Much like the future of the hobby prognosticated by the outsider 80+ years ago, it looks daunting at face value, but is actually very bright once all factors are considered.

The Reeded Edge Heads to P.A.N. with Hundreds of New Purchases in Tow; eBay Discount for ALL Web-store Customers!

monroeville-convention-centerAnother week, another coin show; that seems to be The Reeded Edge’s mantra  of late. Truth be known, this is not just another coin show, but rather P.A.N. (Pennsylvania Association of Numismatists), Pennsylvania’s largest numismatic event, and one that is thankfully a mere hour and forty five minute drive from Cumberland. This Monroeville-based show (an eastern Pittsburgh suburb) is a collector favorite, and tends to draw crowds from neighboring states such as New York, New Jersey, Maryland, West Virginia, Ohio and Michigan. There is always a predictable contingent of trading partners, but it is the X factor that keeps this show interesting. You have heard us comment, on more than a few occasions, that you just never know what is going to happen or who is going to walk into a particular coin show….Nowhere is this more true than P.A.N. We have had some tremendous buys at this show, and conversely, some impressive sales. Given the healthy state of the coin market, we are guessing that this should be both an active and productive four days. Both Rob and Robbie will representing The Reeded Edge at The Monroeville Convention Center, beginning on Wednesday for dealer set-up, and concluding on Saturday afternoon. Just look for The Reeded Edge’s giant BUYING, BUYING, BUYING sign, which should be plainly visible from all vantage points of the bourse floor. True to our sign’s message, the guys will have their usual open checkbook policy in full effect. Our benchmark for a successful show is usually predicated on what we buy. Please, if you have a single important rare coin, or an entire collection, Rob and Robbie would love a first shot. The term aggressive gets a bit overused, but honestly, we have NEVER met a nice coin that we didn’t like! We would be remiss if we didn’t mention the sales tax exemption on gold and silver bullion in Pennsylvania-yet another reason to spend some time in the Pittsburgh area to take in a coin show this week.

Speaking of sales tax, The U.S. Supreme Court’s Wayfair decision has had some far-reaching implications, especially for internet seller’s trying to get a handle on its exact application. Nowhere has this been more evident to the numismatic community than on eBay. The online behemoth seems to be scrambling like a rat in a maze trying to figure who is and isn’t liable for paying the various states’ sales taxes. Their answer? Tax any and all states until they hear otherwise. This has been troubling for 36 states with numismatic sales tax exemptions, like Delaware and Maryland. As an eBay merchant with a significant online presence, we can tell you firsthand that this is creating a selling hurdle. Combined with eBay’s unconditional 30 day return privilege (which is just ripe for abuse), this once safe trading venue is getting more challenging by the day for buyers and sellers alike. Like many other coin dealers across the country, we are actively exploring alternative markets to eBay. There will be an emerging platform, but at this point we are hard pressed to say who or what that will be. We firmly believe that necessity breeds innovation. Unless eBay makes a commitment to become more consumer friendly in the very near future, they could become a tech giant dinosaur. I guess only time will tell!


The Reeded Edge Returns to the Homefront After Back-to-Back Shows

As the old saying goes, there is no place like home. This is especially true coming on the heels of successive weeks on the road. Last week’s North Carolina Numismatic Association’s Annual Convention was pretty much as expected. The crowds were decent, and the seller’s plentiful. But, absent was the quality retail buyer. This show just does not seem to garner this sector, at least not in the numbers that other shows of comparable size do. Despite this noticeable void, the guys still reported a solid show. This was especially true from a buying perspective. Although there were few really marquis coins from Charlotte, there were definitely numerous purchases, In all, the quantity of material may have actually eclipsed the prior week’s VNA show in Fredericksburg. Of special note, was a large raw collection, which should be featured shortly on our TRECOINS eBay store. For those of you new here, we do not list any raw coins in our online store, on our REEDEDEDGE eBay account, in Coin World or Numismatic News, on Collector’s Corner or our regular published price list (both electronic and print). This is just one more reason why collectors of raw coins should make a point to visit our TRECOINS eBay store. With two weeks in the office before heading to Pittsburgh for the PAN Show, we hope to be playing a lot of catch-up, including listing many of the coins which have been sitting idle in our vault for the past several weeks. To put it in plain terms, we BETTER get caught up, because another large collection is looming in the very near future. With the help of our first-rate office staff, we know that we will get it done without missing a beat. Next week, we will be featuring an in-depth look at the early fall coin market, so please stay tuned.

The Reeded Heads to Charlotte for the N.C.N.A. Annual Convention

cabarrus arenaRob and Robbie will be gassing up The Reeded Edge mobile this week to head towards southwestern North Carolina for The North Carolina Numismatic Association’s Annual Convention and Coin ShowThis is a quirky and intimate southern show where we never know quite what to expect. The Cabarrus Arena & Events Center is about 15 minutes outside of the town of Concord (a Charlotte suburb known best as the home of The Charlotte Motor Speedway), and is literally, in the middle of nowhere. Despite the odd location and the arena’s pay-to-park policy, people still do show up for this event. Although this venue has had a recent record of moving around the state, this is the third consecutive show at the arena, suggesting some logistical stability. The quality of the audience varies from show to show, but the potential for something to happen in this dynamic area of North Carolina is always present. It’s what keeps the guys coming back year after year. Rob and Robbie are only one week removed from a successful and fruitful Virginia Numismatic Association Convention, and as a consequence of a six-figure buying frenzy, will have hundreds of new coins in tow. Aside from their multi-million dollar inventory of certified coins available for sale, the guys will also be actively buying. Just look for the giant BUYING BUYING BUYING sign located behind their booth at the left-front of the bourse floor. If you have any significant coins or an entire, fresh collection, The Reeded Edge would love to be your go-to dealer. Please be sure to offer the guys anything of interest, as their open checkbook policy will be in full force. If Charlotte is in your plans for what promises to be a gorgeous upcoming Fall weekend, please stop by the arena on Friday or Saturday, and say hi-The Reeded Edge would love to see you at the show!

The Reeded Edge Heads to Fredericksburg to VNA Coin Show

VNA bourseAsk Rob and Robbie what their single favorite coin show of the year is, and they will probably both answer VNA. The Virginia Numismatic Association Annual Convention is just the perfect mix of everything. It’s not too big but yet not too small. Although populated by mostly regional dealers, it also attracts some national players. The crowd is always robust and eclectic. There are a plethora of coins and coin collectors in this area, so one never knows what might walk through the front door.  For these reasons and more, the guys have a large front and center spread, very probably the largest bourse of certified coins in the entire room. Just look for the giant BUYING, BUYING, BUYING sign (visible from virtually all vantage points in the room) marking the Reeded Edge’s end-cap booth. Not to out-do the last several shows, but both the quantity and diversity of our United States certified coin inventory in Fredericksburg will be unprecedented. Please consider stopping by our booth with your want list. Equally as important, the guys will be aggressively BUYING ANY OR ALL BETTER, FRESH UNITED STATES COLLECTOR COINS. Our open-checkbook policy will be in full effect; we routinely get asked if we are buying coins, to which we ALWAYS answer, “WE ARE ALWAYS BUYING!” This weekend in Fredericksburg will be no exception. We certainly hope that this historically important and quaint city is in your travel plans for this upcoming weekend, as the guys would love to see you at the show!