Opportunity to flip for profit fuels temptation to speculate

Published : 11/16/11
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Have the U.S. Mint’s marketing practices turned modern coin collectors into greedy speculators?

In the modern numismatic vernacular, perhaps instead of “turned” we should say “flipped,” because “flipping” 2011 American Eagle 25th Anniversary Silver Coin sets is the sport of the day. It’s the dominant topic whether on Internet message boards, in Letters to the Editor or in complaints aired by those shut out of the possibility of purchasing a set directly from the U.S. Mint due to a multitude of sins being laid on the doorsteps of Mint headquarters in Washington, D.C.

Twenty years ago the U.S. Mint used essentially the same approach to limited issues — ordering limits per household — but the cries of anguish from the disenfranchised were much lower pitched, in part because fewer people were left with an empty space in their collections, and communications were not as quick or as easily accessed.

Today, collectors who do not even collect a modern series such American Eagle bullion coins can’t resist the temptation to profit. The rationalization goes like this:

“Why not? It’s perfectly legal. There’s nothing wrong with profit.”

Despite the frustration of dealing with the Mint’s antiquated, slow online ordering system, it can be well worth the effort. For example, one who successfully ordered the limit of five 25th Anniversary sets had $1,504.70 charged to his credit card. But before his credit card bill was due, he could have “flipped” (sold) the five sets for double or triple his cost, reaping a tidy profit.

Many who never had any intention of keeping even one set will sell their five sets, rationalizing that the easy profit can be used to buy more of the coins they really collect or something else needed or desired.

The “numismatic crime,” so to speak, was one of opportunity, made possible by the comparative ease of e-commerce, which was not available 20 years ago. Although the Mint’s website was slow on the day of the offering, all 100,000 sets were sold in approximately four-and-a-half hours. With confirmation of orders, speculators were already selling into the secondary market. In fact, some had “pre-sold” sets on eBay weeks before the noon Oct. 27 on-sale offering by the Mint.

The Mint’s imposed limit of five per household incentivised even those who collect the series. Instead of ordering just one to keep their collections complete, they ordered five sets with the knowledge they could sell four and add one to their collections “free” and pocket some profit.

Some suggest that the Mint should have limited the number of sets to one per household. While it would no doubt have provided a wider disbursement, it would also likely have driven the secondary prices higher. Wider disbursement would mean dealers who make markets in these coins would have had to spend more money acquiring sets from a higher number of buyers and reduced the odds of being able to cherry-pick Mint State 70 and Proof 70 coins in order to offer the coveted matched graded sets.

Mint officials have so far only apologized for the antiquated website. They have not made any commitment to examining their marketing practices or explained why the mintage was set at a third of what logically should have been considered given the sales history of the series, which they should have had in hand. There has to be more accountability. If senior Mint officials lack the leadership skills and courage to seek solutions, then they should be replaced. The level of speculation they have set in motion, if continued, will eventually destroy the market. ■

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