Has the Canadian Paper Money Market Finally Come of Age? (HERITAGE SALE)

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If yesterday's Heritage Sale #3500 (http://currency.ha.com) is anything to go by then the answer to the above question is a resounding YES !!

A good friend of mine described the overall prices realized as "insanity" and my initial reaction was to agree with him. However, the more I think about it the more I am beginning to conclude that the Canadian paper money market has finally come of age, largely as a result of the global reach of the Internet and the close proximity of American buyers. By way of comparison, Australia, which has a strong resource-based economy like Canada's but with only 60% of Canada's population, has already witnessed two Australian notes selling at public auction for well over $1,000,000 each with numerous sales well over $100,000 each. As far as I am aware, Canada has not yet witnessed a $100,000 realization in a public auction, but that's only a matter of time now.

What struck me most about yesterday's Heritage realizations was that the rarest-of-the-rare chartered bank material brought multiples of catalogue value irrespective of condition (including some notes in rather unattractive condition). Scarce and rare notes in VF and better condition performed very strongly too. I have listed below a few chartered bank examples and you can draw your own conclusions (all prices include the 15% buyer's fee):

Lot 12630: Bank of PEI $1 1877 PMG-65 --- $2,760 (nearly 3 times book value).

Lot 12651: Bank of Nova Scotia $100 1919 EF --- $46,000 (3 times book value).

Lot 12662: Bank of Hamilton $10 1922 EF --- $20,700 (3 times book value).

Lot 12663: Bank of Hamilton $25 1922 Fine++ --- $19,550 (double book value).

Lot 12676: Bank of BNA $5 1886 (Victoria branch) F-VF --- $11,500 (previously unreported).

Lot 12711: Molsons Bank $100 1914 VG --- $27,600 (3 times book value).

Lot 12747: Royal Bank $10 1913 Battleship VF --- $1,955 (double book value).

Lot 12765: Royal Bank $5 1920 St. Kitts branch VG (badly eroded top edge) --- $10,925 (5 times book value).

Lot 12773: Bank of Ottawa $10 1906 VF --- $6,325 (close to double book value).

Lot 12780: Quebec Bank $5 1898 F-VF --- $5,750 (about double book value).

Lot 12783: Union Bank $5 1912 NWT Overprint VF --- $13,800 (3.5 times book value).

Lot 12802: Bank of Commerce $5 1892 YUKON Ovpt Fine  --- $20,700 (double book value).

Lot 12831: Dominion Bank $10 1925 PMG-66 --- $10,350 (4 times book value).

Lot 12844: Farmers Bank of Canada $5 1908 Fine --- $13,800 (nearly 3 times book value).

Lot 12850: Home Bank $100 1917 F-VF --- $23,000 (over 4 times book value).

Lot 12874: Ontario Bank $5 1888 VF --- $16,100 (over 2.5 times book value).

Lot 12899: Weyburn Security Bank VF+++ --- $12,650 (about 3 times book value).

It's important to remember of course that the prices published in the latest chartered catalogue are over 2 years old. However, despite this, the latest Heritage prices were still a shock to me. Remember too that these notes were graded using the laxer American grading standards and not the more conservative Canadian standards upon which the catalogue prices are based! I don't know who can afford to pay these prices but that's another matter entirely. Also, I don't personally feel that the same notes would be able to attain anywhere close to these prices on eBay or at commercial shows or auctions in Canada but again that's another matter. The better Dominion of Canada and Bank of Canada material sold at very strong prices too but not, in general, at such high premiums over book value as the above chartered notes.

Thus, at the end of the day, it's clear that there will always be a strong demand for RARITY and TOP CONDITION.

Lot: 13024 - 2008 April Rosemont, IL (CSNS) Currency Signature Auction #3500

The highest price realized for a Dominion of Canada or Bank of Canada note was US $25,300 for a 1954 $5 Devil's Face Replacement, Beattie-Coyne, *A/C 0005281 that was graded PMG Superb GUnc 67 EPQ.  This is over twice the current book price for this note.

The auction description for this note stated:

"This Devil's Face $5 replacement is an extraordinarily rare note, with the Charlton reference indicating that only about 4,800 such examples were printed. That such a note would survive in this condition is simply unbelievable.  This is certainly among the finest quality Canadian notes we have ever handled, with brilliant colors, exceptional originality, and letter perfect centering on both face and back.  It is the only example of any $5 Devil's Face replacement that PMG has graded, and it would not surprise us one bit if it remained the finest forever. PMG Superb Gem Uncirculated 67 EPQ, a note for the collector who demands and can afford only the finest.  From The Thomas M. Flynn Collection"

Unfortunately, Heritage Auction Galleries didn't do their homework very well, as a 2nd PMG Superb GUnc 67 EPQ $5 Devil's Face replacement exists.  I contacted several consignment directors from Heritage at least 2 weeks before the auction to let them know that their lot description was inaccurate and included a scan of my graded bank note.  Though they did respond in a timely manner, they not surprisingly decided to leave the existing inaccurate description for this auction lot.  There is no doubt that the price realized was a direct result of the perceived uniqueness of this PMG graded note.


{http://www.davgro.com/images/cpmf/1954_$5_DF_AC0004737_Front.jpg}

Lot: 13024 - 2008 April Rosemont, IL (CSNS) Currency Signature Auction #3500. The highest price realized for a Dominion of Canada or Bank of Canada note was US $25,300 for a 1954 $5 Devil's Face Replacement, Beattie-Coyne, *A/C 0005281 that was graded PMG Superb GUnc 67 EPQ.  This is over twice the current book price for this note ......

Thanks for pointing that out. I noticed that the $20 Coyne-Towers Asterisk note in PMG-64 (Lot 13026) also realized about double the current book price (sold for $25,300). Again, whenever true unambiguous rarity and top condition come together then the sky appears to be the limit.

Arthur:
Long time no time.  I did follow up this auction cause a lot of interested notes for me......
However, no luck for me.

Heritage DF $5 replacement note #0005281 graded UNC during 2004 Heritage auction.  Someone let it graded by PMG turn out @ UNC67 and sell it at US$25,300 with a surplus US$18,400 (less buyer premium at US$15,100).

Not against PMG or TPG, but we need to do homework .....

 I was very surprised to see LOT # 12969 sell for $7,500 in V.F.this is a 1923 $1 test note with catalogue number DC- 25iT.  That is three times catalogue value.

 I wonder if this will increase the values in the book for this note and some of the others that sold for record prices?

Here is a scan of the note.

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I would have to agree that the prices realized in the recent HA auction were quite impressive. But it is important to look at the whole picture and not just at the end auction sale price; there is more at play then just the very high sale prices. First look at who was bidding on the items and you can only speculate on what their motivation is for purchasing a note.

If you were at the live auction or listening live, you would have observed that there were two particular bidders that were purchasing a lot of the notes. The Auctioneer had their numbers memorized. Also from what I have gathered from conversations, these two bidders are very well-off and have the money to splurge. So I pose the question, when you have two wealthy people bidding on notes, can ego/pride get in the way? Can that drive the price up and up? This would create a one time buy price, but not creating a market price for the note?

I truly believe that answer to these questions is overwhelmingly YES. I have been to several auctions where notes have sold for well over catalogue or even market prices. It is sometimes jaw dropping how much some people will overpay for a note, when you know there is no way in H E Double Hockey Sticks that even their great grand children won’t be able to sell the note for a profit.

Another factor is that the sale occurred in the US, where it is know that America’s are paying over cat. prices for notes, even Canadian, especially for high end PMG notes. Just ask any Canadian dealer who went down to the recent FUN show what Canadian notes were selling for, and that no deals were to be had.

It is important to remember that some people have money to burn, and it pumps up their ego to outbid the other multi-millionaire in the room. Also one sale does not set / establish the standard price in the market.

A very simple rule of thumb is as followed:
1st sale is a sale
2nd sale is a trend
3rd sale is a market