2014 26th Edition Charlton Replacement Results 3 of 3

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19th Edition Perspective

The 19th Edition was in fact the very last year that showed a net gain to the average cost of a replacement note making this year’s Edition the 7th straight losing Edition and the 5th worst in its 26 Edition history.
From the 19th Edition to the current 26th the average price has fallen by -46%. With a historical average of $577 for the TRN Index we are still -18% below this average. To put the 19th Edition’s height into perspective we would need an 86% increase to Catalogue prices simply to breakeven. Such an increase would grow the TRN Index market cap to $697,124
What the books are pointing to is that demand is down and down significantly from 2007. Since then we have entered a rather large correction period with a clearly defined trend.

Best Performers

If so many ranges are working their way threw a “correction” period, are any doing well? How well? First the parameter will be to only look at ranges currently down no more than -5% from their all time highs. This list is staggering. The total ranges that meet this criteria? 166 ranges totaling 20.8% of the index total ranges but wait, it gets better. Its market cap is $146,645 or 39.1% of the Index’s Market cap. What does 7 years of declining values have to say when almost 40% of the Index’s market cap currently sits at their all time highs? Price volatility.

Let’s take a look at the 25 most notable ranges currently at their height. This group alone represents a current market cap of $127,350
 
25 most notable ranges 26th Edition
Sign / Prefix        Range       Cu./Hi
Je-Do; BTV    (0.080M - 0.086M)    0%
Je-Do; BEK    (9.315M - 9.405M)    0%
Je-Do; AOP    (7.075M - 7.076M)    0%
Kn-Do; AOB   (2.240M - 2.320M)   0%
Je-Do; HOH   (7.060M - 7.140M)   0%
Je-Do; AOM    (0.480M - 0.484M)    0%
Je-Do; AOR    (2.640M - 2.643M)    0%
Je-Do; FEP    (0.045M - 0.135M)    0%
Je-Ca; APV    (1.165M - 1.166M)    0%
Je-Do; BEU    (0.023M - 0.025M)    0%
Bo-Ra; *Z/Z      N/A      0%
Je-Do; BTF    (8.359M - 8.360M)    -1%
Je-Do; HOG   (9.920M - 9.940M)   -1%
Je-Do; BER    (9.675M - 9.720M)    -1%
La-Bo; *BC    above 1.9M    -   1%
Co-To; *A/E      N/A      -1%
Be-Co; *A/E      N/A      -1%
Lo-Bo;  *C/I      N/A      -2%
Kn-Th; FDU    (9.240M - 10.00M)    -2%
Je-Do; FER    (9.990M - 10.00M)    -2%
Be-Co; *A/B      N/A      -2%
Co-To; *A/B      N/A      -2%
Bo-Ra; *CB    One Known       -2%
Be-Co; *A/C      N/A      -2%
Co-To; *A/C      N/A      -3%

With so much of the TRN Index market cap valued so high could there be any other area that needs mentioning? Yup, all the new additions to the 26th Edition being the largest of its kind. In fact 132 new ranges were added and valued at $31,360 Keep in mind that the *DY currently sits with no market value, how much could this one be worth? $100? Not likely.

What to “expect” in the future?

We are, in a declining trend but a trend that hasn’t run its full cycle. With 26 Editions spanning 33 years makes it a very short history. I do not believe we have yet run threw one entire cycle. In order for a trend to end and lead us into a new cycle I believe the following would be a great start. The Editions first need to bottom. Inflation alone can do wonders to prices along with price adjustments made systematically as needed to shake out the excess. Naturally notes will get eliminated from the general collecting pool for any number of reason. Collectors start to look at other ways to grow very personalized collections that are departures from past preferences. More people want into the collecting community then want out.  This I believe would give the overall market a good foundation from which to grow from but the future always seems to write its own story.   

2014 26th Edition Charlton Canadian Government Paper Money Replacement Results 1 of 3
http://www.cdnpapermoney.com/forum/index.php?topic=13752.msg60326#msg60326
2014 26th Edition Charlton Canadian Government Paper Money Replacement Results 2 of 3
http://www.cdnpapermoney.com/forum/index.php?topic=13753.0

2014 26th Edition Charlton Canadian Government Paper Money Replacement Results 3 of 3
http://www.cdnpapermoney.com/forum/index.php?topic=13754.0

More people want into the collecting community then want out.

That may be true, but the increased demand by increasing numbers of collectors is balanced out by the increasing number of collectible notes.  In other words, the Bank of Canada has not stopped printing foldable currency.  It would be pure folly to suggest that every new collector is going to want one of everything when one of everything simply gets more expensive simply by adding new ranges every year.

All great points mmars.

That may be true, but the increased demand by increasing numbers of collectors is balanced out by the increasing number of collectible notes.  In other words, the Bank of Canada has not stopped printing foldable currency.  It would be pure folly to suggest that every new collector is going to want one of everything when one of everything simply gets more expensive simply by adding new ranges every year.

One of everything

One should not assume when looking at the S&P 500 index that one would buy all 500 companies, this was never the Index’s intention to make such a claim nor does it. Prices are currently low and are in a current downward trend. To dispute this, one needs to completely dismiss all 26 Charlton Catalogues.

I don't understand the point of indexing catalogue values to inflation.  What is the point of adding that variable to the mix?  All that does is make it painfully clear that investing in paper money is a losing proposition over time, much the same way that investing in slot machine gambling is a losing proposition with the odds that you'll end up in a deficit situation increasing as you continue to wager over time.

Inflation and why

Inflation is a basic economic reality that must be addressed and accounted for. There is no choice in the matter, to ignore inflation would be no different then adding up your budget and ignoring the income tax effect to your net pay simply because you hate the idea that half your money will be taken. But the results of burying your head in the sand would be disastrous. No one should ever believe that Inflation is the lone culprit involved in stealing value away from your collectables making it a losing investment over time. Collectors and Collector decisions alone are the reason and the only reason that will either make an investment in paper money profitable or not regardless of market trends and cycles. If the TRN Index is down YoY this should not be simplified and assume losses for all Replacement note purchases nor should the assumption be made that an Increase in the TRN Index will net positive gains for all replacement note purchases. Benjamin Graham was known for saying, “Price is what you pay and value is what you get”
 

I would dearly LOVE to know when this blessed event ever took place in Canadian numismatics.  I know the discussion is centred on replacement notes, but in general, Canadian paper money has always been way behind the markets of other countries simply because the collector base for Canadian notes is so small.Canadian notes is so small.

To address this question let me clear up a couple of points. To start I do not believe that there is no single greater authority in the Canadian paper money community then the Charlton Catalogues. Every year the Editions are released and within each Edition you will find that prices are made up of a pricing panel as well as their combined results for prices related to that particular Edition. The talent that comes from having a pricing panel is significant and these Editions are all encompassing. One has to assume that such a panel has its ear close to the market pointed in many different directions. From auctions to shows to “stories” and personal opinions, they all play a role and every year are digested and refined until all their sums give out 1 price. That price is then printed and serves as a historical reference that cannot be changed.

Let’s take a look at what influences prices.

1.   If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
2.   If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
3.   If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price.
4.   If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price

The increase number of ranges that are introduced in the Editions must be eliminated when calculating prices; they are, separate from each other. The 26th Edition had an increase to the total cost of the TRN Index threw new entries which totaled a 10% increase YoY yet the Average cost or a replacement note had a -9% change in price YoY. As long as a replacement note can be sold above its face value a reasonable expectation is that supply is naturally “motivated” to grow and grows consistently with varying degrees. Keep in mind that this in itself has its own trends and cycles and results. If we take all 26 Editions and look at all of them you will find a few interesting points. Our starting point will be what is referred to as the “peak” of the market which we could as mentioned call it the “blessed event”, which is the 19th Edition. At that time the average cost of a replacement notes was $569. What did the 19th Edition’s $875 look like relative to its average? At the time it would have indicated a 54% high over its historical average for everyone to see. The Average at that time would have included Editions 1 threw 19. To narrow down the Editions for simplicity one could see that Edition 14 was basically the same Edition as the 20th netting zero gains. If one wanted the range to be expanded they could look at Editions 10 threw 26 and see those results are not much more than a break-even as well. At the high end of these 2 ranges you find the 19th Edition clearly defining the peak. To try and pin point the reason (s) for the collapse in prices would be futile because the high has been recorded and is fact.

I didn’t make this up; the Charlton Catalogue did which is there for everyone one to see which has recorded 33 years + of price history as it passes threw all its trends and cycles.

MG

" I didn’t make this up; the Charlton Catalogue did which is there for everyone one to see which has recorded 33 years + of price history as it passes THREW all its trends and cycles."

NOTE: the spelling should be "through" not "threw" in several places in the above thread --- as in "I threw the ball through the window".

This is not intended as a facetious comment. If errors are are not corrected they will persist.