Economy falling down... when to buy?

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My father is a real estate expert and he told me that in spite of the good deals available at the moment, in about 6 months to a year from now, there will be such shortage of cash that there will be a lot of sellers wanting to get rid of their old bills to liquidate some cash but there won't be enough buyers to bid the bills up to book value.

A $100 bill that's worth $150 will not sell for much less because of the gap between face value and book value.

But a $5 bill that's worth $900 by the book may sell at half price.

What do you think?

What do you think?

Look at what is selling on the trading post now, or on ebay. Deals are to be had, but still be leary if buying from unknown sellers on Ebay.
Offering a note at 50% of book is no deal if it is being sold as a GEM and it's pressesd and  actually an AU.
It's times like this that not everything is as it appears to be.
FRIEDSQUID

The example given above this is what I make it out to be;

A $100 bill that's worth $150 – A COMMON NOTE
A $5 bill that's worth $900 – A RARE NOTE

My thoughts of what happens in hard times;

Common notes will loose demand, as supply is abundant - sale price will usually be a lower book value. Customers don’t want to spend, and sellers need to move notes, market is weaker, deals can be had.

Rare notes will still remain in demand, as supply is always scarce – sale price will usually remain around the book value. Customer wants the items and seller wants to sell, market is stable.


No matter what the spread is in the book, the seller always wants there invested interest out of the item.

Always remember, “Caveat emptor”, Is it too good to be true? do you homework when buying a note, in good times or bad.

Always remember, “Caveat emptor”, Is it too good to be true? do you homework when buying a note, in good times or bad.

I would agree with this statement almost 100%, but as times get tougher some people have no choice but to sell  what they have ...for what they can get... we don't all have bottomless pockets to dig into

I wouldn't buy any banknotes during this dire time - as money is getting tight and I feel I should only spend money based on "needs" and not "wants."

If I "wanted" something, I would request it for a Christmas gift or something.  But my money could be used to purchase something we absolutely need and not desire.

My father ... told me that ... in about 6 months to a year from now, there will be such shortage of cash that there will be a lot of sellers wanting to get rid of their old bills to liquidate some cash but there won't be enough buyers to bid the bills up to book value.

As others have commented it all depends on what you consider a "good deal."  Its very difficult to get a good deal when its being auctioned on the Internet and you cannot inspect the note personally unless it is being sold by a reputable dealer.   Yes- it may be wise to wait 6 months to a year. But then again, it may be that in 6 months to a year things begin to turn around, and the promising momentum gets people spending/investing again.  If that is the case, then you could miss out on a lot of good deals while waiting for things to get worse.

Most collectors who've been collecting for any length of time know that there is "book value" and "market value" and in times like these there can be quite a discrepency.  Generally speaking-- hard economic times usually mean the market gets a little softer and notes can be purchased below book. 

Common notes will loose demand, as supply is abundant - sale price will usually be a lower book value. Customers don’t want to spend, and sellers need to move notes, market is weaker, deals can be had.

Common notes have always been a tough sell and usually only move to newbies in this hobby. 

Unfortunately, what we're seeing is too many "Gold Flags" or "UNC" sequential "ink smeared" 1969 $20 with "small stains" on the reverse, and similar chaffe coming out of the woodwork.  Sellers are "dressing up" ridiculously common notes and using any angle to sell them.

Rare notes will still remain in demand, as supply is always scarce – sale price will usually remain around the book value.

Despite how gloomy the economy appears to be -- I agree that rare notes will remain in demand.  I have seen a few go for less than what I would have expected-- but I think there's so few being offered right now--that when they do go up for bid--they attract more attention than before.  I have recently seen low grade 2 digit radars auctioned for above book. 

If you want a good deal -- I think the trick is to find a rare note that not all collectors are scrambling to buy.  What is in demand often goes in cycles.  Be patient (do your homework), inspect the note thoroughly (I usually bid up to a grade lower than what is stated on the Interent), bid only on notes that have been supersized or properly scanned (unless you know this note to be in good shape), and the deals will come to you. 

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I agree with all of you especially with the idea that assets are plummeting in value. For myself being in the mortgage industry i saw first hand peoples debt levels rising significantly over the past year. People have been using their houses as ATM's and the problem with such a strategy is that it will only work as long as real estate values keep increasing which we know have been retracting. I can't tell you how many people are surprised at what their properties are valued at. Most people know values are dropping but most do not believe it will happen to them which brings me to my point.

Bank notes will have to come down in value significantly. When you think about it, collecting paper money is a serious luxury. Think about how much time is spent (and Money) to drive, buy protective sheets, brick costs) just to have it sitting in the closet is pretty crazy. When times are bad people need access to cash and they start saving money in more traditional avenues such as a bank account( which have very low fees compared to purchasing paper money). People will start bringing in their notes back to the bank just to get face value. I believe this to be a good thing as it will re-balance what is available and notes that are of poor condition will disappear. If you happen to have funds available currently and don't have the luxury of being a brick searcher things could be exiting but as mentioned before in this link we must ALL watch out for the quality of notes on other sites. When we are faced with a purchase of a note at several times over face value and not being able to physically inspect the note in addition to not knowing the seller is extremely risky.

Wow. That's freaky. But what notes could someone possible bring to the bank for face value??? Certainly not a $5 note he paid $100 for, or even a $20 note that's worth $40. Maybe some of the 1975 series in less than mint condition.

I was just about to purchase a 1935 $20 note, it's a VF- with demerit points. I offered $1500, he was asking $2150 and brought down to $1950. I won't pay that much but I'm still thinking because many of these went on eBay for less than book value. His note should be worth around $1575 as a VF- but if prices drop like they are, notes like these may be out for auction and there might not be enough buyers to pay such a price.

As for savings, I never leave a penny in a bank account. They are thieves. They use the fine print to legally steal as much money as they can from you in terms of fees, while paying you 0.1% interest or a "whopping" 1.5% if you freeze the funds. Heck, if I want to use my Interact card at McDonald's, they'll charge me $1.25 for a 5 dollar transaction, add $2.50 if it's outside of the province and add $5 if it's outside of Canada. Yuck!

Any appreaciating asset can bring you a better return (paper money, bobblehead dolls, sports memorabilia, etc). Sure the market is in a decay right now, but the primary treand is always upward. I will not sell my bills now only because their values will drop in the next year or two. I know that in 10 years from now, they will be worth more or less the same as what the expected growth would indicate. A rare $1 that I purchased now for $100 will be worth $300-500 then.

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If you believe bank to be thieves buy their shares and receive a regular cut of the profits on a quarterly basis!!! lol

Wouldn't be surprised if they're screwing over their shareholders too. Banks do not provides any useful, productive or innovative asset to society yet they drain or economy and sitting on all our money.

Wouldn't be surprised if they're screwing over their shareholders too. Banks do not provides any useful, productive or innovative asset to society yet they drain or economy and sitting on all our money.

I really don't see the point in where this thread is going??
If you have money sitting in a bank... take it out and stop complaining

Banks do not provides any useful, productive or innovative asset to society

They do supply me with bricks

I will try to bring this thread back on topic:

The danger is this. Someone pays $100 for a $5 note. Times are bad and he needs to get rid of the note ASAP. The note isn't in the best condition and the seller notices that notes are not trading for as much as he perceives his note to be worth so what can he do to get his original $100 back plus fees.

Most serious collectors I know are NOT in the hobby for short term gain. (Actually, many collectors I know do not have serious cash flow problems!)  Collectors who have become dealers (or brick hunters) maybe experiencing some cash problems.  They may be willing to let go of notes for less than what they would have previously held out for.

Perhaps your father sees paper money collecting more akin to trading on the stock market and can't see the long term rational to collecting money.  If the note isn't in the best condition than it really doesn't matter when he sells it-- he's likely going to take a loss (unless he sells it to someone who is less knowledgable).  Most collectors who feel compelled to "unload" a note will often take a loss (even in good times).  My original point was to be sure you know what condition the note is in before you purchase.  Always be careful when you think something is a "Good Deal!"

I think that we can all agree there will be less transactions, sales, and demand when buyers become wary of what they're getting.  This may bring auction sales (& dealer prices) down.  However, this may be offset by 1) people looking for a new investment (rather than real estate for example)  2) more discriminating collectors seeking the same (fewer) rare notes being offered

You've also stated that:

some sellers my resort to altering a note to try an hide issues with the note and if not careful his bad expensive note can become your bad even more expensive note.

I'm afraid that this is a hazard that we're all exposed to no matter how bad the economy is.

Yes we all know that it is a bad time with the way the economy is and possibly even worse is where it can be going.  So that brings in the question of people needing cash and wanting to sell notes to help get through the tough times. And when this happens people tend to think it may be a good time to purchase notes at a lower price and make a dollar or two down the road when the market starts to come back up someday??

But as talked about before is the note that someone has bought for a 100 dollars and now just wants to try and break even selling the note due to the fact that there is a need for cash at this time.  And that is 100% correct that they will have a very hard time doing so unless they find someone less knowledgeable and does make the purchase. Those are the people that maybe should not have stretched themselves so cash thin that they are having to sell off notes to try and keep there head above water.

 

We See this time and time again. This hobby is not a get rich quick deal, and so many people continue to think that and try that. Again this is a HOBBY and ALL HOBBIES cost money$$$$$$$. People don't think nothing of going to the bar and dropping 200 dollars every weekend or pay almost 15dollars a pack for smokes and think nothing of the loss there. What about snowmobiling?? Load up the sleds on a trailer and go for a weekend.. 20000thousand dollars worth of sleds and gear, 250 for fuel, 1000 for insurance and on and on, yet they spend that cash and think nothing of it. WHY, because it is a hobby and they enjoy doing it... In my eyes that is no different then collecting notes. I very very much enjoy doing it and buying and trading and selling, that is the fun in it and one MUST remember that it is a hobby and most hobbies are very expensive, but we do it because we enjoy doing it.  And the bonus with collecting notes is that if one keeps his hobby going and hangs on to his notes for some years that there is most likely the chance on turning over some extra cash down the road.  But remember that this is a hobby and your are not likely going to strike it big over night, and always spend well within your means and do it because you love it as a hobby and not a get rich quick scheme!

I got off topic a bit here but these are my personal thoughts on this situation, what do you others feel about it? Do you see it this way as well or am I on my own little island?  lol

 Jeff

Do you see it this way as well or am I on my own little island?  lol

Well Jeff, I'm probably on that island too.... but my side has white sandy beaches,  beautiful green coconut trees, and an abundant supply of sea crabs...where are you....I don't see anyone here

You may not be aware, but in the 19th Century collectors of coins, stamps, art, and other collectibles never expected to make a profit from their hobbies. They bought things solely because they liked them. They paid for the pleasure of owning and handling the material. Many collectors ending up selling at a loss as confirmed by existing early auction records. In those days a rare coin might not change in value for 20 or more years.

It was only in the 20th Century that buying for investment came onto the scene. The fundamental question is "Why should we always expect to make a profit?" Often we do make a profit, but not always. After all, we never expect to make a profit on the vast majority of other things that we buy, e.g., cars, televisions, CD's, furniture, clothes, etc.! Why should coins and paper money be any different?? One problem with paper money, coins, stamps, etc., is that although they are easy to liquidate in good economic times they are not so easy to liquidate in bad economic times. After all, you cannot actually force anyone to buy the note that you want to sell! The same goes for real estate too!

The moral of the story has always been to buy what you enjoy owning and don't become obsessed with making a profit!

You may not be aware, but in the 19th Century collectors of coins, stamps, art, and other collectibles never expected to make a profit from their hobbies. They bought things solely because they liked them. They paid for the pleasure of owning and handling the material. Many collectors ending up selling at a loss as confirmed by existing early auction records. In those days a rare coin might not change in value for 20 or more years.

It was only in the 20th Century that buying for investment came onto the scene. The fundamental question is "Why should we always expect to make a profit?" Often we do make a profit, but not always. After all, we never expect to make a profit on the vast majority of other things that we buy, e.g., cars, televisions, CD's, furniture, clothes, etc.! Why should coins and paper money be any different?? One problem with paper money, coins, stamps, etc., is that although they are easy to liquidate in good economic times they are not so easy to liquidate in bad economic times. After all, you cannot actually force anyone to buy the note that you want to sell! The same goes for real estate too!

The moral of the story has always been to buy what you enjoy owning and don't become obsessed with making a profit!

I totally agree with you. REAL collector know this moral. If you planning to make profit with banknote well maybe your not a real collector !

Patrick

bugsy: Although collecting notes is a hobby, it is one where you're trading assets. And you do not trade assets to make a loss. The time and energy you spend to have a collection is the "hobby" part. But the money you spend and the calculations you do is the "investment" part. One can make an argument for a gambler who gambles as a "hobby" or someone who plays Poker as a "hobby". You do not spend money on gas and all that time of yours to go to a Poker game without hoping to win some money.

Although some notes may be 100% for a hobby, where will a 1935 $20 bill that sits in the closet take you? You can impress your friends by showing it to them and telling them how much it's worth and the history behind it. I showed my sister a 1935 $2 bill that's worth $625 and what does she do? She buys a 1974 $2 bill (very bad quality) from a friend for $10. I told her it was really stupid and she was like "whatever it's only 10 bucks" and she spent the bill at face value (dumbest thing ever).

But overall, it is an INVESTMENT. When my kids go to college, I know that of I don't have the cash (God forbid), the $10K that I have spent in my collection can bring me back $100K then and that could make the difference between my boy becoming a doctor or a 9-5 commoner. But most probably my kids will have some of the bills that their generation can only obtain from shows for thousands of dollars a piece.

Also, would you ever buy a rare bill at above the book value? I mean wouldn't you want some kind of insurance that you can get your money's worth eventually... if not within a year, at least when the next series of bills come out.

I have purchased many notes at above catalogue value, and would do so today, even with the current economic uncertainty. I have never regretted any of those above-book purchases.  Those are the purchases that have always resulted in the best returns, when a sale occurs. Good material will always translate to good returns, whether for collector satisfaction or investor purposes. The few times I have not made such a plunge are what I regret most.

Well put Alvin.
 I often tell collectors to buy the note/coin, not the bargain.
Often, choice material is not bargain priced, nor will be in the future.

the $10K that I have spent in my collection can bring me back $100K then and that could make the difference between my boy becoming a doctor or a 9-5 commoner.

I don't think money will be the determining factor as to whether or not your son becomes a doctor or as you say "a 9-5" commoner

eyetrade:

I will have to disagree with you. All hobby's cost money and I'm not doing it for an investment purpose. I do it because I love doing it. If I was doing it for investment purposes I can think of loads of ways to make better and quicker money then investing in paper money. The investment is something that will  take place after keeping it for some time. That's just a bonus as far as I'm concerned. I know lots of people that are just addicted to collecting notes and there entire collection is not worth 1000 dollars but they are in it for the spirit not the potential to make money.. If you think your collection is the cost of your son being a doctor or a 9-5 person you are in it for the wrong reason, I think..  And always remember to stay within your means.. I collect because I enjoy it and if I can make some extra cash great. Ask how many people would still collect if they could not make any money at it, and I bet most would say yes, because they are in it for the love of the hobby and not the big money like you are..

I collect because I enjoy it and if I can make some extra cash great. Ask how many people would still collect if they could not make any money at it, and I bet most would say yes, because they are in it for the love of the hobby and not the big money like you are..

I agree with you on this...I collect because I enjoy it...not because it will make me rich....and as you said there are better ways to make money....

We all believe in telling people to collect for fun, and the money is secondary.
Truth is, paper has been a great investment long term.
Compared to stocks that have peaked and dropped.
Bettered only by real estate that has skyrocketed, but in certain regions only.

For those of you collecting for the pure joy of it and disregarding the investment aspect of our hobby, you may be pleasantly surprised by the value of your collection once your ready to sell or pass it on.

The truth remains that this has developed into an investment oriented hobby where the risk of depreciation exist as does the potential for growth. It is difficult to compare this to any sporting hobby as the capital invested in numismatic is very likely to sustain its value.  I am confident in saying that many of the future and existing members will not continue our hobby if they do not see the same potential.

I have always liked member "Ottawa" signature " Buy the very best notes that you can afford and keep them for at least 10 years. "

I am not saying I do it to get rich. But it's still in a way an investment. When you're looking for a rare bill where the face value is insignificant and the difference between one grade to another involves in hundreds, if not thousands, you tend to shop around to get the best quality for the least price.

If I can buy a $20 bill that's worth $180 for $120 because the auction's end time was overnight, I'd be happy to resell it at $170 and buy two notes in exchange.

I know it out of the topic “Economy falling down …. When to buy”

When reading forum members comments here, I want people to take in consideration for the following illustrations:

First, I got a neighbor buying their 2nd house nearby and rent it out to cover the mortgage.  The husband told me because he got two kids, so 10 to 20 years down the road, each kids can get one.  He’s planning for his kids.  If one day he needs the money and sell the 2nd house, do we consider him as an investor, or using our term as collector?

Second, I got a distance friend with hobby to buy old antique cars (1930 to 1950) and I would say he’s a 100% collector.  He got a good government job (6 digits salary), no kids and every month spend money to rebuild those cars …..  Who's going to own the cars when he pass away?  Can the selling price over his total costs?  Probably not.

Third, how do we distinguish a collector, reseller or dealer?  100% buying not selling classify as collector … or 90% as collector 10% reseller …. something like that …., it’s really hard to draw a line.  In real world, I believe even a collector may still sell his collections.  Not talking he makes money or not, I am talking his reason because he changed his mind to collect [1] Chartered Bank Notes from BOC Notes or [2] “Solid Number Notes”

Fourth, I have a relative with hobby to taste “Red Wine”.  This is his only one hobby and he can’t sell it, he just to enjoy it.  Is it cost him money?  Definitely yes and without any return except personal satisfaction.

It’s not we need to raise our children that we have no choice.  We have choice to select our hobby and determine how much to spend ……

My comment is don’t over spent (means don’t use all your money to buy notes), we need to have some reserve in our bank for emergency or using investment adviser's term “don’t put all your money into one single basket”.

No one has a conclusion for this topics and it leaves to everyone to digest just like we buy what we like to buy (means collections) …..

Lastly, I agreed with kid_kic79 that this hobby has developed into an investment hobby.  Ask yourself whether you want quick money or really to enjoy your collections?


Good economy, bad economy, people still spent money.

Good economy, bad economy, people still spent money.

Relatively.

Good economy = Stable job, productivity, inflation, basic life needs covered, money to burn (ie: spend, invest, travel, leisure) = More jobs, more spending, more production/innovation.

Bad economy = Lower demand --> Lower production --> Layoffs --> Lower buying power --> Bad business, struggle to keep up with life's basic needs, very little room for luxury. Might even consider liquidating assets, investments, savings, etc.

If collecting is a hobby, the supply vs. demand will rise as people won't be able to afford such an expensive hobby. Those with $1000 bills sitting in the closet might need to liquidate them if their primary source of income has depleted.

The pure investors know the market swings relatively better and when market is good, they buy and sell to make a steady profit but when it's bad, they use their cash to buy buy buy! Because they know it'll return them big once market goes on a boom. They usually look at the primary trend more than the secondary trend. Though I know some traders in the market that look at daily fluctuations and most of them are losers in the long run.

Besides, if you're gonna put so much time and effort into a hobby, and work your ass off so you can afford it, why not put some work into it and make the hobby earn you money? Like in Poker.... some people work for the money so they can spend it in Poker, some people put the work in Poker (studying the game, managing bankroll) so that IT brings them money to afford better things in life. Who ever said a hobby can't be a part time job?

I have always liked member "Ottawa" signature " Buy the very best notes that you can afford and keep them for at least 10 years. "

I'd agree with that statement, judging from a majority of auction results I've watched that seems to be the case especially with the older rare notes.

If you're a just beginner in collecting banknotes it would seem to be a good time to buy since most common material would be selling for not much above face value.

Gasp  TD Bank is gonna charge me a $35 inactivity fee for not using my line of credit. This is gonna force me to order bricks more often. To me one of the fun aspects of collecting is the thrill of the hunt!

Dei Gratia

Hi everyone, I have to contribute to this one:

Any contrarian investor will be the person who waits to invest/buy until a time like this when economy crashes.   The question of when to buy really becomes a question of "are we actually at the bottom, and how long before recovery?"

So, that is the investor standpoint, as I see it.

From a collector standpoint, it doesn't matter, we have the notes we love, and that is great.  Like the car example.  Things may cost us more money, but the satisfaction in return is the payoff.

Cross over between collector and investor / speculator may be apparent when a collector needs to sell off because he is too far invested.

A car collector might have to sell off one of his beauties.
A note collector might need to divest himself to make the ends meet.

So, the time to buy would be at the lowest point (of course, but no one really knows where that is), and a person who has the available extra funds will be in the best position.

Those who needed to divest, are losing out.

That's the economy. 
I'm on both sides right now:   I need to do some divesting so that I can re-allocate assets.  They are notes from my personal collection, so I do not consider myself a dealer, but I am sure many people who see continuous sales posts from someone assume someone might be in it for the dough primarily.



Anyway, If I knew when to buy, then I would be able to see into the future, and if I could do that, I would have taken the 6 49 already. LOL

Have a good day everyone.

Hudsonab

when to buy? or what to buy? seem that is the question. Regular note will all ways be there so save your money and buy a key note (or key date for us who save both notes and coins) to add to your collection. When the economy goes down it seem that the non collectors will go though what they have and sell. The chance that something will turn up at your local dear or here on this forum. (thats the collector in me)


Harold