The first working day of the 2009 New Year seemed to me to be an excellent time to knock up some numismatic New Year's Resolutions that'd guide my decision making for the coming year.
I don't know about you, but the pace of daily life these days often has me lose touch with my longer-term goals (says he based in the bustling metropolis of Fremantle!), so any opportunity to revisit them and correct wayward tactical efforts that have cropped up since my last review are always productive. Listed below are a few points that I've personally committed to for 2009 - check them over and see if any are relevant for yourself (PS - any offers of spurious government subsidies will be gratefully received):
1. Keep Up To Date With The Market: I'm doing reasonably well with this at the moment - I attend most of the major auctions and trade shows around the country, I subscribe to all of the major numismatic magazines published around the world, keep up to date with the world's leading numismatic websites and have a network of contacts that are key players in each of the product markets that I operate in. As trends in demand or supply develop, I'm confident I'll know about it before most! The changes in liquidity that have taken place in the past few months have reinforced the competitive advantage that "first movers" have over the rest of the herd. Do you have a system of keeping up to date with the market you collect in?
2. Stay In Touch With My Objectives: Whether it be the pace of modern life or an unfortunate tendency to being distracted regularly by such trivialities as breaking news on teh SMH website or seeing a dog with a puffy tail, it isn't unusual for me to intermittently lose immediate touch with my objectives. I may still work hard and take risks, but I have deviated slightly from my objectives from time to time, if only because I didn't remind myself of what they were! I've recommitted to a range of specific and measurable objectives when it comes to my personal portfolio and the operating stock within my business, and I'll be making sure I regularly (ie weekly) check the measures I've set of each of them. Have you set any objectives when it comes to your collection or portfolio? You may not need to have pages and pages of them, nor may you need to check them weekly, but as a wise man once said "If you don't know where you're going, you'll probably end up somewhere else."
3. Set A Budget And Stick To It!: I often find that the very mention of the word "budget" can draw a titter of derision from some collectors, as if a real collector has no need for any such imposed discipline - they're strong enough as it is! (Whether these folks would have been the same people that sneered at seatbelts when they first came out is open to debate.) I think the past few months would have given our more free-wheeling colleagues a fair kick in the pants however, my own observations are that those collectors who have been hit the hardest by the financial crisis so far are those that had over extended themselves in some way in the weeks leading into the crisis. I certainly would've made my past few months on God's green earth less stressful if I'd stayed within my own self-imposed financial parameters. It's very easy to get caught up in the hubris of a flowing market and to BYOB (believe your own insert scatalogical comment here), however the reality of reduced cashflow or mounting debt is an excellent leveller of men. No matter what Messrs Rudd and Swan may ask of me, count me in as one of the many Australians who have reined in their spending to ensure I don't need to sell a kidney in India to put food on the table. A budget imposes discipline when it comes to evaluating potential acquisitions, and ensures that you won't need to sell your collection before you originally intended to do so. Have you considered a budget before?
4. Forecast Demand: Although most collectors (quite wisely) focus their acquisitions in a pre-determined area, it can often be invaluable to at least have a stab at forecasting what will be popular in the collector market in the coming months. It doesn't take much to imagine why a dealer does well to develop an eye for what's going to be hot and what's not, but for collectors the best way to buy low and sell high is to know what is likely to be high when you want to sell! This is such a complex and interesting field I'll leave my own observations on the market for 2009 to next week.
5. Stick to the Knitting: This resolution ties in neatly with those related to objectives, budget and knowledge - they're all about reducing risk. In these days when today's bargain has the potential to be worth exponentially more in future than tomorrow's lemon, now may not be the most appropriate time for me to have a punt on an esoteric rarity that I may not be able to find a buyer for in the reasonable future. Ditto for a collector, leave the entree into 16th century Polish letter openers until the days when the kitty has a little bit of fat in it. If kitty is full as a goog right now, well that's another story!
6. Quality: Most people aren't aware that liquidity is the factor that suffers the most in market phases such as the one we're in at the moment, and not necessarily price. Most collectors would rather toss their most highly prized rarity back in the safe and get a second job working the graveyard shift in the local servo before selling it at a heavy discount to what they believe it's worth, and this is the primary reason why the numismatic market doesn't have the price volatility seen in the stockmarket or deriviative market for example. The items that suffer the biggest drops in liquidity in an "off" market are what are known as "off-grade" items - just what "off" grade means is different for each item, but let's make a sweeping statement and say that it covers items grade EF to about Unc - these are the items that have commanded a significant premium to most items that are around, yet they still aren't regarded as being premium quality items by discerning collectors. Ironically, lower grade items sell quicker than those in this grade range, as do items graded UNC+. It's the middle ground that softens up the most. I'll be focusing only on getting really premium material in the coming months - do you know what premium means for your area of interest?
7. Price: Now, more than at any other time, it is critical to know exactly where actual market values are at, as opposed to catalogue values. Sure, an item may command a particular catalogue value, but what are your fellow collectors interested in paying for it in these lean and mean times? Are dealers still dead keen in getting them, or has demand dropped off significantly? I've made some pretty serious errors by making acquisitions based on the values printed in a catalogue (I've both paid too high and prepared to bid nowhere near enough), so I'm now well into in the habit of checking the latest auction results and am regularly in touch with my network of contacts who are involved in the same areas I'm in. Do you know what the actual market is for your collection at the moment? Do you know what your next acquisition has been making at auction in the past few months?
8. Review, review, review: Planning to work and working to a plan is an excellent way to proceed in the current market, and that's definitely what I'll be doing. I'll be reviewing my portfolio and operating stock regularly, any acquisitions that aren't up to par will get the heave ho without any ceremony at all. The old adage of successful traders is to let your profits run, and cut your losses short - regular reviews allow me to do this anyway. If you're scratching to rustle up enough folding stuff to finance the coming acquisition of a rarity you've been lusting after, run a keen eye over your past acquisitions and see if there aren't any old friends that you can tip out to make up the difference. You'll be surprised what you might have lying about the place! Do you have any duplicates or superfluous items that you no longer need?
And that's it for me for the coming year - although retail spending (a key determinant to the success of the rare coin market) is forecast to stay restricted in the coming year, I'm quite confident that anyone that operates sensibly will remain in the game long enough to see better days.