Every decade or so there is some investment… high tech stocks, gold, junk bonds, houses, tulip bulbs, you name it, which just cannot go down in value because this is a “New Era.” Then that market crashes.
The first time I observed this phenomenon, I was 16 years old and working for a coin store in a small town in South Georgia, around 1964, when Hillary was a Goldwater Girl. The coin store was called Coins and Components because the owners, two air force pilots, were diversifying their portfolio with stereo components. This was before the internet, although there was an internet of sorts…DARPANET, which only a few pointy-headed pseudo-intellectuals in Washington knew about anyhow. The computers that existed were in rather large buildings, and it was yet a few years before I would know what an “infinite loop” is.
The coin dealers were linked by a nationwide network of teletype machines. If Al Gore were still alive, he would see differences in the technology used. He might scream at the dead trees on the floor and the electricity consumption (which was thought at the time to be just a few short years from “too cheap to meter,” but that is a story for another day). He would find no differences at all in the network concept of the coin dealer internet. Of course, I’m just joking with the political references, so your reading won’t become monotonous.
My job at the coin store was to search through bags of coins from local banks and take any out that were worth more than face value. There had been a surge in the price of silver. Silver nickels, produced during WWII, were being sold in bulk then melted down for their silver content. There were other coins of numismatic value in general circulation at the time. As I recall, the mint took the silver out of other coins at the time, but their silver content had not yet exceeded the value of the coin. So it was not yet profitable to melt down anything other than war nickels. I was paid 50 cents per hour when I began and maybe slightly more when the job ended.
I was a kid collector. The hobby began to take on the face of an investment, drawing me into that aspect of the market. I was lucky I did not have much money to spend, although I did not think so at the time. I found most of the coins for my own collection by looking through rolls of coins I bought at the bank. In those years in that town, it was safe for me to walk or ride my bike to a bank and buy $25-$50 in rolls of coins. I rarely collected high denomination coins, fifty cent pieces, silver dollars, even quarters, because just saving them put a dent in my wallet. So I was somewhat resentful when I wanted to purchase a coin, but happy when the ones I found went up in value. You all know how that works I’m sure.
The importance of stereo component sales diminished as coin sales rose. Suddenly the teletype spit out constant reams of paper and the shop was filled with customers on weekends. Silver dollar prices streaked towards the roof. The US Mint churned out proof sets, mint sets, rolls of coins and sold bags of uncirculated Carson City silver dollars that it discovered in a vault into the face of rising prices and heavy demand. Private mints began producing collectibles that looked like coins, but of course were not legal tender. A roll of uncirculated new pennies sold for $1 through dealers. They were 50 cents at the bank and Uncle Sam was churning out 100’s of millions. Higher denominations also sold at a premium. The belief was that they would be worth more the next year… just like houses in 2007, tulips in Holland centuries ago, stock in the 1920’s. The objects change, but the psychology never does.
One week the prices started crashing. I believe it began with a particularly collectable silver dollar from the New Orleans mint. The teletype machines screamed out in panic as prices of almost all collectible coins dropped all week. As I remember, the value of that silver dollar dropped from $400 to $40. I could be wrong on the exact details and I am not going to spend time researching it for this blog post. But the drop was significant.
It was soon all over but the crying. Not long afterwards my job ended, the store closed. But it has had a profound impact on how I view markets.
HEK
