August 04, 2017

What is something worth when it doesn't sell?

This is a question I consider almost every day. This is also a question that affects all dealers and all collectors, in every type of collectible and in every specialty. What I'm going to say is merely opinion and I know others can and will disagree. Let's start with a live example and guess what it might sell for today.

The certificate shown came from the Gilpin Tramway. That line was a historic 24-inch narrow gauge operation that served a large number of gold mines around Central City, Colorado between 1887 and 1917.

Unless collectors tell me, I cannot possibly know what dealers currently ask for Gilpin Tramway certificates. Auction sales, however, have given me records of thirteen definite transactions since June, 1989. Sale prices have ranged from $61 in a 1989 Smythe sale in the U.S. to $594 in a 2006 FHW sale in Germany. The average sale price has been $216, and auction start prices have tended to cluster around $150 to $350. I have recorded nineteen serial numbers so far and assume there are probably twice that many in existence.

So what is the collectible value of this certificate? Based on actual sales, I currently estimate about $200. 

But what about the reader who yelps, "Wait a minute. I saw one sell on eBay for $99!"

True. That was in August, 2011. But so what? The certificate has appeared on eBay five times and it has sold there for an average of $198. That makes me wonder whether my $200 estimate might not be $25 to $50 low.

I have no choice but to estimate that collectors are CURRENTLY willingly pay at least $200 in auctions. Furthermore, I suspect most of those same collectors would not balk at a $250 to $275 price tag from U.S. dealers. Because of differences in the value of the Euro and collecting habits, I suspect $300 to $400 would be a fair offering price in Europe.

I am NOT saying that all sales – or any sales! – will take place in those ranges. If no one desires a Gilpin Tramway certificate at sale time, then those certificates are theoretically not "worth" $400 or $300 or even $200. Simple.

Yet, what is the price if professional dealers or auction houses won't lower prices below $200? Once again, the conclusion is quite simple. If anyone – collector, dealer or auctioneer – refuses to part with a collectible if it doesn't sell above $200, he, she or it is valuing the item like a collector. My price estimate must remain $200.

The point of all this is that whoever desires a collectible the most is the party who sets prices. In most cases that is the collector/buyer. But if an amateur seller or professional dealer is playing the role of collector, then their desires win. They set the price and that is that.

With all that groundwork out of the way, I'll go back to my first question. What is something worth, when it doesn't sell? 

Gilpin Tramway certificates and thousands of examples like them are easy. While there will always be disagreements over price, similar certificates are still collectibles that collectors want. In the case of known and established items, collectors perceive the pricing question as less risky because they have a "feeling" for rarity. Whether there are 19 certificates in existence or 38 doesn't matter. Collectors are reasonably certain that a thousand more are not going to suddenly appear from some long-lost safe.

On the other hand, collectors find one-twosy certificates (where only one or two are known) much harder to value. I don't know a single collector who doesn't desire unique or nearly-unique items. If a new variety suddenly appears, however, they cannot possibly know whether a thousand more are likely to follow. Can they safely spend a significant amount of money betting their one-of-a-kind item will stay that way? To a very large degree, their reluctance to buy is a judgement of risk, based on minimal information.

Now, let's say a seller genuinely wants to convert certificates into cash and has no desire to keep certificates for personal reasons. Let's imagine that the seller offers a certificate for $200 and no one buys. Then he offers it several more times with identical results. I have seen this scenario play out countless times. Is his certificate worth $200? 

There are a myriad of possibilities, but evidence is clear that:
  • with the information provided to potential buyers
  • the item is NOT worth $200
  • to any of the people the seller has reached so far
  • at this point in time.
It is equally clear that if the seller truly wants to sell, he must change one or more of those variables. The seller can:
  • change his offering price, either lower or higher
  • reach out to more or different potential buyers
  • offer the item at a different time
  • do something to decrease perceived risk of purchase.
Each of these potential strategies is a long discussion in itself. The world abounds with books and websites about marketing. Most marketing experts will testify that sometimes, very minor changes make large differences in sales. Like changing an offering from $200 to $199 or changing a single word in a write-up.

From a cataloger's point of view, I generally assume that if a $200 item goes unsold one or two times, it is probably still worth $200. If the same item is goes unsold three, four or five times, then it is crystal clear that potential buyers value the item less than the seller. 

How much less?

In the Gilpin Tramway example above, we see a 10x range in prices ($61 to $594) measured from low to high. With collectible stocks and bonds in the railroad specialty, I have conclusive proof that we should always expect a minimum 4x range in certificate sale prices. Lacking any special features or problems, I always expect to see price ranges from $50 to $200, or $200 to $800, for the very same type.

Looking at a failed $200 transaction objectively, we could assume that $200 was slightly above the high point of a typical 4x range. Maybe it would have sold for $175 within the real $45 to $175 range. It is also possible that the $200 offering was below the bottom of a $225 to $900 range. Maybe, potential buyers were scared and thought, "Wow, this certificate should be worth more than $200! What's wrong with it?"

Although I have definitely seen the second scenario play out in real life, students of capitalism generally suggest that the $200 offer price must be too high. Regardless of my own opinions about rarity, I must also agree. In such situations, I always lower estimates to $150 to $175 after about two failed $200 offerings. If sellers choose to lower prices and items still go unsold after three or four offerings, I will drop estimates further, even if I think items are scarce or rare. Scarce and rare don't sell. Desire does!

Sellers are always aware that collecting is emotional. All collectors have emotional needs to collect. No surprise there.

But how many sellers understand that collectors also view their hobby with an eye to the concept of risk? It is seldom talked about, but collectors always question whether their purchases are sensible. They are always estimating financial risk. And what affects the perception of financial risk? Rarity, condition and external circumstances.

Yes, desire is what attracts collectors in the first place. But evaluation of risk is what controls their wallets. If collectors have boundless wealth, concern over financial risk may be greatly minimized, but sellers should realize that the evaluation of financial risk never disappears.

It appears to me that it is crucial, perhaps more crucial than price, for sellers to diminish perceived risk. I believe they need to tell buyers everything they know about a collectible. If a certificate is one of five known, sellers should say so. If it is torn or a signature is smudged, sellers should say so. If sellers know nothing, then they should never pretend. They should never use words like "rare" or "scarce" without proof.

If a certificate is very attractive, sellers should say so, but they should avoid hyped words like "WOW!", "Unbelievable!" and "L@@K." They scream "amateur" and "pushy" so loudly that many intermediate and advanced collectors often perceive more risk, not less.

In conclusion, I reiterate that it is neither easy nor accurate to estimate prices for collectibles. While my estimates may be nothing more than educated guesses, I always try to use past prices to guide my estimates. If no previous prices are known, then I usually use the guesses of sellers unless they appear totally absurd. While eBay prices are part of price history, I NEVER use guesses of value from amateur eBay sellers. If I have used professional sellers' prices as guideposts for my estimates, and they fail to attract buyers after two attempts, I commonly lower my estimates 15% to 20%. 

July 27, 2017

Terminology - "coupon bonds" versus "bearer bonds"

Are these terms equivalent? Well-l-l-l. Not really.

First off, I want to make it clear that I am talking about corporate railroad bonds. I am NOT talking about U.S. Treasury bonds and related securities.

Read practically any coupon bond and you will usually see that some company promised to pay a bank or individual OR BEARER a sum of money on a specific day. Why this phrasing?

Generally speaking, such a company would have given a mortgage on its assets to a wealthy individual or a large bank in return for money. Along with the "mortgage" or other contractual agreement would have been a large stack of bonds that formalized the repayment agreement in smaller denominations.

The bond at left is a $50,000,000 loan. Theoretically, the Cleveland Cincinnati Chicago & St Louis Railway Company would have given the Mercantile Trust Company a mortgage and $50,000,000 in bonds. In return the Trust Company would have given the company several million dollars right away, perhaps as much as $10 or $20 million. The Trust Company would then have marketed the CCC&StL bonds to its customers in return for cash and it would have subsequently lent the company more money over the ensuing months and years.

That does not mean all of the bonds were ever sold. That does not mean all, or even any, any of the bonds were sold for $1,000 each. Nor does it mean that the CCC&StL ever received the whole $50 million loan. After all, the Trust Company was taking quite a risk and wanted to be paid for that risk!

For ease of selling, this bond was issued to the "Mercantile Trust Company of New York, or bearer." Whoever bought any of the bonds from the Trust Company became owners the moment the bonds were handed over. No muss; no fuss.

Obviously, bearer bonds were wonderful assets when they needed to be sold quickly. Only buyers and seller were involved. And redeeming coupons was equally easy because they too were bearer instruments. Whoever turned coupons in for redemption were the ones who got paid.

However, bearer bonds and their attached coupons were terrible assets in the event of any kind of loss. Whether it was fire, flood, earthquake or theft, bearer bonds were rarely replaceable once lost.

The obvious solution was to register bonds with companies. Once a bond was registered, every sale needed to be recorded and that took time. But, at least the bond was safe.

The text of most bearer bonds allowed changing from bearer to registered status. For instance, the text of the CCC&StL bond clearly said, "or, if this bond be registered as hereinafter provided."

In the text that followed, the bond indicated that the bond, "may at any time and from time to time, be registered."

Huh? Does that mean what I think?

Yes, bearer bonds can be registered to a specific owner and then "registered" to a bearer and then registered to a new owner sometime later. Maybe even back and forth between registered and bearer status. Specifically, the text on this bond says, "until registration is made to bearer."

What happens to the coupons if a bond is registered?

Even though bearer bonds might be registered, the coupons can stay with the bond or they can be removed. Whatever the owner chooses. Specifically, "the owner of record may surrender all unpaid coupons hereof."

This particular bond was issued in May, 1893, shortly before the great Silver Crash. The registration panel on the back shows the bond remained as a bearer bond for 34 years before being registered by the New York Savings Bank in July, 1927. At that time, the Savings Bank decided to surrender the remaining 165 coupons in order to be paid directly by the company. The transfer agent made note of that fact by stamping the bond, "Coupons Detached."

The New York Savings Bank then held the bond through the Wall Street Crash of 1929 and the worst years of the Great Depression before ultimately selling it to Massachusetts Life Insurance Company in 1935. That company held the bond for the next 39 years before being transferred to the account of Bear, Stearns in 1974.

Three years later, the company was part of the large Penn Central bankruptcy and was being transferred to Conrail. At that time, the bond then went under the ownership of Warren Buffet who held it until it was permanently cancelled November 3, 1978. Buffet purchased the bond at a time when investors were arguing that railroad bonds such as this were either highly over-valued or high under-valued. I'd guess that Buffet paid no more than about $60 for this little investment. It was a time when interest rates were just starting to jump and when Conrail was negotiating how much to pay Penn Central bondholders. I do not know the outcome, but I seriously doubt Buffet lost any money.

What about an example of the opposite direction in registration?

I have only have one example and this is with a bond from the 999-year bond of the Elmira & Williamsport Rail Road Company issued during the Civil War. It originally had 100 coupons attached, but the bond was issued to Richard H. Downing, 'or assigns.'

A registered bond with coupons? Hmmm.

These bonds are entirely silent about the meaning of the word 'assigns.' There is a registration panel on the back which very similar to the CCC&StL bond. The E&W bond, however, shows absolutely no evidence of ownership for a century until it was transferred "to bearer" on Dec. 4, 1963.

Who had the bond during this period? Who cashed in all the coupons? All we can do is make some logical assumptions.

Those assumptions are that, 1) someone had possession of this bond for a century. 2) Someone, either Downing or his 'assigns,' collected about $5,000 worth of interest during that period. 3) For some reason, some legal owner expended the effort to convert the bond to bearer status in 1963. 4) There are absolutely no transfers recorded on the bond in the intervening period between 1863 and 1963. 5) It seems unlikely that someone presented proof of legal title every time they redeemed coupons.

Therefore, I assume that the word 'assigns' was interpreted as 'bearer' for the period between 1863 and 1963. For all intents and purposes, this coupon bond seems to have been a bearer bond for its entire lifespan. Or at least until September 3, 1982 when Congress enacted the Tax Equity and Fiscal Responsibility Act of 1982 (aka TEFRA) that required that securities be registered in the name of the owner.

In conclusion, it appears that most coupon bonds have the ability to transform from bearer bonds to registered bonds and then back again. Secondarily, some old 'registered' bonds may not have been treated the same way as later registered bonds. Finally, the terms 'bearer' and 'registered' really involve the idea of protecting an investment from physical loss much more than the concern over how interest was going to be paid on that investment.

To which I say, it is no wonder beginners are sometimes stymied by bonds!

June 08, 2017

Spink USA 'Numismatic Collector's Series' sale in mid-June

I recently received a pair of catalogs for upcoming Spink USA sales. The first is one of the continuing series of Numismatic Collector's sales that will take place June 19 and 20 in New York. This sale (#335) is heavy on coins and currency and features a substantial number of gold items.

The second day of the sale features stocks and bonds, predominately in multi-item lots. Lots  824 through 854 are U.S. certificates and almost all are related to railroads. I count the U.S. offering at roughly 670+ certificates, making the average lot size about 24 certificates each. Generally, I classify price estimates as anywhere from 'low' to 'sub-wholesale.' While these are dealer-size lots, I will recommend that collectors look at this sale as an opportunity to bolster their collections at great prices.

With the possible exception of a 2-item lot of Ferro Monte Rail Road certificates, no overwhelming rarities catch my attention. On the other hand, I don't see any lots of ultra-common material either. Everything seems to be intriguing middle-of-the-market material that will fill holes in most collections. Anything that isn't wanted should be quite salable on eBay.

There are an additional 45 lots of world certificates, also mostly containing multiple items. That part of the sale is heavy on Canadian and Russian certificates plus a couple Chinese bond lots. 3 of the 17 Canadian lots involve railroads. (Most of the remainder are related to mining.)

The second catalog that came from Spink USA involves an auction of a large collection of terrific banknotes from Europe, Africa and the Middle East. Although off-topic for me, I suggest anyone interested in highly-colored banknotes from the Muslim world check out the the Rauf Al Mannai collection scheduled for June 21 and 22.

You can view the Numismatic Collector's Series catalog online at Click "Auctions" on the top menubar and scroll down to sale 335. (Or click here to go directly to Sale 335. Contact Spink directly for a physical copy of the catalog.

See also Sale 334 for the Rauf Al Mannai Collection catalog.

April 16, 2017

"Market Basket" price index, revisited

Back in February, I updated my "market basket" price index. That created some degree of interest, especially among European dealers who felt that things were different there. I concurred that it was possible, but I needed proof. To check whether our "feelings" were correct, I had to make two substantive changes to the chart and database.

The changes

First I thought it wise to increase the sample size from 43 varieties to 100. The basic idea was to start with certificates in the year 2000 that were mid-range collectibles, ranging in price from roughly $60 to $400. The selection includes a handful of popular autographed items.

Currently, the price index includes 4,377 definite prices of certificates that tend to appear for sale anywhere from three times per year. Scarcer inclusions may appear for sale only once every three or four years. In other words, none are particularly common nor overly scarce. They are all acquirable.

Of of the current 4,377 prices in the database for the 100-item Market Basket, there are a few valid, but decidedly abnormal prices. One item sold for as low as $2 in a multi-item lot and one sold for as much as $2,238 for no observable reason. The number of prices that go into the price index is always increasing because of new sales and the adding of sales from old auctions. There are a sufficient number of typical prices that oddball prices have no noticeable effect on the overall Index.

(A special thanks(!) goes to Mario Boone who is helping me acquire prices from his oldest sales and those of his father Erik before him. Can anyone help with sales results from old FHW, Gutowski, Tschöpe and other European sales?)

Secondly, I added a way to separate price origins by continent. That was a feature I had never seriously considered before. One of my original problems, and one that still plagues the project is that my records of European sales are thin prior to about 2003. While I have many prices from that period, I still have an insufficient number to calculate five-sample moving averages for all 100 certificates in the index.

The upshot?

Even a quick glance at the chart shows that there is a strong, obvious and definite difference in the price behavior of North American certificates in Europe. While certificate prices are currently twice as high in Europe, there are measurably more sales in the U.S. Consequently, the overall value of the Market Basket has been dropping, all the while prices in Europe were increasing.

Why are American prices so distressed. In my opinion, eBay!

While eBay sales are lower than any established dealer would like, they are nonetheless valid and genuine sales. Additionally, eBay prices are so low that they have dragged down prices in ordinary live auction house sales. The number of Market Basket certificates that sold on eBay before to 2005 were insignificant. However, more and more have been appearing there since that time. Because they are scarcer than typical eBay certificates, they tend to sell quickly. However, because advanced collectors do not necessarily look at eBay frequently, they tend to sell at prices below those found in live auctions. Because of the ever-increasing number of mid-rarity items that appear for sale on eBay, eBay prices now make up 25% of the total prices calculated.

I don't like that percentage anymore than mainline dealers and auction houses. I am sure professional dealers are selling at prices above eBay all the time. Sadly, dealers do not share their sales histories, so I have no valid proof of that belief. That means I must use whatever prices are available. With the exception of Archives International auctions, publicly-available U.S. sales results, discovering non-eBay prices is getting harder and harder. Yes, I can find hundreds, or even thousands, of certificate offerings on websites; I cannot possibly learn how many actually sell at stated prices.

It is interesting to note that very few U.S. certificates in this Market Basket have appeared for sale on eBay(DE) or eBay(UK). When they have appeared, however, they have always sold at prices drastically lower than even eBay(US) prices. European dealers have told me that their customers "are not buying on eBay." It certainly appears that is true for North American certificates! Is that because advanced collectors don't participate on eBay? Or is because European sellers don't offer many medium- to highly-desirable North American certificates on eBay?

One final point

Note that U.S. sales showed a slight uptick during the last half of 2016, while European prices dipped. As I have pointed out several times before, my index is based on a moving average of five sales immediately before each six-month calculation on June 30 and December 31. That means that the graph of the Index lags actual price changes by six to possibly twenty-four months.

I cannot possibly suggest that either of these latest dips or upticks are the beginning of longer-term changes. Nonetheless, we should probably keep an eye on them.

Well, maybe one more point

Another point that bears consideration is that the chart clearly suggests that desirable North American certificates fetch better prices in Europe. Currently twice as much.

The "race to the bottom" brought on by ultra-low eBay prices is not doing certificate collectors any favors. If things don't change, North American collectors will wake up some morning and wonder where the good certificates have gone. "Uhhh...Europe!" So, how are they going to collect such items? "Duhhh...Pay the price!"

March 16, 2017

Boone Auction 58, April 1, 2017

As usual, Mario Boone ( has come up with another great selection of certificates for his upcoming auction 58 in a couple weeks. Mario deals in certificates from around the globe, so his selection is always wide-ranging. Regardless of your specialty, you will always find something of interest.

I want to stress to my American collectors that Mario grew up surrounded by global certificates. That long experience allows him to buy and sell things that most of us will only see in photographs. That experience also means that he is exceedingly competent in shipping items everywhere on the planet. I say this to suggest that you should feel comfortable in dealing with Mario even if you have never bid in European auctions.

Having said that, I need to point out that prices in European live auctions are different than those encountered in the U.S. There are a couple key reasons.

First, Price history strongly suggests that, on average, European collectors are less enamored with vignettes on certificates than American collectors. On the other hand, they tend to pay substantially more for rarity. Second, collectors will learn that the selection of North American railroad certificates available in Europe is different. That means that some certificates are much more common in Europe than here – and vice versa!

These two significant differences routinely compound to offer opportunities to acquire certain rarities that are underpriced by American standards. Those are the items I want American collectors to consider in this and other European sales.

Let me give a couple hints.

My readers interested in railroads will find forty-two certificates from North America in Auction 58. (3 each from Canada and Cuba, 1 each from Honduras, Puerto Rico and Mexico, 33 from the U.S.) And yes, your will quickly see a few from that number that are relatively common in the U.S.

At the same time, you should be able to spot some terrific rarities. One of those is an 1870 aid bond issued by Barbour County, Alabama to purchase stock in the Vicksburg & Brunswick Railroad. Minimum bid: €200. I'm sorry, you cannot currently find this certificate listed in my database; this is the first time I have ever encountered it.

On the same page in the catalog are two bonds from the Maxwell Land Grant & Railway Company. I have recorded prices for such bonds that range from a high of $3,750 in 2003  to a low of $1,225 in 2005 (on eBay). The last price I saw was $2,000 in 2015. Mario's starting bid for each bond is only €300 (about $318.)

Now for the kicker!

Both were signed on the back by Thomas Scott as trustee. Additionally, both were also signed on the front by William Jackson Palmer as president. For people unaware of Palmer, I'll merely mention that if sold in the State of Colorado, his autograph would probably fetch a couple hundred dollars as an ordinary 'cut signature.'

Maxwell Land Grant bonds are scarce; lots 1254 and 1255 represent two of eight bonds that I have recorded since 1999. However, they are downright common compared to lot 1266. That happens to be stock certificate from the Wharton Railroad Switch Company. In thirty years, this remains the only example I have ever seen. Start price? €80.

While you're at it, why not take a look at lot 1272, another item with a minimum starting bid of €80. It is a stock certificate from the Wilkes-Barre & Wyoming Valley Traction Company and is also the only example known to me!

Yes, I know that not everyone is impressed with potential one-of-a-kind items. I get it. And I am certainly NOT saying those two lots are genuinely unique. It is always possible others might appear at some time. But they are definitely worth a look,

While you're at it, why not take a peek at an item that is three times as common. (i.e., three examples known.). Lot 1202 is an 1854 certificate from the Honduras Interoceanic Railway and possibly the oldest stock certificate from Honduras. Mario tells a good story of the company and how it ultimately gave Honduras one of the the highest per capita debts in the world. This is an historic piece with a start price of €700.

I always recommend acquiring a physical catalog (170 pages, full color.) However, since time is a little tight for the start of the auction on April 1, you can see and bid on all items at

February 04, 2017

"Market Basket" price index updated to the end of 2016.

About every six months, I update my price index to show how railroad-related collectible scripophily prices have been doing. As you can see from this chart, prices continue to decline – AT LEAST FOR THE 43 CERTIFICATE VARIETIES THAT MAKE UP THIS INDEX.

The index, on December 31, 2016 was $3,386, down from the high of $6,913 at the end of 2003. While not particularly stunning news, I can say that prices are currently up about 1.3% since the first of the year.

Please read more at the page on the website titled, Railroad Certificate Price Index.

January 10, 2017

Numismatic Collector's Series Sale 329 approaching

The latest Spink auction to feature North American railroad stocks and bonds is coming up January 17 and 18. The sale will take place at Spink's New York offices as well as online.

I count thirty rail-related lots, 27 of which are multi-item lots.

It appears that this auction should appeal strongly to small and medium-sized dealers. Because dealers always need to bid with their eyes on profiting through resale, collectors who like buying multiples should have a field day. I know I am being selfish, but I would love to see all these lots sold so buyers can send me images of some of the scarcer certificates I see sprinkled throughout the lots. (Okay, I admit that was a shameless plug for images for my online catalog.)

Standouts among the singles and smaller lots are three lots that feature certificates autographed by Otto Mears and Jay Gould. The descriptions of the items included in two of those lots are a little unclear, so I recommend calling Spink for confirmation before bidding. Consider this a great opportunity. Anytime there are questions about auction contents, lots tend to sell for less. (Bad for sellers; good for the buyers!)

Another lot features two variations (a proof and a specimen) of a rare Nevada Central Railway bond. I am reasonably sure that the both certificates are unique. Even in this market, I will go out on a limb and suggest Spink's sale estimate is a bit on the low side.

As mentioned above, multi-item lots make up most of the sale. Only two lots include large numbers of duplicates – 500 Illinois Central certificates in one lot and 50 1963-vintage Pennsylvania Railroad certificates in another. All the remaining 25 lots are enticing, well-mixed selections, including large numbers of both issued and unissued certificates. All those lots appear ideal for resale inventory or for bolstering collections at affordable prices.

To purchase a physical 142-page color catalog ($20), email Spink at You can normally download a PDF copy of the catalog, but the link is currently broken. (I have sent Spink a message to that effect, so it should be repaired by the time most of you read this.) You can always view the catalog online at (Rail-related stock and bond lots start at lot 998.) There you will find info on how to bid remotely.