January 2006
I am one, so are three of my four neighbours. Baby-boomers. The generation X that followed shortly on the heels of the second world war.
So what has that got to do with investment in coins I hear you say... in a word EVERYTHING. In my earlier article Great (S African numismatic) investments of the future I gave the groundrules for buying rare coins sensibly and some advise on the importance of research.
Men and women from the Baby Boomers age were born between 1946 and 1964, many moving into the 50 plus age group are well educated and have very substantial investments in shares and property etc... but above all they are all moving into retirement. With retirement comes one of two choices boredom followed by death or developing an outside interest followed by life.
Conservatively speaking we have hundreds of millions of men and women who fall into this category in the western world. If just a fraction of one percent of these Baby Boomers in retirement develop a hobby in numismatics and start drawing on their investments to feed their outside interests the value of sound investment numismatic pieces will explode. This impact of this future trend has been predicted by many researchers including the Citigroup Global Markets report headed "The Next American Dream". It predicts that...
The most persistent investment cliché about baby boomers is that, as they start retiring, they will pull their money out of the stock market.
and....
As for wealth, boomer savings rates are high, the Kerschner/Geraghty report says — about 20 percent of income at age 50, extrapolated from data from the Bureau of Labor Statistics’ Consumer Expenditure Survey. Even if that high rate declines at age 60 and beyond, it “is still likely to be relatively high, given continued growth in real incomes” both because boomers will work longer than their peers in previous generations and because productivity will rise. “So where,” asks the Citigroup report, “will that money go?”
and...
The final goal for aging boomers is remaining active — or, more precisely, “lazily active.” Boomers will stay in the labor force longer but will also engage in leisure activities, especially, the report predicts, home improvement, travel, and hobbies.
In summary the extracts tell us that the baby boomers with spare cash or investments to spend are predicted by many reports to withdraw that money and spend it on interests and hobbies. The value of that investment will be so large that it will impact negatively on the stock markets in the future.
We are talking about an enormous amount of money looking for a home in a range of hobbies like philately, numismatics, old books, antiquarian maps and travel. When you think about it it all makes sense. What use is a large investment portfolio in shares when you are sitting at home with nothing to do? The Baby Boomers are action men and women, their communication with the world in the future will be through the Internet and their interests will develop from this same platform. Look at the growth of eBay* in the last few years and the associated rise in rare coin values over this period. eBay now has hundreds of millions of active participants from around the world and this is just the thin edge of the wedge.
*eBay recorded a 77% rise in third quarter profits in 2005 to $182.3m as sales increased 51% to $805.9m.
So it figures that the Internet has today made the trials of geography a distant memory... as people of like mind, in continually growing numbers, bid for the same item.
The superannuation companies in Australia have already recognised this potential and are now investing millions of dollars in old Australian bank notes sending their value through the roof. Old and rare single Australian bank notes that sold for a few thousand dollars a few years ago are now selling for hundreds of thousands of dollars.
So here's the equation... a large influx of many tens of thousands of new coin and bank note collectors with large amounts of money to invest. A dire shortage of supply of the rarer numismatic pieces creating an unprecedented demand - even for pieces that just a few years ago would not have raised a bid at auction.
And this equation is not restricted to numismatics as the same impact will be felt across all hobby-based investment areas - because it is the history behind the coin, stamp, book or map which will be the basis of the investment as that item has a story to tell. A story that can be shared with family, friends, social groups and, above all, can be further researched on the Internet. But above all pre-1932 numismatic items will soar.
So what makes coins and notes from the pre-1932 era so special?
When we were on the gold standard the value and credibility of each coin was intrinsically held in its precious metal content or, as in the case of currency trade tokens like those of Strachan and Co, in the goods in the store. This was taken away in 1932 when we went off the gold standard. Today our coins and bank notes are only worth what currency traders on Wall Street dictate hour by hour, day by day. In other words our currency has no gold backing - it is based on faith.... and an awful lot of unpaid debt that continues to grow exponentially. It will be the lure of numismatic items that had real value which will add extra impetus to the explosion in pre-1932 coins as an investment.
Move aside gold, shares, property and cold investments - nothing will match investments with a story to tell..... that's our predicament making coins the investment of the 21st Century.
Oh, and my three neighbours? One has already started to dabble in numismatics as a post-retirement interest and another has just bought his first old and valuable bank notes. The race has already started.