Recently a dealer received a call from a gentleman who asked, “Can I buy coins from a TV advertisement and bring them to you to resell for more money?”
In other words, this gentleman was thinking like an entrepreneur. He wanted to buy coins and resell for an immediate profit.
But, he didn’t think of the business fundamentals before asking the question.
Basically, in any business with a physical product, there are suppliers and there are customers. The supplier for one business becomes the customer of another. The TV advertiser “supplies” to his customer base, but he has to be a “customer” to someone else to obtain his “supply.”
Unless we’re talking about current year or we’re talking about counterfeit, no more earlier dated coins will be minted.
So, who provides the supply for these earlier dated coins?
Frequently, the supply is from Joe, Sally, Don or Nancy who decided to liquidate their collection for cash. Or, perhaps their interests changed, and now they want to sell in order to buy different coins.
But, where do Joe, Sally, Don and Nancy sell their coins? They sell them to dealers either directly at a coin show or at a coin shop or indirectly by selling to someone else first, for example, at a coin club meeting.
In effect, Joe, Sally, Don and Nancy become suppliers to the coin shops.
Now, let’s jump to the other side for a minute. Where does the TV advertiser get their coins? Unless they are coin dealers, they generally get their coins from several coin dealers around the country. Even if they are coin dealers, they still need to buy from other dealers to get the quantities they need for their promotions.
So, the coin dealer becomes a supplier to the TV advertiser.
But, remember, businesses as a rule are not altruistic. When a business sells their product, they add a margin to their prices to cover their operating costs and profit.
Likewise, when a coin dealer sells coins to the TV advertiser, the TV advertiser, in turn, has to add more cost to the product to cover his additional costs of doing business and making a profit.
Let’s see. The coin dealer buys the coins at a price less than what he knows the market price is today, call it $a. He sells it to the TV advertiser at a price of $a+$b to cover his costs and profit. The TV advertiser sells the coins at a price of $a+$b+$c to include his costs and profit.
Back to the gentleman’s question, the answer is, “No, you cannot buy coins from a TV advertiser and realize an immediate profit by selling to a coin dealer.”
Side note: By the way, wasn’t there an obnoxious commercial on TV about a guy buying a piece of art in an auction and immediately trying to resell it in the same auction? Don’t remember the advertiser, but the concept is the same.
Coins, of course, can gain in value such that a profit can be realized at a later date just not immediately. And, those coins that contain mostly gold or silver can provide the most growth in value in economic downturns.