Is eBay a Source for Virgin Nationals?|
January 07, 2014
eBay was founded on Labor Day 1995. The big question in numismatic circles is: Has eBay been responsible for bringing huge amounts of virgin numismatic material to market that otherwise would remain buried in the weeds?
Of specific concern to me is the eBay effect on the rate of National Bank Note discoveries.
Lee Lofthus’s important article, “Are there more nationals to find?”, in the December 2012 Bank Note Reporter seriously ignited interest in what remains in the weeds. His calculations indicate that depending on how you wish to cook the numbers, only between 10 and 25 percent of the outstanding nationals have been reported in the census maintained by the National Currency Foundation. This unambiguously tells us that there are hundreds of thousands more out in the weeds waiting to come in.
I have been collecting census data for Alaska, Arizona, New Mexico, Wyoming and large-size Territorials since the late 1960s. In 1989 I got smart and began storing these data annually, creating for us a snapshot of just where my various censes stood on the last day of each year ever since.
I have been very diligent about recorded data. Fortunately notes that I track get good exposure, especially the Territorials, because they are sufficiently scarce people preferentially put them in auctions or otherwise expose them through ads. The result is that I don’t miss many as they go by.
My 24 years of data bridge the launch of eBay, so if eBay has had a material impact on bringing virgin material to market, that effect should show up in my data.
I expected to find a rate increase as I set out to crunch my numbers.
I simply plotted the total number of reported notes by year from 1989 to the present. This provides a look at five data sets. Those plots are shown on Fig. 1.
For those of you who are mathematically inclined, the Alaska, Arizona, New Mexico and Wyoming data sets are totally independent of each other, which is good for statistical purposes.
The results are startling. All five plots are linear.
This reveals that the rate of discoveries has held constant for 24 years in all five data sets. There is no eBay effect.
If there was an eBay effect, then there should be a rate increase, which would be manifested as a change in the slope of the curves with time. Specifically, the curves should have started to bend upward after 1995 and continued onward with a steeper trajectory. They don’t. So what do the data tell us?
No one can deny that eBay plays an important role in the marketing of collectible currency. My data simply reveal that it hasn’t created a flood of virgin material from the weeds. This finding goes against conventional wisdom.
What I can say with confidence is that the existing numismatic market draws virgin nationals to it simply by virtue of being the market for such material. Once released from the weeds—however that occurs—the material heads our way regardless of the path it takes and we get to see it. That is the classic operation of any market, and our market is alive, well and well known.
Yes, eBay has caused a tectonic reorganization of the numismatic market in that all sorts of sellers flock to it to market their wares because they are assured of reaching a wide audience and most likely will realize a fair price. Furthermore, owing to the reach of eBay, uninformed sellers do not find themselves at much of a knowledge disadvantage because their material will find its level owing to the exposure it gets and the inherently competitive character of that venue. This saves them the bother of having to research what they are selling beyond finding the right niche in which to list it.
EBay provides many small players with an opportunity to cut out the middlemen in the form of the hometown coin dealers and vest pocket dealers who used to be the only game in town for most sellers of raw material. The result is that such middlemen are becoming an endangered species.
The fact is that eBay has simply caused a reorganization of how the same material is marketed, but it hasn’t altered the net supply or caused virgin material to come onto market at a faster rate.
The fact is, the material that used to reside in coin shops or appear on bourse floors is the same material that is now available on eBay.
A similar reorganization of our market occurred with the advent of the formal numismatic auction firms. That sector has been under full steam since the mid-1970s. The numismatic marketplace that I knew in the 1960s consisted of a plethora of independent sellers of every imaginable stripe. That model has been largely supplanted by the auction firms such as Heritage, Knight, Stack’s Bowers. And eBay. The vest pocket dealers of yore have morphed into runners for the major auction houses.
The corporate types figured it out and have insinuated themselves into our game so they can skim a percentage of the flow. The transformation has been as radical as the demise of mom and pop cafes and emergence of the McDonalds. Like it or not, the corporate types created a more efficient marketplace.
The fact is that if you track notes, you will see a fluid flow of them as they slosh back and forth between traditional numismatic vendors, the formal numismatic auctions, and eBay.
Those who have material for sale use whatever form of the marketplace appeals to them at the moment to move their wares, but it is the same material no matter where it shows up.
The lament of the census taker is having to sift through all the so-called retreads on eBay to find a new hit. My estimate is that the ratio for notes on eBay runs about 15 previously reported notes for each virgin for the states I track.
Yes, of course, virgin material turns up on eBay, but that material is coming to us anyway. Some of it just gets short circuited to eBay first. The notes move toward the money, and our numismatic market is where the money is so sooner or later everyone figures that out so we get to see the notes. EBay is simply part of our market now.
The data on Fig. 1 zap another conventional wisdom; specifically, that virgin material is slowly drying up.
There has been no decline in the rate at which virgin material has appeared over the period of record. Intuitively we expect the rate at which virgin material gets released from a fixed pool to taper off as the bottom of the barrel is approached. Clearly that hasn’t happened either.
For 24 years running there has been a steady increase in new material. This reveals that the weeds are still full of nationals.
What is the mix of the virgin nationals that keeps arriving? My experience is that it is the same as ever. That is, the same percentage of rare notes is coming along now as in the old days.
Similarly, the average grade of the new discoveries has not fallen off. High grade pieces still appear.
If the trends continue—and there is no sign they won’t—today’s rarities are tomorrow’s scarcities. Let me close this with an anecdote that demonstrates the operation and to a degree the fluidity of our marketplace. Back in the 1960s when I started learning about nationals, one of the first things I did was obtain a Friedberg catalog and search through the list of national banks for a bank from my birthplace, West Orange, N.J.
I was absolutely thrilled to discover the place had a bank, so I began seeking out dealers who might have one. In short order I learned of Tom Settle of Long Island and in 1965 wrote to him to ask if he had one. Miraculously he had two 1902 $10s, one of which I bought for $25. The bug had bitten seriously. I took the next logical step. I decided I had to have a small-size note from the bank.
Thus commenced a fruitless search that caused frustration for the next five years.
I couldn’t find a dealer or collector who had even seen one, let alone had one for sale. And believe me, I contacted everyone in New Jersey as well as those in neighboring states.
I was living in Tucson at the time, but made periodic trips to New Jersey to visit my uncle, who lived in Clifton. For the fun of it one fine day in June 1970, he and I drove over to West Orange so I could have a look at the bank, at the time a branch of the National Newark and Essex Bank.
Once there I was compelled to go in to determine if anyone had ever seen any notes from the bank. The receptionist had no idea what I was talking about so she summoned the bank manager.
He said that someone had brought in a $20 the previous year and given it to him at face. If I was interested, he would dig it out of his safe deposit box and show it to me. In minutes I was looking at the very first small-size note I had ever heard about from the bank.
He explained that he had offered it to the son of the president who lived nearby, but the son showed no interest in it. Of course, I had to inquire if he would part with it. Then I had to come up with an offer—you know, not high enough to scare it back into the safe deposit box as some priceless heirloom, but not too low to cheat myself of landing it.
I finally blurted out what at the time was a high offer of $50. The fellow laughed, handed it to me and told me to give him $21 so he could recoup the interest he had tied up in it for the year that he owned it.
Later on I upgraded it. A problem I always had was that duplicates burned a hole in my pocket so I moved them out quickly. There wasn’t much of a market for the piece when it became a duplicate in 1979. However, there was a very civic-minded kindly women many years my senior whom I occasionally visited who was the last person I knew still living in my old neighborhood. She used to tell me news of people I once knew, so I gave the note to her. I was aware at the time that it was leaving numismatics.
A few years later before she died, she told me she gave it to a descendent of the president. For all I knew, it was the same guy who had passed on it when the banker had offered it to him years earlier. Regardless, it was firmly back in the weeds from whence it had come, and as a practical matter I probably could have been justified in erasing it from the N.J. census.
Currently there are 23 West Orange small notes in the census. They just keep comin’ out.
Bob Hearn contacted me in July 2013 asking if I had seen the West Orange note that just appeared on eBay. He averred that it was probably going to be new to the census, although he hadn’t checked yet.
You guessed it, there it was, my former note offered by Evergreen Coin in Lawrenceburgh, Ind. It had no reserve, but by the time I saw it others had bid it up to about $50 with about a week to get to closing. I brought it home.
The last lead I had on it was in the 1980s, where it probably resided in the hands of an old line West Orange banking family far removed from numismatics. I’d love to know the details of its 30-year odyssey on its way into the inventory of the dealer in Lawrenceburgh.
The amazing thing is that no one ever washed it during its travels. That in itself reveals that it resided most if not all that time out in the weeds.
My points? Nationals move to our market because ours is the market. If they detour out for a while, they will come back.
Once in our marketplace, items flow like water, changing hands many times with occasional appearances on eBay. EBay is every bit a part of our market as your favorite dealer or auction house. The fellow who put the West Orange note up on eBay is an established numismatic dealer who is using eBay to reach as wide a market as possible.
This note had the look of a virgin because it came through eBay, but that was a misperception—the same misperception that leads people to think that eBay is responsible for bringing a flood of virgin material to market.
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