Collectible Stocks and Bonds from North American Railroads     by Terry Cox

A guidebook and catalog of prices
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Cox's Corner
August, 2010

Scripophily 83

This article appeared in:
Scripophily, Aug, 2010

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How important are catalog price estimates?

I frequently write about the pricing of collectible certificates and I have numerous pages on my website dedicated to the subject. Pricing is one of my key concerns and it is a popular question among beginners. However, I receive little correspondence about the subject from advanced collectors. At first, that seems odd given the significant personal wealth many collectors have invested in their hobby. On closer examination, I believe advanced collectors choose not to waste time on the subject because they know that catalog estimates have little if any effect on prices for rarities. I think those collectors use catalog listings for other purposes.

I have written several times about what I call the pricing paradox. Catalogers cannot possibly satisfy everyone. Paradoxically, catalog writers must actually dissatisfy the maximum number of readers. Ideally, half their readers should think catalog estimates are generally too high and the other half should think them too low. When readers' positive and negative price disagreements are roughly equal, catalog price estimates are about right.

It would seem that such a paradox would precipitate unpleasant encounters with readers who object to high or low price estimates. That rarely happens. In fact, if there is anything uncomfortable, it is that catalogers must keep their strong personal opinions about prices out of print. For instance, I believe that dramatic numbers of today's certificates are selling for insanely low, even stupidly low prices! But who wants to hear that kind of carping? Catalogers, myself included, must base price estimates on sales and market trends, and keep their opinions to themselves.

I used to work in the coal industry and helped estimate the values of large properties. Most people can probably imagine the scale of volcanic arguments that erupted when valuations reached into the hundreds of millions of dollars. Most people can also imagine that discussions over certificate valuations are trivial by comparison. Past experience at large property valuation helps me keep certificate pricing in perspective.

In rare instances when people try to convince catalogers to alter prices, they are really saying they believe catalog price estimates affect sales prices. If that were true, my catalog should have helped keep prices sensible within my specialty. Instead, precipitous price declines have forced me to lower price estimates almost continually for the last ten years. I hate to lower prices, but I have no choice. That is what is happening in the hobby. Arguing for artificially high "book prices" would have helped no one.

In truth, collectibles sell exactly like other items of value, no matter whether those items are bags of potato chips or luxury yachts. Simply put, buyers control sales. While buyers might check "book price" suggestions prior to purchase, their impressions of value at the moments of purchase are the only factors that positively or negatively affect prices.

Yes, sellers can and do prevent sales by insisting on exaggerated impressions of value. Regardless of sales literature, cajoling, or even outright deception, sellers can rarely force sales of any products without agreements from buyers. As best I can tell, "book values" in catalogs such as my own have little effect on commerce beyond sales of books and consulting services.

We seem to be in a period where prices are nutty; we see rarities sell for insane low prices at the same time we see common certificates sell for crazy high prices. Bidding rationale is unclear. It is plainly clear, however, that catalogs like mine have not calmed monumental price swings one tiny bit! I don't think catalog price estimates have any effect on prices and I don't think intermediate and expert collectors see any effect either. I personally think that is the reason advanced collectors rarely comment on the accuracy of catalog prices.

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