Collectible Stocks and Bonds from North American Railroads     by Terry Cox

A guidebook and catalog of prices
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The effects of hoards on prices

What is a hoard? People throw around the term "hoard," but how many will agree on its meaning? A "hoard" might mean 10,000 certificates. It might mean 10 certificates. Regardless of the number, the release of hoards affects prices.

I think everyone will agree that when hoards of certificates hit the market, prices are likely to drop. The question is not IF releasing hoards will hurt prices, but how much and for how long.

Three concepts govern how much downward pressure selling a hoard will create.

  • How fast the owner wants to liquidate.
  • How many collectors want items in the hoard.
  • How much the hobby knows about the hoard.

Obviously, these concepts are nothing more than simple supply and demand.

Let's say 500 people want one particular variety of certificate, but only ten examples are known. No matter how much money they may have, 490 people are not going to get what they want. THAT is demand.

Conversely, imagine there are 500 examples of a very plain certificate and only 10 people really want that variety. No matter how low prices fall, selling any more than 490 certificates will be difficult. THAT is over-supply.

It is against this backdrop that hoards affect prices.

Sellers must accept lower prces when they want to liquidate quickly. This seems obvious, but it is almost uncanny how many people choose to ignore this inviolable rule. If someone wants to dump a hoard quickly, they must be willing to accept pennies on the dollar.

Experienced sellers will liquidate hoards, even small hoards, over months or years, trying to balance unknown demand with their potential over-supply.

When demand exists, it makes itself known by higher auction prices. Gauging demand is tricky because it rises and falls throughout the year and with the ups and downs of national economies. Moreover, it takes multiple sales to establish whether an upward trend exists, or high prices are merely the result of two or three monied collectors satisfying a thin demand.

Information about hoards most emphatically affects prices, but predicting directions is almost impossible. Sometimes, full disclosure of a hoard's existence generates interest and a commensurate increase in demand for selected items. There are other times when it appears that knowledge decreases demand (and prices).

Like most other commodities, knowledge about hoards is neither equally distributed nor equally appreciated. That is why predicting the effect of disclosure is so difficult.

In general, simply understand that hoards usually push prices down. The larger the hoard, the deeper and longer the effect.

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(Last updated October 22, 2015)


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