Auctions Are Terrible Places To Hunt For Deals

[DBTrek]

I don't know where I got the idea that bargains could be found at auctions - maybe from hearing about people picking up cars and house for pennies on the dollar or something ... but it's a lie. Auctions are terrible places to find deals. In fact, people regularly pay well above market prices simply for the joy of buying something "at auction" it seems.

For example, right now I'm checking out Morgan Silver Dollars. If you're not familiar, Morgan Silver Dollars were mass produced by the US government from 1878-1904. It was a proper pork-barrel project created to enrich the Western cities at the cost of the US taxpayer. After the discovery of the Comstock Lode, the biggest silver deposit ever seen in America at the time, Western politicians got to scheming. How could they both discover an ungodly amount of silver, and still unload it on the market without dropping prices through the floor by flooding the existing supply?

If you guessed "make the government mint tens to hundreds of millions of Silver Dollars nobody wanted or needed" - give yourself a star. That's exactly what they did. They got the US Treasury to agree that they must spend millions (in 1878 dollars) per month on buying silver and refining it into silver dollars. Thanks taxpayers!

But I digress.

Point being, since millions upon millions of these silver dollars were created and never circulated, they've become quite the collector's item in the 20th and 21st century. In fact, if you know what you're doing, you can find some of these dollars well below collector's value, and flip them for a quick profit ... which is exactly why I'm sitting through this four hour bullshit auction as I type this.

Anyway, over the last couple of hours I've watched people lose their effing minds during the bidding process and pay incredible prices on some of these Morgan dollars. Here's one example:
https://www.invaluable.com/auction-lot/1895-s-morgan-dollar-f-9664c98af6#

This 1895 Morgan Dollar from the San Francisco Mint is worth about $368 dollars. How do I know? I pulled the eBay sales on this coin for the past three years and averaged them, giving a higher weight to the more recent sales. What did it sell for? $370.

Now .. that may not seem like much - what a measly $2 right? But it's NOT a measly $2. Every auction has a bidders premium of 17.5%. So that bidder actually paid $434.75 for the dollar. Did I mention the flat rate $7 shipping? They paid $441.75 for it total ... for a Morgan Dollar they probably could've bought at a coin shop for around $350 if they bothered looking.

I watching this happen over, and over, and over again at this auction.
People are crazy.

[C-Mag]

Auctions only provide value to the buyer when it's a buyers market. Today, with a world wide customer base it is a sellers market.

My Dad started going to the annual State property auction in the 1970s when it started. The deals were incredible, because there were very few bidders and a bunch of property. I remember in late 70s he came back with 3 Police Interceptors, Dodge Fury IIIs, with 440 big block engines, heavy duty brakes, etc, etc. He got them for around $400 a copy. Those were our starter cars for us kids. They were great, top end of 160 mph + Tough as nails.

That same auction still runs today, I went to it 2 years ago. There were hundreds of bidders there, the prices flew through the roof. No sense in hanging around.

[Haumana]

Auctions are a hit and a miss. Property auctions can be good if you are a buyer looking for a home but not great if you are an investor looking for a rental. Ebay is where I learned about how silly auctions can be. Watching people bid over the value of an object just for the stoke of "winning" the auction was eye opening. I actually sent some people links to where they could have bought the item for cheaper on auctions I was bidding on but "lost." People get goofy in that type of environment.

[Smitty-48]

it's like real estate

it's not about how much you pay

it's about how bad you want it

it's like for a Picasso, I would go all in, if I was rich enough to play in that league

[DBTrek]

Auctions only provide value to the buyer when it's a buyers market. Today, with a world wide customer base it is a sellers market.

Ok, you may be on to something.
That's probably true.
Guess I should check back in a few months when the dollar is worth diddly.

[C-Mag]

Auctions only provide value to the buyer when it's a buyers market. Today, with a world wide customer base it is a sellers market.

Ok, you may be on to something.
That's probably true.
Guess I should check back in a few months when the dollar is worth diddly.

Still, if you are after the obscure and unwanted you can find great value. Look at Jimmy DiResta, made a career off buying tools and making things in NYC. He was the only one that actually wanted to work.

[Fife]

Auctions only provide value to the buyer when it's a buyers market. Today, with a world wide customer base it is a sellers market.

Ok, you may be on to something.
That's probably true.
Guess I should check back in a few months when the dollar is worth diddly.

Still, if you are after the obscure and unwanted you can find great value. Look at Jimmy DiResta, made a career off buying tools and making things in NYC. He was the only one that actually wanted to work.

Yep. Asymmetrical information is the only way to go.

And it doesn't come easy. But there is little in life more exhilarating than finding specialized information, and then cleverly exploiting it. Truly an example of the non-zero-sum truth of human economy. Something that didn't exist is conjured into reality.