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Meteorite Economics 101

In a message dated 9/13/98 12:19:31 AM Pacific Daylight Time,
mblood@access1.net writes:

<< 	I in no way intend to imply a softening of my sentiments about the
 promotion and auction of meteorites from the field.  >>


Hello Michael (and list),

I want to thank for your kind comments about me personally.  However I do want
to challenge your severely erroneous beliefs that there is harm in allowing
finders of meteorites to get the FAIR SHARE of their rock's value, after all
it is their property!

It is erroneous to think that field prices have ANYTHING to do with retail
VALUES.  You are so wrong about that.  Case in point:  A certain dealer paid
less than $4/g for his Portales at auction the other day and he is selling it
for $17/g to $25/g in cut slices.  The Esquel was originally bought for around
$160/ pound "out of the field" and what does that have to do with the fact
that it is selling it for $20 - $30/g?  There are dozens of other examples.
         
My assisting people who find meteorites and helping them get the most money
for them does NOT drive up retail prices!  Yes, it cuts a little bit out of
the dealer's profits, AS MUCH AS COMPETITION BETWEEN THE DEALERS WILL ALLOW
IT.  But I can't make dealers pay more than they want to pay.  I am flattered
that you think I have such power, but you are wrong.  And THEN, whatever a
dealer will pay has no effect on what the market is willing to pay.        
         
I know some dealers try to justify why they are selling their merchandise for
such high prices.  And more power to them if they persuade people to pay more.
That is called good marketing.  It has nothing to do with what the meteorite
is actually worth.  The bottom line is that THE MARKET WILL DETERMINE THE
VALUE, NOT what a dealer prices it at, not for how low or how high a finder
sells it for, or what cut a broker in the middle gets.        

However, the higher the retail prices go up, this does create more room for
the finders to attempt to get more for their rocks.  Is it fair for retail
price to go up two or three or four times and the field prices to remain
constant?  Of course dealers want to get meteorites out of the field at as
cheap of price as they can, but you have to wake up and realize that the same
internet that is allowing you to build a meteorite retail business is also
educating the finders.  It is a double edge sword, that in the not to distant
future will ADD stability to the pricing structure by evening the playing
field.
         
I suggest that you take a class in economics in your spare time, then you
might be able to grasp this concept.        
         
Specifically, there were two factors that played a much bigger role in the
price of the Portales than anything I did.  First, Skip Wilson, a meteorite
hunter from Portales, sold a meteorite he found several years back.  It was
the 20 pound main mass of the Kenna Ureilite.  One dealer is offering Kenna
now at $220/g.  Skip sold that meteorite to a dealer for $1,000.  Not $1,000/
gram not $1,000/ pound, but $1,000 for the WHOLE 20 pounds.  Do the math!  The
way Skip sees it, he gave away $2 Million Dollars because he didn't know what
type of meteorite it was BEFORE he sold it.          
         
TWO MILLION DOLLARS!!!!!!!!!!   How long does it take you to earn two million
bucks?          
         
KEY POINT HERE:   If field prices have an impact on retail prices (as you
suggest) then why is Kenna selling so high?  With a 5 times mark up (to allow
for saw losses and shipping and all those other excuses that dealers like to
talk about) the Kenna should be selling for $0.55/g right now!!!  Why isn't
it?   Why is the asking price $220.00/g?    
         
ANSWER:  Because field prices have NOTHING to do with what the market value
is!!!!!!  

Skip Wilson told Mrs. Wallace (the finder/owner of the 37 pound Portales) on
the day the meteorites fell, "This is a different type of meteorite, unlike
anything I have ever seen.  You ought to get it classified before you sell it,
then you know what you are dealing with."  Later she heard of what happened to
him when he sold his Kenna to a dealer years before.      
         
Word spread around the area that meteorites CAN be worth $100,000/ pound like
the Kenna is, and yes there was still the Monahans info floating around to
confirm that they can be valuable.  Then to top it all off, there were a lot
of people with a lot of cash making wild offers to the lucky finders of the
Portales.        
         
The point is, (and I know this may be hard for you to believe Michael) SOME
meteorites ARE worth a lot of money!!!!   It is arrogant to think that it is
OK for a dealer to ask as much as he can for a particular meteorite but that a
farmer should not.  You went off the other day about the racist views found in
the literature and behaviors of western science and scientists.  You are
swerving into the same area when you say that it is OK for all the dealers to
ask OVER $7/g for Portales but it is not OK for someone from Portales to ask
the same, just because the dealers are "educated" as if the folks from
Portales are not!  This type of "intellectual elitism" is not only an insult
to the residents of Portales but exposes your over-inflated view of yourself
and the other dealers.        
         
The second fact that played a huge role in the Portales situation, is that in
the area of negotiation, one MUST be willing to walk away from the table empty
handed.  Certain dealers were not able to do that.  After the first batch of
rocks were sold, Skip Wilson told me that certain dealers returned waving
hundred dollar bills around and "the boys selling the rocks decided to dig
their heels in!"  They were offered $2/g, then $3, then $4, then $5, then $6
where they finally accepted.  It wasn't until AFTER that when the Shaw
brothers came to town and asked "What is the going price?"  They were told one
dealer was paying $6, so the said "We'll pay $6.50/g."  So they bought some.  
         
Meanwhile, Skip Wilson found a few and was still saying "I am not selling mine
for ANY price, until I find out what it is."  And Michael, this was also a
WEIRD meteorite.  It was SO obvious to everyone that this was no ordinary
meteorite.  Within a couple of days Wallace had her rock at UNM and they were
saying it was very unusual, possibly a mesosiderite.  Collectors were calling
in to local finders offering $15/g.          
         
Many of the locals have access to the internet and they saw some dealers
selling Portales from $20 to $45/g and they were not stupid!  Would you sell
something for $100/pound if you saw others selling for $45/g?  Heck no, you
would get try to get the same $45/g.          
         
Answer me this: WHY IS IT WRONG FOR PEOPLE TO WANT TO GET THE HIGHEST FIELD
PRICE?  Especially in the case of Portales when there are many people willing
to pay more than the standard $100/pound "field price"?        
         
I don't mean to get too personal here but you were the one who told me that
you wanted to "fight me tooth and nail" on this issue, so here goes...

You preach (in this issue of Voyage! and on this list) that you want to help
in keeping prices low, when you are one of the biggest culprits of marking up
prices way over market value at your website!  It leads many to conclude that
you don't really care about low prices.  You pull this politically correct
garbage as a marketing ploy to make yourself look like a "good guy."  Many
people think that it is people like you that are doing the real harm to the
meteorite market, trying to get people to pay over inflated prices on stuff
they can get elsewhere for half the price.  Then you try to shift the blame
when you spout all this misinformation.  You talk about others that you say
are "harming this field" when in fact you are a parasite that does NOTHING to
contribute any good to the field, only to put a few extra bucks in your
pocket.          
    
Perfect example:  The Great Meteorite Hunter, Skip Wilson, from Portales,
retails slices of the Macy meteorite for (I believe) $1.25/g.  On your site
you have Macy listed for $5/g.  Is a 400% mark up really necessary?  Is that
your idea "doing your part to prevent prices from escalating"?        
     
I believe I had little to do with the field price of Portales.  But what if my
actions did inflate the price?  IF the Portales is in fact worth $25/g, what
is wrong with the finders getting $7/g for it?  I have said before and I will
say it again, I think meteorite finders are entitled to their FAIR SHARE.  And
in the case of Portales, if people are lining up to pay $7/g, then GREAT.     
     
One thing is inevitable: As we progress further into the information age, both
the finders and the collectors are going to be more informed.  Therefore, the
market is not going to allow for overpricing on the retail side.    
     
Do I think ALL dealers will eventually all be out of business?  No, but many
will.  There will always be a need for FAIR dealers, such as Blaine Reed, who
will be willing to buy large specimens, cut them down and distribute them to
researchers, museums and collectors at fair retail prices.    
   
The bottom line is that the market will not pay too much or too little for
something OVER THE LONG HAUL.  Yes, a few individuals or dealers might pay too
much now and then.  But they will either learn from their mistakes or be
pushed out of business.  The market forces are just too great. 

Trust me, even if the Portales field price was the same $0.11/g that the Kenna
was sold for, many dealers would still be asking the same price for it.
Portales is priced at $20/g because the dealers think they can sell it for
that!  Just like Esquel at $20-$30/g, just like Zagami at $500-$1,000/g and
just like Kenna at $220/g.  

The truth is that the more the finder gets, the less dealers like you will be
able to make in the mark up since the market sets the retail price!  You don't
like that.  I don't blame you.  But too bad.  That is the way it is and there
is nothing you can do about it.  You can kick, scream, cry and feel sorry for
yourself all you want but you cannot change the paradigm shift that is
occurring.  You can write stories in magazines and make posts on this list
until everyone is sick of hitting the delete button, and it is still going to
happen.  

As a matter of fact, as the internet grows and the middlemen's cut is shrunk,
end buyers might even see retail prices drop, at the SAME time the finders
compensation will be increasing!  Now wouldn't that be great for everyone?
Everyone but you as a middleman dealer.  Institutions have almost always
gotten their stuff for free, since they are able to swap for new material they
want with stuff in their excess inventory (stuff that was probably given to
them 100 years ago for free.)  So really that is a mute point when anyone says
that high prices are bad for science.  And things would have to get real bad
before retail prices reach the astronomical costs that it takes to go to
Antarctica or even to Space to get material.

Economics 101;  Lesson #1:  Competition is good!

See you all in Denver!

May the (market) force(s) be with you,

Steve Arnold
www.meteoritebroker.com  
     
        
 

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