This is a rather painful article for me to write. I’m going to detail some of my biggest tangible investing mistakes. These were really great antiques I passed on that, in retrospect, I should have purchased.
My investing mistakes usually had one thing in common: they seemed expensive at the time. Of course, these lost opportunities would all be hideously more expensive today, assuming I could even find items of equal quality. So, without further regret, let’s examine some of my greatest failures as an antique investor.
In 2005, a long-time jeweler in downtown Boston was liquidating his shop and going out of business. So one Saturday, I confidently strode in armed with a loop and an untapped credit card. I looked through tray after tray of jewelry, but didn’t find anything appealing. Then I saw it. A gigantic, unmounted, old mine cut diamond sparkled seductively from a display case. I asked the salesman to pull the diamond for me so I could examine it more closely.
It was truly a gem. The stone was huge – approximately 4.5 carats. And with the exception of its somewhat yellowish tone, which is the norm for old mine and old European cut diamonds, the stone was otherwise excellent. The cut was well executed and the gem was only moderately included (flawed).
The allure and sparkle of a fine old mine cut diamond is difficult to convey unless you’ve seen one in person. In these Victorian era cuts, brilliance – pinpricks of white light – are minimized. Instead, fire – rainbow colored flashes of light – are emphasized above all else. And the slight yellow tint of old mine cut diamonds lends them a charming, warm character that is unmistakably alluring.
The stone in front of me was a monster, not only in terms of size, also in the intensity of its dazzling fire. The salesman was determined to sell the gem. I was lukewarm. He wanted $3,500 for it. I told him no. He offered it for $3,000. I said I didn’t want to spend that much. Clearly desperate, he finally said he would let it go for only $2,700 and swallow the sales tax too! I vacillated. I really hadn’t intended to spend so much money that particular day.
I pushed for $2,500, but the salesman held firm. In the end I passed, mostly because I felt the stone’s color was a little too poor. I feared it would turn into a white elephant – a showy, expensive item that can’t be easily resold because of one, major flaw. It was one of the stupidest investing mistakes I ever made in my life.
Demand for quality old cut diamonds has skyrocketed over the past decade. The stone that the salesman practically begged me to buy for $2,700 in 2005 would probably sell for at least $10,000 in 2017, if not more. That works out to an annualized return of about 11.53% over the last 12 years. And that is assuming a conservative wholesale price. If you wanted to buy it from a jeweler or other retailer it would probably be $25,000 or more. I still have nightmares about passing up that diamond.
And yet that was only one of many stupid investing mistakes I’ve made with antiques over the years. Another incident occurred in 2003 when I was perusing the inventory of a Boston area antiques dealer that specialized in estate jewelry. This gentleman had a platinum, sapphire and diamond Art Deco brooch for sale that instantly piqued my interest.
This beautiful piece was clearly all original, without any modifications or repairs. The finely wrought platinum setting was indicative of a very high quality piece of jewelry. The mounted stones did not disappoint either. Although liberally sprinkled with small, single-cut diamonds, the real star of the show was the gigantic, deep blue sapphire set in the middle of the brooch.
This was simply one of the finest sapphires I had ever seen. And it was completely natural as well. Under the loupe you could faintly see distinctive, hexagonal color banding, a sure sign of a natural stone in the context of a 1920s piece. This was no synthetic, but a completely natural, untreated sapphire. And the color was phenomenal – an intense, vivid royal blue that only occurs in the very finest sapphires. Of course the stone was large. By my estimate it was at least 1.8 carats and may very well have tipped the scales at over 2 carats.
The dealer wanted $1,200 for the piece. I countered with an offer of $1,100 in cash. He knew exactly how nice the item he had was and promptly turned down my offer. I walked away, ensuring this experience took a hallowed position in my pantheon of antique investing mistakes. I shouldn’t have walked away. I should have just paid him the extra $100 and exited the shop with my new treasure while thanking God for my good fortune.
But the economy was bad at the time and I was doing contract work. I didn’t feel comfortable paying full price. I really, really should have though. Years later in 2010, the price of good quality blue sapphires jumped by about 50% practically overnight. The central sapphire from that brooch would be worth around $5,000 in 2017 by itself. That $1,200 investment grade brooch would probably wholesale for maybe $7,000 or $8,000 today. That represents a 13.42% annualized rate of return!
I hope that my investing mistakes can be a learning experience for you. I knew that the superlative pieces I passed over were incredibly high quality. I simply couldn’t bring myself to pay the extra $100, $200 or $300 that the seller wanted for them. That tiny, additional premium simply seemed exorbitant at the time.
I could not have been more wrong. The very best investment grade art and antiques often trade at premium prices. Take my word for it. Save yourself some heartache and pay the nice dealer his extra $100. It will be well worth it in the long run.
