The world is continuously changing. It happens regardless of whether you are awake or asleep – 24 hours a day, 7 days a week, 365 days a year. And nowhere is this unremitting change more apparent than in the world of investing. Securities markets fluctuate ceaselessly – sometimes second by second. People who invest in alternative assets like art and antiques may believe they have escaped this bewildering, cacophonous situation. But this is an illusion. Even the illiquid antiques market is always changing, albeit usually on a less manic timetable than traditional investments.
This constant variation can lead to unexpected – and sometimes negative – consequences. One example of this is the psychological phenomenon known as anchoring. Anchoring is the process where a person relies too heavily on immediate history to frame his opinion or world view. This can be a pernicious bias in the world of investing in general, but especially so in antique investing.
Let me give you an illustration. For many years I had admired the impressively large silver trade coins that France struck before World War II for its colony of French Indo-China in modern day Vietnam, Laos and Cambodia. These extremely attractive silver coins, called piastres, bear the French personification of Liberty on the obverse. The French version of Liberty on the piastre is seated, but otherwise looks uncannily like the Statue of Liberty in New York City’s harbor. This is no coincidence as the Statue of Liberty was originally a gift to the United States from France in the late 19th century.
In any case, I had always thought about adding a specimen to my collection. Prices were quite reasonable, if not downright cheap, with good quality examples selling for perhaps $25 to $40 each. But I never did manage to pull the trigger. Life distracted me. There was always some other, more immediate obligation that needed my $40.
I thought this wasn’t much of a problem. Although most of these coins are now over a century old, they were struck by the million. So I assumed there would always be a ready supply of these coins available. And besides, I reasoned, “Who, other than me, could possibly be interested in French Indo-China piastres?”
And for the longest time I was right. For many years prices barely moved. You could have bought a nice French Indo-China silver Piastre trade coin for $25 in the year 2000. In 2005 it may have cost you $30. In 2010 one may have run around $40. I always thought I would be able to acquire a fine specimen for somewhere in this “traditional” price range. I was wrong.
I was engaging in anchoring in the worst possible way. I was allowing my knowledge of past prices to influence my ideas about future prices. Instead of focusing on the relevant facts of the coin series – its attractive design, historical importance, impressive size and substantial silver content – I relied on the fact that prices had hardly changed over more than a decade, from the late 1990s to 2010. I “anchored” to the old pricing structure and imbued it with an importance and permanence that it did not merit.
Anchoring is a fairly common mistake among antique investors. The prices of antiques often “stair-step” upward over time. This means that a certain investment grade antique may trade at a specific price point for an extended period of time only to double or triple in price over a relatively short time once it is “discovered” by aficionados and connoisseurs.
Today, in the fall of 2016, a problem free French Indo-China silver piastre in good, but not great condition will easily sell for $60. And honestly, if you want a really nice, problem-free coin – a higher grade example that isn’t scuffed, nicked, harshly cleaned or otherwise impaired – it will most likely cost you at least $100. This is what happens if you succumb to anchoring. Prices walk, trot or, occasionally, gallop away from you.
I would like to think that my experience with French Indo-China trade piastres is an isolated situation. Since then I have made a conscious effort to prevent anchoring from coloring my investment viewpoint. And that is why I feel compelled to tell you this secret. Prices for investment grade antiques are rising practically across the board. They often sell for double or triple what they did only five or ten years ago.
And I don’t foresee this trend changing anytime soon. I wouldn’t be surprised if many categories of fine antiques were to double (again) in value over the next five years. Under these circumstances, anchoring is a grave financial misstep; don’t let it hamstring your antique investment plans. The price you see today may just be the best opportunity you have to acquire high quality antiques.
