We live at a unique junction in financial history – a time when antiques as an asset class are the cheapest they’ve been in decades, if not centuries.
Want an example?
How about diamonds? These gemstones par excellence have been known as symbols of love and wealth since medieval times. And although I’m not a big fan of investing in modern white diamonds, I do love their antique cousins: old mine cut and old European cut diamonds.
Before the discovery of major deposits in South Africa around 1870, diamonds were one of the world’s rarest gems. In fact, only the very wealthiest people in the noble or merchant class could afford to own a diamond (even a fairly small one) in the pre-1870 era.
But fast forward to today, where $15,000 is enough to buy you a gigantic old mine cut diamond weighing between 2 and 4 carats. This is the kind of stone only the richest of the rich would have been able to afford in days past. Sure, $15,000 isn’t particularly cheap on an absolute basis, but at only 1/4 to 2/5 of the typical annual salary of a U.S. middle class worker, a sizable old mine cut diamond is still far more approachable than at any previous time in human history.
Today’s antique bargains aren’t limited to old diamond jewelry though.
Discerning collectors can currently buy a complete antique sterling silver service for 12 people (consisting of 60 to 90 individual pieces) for between $2,000 and $3,000 – generally less than a month’s gross wage. Contrast this with the $400 to $600 price tag of a similar service purchased new in the late 1930s. Of course, the average American wage at that time was just $1,368 a year, meaning that a complete silverware set cost more than 4 full months of labor.
But I’m particularly fond of 19th century French silverware sets. The French had (and still do have, to be honest) an artistic flair that makes their old silver one of the great antique bargains of the modern era. It is possible to pick up a set of elegantly-wrought Belle Époque solid silver teaspoons for just a few hundred dollars (and sometimes less). As an added bonus, some of these sets are fire gilt – a silversmithing technique that was abandoned in the mid 19th century for inferior (but cheaper) gold electroplating.
This pricing is insanity.
In some instances, you are paying as little as double melt value. I’m not sure how much French silverware cost in the 1830s or 1860s or 1880s, but I’m absolutely certain that it sold for far, far more than double melt value.
It is difficult to convey in words how anomalous the situation in the antiques market is right now. Average people have the ability to afford objects that would have only been accessible to dukes and duchesses in past ages. And although I’ve only given a couple examples above, the situation is similar across a broad swath of the antiques industry.
But how did this happen? How did unrivaled antique bargains become a seemingly ordinary fixture of the modern world?
I think that we can safely lay the blame for these stunningly low valuations on the onerous economic backdrop of the last 20 years. The average household has taken on more and more debt in order to maintain their lifestyle in the face of stagnant wages and ever rising costs. This excessive debt has gradually choked consumer demand as people have prioritized the mortgage payment and grocery bill above all else.
Things came to a head during the Great Recession of 2008-2009 when many households simply collapsed financially. The U.S. Federal Reserve boldly rode to the rescue, but only for the banking system. Our monetary authorities effectively printed money and handed it out to their banking buddies, while leaving average Americans desperate for even the smallest of financial crumbs.
Under these circumstances, it becomes easier to see how such beautiful and desirable antiques came to be esteemed so shabbily. In effect, we have been experiencing a soft depression where all the usual economic indicators – the stock market, unemployment rate and GDP – are solidly green. But this obscures the true financial condition of the average household, which is poor – bordering on insolvent.
In reality, the present economy is much closer to that of the 1930s – the era of the Great Depression – than it is to some bold new 21st century economy.
So what’s the takeaway here? It’s pretty simple. Antique bargains abound today – fine vintage items are simply dirt cheap no matter which valuation methodology you choose to use. The only items that have been bid up these days are one-of-a-kind trophy antiques or artworks – the kind of things that billionaires display in the cavernous foyers of their $100 million beachfront homes in order to impress other billionaires.
This leaves us with some good news and some bad news.
Here’s the good news first. If you’re looking to buy vintage items at more realistic prices – say anything less than about $100,000 – then you’re in luck. Antique bargains can be found in everything from old furniture to vintage jewelry to 20th century Japanese woodblock prints. The only caveat I would give is to bias your purchases towards pieces that meet the Antique Sage’s 5 rules for investment grade art and antiques.
Now for the bad news.
It is almost a foregone conclusion that a recession is coming. And given the frailness of the world’s ailing financial system, it is likely to be global in nature. This will mean mass layoffs, falling stock markets and widespread corporate bankruptcies.
The time to prepare for this outcome is right now. Sell some of the stocks in your retirement or brokerage account. Make sure that you have sizable cash reserves. Don’t take on frivolous or unnecessary debts.
Antique prices have a tendency to stagnate or fall during recessions. This makes it an ideal time to buy. But you can only take advantage of the fire sale pricing if you have some free cash when the time comes.
I believe that the coming recession will be so severe that the Federal Reserve (and most other central banks around the world) will eventually resort to dropping helicopter money on the public in an attempt to improve the dire economic situation. But the period leading up to this unconventional monetary policy will be absolutely brutal for most people. Only those with their financial houses in order going into the crisis will be well-positioned to take advantage of the tumultuous situation. There will be tremendous antique bargains to be had, but only for those who are prepared.
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