Browsing Category

Investing

Postmortem of a Legend – Why Vintage Baseball Cards Don’t Qualify as Investment Grade

Postmortem of a Legend - Why Vintage Baseball Cards Don't Qualify as Investment Grade

When I’m doing research on possible investment grade antiques, I come across a lot of marginal antiques.  In this situation a particular class of antiques comes very close to being investment grade, only to lack one or two vital attributes.  An item’s investment grade status is generally determined by five distinct elements: portability, quality of materials and construction, durability, scarcity and stylistic zeitgeist.  In a marginal class of antiques, one or more of these qualities is absent or inadequate.  This delineates items that are merely collectibles from true investment grade pieces.

Vintage baseball cards are a great example of this phenomenon.  For a long time I looked into these early to mid 20th century mementos of the great American pastime.  They have a lot going for them.  First and foremost, they celebrate that quintessentially American sport – baseball.  This gives them major cultural or zeitgeist points, especially considering that the antique market is awash in goods that are total anachronisms in the current age.  Copper coal scuttles and brass tea strainers are not only unnecessary in the modern world, but also lack any significant stylistic mojo.  In contrast, baseball cards are still culturally relevant.  That is a major win.

However, a class of antiques cannot be declared investment grade based solely on scoring well in one of the five aspects of investability.  And while baseball cards do well in two of the other categories (portability and scarcity: both good enough) they fall flat in the final two elements.  Quality and durability are the investment Achilles heel of baseball cards.

Originally used as cheap prizes that were packaged with cigarettes or candy, vintage baseball cards are made out of cardboard…and not high quality cardboard either.  Intended to be abused, lost and damaged, they were throwaway items.  Baseball cards were meant for hyperactive, grubby kids to trade amongst themselves and put in the spokes of bicycle wheels.  They were never meant to be treasures and were, consequently, never manufactured to stand the test of time.

This cheap fabrication was reflected in their mass printing and distribution.  In the 1920s through the 1960s every candy shop and corner store in the U.S. sold baseball cards (and candy or gum with them) for a few pennies each.  They were the antithesis of luxury goods.  Unfortunately, in my opinion, this is fatal to any aspirations baseball cards may have to become legitimate investment vehicles.  After all, when accidentally nicking the flimsy edge of an iconic 1932 U.S. Caramel Babe Ruth card instantaneously drops its market value by 25% or more, the importance of durability in investment grade antiques becomes obvious.

Another major factor that eliminates vintage baseball cards from contention for investment grade status is the fact that professional baseball is a largely U.S. (and Canadian) sport.  This severely limits the possible collector base, a fatal coup de grace when coupled with their less than durable cardboard construction.  Most investment grade antiques have strong international demand, reducing dependence on any one geographical area.

Of course, baseball is also big in Japan, but that doesn’t fundamentally change matters much.  It is unlikely that most Japanese baseball card collectors would be scouting for vintage U.S. cards anyway.  Instead, they would probably just stick to vintage Japanese baseball cards.  Baseball is a major sport in a few other Central and South American countries, but they are too small to impact demand in the U.S. card market significantly.

Now I don’t want anyone reading this to get the wrong idea.  I don’t dislike vintage baseball cards or think they are “bad”.  I don’t even have an opinion on their future return potential, which may or may not be good.  What I do know is that according to the five attributes of investability, vintage baseball cards come up short on two.  It doesn’t mean they can’t appreciate in the future, but it does mean that I can’t predict that possible appreciation with any certainty.  When investing my own money, I would prefer to stick with a surer thing.

Don’t Collect the Artist

Don't Collect the Artist

Those of us familiar with the art world constantly hear the names of famous artists thrown around.  Andy Warhol, Jasper Johns, Roy Lichtenstein and Willem de Kooning are just a few of the modern artists whispered about in hushed, reverent tones – almost as if their names invoke a supernatural power.  These artists and their many contemporaries usually have their works breathlessly described with words like ground-breaking, powerful, avant-garde and unique.  Their works also often sell for astonishingly high sums of money.  10 million dollars – 20 million dollars – 30 million dollars – it almost seems as if there is no limit to the prices some works of modern art can command.  And yet, these artists’ works are rarely good investments.  Why?

To be blunt, they are fads.  The people paying outrageous sums of money for non-representational blobs of brightly colored paint on a white canvas are not really art connoisseurs.  They wish to be perceived this way, but wishing doesn’t make it so.  Today’s modern art collectors are largely nouveau riche financial services executives or wealthy technology entrepreneurs who want to be recognized by their peers as cultured individuals.  Collecting art is a good way for them to appear as urbane sophisticates.  And no art serves this purpose better than abstract works from well-known modern artists.  Most modern art can be simultaneously opaque, unapproachable and sometimes, quite frankly, unconscionably ugly.  But these works are popular right now and make for great conversation pieces.  So out comes the checkbook and before too long another record price is set.

And now we’ve arrived at the heart of the matter.  Most of these hedge fund manager and Silicon Valley CEO collectors don’t know the first thing about art.  They are just parroting what they hear their jet-setting friends and business associates say.  Instead of understanding and appreciating the art itself, they are “collecting the artist”.  In some ways this is a very human reaction to what can be a very intimidating field of study.  Art is often complicated; meaningful commentary on a work can rarely be distilled into a glib, dinner-party sound bite.  And if you don’t really care about art – but only about impressing your very wealthy colleagues – then collecting the artist (especially modern artist) might seem like a reasonable move.

All of this focus on artists instead of art creates an opportunity for those investors who are willing to educate themselves properly and not be deluded by the latest craze.  Real art is instantly, undeniably beautiful.  It stands on its own merits, never relying upon a famous artist for its desirability.  When reasonably priced, authentic, high quality art tends to appreciate in monetary terms far into the future, regardless of who created it.  Don’t be caught chasing a hot artist in a fad that you don’t understand.  Always collect art for the beauty and allure of work itself; never just blindly “collect the artist”.

The Five Aspects That Influence Art’s Desirability

The Five Aspects That Influence Art's Desirability

It is often said that beauty is in the eye of the beholder.  And nowhere is this statement repeated more often than in the world of fine art.  However, upon close examination there are actually some attributes that are effectively universally desirable.  And while any two individuals’ opinion of the same work of art can vary wildly, just five universal characteristics ultimately determine desirability.  These five qualities are: portability, quality materials and construction, durability, scarcity and stylistic zeitgeist.

Size matters, as the old saying goes, and bigger is better.  This is true regardless of whether the item in question is an old mine cut diamond set in a Victorian yellow-gold ring, an ancient Egyptian Ptolemaic bronze coin or an illuminated leaf of a French medieval manuscript.  Larger art works are visually impressive, more easily displayed and more readily appreciated by both connoisseurs and amateurs alike.  Therefore, when two items only differ in size, the larger example will be more desirable with collectors, all else being equal.  But this trend is only true as long as portability is preserved.  Once an antique exceeds approximately 12 inches (30 centimeters) on any axis it loses portability and is thus no longer investment grade for our purposes.  Objects above this size can certainly still be desirable – and many are – but it is no longer a given that larger automatically equates to more desirable.

Quality materials and construction are to fine antiques as top-notch ingredients prepared by a celebrated chef are to great cooking.  Use of the finest materials by the best craftsmen is a trait common to all outstanding antiques.  There is a reason that glittering precious metals, exotic tropical hardwoods and alluring semi-precious stones are recurring themes in the world of upscale antiques.  It is because the finest materials, when skillfully assembled, produce the most stunning works of art – the sort of masterpieces that are visually impressive and widely coveted.

Another aspect inexorably bound up with material quality is durability.  A well made antique will exhibit surprising durability, weathering the passing centuries with tremendous grace.  It will continue to look stunning even as more mundane items crumble to dust under time’s relentless assault.  Simply put, the finer things in life are invariably better made and, consequently, inherently more durable.  This holds true regardless of whether it’s an ancient Roman hardstone intaglio or a 1950’s era Omega Seamaster wristwatch.

When most of us think of expensive antiques or art, scarcity is often the first thing that comes to mind.  There is a good reason for that.  Truly fine art is rare.  Wars, natural disasters and neglect have, over the centuries, gradually whittled down the surviving pool of quality art and antiques.  Those works that remain are not only renowned for their aesthetic beauty and cultural importance, but also for their great rarity.

The final aspect that impacts desirability is what I call stylistic zeitgeist.  This concept deals with how purely a work of art reflects the cultural milieu of its time period.  For example, an Edwardian diamond choker that is stylistically focused will be much more desirable than a similar Edwardian diamond necklace that awkwardly incorporates transitional elements from the emerging Art Deco design language.  Connoisseurs simply assign more value to art that better embodies the characteristic qualities of a movement or time period.  In short, collectors wish their Georgian antiques to reflect Georgian style, their Art Nouveau works to exude Art Nouveau form and their Mid Century American art to epitomize Mid Century American design.

Antiques and fine art can be a fundamentally sound allocation decision in a sophisticated investment portfolio, but it is important to understand the elements that drive universal desirability before buying.  Adhering to the five attributes of portability, quality materials and construction, durability, scarcity and stylistic zeitgeist will help ensure good returns on your art investments.  Some items will have the right stuff while others won’t.  By using the five characteristics mentioned above you can more easily sort the good from the bad.

The Best Investments Are Often Those Nobody Thinks Are an Investment

The Best Investments Are Often Those Nobody Thinks Are an Investment

The best investments are often those that nobody thinks of as investments at the time.  For example, if, circa 1960, you suddenly announced to your family, friends and coworkers that you were going to sink every last penny you had into California beachfront real estate, the news would most likely have been poorly received.  The skeptics would clamor around you saying things like, “What’s wrong with good old fashioned bank CDs?” or “Why don’t you consider a safe treasury bond, instead?”

Someone may even suggest that, if gambling is your game, you could always take a chance in the high risk stock market.  After all, the leading newspapers and respected periodicals of the day didn’t have any articles about the investment merits of California beachfront real estate, so almost anything else would have to be a better investment!  Right?

But of course the traditional wisdom was wrong.  And not just a little wrong either, but utterly, laughably wrong.  A well chosen parcel of unimproved California beachfront property that could have been purchased for a few thousand dollars in the 1950s and 1960s would today be highly desirable prime real estate that would easily sell for a few million dollars.

That is a nominal increase in price by a factor of approximately 100 over the last five or six decades.  This gives our hypothetical California beachfront property a return of over 13% per annum versus around 10% for U.S. stocks and 6.5% for U.S. treasury bonds during the same time period.

In today’s investment landscape all the traditional asset classes have been bid up.  Neither stocks, nor bonds, nor cash are going to have very impressive returns over the next couple of decades.  But many investment grade artworks and antiques still trade for eminently reasonable prices.

So that vintage 1962 solid 14 karat gold Hamilton Thinline mechanical wristwatch for sale on Etsy for $525?  It has a very good chance of outperforming most of the stocks and bonds that are currently stuffed into your various retirement accounts right now.  And if you are smart enough to defy traditional wisdom and buy the handsome timepiece in question, an obvious question will haunt you 20 or 30 years down the road:  “Why didn’t I buy a few more vintage wristwatches (or other investment grade antiques) for next to nothing when I had the chance?”