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Antiques, Millennials and the Rebirth of Formal Dining

Antiques, Millennials and the Rebirth of Formal Dining

One of the most persistent myths of the modern age is that Generation Xers and Millennials abhor antiques, while at the same time oddly adoring anything “vintage” (as if there was much difference between the two).  The mainstream narrative goes something like this:

The younger generations love living in apartments, condos or townhouses in the inner city.  Your average Millennial employs a sleek, streamlined sensibility when decorating his (or her) posh city condo.  The color palette is invariably bright and colorful and design choices are always modern and sophisticated.  All things considered, in the popular imagination a typical Millennial’s urban pad looks remarkably like the product of a James Bond villain – part contemporary art collector and part evil genius.

But like all myths, this one isn’t quite authentic.  It is true that younger people like different antiques than older generations.  For example, overly ornate and frilly Victorian styles are out and alluringly sleek Mid-Century Modern is in.  Grandma might not approve, but this is a story that has been retold many times throughout human history.

The real issue for Millennials is that they were born into less than ideal economic circumstances.  Jobs and raises have been scarce for many people since the Great Recession of 2008-2009, but younger workers were hit especially hard.  As a result, Millennials have been forced to live in smaller apartments, live with roommates or even, under exceptional circumstances, move back home with their parents.  None of these living arrangements is conducive to buying antiques.

In addition, practicality reigns supreme in the lives of most 20 and 30 somethings these days.  If your dining nook doubles as a living room, you’re not going to feel particularly inclined to clutter it up with unnecessary furniture or knickknacks.  Instead you would carefully and thoughtfully decorate in a way to make maximum use of the space.

Another major reason that Millennials shy away from buying antiques is because they don’t host formal dining parties.  Given their fluid living arrangements and restrictive space constraints, this is perfectly understandable.  Instead, they tend to focus on more intimate, informal gatherings with good friends.

But these trends may not last forever.  I think that formal dining (or at least more formal dining, relatively speaking) will make a comeback over the next couple of decades.  Why do I believe this?  That’s easy – demographics!

Right now it is a safe bet that most family gatherings in the U.S. occur at the clan matriarch’s house.  This could include holidays, graduations, birthdays or anniversaries, among others.  And for many families, these celebrations involve semi-formal or formal dining.  After all, Thanksgiving dinner just isn’t the same without fancy place-settings around the big mahogany dining room table.

This means that under most circumstances, Generation Xers and Millennials make the pilgrimage to the ancestral family home several times a year for these events.  And while traditions vary from family to family, it isn’t uncommon for the fine china, good silver and formal dining room suite to be on full display during these meals.

This is a system that exists because it works.  But it only works because the older generations – the Baby Boomers and Silent Generation – tend to live in the largest houses and, just as importantly, have the accessories for formal dining.  It is difficult to host a family gathering in a cramped condo.  Likewise, formal dining requires nice silverware, plates and glasses – many of which are invariably antiques.

But right now the Silent Generation is quickly passing into the mists of time.  The youngest members of that generation are in their mid 70s as of 2018.  The Baby Boomers are not far behind.  They range in age from their mid 50s to early 70s.

And now we come to the crux of the matter: downsizing.  The ancestral family home and de facto gathering spot is usually owned by the oldest members of a family.  These houses are, generally speaking, generously proportioned and chocked full of a lifetime’s accumulation of stuff.  But they are also highly demanding in terms of time, money and maintenance.

Within the next 20 years, the Silent Generation will pass away and many of the Baby Boomers will choose to downsize for the sake of convenience and expense reduction.  But the family gatherings will not stop just because grandma and grandpa have moved to a retirement community in Florida.  This will leave a formal dining vacuum that will need to be filled.

Enter the Generation Xers and the Millennials.

These younger generations will be forced to take up the challenge of formal dining and family gatherings.  By this time it is probable that, just like the generations before them, they will have abandoned their tiny inner city condos and apartments for larger suburban housing.  And this is just as well, because they will need the room.

Now, I don’t believe that this means that Millennials will adopt the tastes of their parents or grandparents wholesale.  Quite the contrary, they will continue to carve their own eclectic stylistic path.  But, discretionary funds allowing, they will buy antiques or vintage items in some form.

Long gone will be the practical but boring, white IKEA furniture.  In its place will be real wood furniture.  It is doubtful that Waterford crystal and Depression glass will make a comeback, but formal dining with paper plates and plastic utensils is equally unlikely.  Instead, a middle path of sensible Fiestaware and meticulously chosen vintage sterling silver decor is more probable.

Is formal dining dead among younger people?  Hardly.  They just haven’t had the opportunity or demographic push necessary to adopt it yet.  Informal entertaining is great, but it definitely has its limits.  The rebirth of formal dining is on its way, and some parts of the antique market will benefit from the trend.

 

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The Worrying Decline of Tangible Household Wealth

The Worrying Decline of Tangible Household Wealth

An unfolding financial trend that has caught my attention lately is the decline of tangible household wealth.  Now, when I talk about tangible household wealth in this context, I am not referring to houses or other real estate.  Instead, I am referring specifically to portable tangible assets – basically anything found in a household that can be picked up and moved.

This includes items such as furniture, antiques, jewelry, fine art, etc.  But I’m intentionally excluding vehicles, like cars, pickup trucks, RVs and heavy equipment because they are outside the boundaries of this discussion.  Now that we have the ground rules out of the way we can plow into the heart of the topic.

Most middle class households have become progressively poorer from a portable tangible asset perspective over the last couple decades.  If you were to take an inventory of the average person’s home today, you would find precious few items worth more than $100.  And if we were to ignore rapidly depreciating electronics and appliances, the amount of tangible household wealth would be embarrassingly small.

Let me give you an example.  A few months ago I helped clean out my grandmother-in-law’s house as she transitioned into a long-term care facility.  Her home was a modest two-story colonial with three bedrooms and one bathroom.  She is a typical middle class woman who lived a typically middle class lifestyle.

But the tangible household wealth contained in her physical estate was surprisingly small.  Nearly all her tangible net worth was tied up in her house and car.  Once we exclude these two items, there was precious little left over, even after a lifetime of accumulation.

The family ended up hiring an auctioneer to sell everything in the house.  The results of the auction amounted to a meager $1,100.  And that sum is before the auction company took its cut.  Although I don’t know exactly how much the auction netted after fees, $500 or $600 would be a reasonable guess.

Just imagine!  All the physical objects this 90 year old woman (and her now deceased husband) accumulated over her entire lifetime (with the exception of her house and car) were worth a grand total of $500 after fees.  That is a shockingly small amount of money!

Of course the whole story is a little more complicated.  Relatives did go through her house first, taking anything that had sentimental (and occasionally monetary) value.  A few pieces of furniture, a handful of jewelry and some Christmas ornaments comprised the bulk of stuff that was removed.  But honestly, I doubt these items in aggregate were worth more than $500 to $1,000.  A total portable physical estate with a gross value of $1,500 or $2,000 still isn’t very much.

I suspect that many other middle class households across the United States are in a similar situation.  And that possibility should be deeply troubling.  After all, portable tangible household wealth has acted as a traditional buffer against financial misfortune for centuries.  But after peaking sometime in the 1990s, U.S. tangible household wealth has been in decline.

This de-emphasis of portable tangible assets in the net worth of average people has taken on renewed importance due to today’s rampant asset bubbles.  Many people have been seduced into keeping their entire net worth tied up in paper assets like stocks and bonds.  In addition to outsized appreciation during recent financial bubbles, paper assets are also perceived as efficient and trouble-free.

But the problem with bubbles is that they always burst eventually, leading to devastating financial losses.  Even investors who try hard to avoid buying bubble assets might find themselves caught in the economic fallout via a job loss or other unforeseen event.  A few gold coins or pieces of valuable jewelry could act as a welcome portfolio counterweight in these circumstances, offsetting some of the unavoidable risks associated with traditional asset markets.

But I also think it is important to ask why tangible household wealth has declined.  Although I more fully explore this topic in an article I wrote titled “Society’s Tangible Wealth Building Escalator Is Broken“, I will hit the highlights here.

First, cultural trends over the last few decades have de-emphasized portable hard assets in favor of financial assets like stocks and bonds.  In particular, the rise of the internet and its associated technologies has absolutely dazzled modern society.  The resulting rise of digital assets, most notably crypto-currencies, has prompted some people to ask why they need to hold any tangible assets at all.

I also believe that intense economic pressure due to the fall-out from our serial boom-bust economy has negatively impacted tangible wealth accumulation.  Simply put, many people don’t have the means to purchase high value physical goods anymore.  High quality jewelry, sterling silverware or a nice painting to hang over the fireplace are simply too luxurious when the mortgage or car payment come due.

Millennials have it even worse.  They are laboring under the burden of onerous student loans, poor job prospects and near zero-interest rates on savings.  None of these factors is conducive to being able to afford fine antiques or any other valuable tangible assets.  You’re simply not interested in buying a late 18th century, curly-maple, slant front desk when you are struggling to pay off your student loans.

Unfortunately, I fear that the decline of tangible household wealth is far advanced by this point.  We have collectively, as a society, spent the past 25 years slowly liquidating our physical inheritance.  I believe this is a trend we will come to bitterly rue the next time the financial markets crash.

 

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Your Hopalong Cassidy Collectibles Are a Bad Investment

Your Hopalong Cassidy Collectibles Are a Bad Investment
Photo Credit (CC 2.0 license): Dennis Amith

I was recently a guest on Harry Rinker’s antique-themed radio talk show “Whatcha Got?”  We had an animated discussion about a range of antique-related topics, and I encourage you to listen to the archived show if you haven’t already.

Unfortunately, I felt that Harry and I sometimes talked past one another due to our different perspectives on the industry.  Harry is one of the venerable old guard, having been in the industry since the 1970s.  My background is a unique fusion of traditional financial services professional, precious metal historian and antique collector.  It isn’t surprising that Harry Rinker and I have differing viewpoints on the antiques industry.

To me the antiques market breaks down into two major categories: investment grade pieces and everything else, which I generally refer to as collectibles.  To Harry, every individual antique category (glassware, furniture, etc.) is sovereign, with a low-end, mid-range and high-end all to itself.

During our talk, Harry made one statement related to these implicit beliefs that stood out to me in retrospect.  It was about Hopalong Cassidy, a heroic cowboy character whose adventures in novels, movies, television and radio made him wildly popular with children from the 1930s through the 1950s.  I will fully quote Harry’s comment here for context:

I sold off my Hoppy [Hopalong Cassidy] collection way too late, but I could buy it back today for 10 cents on the dollar because people who collect Hopalong Cassidy stuff are gone.

Now, I don’t want anyone to think I am belittling or ridiculing Harry Rinker.  He was nothing but a gracious host to me during our talk.  And he has decades more experience on the dealer side of the antiques industry than I have (or probably ever will).

But believing, implicitly or otherwise, that your Hopalong Cassidy collectibles will appreciate in value over time is just bizarre to me.  In my opinion, there is no such thing as an investment grade Hopalong Cassidy collectible.  It is sort of like thinking your collection of 1980s Alf memorabilia or your modern-day shrine to Katy Perry are good investments.  You can certainly hold that opinion, but it is unlikely to be validated over time.

Does pop culture memorabilia occasionally appreciate in value?  Sure!  But it is generally driven by demographics and fads.  And, as Harry Rinker so perceptively noted, the people who grew up with Hopalong Cassidy are either dying off or not collecting anymore.  Unless that fading demographic trend gets an unexpected assist from an oddly specific mid-20th century children’s television hero revival, there will only be fewer Hopalong Cassidy fans in the future.

Alf collectibles and Katy Perry memorabilia are no different.  They will each have their day in the sun as kids who grew up with them reach middle age (Alf is there right now).  Then they will ride off into a long, slow metaphorical sunset.  In short, pop culture collectibles don’t make any sense as long-term investments!

As an aside, because the subject of Alf came up, I feel compelled to insert a Simpson’s quote here.  As Bart’s friend, Milhouse, stated so eloquently, “Remember Alf?  He’s back…in pog form.”  Now that I have that out of my system, we can go back to talking about serious adult things again!

We can objectively evaluate the desirability of Hopalong Cassidy collectibles in greater detail by referring to the Antique Sage’s 5 rules for investment grade antiques.  In order to be desirable, an antique must have portability, durability and scarcity, in addition to being high quality in both materials and craftsmanship.  Finally, it must also possess good zeitgeist, or cultural relevancy to the period in which it was created.

How do Hopalong Cassidy collectibles measure up?  Unsurprisingly, they fail the 5 rules of investment grade antiques.  First, primarily being children’s toys and accessories, they are almost universally poor quality, having been made from plastic, die cast, paper and other low-end materials.  Now, vintage Hopalong Cassidy memorabilia might be good quality relative to the junky Chinese toys that are foisted on us today, but the Antique Sage quality metric is an absolute standard, not a relative one.

As a consequence of their low quality materials and middling construction, Hopalong Cassidy collectibles have poor durability as well.  Another investment grade attribute, scarcity, is also lacking due to the mass produced nature of these children’s toys.  The overwhelming abundance of Hopalong Cassidy memorabilia is particularly apparent when compared to lackluster (and falling) demand.

We can check this assertion by performing a quick eBay search, which reveals over 4,600 Hopalong Cassidy collectibles available on the online platform as of the spring of 2018.  That hardly seems scarce to me!

These 20th century children’s accessories do better on the final two traits, portability and zeitgeist.  I would say that Hopalong Cassidy collectibles maybe score a 3 or 4 out of 5 on the zeitgeist scale.  This is good, but not perfect.  For example, I think vintage baseball cards from the same time period (the 1930s through the 1950s) have better zeitgeist.

As for portability, Hopalong Cassidy collectibles tend to be compact and, therefore, score fairly well here.  Of course, this is cold comfort to any Hopalong Cassidy fans who might have had visions of selling off their extensive collections in order to fund a cruise around the world.

My conclusion is straightforward.  In order to be considered investment grade, an antique should ideally score well on all five of the Antique Sage’s requirements.  As a concession to reality, however, I do allow for a mediocre score on any one attribute.  Unfortunately, Hopalong Cassidy collectibles falls well short of these requirements.

 

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The Sad Demise of Physical Paper Assets

The Sad Demise of Physical Paper Assets
Photo Credit (CC 2.0 license): Wystan

The decline of physical paper assets has been one of the more troubling trends in the financial industry over the last couple of decades.  And that is saying a lot, because there have been a number of alarming trends in the financial markets over that time.  Now, when I talk about physical paper assets in this context, what I’m referring to are certificates indicating the ownership of financial assets – things like stock and bond certificates.  But before I continue, I think some historical background and definitions are in order.

Although often taken for granted in the modern age, physical wealth has been the bedrock of Western society for hundreds of years.  Farmland, houses, jewelry and bullion were just a few of the physical assets that traditionally underpinned middle class society from the Middle Ages to the 18th century.  However, as the 19th century progressed and financial markets evolved, new types of financial institutions were created, along with the physical paper assets to match.

Corporations, in particular, were a major step forward in the development of modern economies.  These large businesses raised substantial sums of money in order to channel huge amounts of labor and commodities into profitable ventures.  As corporations came to dominate the business landscape, there naturally developed a need to keep track of who owned what.

Thus, the most fundamental of physical paper assets was born: the stock certificate.  These certificates were often brightly colored and beautifully decorated with engravings in order to make them both visually pleasing and difficult to counterfeit.  Although the holder of a stock certificate did not automatically gain ownership of those shares (that prerogative rested with a company’s stock transfer agent), a stock certificate was still an important symbol and confirmation of equity participation in a company.

The stock certificate was inevitably joined by its financial twin, the bearer bond.  Bearer bonds were debt obligations issued by a government or corporation that made interest and principal payments to whoever had physical possession of the instrument.  Unlike stock certificates, bearer bonds functioned exactly like cash.  If you held a physical bearer bond, you were happy (and rich).  If it was stolen or lost, you were exceedingly unhappy (and poor).

Now that the historical primers are out of the way, it is time for the crux of this article.  For the last 150 years, American households have enjoyed access to four major types of physical paper assets based on the modern economy: stock certificates, bearer bonds, U.S. savings bonds and physical cash.  These physical paper assets were perfect complements to more traditional physical assets like real estate, jewelry, antiques and bullion.

Our access to these time honored physical paper assets, however, is rapidly coming to an end.  In fact, they are being systematically eliminated by the powers that be.

Bearer bonds were the first on the chopping block.  These securities had the advantages of being both readily negotiable and having high face values.  According to the government, this made them perfect for organized crime and tax evasion.  Of course, it also made them perfect for honest citizens who wanted financial discretion.  Predictably, the government didn’t like the idea of regular people being able to easily stuff a million dollars worth of bearer bonds into a suitcase.  That sort of thing should be reserved for members of Congress!

As a result, the U.S. government banned the issuance of new bearer bonds in 1982.  Existing bearer bonds were not redeemed, however, and remained outstanding until their original maturity dates passed.  By now though, in the year 2018, pretty much all U.S. corporate or government bearer bonds have matured.  These physical paper assets are effectively extinct today.

Physical stock certificates were the next to go.  Between 2006 and 2010, a series of obscure changes in back-office operations dealing with stock settlement and registration slowly discouraged the issuance of physical stock certificates.  This culminated in 2009, when the Depository Trust Company (DTC) – the centralized New York City clearinghouse for stock settlements – instituted a prohibitively expensive $500 fee for every new paper stock certificate issued.

Over the next few years, most brokerage firms, including Scottrade, Charles Schwab and eTrade, either passed on this exorbitant fee to their customers or ceased issuing physical stock certificates altogether.  In 2013, the pace of change quickened when the Depository Trust & Clearing Corporation (DTCC) – the parent company of the DTC – proposed the elimination of all physical stock certificates.  To make the proposed change sound less offensive to a reluctant public, the DTTC euphemistically refers to this draconian policy as “dematerialization”, claiming it will lower costs.

Although many investors have enjoyed the convenience of digital registration of stock ownership, it is not without drawbacks.  Any stock you have in a brokerage account is always held in “street name”.  Street name means that the legally recorded owner of the security is your broker, not you.  This means that in some situations your broker can legally pledge these securities as collateral to a third party.

Under normal circumstances, securities held in street name by your broker are not a problem.  But when the financial system is under duress and bankruptcies are commonplace, this practice transfers considerable risks to account holders.  Yes, your assets would theoretically be covered under the Securities Investor Protection Corporation (SIPC), but I wouldn’t want to be forced to rely on government promises in such a situation.

Even staid U.S. savings bonds have not avoided the digital carnage waged on physical paper assets.  These time-honored investments have been a fundamental building block of U.S. middle class wealth since the Great Depression.  Available in denominations as small as $25, U.S. savings bonds have provided generations of Americans with a safe place to park their extra money.

U.S. savings bonds were traditionally issued in physical form.  Much like physical stock certificates, U.S. savings bonds did not represent direct ownership.  Instead, the U.S. government registered ownership upon issuing a savings bond.  Physical savings bond certificates not only confirmed ownership, but also provided a tangible token of the act of saving that doesn’t exist with a regular bank account.

Or they used to, at least.  The U.S. government discontinued the issuance of physical savings bonds back in 2012, claiming it would save the American people a paltry $70 million over five years.  In my opinion, this act was the death knell of an already wounded U.S. savings bond program.

Even that final bastion of physical paper assets – paper money – is under widespread assault.  Former U.S. Treasury Secretary Larry Summers has publicly come out in favor of discontinuing the $100 bill.  The European Union recently followed his questionable advice by getting rid of their highest denomination bill, the €500 note, in 2016.

The argument in favor of removing high denomination bills from circulation is that they purportedly help fund organized crime and corruption.  However, such a move also has the (fully intended) side effect of moving all financial transactions firmly under the watchful eye of less than benevolent governments.  As credit cards, PayPal, wire transfers and other digital means of moving money become more ubiquitous, it is not so far-fetched to imagine a dystopian future where governments consider completely eliminating cash.

Maybe the demise of physical paper assets was inevitable.  Maybe a fancily embossed sheet of paper that unequivocally states you own an asset is an unnecessary anachronism in a computer driven, digitally-connected world.  But I have had too many experiences in my life where the unsympathetic voice on the other end of the phone flatly declares, “I’m sorry sir, but we have no record of that in our systems.”  Without physical certificates to prove ownership, such a situation could quickly escalate from an annoyance to a disaster.

The rise of digital wealth in modern society may be inescapable at this point, but that does not necessarily mean it is a wholly positive development.  I believe the slow, irreversible death of physical paper asset is both a warning and an opportunity for the average person.  It underscores the importance of those tangible assets that remain available to us – fine art, antiques, gemstones and bullion – while prompting us to ask ourselves how much of our personal financial information we want to expose to monopolistic corporations and power-hungry governments.

 

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